L5/05
Sheena Capperauld Todd v Colin William Todd and Others
Act: McIlvride, instructed by Anderson Fyfe, Glasgow
At: MacColl, instructed by John Jackson & Dick, Hamilton
DUMFRIES: 25 May 2007
The sheriff, having resumed consideration of the cause, Finds in Fact:-
1. The petitioner is Sheena Capperauld Todd ("the petitioner") who resides at 10 Kenmure Road, Whitecraigs, Glasgow. She is a director of the fifth respondent Sanquhar Home Limited ("the company") and is the registered holder of 250 fully paid ordinary shares of £1 each in the company. She was formerly married to the first respondent.
2. The first respondent is Colin William Todd ("Colin Todd") who resides at 156C Finnart Street, Greenock. He is the managing director and secretary of the company and is the registered holder of 387 fully paid ordinary shares of £1 each in the company. He is the brother of the second respondent, the son of the third respondent and the brother in law of the fourth respondent
3. The second respondent is Laurence Timothy Todd ("Laurence Todd") who resides at 1 Finnick Glen, Ayr. He is a director of the company and is the registered holder of 337 fully paid ordinary shares of £1 each in the company.
4. The third respondent is Margaret Hilda Todd ("Margaret Todd") who resides at 26 Cherryhill Road, Ayr. She is employed by the company but is not a director of the company. Nor does she hold any shares in the company
5. The fourth respondent is Carol Todd who is married to John Todd, the son of the third respondent and brother of the first and second respondents. She is the registered holder of 26 fully paid ordinary shares of £1 each in the company.
6. The fifth respondents are Sanquhar Home Limited incorporated under the Companies Acts (Registered Number SC80828) and have their registered office at Lauries Wynd, Sanquhar.
7. The company was incorporated on 12 November 1982. In terms of its Memorandum of Association, the company's objects are to "own, operate, manage, maintain, furnish and fit up with all necessary conveniences, furniture, instruments and equipment a private hospital, nursing home or residential home, with all suitable accommodation for the treatment and care of patients".
8. The company's Memorandum and Articles of Association are Production No 5/19. They were amended by special resolutions dated 14 May 1989 (Production No 5/20) and 28 January 1993 (Production No 5/21). The latter amendment provides that the directors' power to borrow and grant security for any borrowings may only be exercised unanimously.
9. The company's authorised share capital is £10,000 of which 1000 ordinary shares of £1 each have been issued. Articles 4(a)-(f) provide that when any shareholder wishes to transfer his shares these will be offered to the other shareholders and provides a mechanism for the valuation of such shares. Article 4(g) of the company's articles of association restricts the ability of shareholders to transfer their shares. It provides that "The directors may, in their absolute discretion, and without assigning a reason therefor, decline to register a transfer of a share whether or not it is a fully paid share..."
10. The petitioner and Colin Todd and Laurence Todd each acquired their shares in the company in about 1989 with the object of carrying on business as a residential home. At that time, they each acquired 250 ordinary £1 shares in the company, as did John Todd. In about 1990 or 1991, John Todd transferred 137 of his shares to Colin Todd, 87 of his shares to Laurence Todd and 26 of his shares to the fourth respondent. In about 1991 or 1992 the petitioner and Colin Todd separated and the petitioner transferred her 250 shares to him. These were subsequently transferred back to the petitioner in about 1992, following a reconciliation. There have been no transfers of shares in the company since that time.
11. The petitioner, Colin Todd and Laurence Todd have been the directors of the company at all material times (with the exception of a period between about 1991 and 1992 when the petitioner was not a director).
12. In the period prior to 2000, the business of the company was always managed on an informal basis. Formal board meeting were never held, nor was it suggested by any director of the company that they should be held. All material decisions regarding the company were proposed by the petitioner and Colin Todd and would be approved subsequently by the other shareholders.
13. From the purchase of the company in 1989 both the petitioner and Colin Todd were involved in and responsible for the management of the company and its business. Laurence Todd, John Todd and Carol Todd have never had any material involvement in the management. The petitioner is a qualified nurse. She was responsible for all nursing issues which arose including staff and dealings with the Health Board. She was principally responsible for the company adding residential nursing care to the residential care facilities it had always offered. Colin Todd dealt with administration and was responsible for the company's payroll. He visited the home more regularly that the petitioner. The company employed a nurse matron (Mrs Prior) to deal with day-to-day nursing matters, and an administrator, Margaret Todd to deal with day-to-day administrative tasks. Both the petitioner and Colin Todd were involved in the preparation of the company's annual accounts and attended meetings with the company's chartered accountants for that purpose.
14. In about 1991, the petitioner and first respondent separated for the first time. During this separation, the petitioner ceased to play a part in the management of the company's business. The petitioner and first respondent were reconciled in about late 1992, but the petitioner did not resume as active a joint management function as previously. Colin Todd, in the period from late 1992 to 2000, took the primary management role in relation to the company, visiting the home for regular meetings with the nurse manager and Margaret Todd and remained responsible for control of the company's payroll. The petitioner continued to play a management role in relation to nursing matters.
15. During the period before 2000 the company purchased supplies of food, cleaning materials and other items from Cost Cutter, a general store in Cumnock owned and operated by Laurence Todd and John Todd. Margaret Todd would order items as required which would be delivered to her at her home in Ayr by Laurence Todd. Invoices were sent from time to time. Most supplies required by the home were purchased from a wholesaler. The company banks with Allied Irish Bank which does not have a branch in Sanquhar. To obtain petty cash Margaret Todd would write cheques to Cost Cutter and receive cash in exchange from Laurence Todd.
16. Prior to 2000 the petitioner and Colin Todd, acting as a partnership, also owned and operated three other nursing homes in Greenock (Marchmont, Alt na Craig and Belleaire). These businesses were also run on an informal basis.
17. The petitioner and the first respondent separated in about September 2000. The separation was acrimonious. Shortly before the separation the petitioner paid £11,386, which had been payable by Scottish Enterprise Renfrewshire to the Belleaire business, into her own personal account. On 8 August 2000, the petitioner also moved £26,000 from the account of Alt na Craig to her parents' bank account. Both of these transfers were made without the knowledge or approval of the first respondent. After the separation there was friction between the parties about the division of their assets. Colin Todd was unhelpful when the petitioner wished information about the company or access to its books. The petitioner took little further interest in the company's affairs and no further steps in connection with its management. This was partly because of Colin Todd's attitude but at least equally because of the disruption caused by the separation and her continuing involvement in the Greenock businesses. In general the petitioner and Colin Todd were unhelpful and antagonistic towards each other in relation to the separation and the businesses in which they had an interest.
18. The petitioner and first respondent divorced in about January 2003. As part of the divorce settlement, the petitioner and Colin Todd agreed to divide their shared business interests (other than the company). The petitioner took over sole ownership and control of the Marchmont and Alt na Craig nursing homes and the first respondent took over sole ownership and control of the Belleaire nursing home. The interest of the petitioner and the first respondent in the company was not divided. The parties did not include their interests in the company in the division of the matrimonial assets because, at the time of the separation, it had poor occupancy rates and was doing badly financially.
19. Following upon the separation, the business of the company was managed and controlled by Colin Todd alone. Laurence Todd took no part in the management of the company. Colin Todd continued to be assisted by a nurse manager and Margaret Todd. The nurse manger was largely responsible for nursing and staff issues. Margaret Todd paid most of the company's bills and was responsible for keeping such financial records as the company maintained. She did so in a way which was similar to what she had done when the petitioner was involved in the company's management. She had access to the company's bank statements which were sent to the home. In the period between 2000 and 2004 overheads were reduced and occupancy rates were increased. This resulted in the company becoming more profitable. The company also constructed a new extension at the home which was to be used as a dedicated unit for elderly and mentally infirm patients. This increased the capacity of the home. The extension was completed and registered in December 2004.
20. Between April 2002 and November 2004 Colin Todd and Laurence Todd dishonestly misappropriated funds belonging to the company to the extent of £55,099.32. They did so by crediting cheques payable to the company to an account in name of a separate business carried on by Laurence Todd and John Todd. These cheques were in respect of invoices issued by Margaret Todd on the company's behalf for fees due by residents of the home. The funds were divided among Colin Todd, Laurence Todd and John Todd.
21. The misappropriation of the funds was concealed from the petitioner and from the company's chartered accountants, BDO Stoy Hayward ("BDO"), with the result that the company's annual accounts for the years ending 30th June 2002, 2003 and 2004 did not provide a true and fair view of the company's affairs despite being certified as such by Colin Todd and Laurence Todd. The company's income for those years was under-declared to the Inland Revenue. As a consequence of that the company is now under investigation by the Inland Revenue and is likely to be liable for penalties and interest in addition to the tax properly due.
22. The misappropriation only came to light at the beginning of 2005 when the petitioner challenged the accuracy of the company's accounts on the basis that the company's income had been understated. As a result, on or about 7 June 2005 Colin Todd and Laurence Todd admitted having misappropriated £55,099.52 from the company. £55,000 has been repaid to the company by Colin Todd and Laurence Todd but only after 16 August 2005 when the present proceedings were raised. On or after 2 December 2005 the balance of the principal sum, £99.52, was repaid. No interest has been paid to the company but Colin Todd and Laurence Todd have undertaken to do so and have also undertaken personally to pay any tax liability that will arise, together with any interest and penalties.
23. Between 1 July 2000 and 30 June 2004 £31,548 was withdrawn in cash from the company's bank account by Colin Todd. Between 9 July 2004 and 26 May 2005 further payments to a value of more than £27,000 were made from the company's bank account either to Colin Todd or by him. He has explained that the money was used to pay contractors and labourers in connection with the construction of the extension to the home in 2004. In the main there is no documentary evidence to vouch or support such payments. None of those payments was authorised in advance by the board of directors of the company.
24. During the period from July 2004 until June 2006 the company continued to purchase goods from Costcutter and to obtain petty cash by issuing cheques in favour of Costcutter in much the same way as described in Finding in Fact No. 15. Three miscellaneous payments by way of cheque were paid to Costcutter and cash obtained in return. These were (a) a payment of £763.75 by cheque dated 7 March 2006, the cash for which was used to pay W Sim for slab work carried out at the nursing home; (b) a payment of £177.68 by way of cheque dated 8 May 2006 then cash for which was used to pay A Livingstone, an employee of the company, following rejection of an electronic wages payment by Ms Livingstone's bank; and (c) a payment of £100 by way of cheque dated 6 June 2006, the cash for which was held on behalf of a resident, Lorna Bunting, following provision of this sum by her sister by way of cheque payable to the company.
25. By interlocutor dated 11 July 2005 this Court (i) interdicted Colin Todd and Margaret Todd ad interim from issuing any cheques or other instruments drawn on the company's bank account for any payments due to any of the respondents or any members of their immediate families or for cash and (ii) interdicted Colin Todd and Laurence Todd ad interim from taking any steps to do any act outwith the ordinary course of business of the company without the express prior written consent of the petitioner. The transactions in which cheques have been paid to Costcutter after 11 July 2005 amount to breaches of the first of those interim interdicts.
26. Colin Todd is the sole proprietor of a separate nursing home business known as Belleaire Nursing home During the four years to 30 June 2004, invoices addressed to Belleaire were paid from the company's funds. Some of these related to the payroll software or services provided by Sage to both the company and Belleaire. Further similar invoices to a value of £100,000 have been paid by the company.
27. In each of the financial years 2002/03; 2003/04; 2004/05 and 2005/06, the company has underpaid when due the PAYE for which it has been liable notwithstanding that the amounts properly due were easily ascertainable from the SAGE computer program used by the company for payment of employees' wages. As a result of the consequent late payment of the outstanding balance of PAYE which remained payable, the company has, in each of those financial years, incurred a liability to the Inland Revenue for payment of interest.
28. In 2000/01 Colin Todd drew a management fee of £16,000 from the company. In 2001/02 the fee taken by him increased by 25% to £20,000. No meeting of the directors of the company was convened to approve the fees taken by Colin Todd in 2000/01 or 2001/02. The petitioner was not advised of the payment of these management fees. In 2002/03 the fee was increased to £26,000 and in 2003/04 to £30,000, resulting in an increase of 87.5% over 3 years.
29. In the period since September 2000, no dividend has been paid by the company and the petitioner has received no payments by way of director's remuneration or otherwise from the company.
30. The day to day financial affairs of the company are dealt with by Margaret Todd. She pays the invoices. She has control of the company's cheque book and signs cheques on behalf of the company. When required she issues invoices on the company's behalf. She receives copies of the company's bank statements. Until 2005 she kept no proper financial records nor carried out any proper reconciliation of the company's receipts and payments. She provided Colin Todd with the cheques used to make the payments referred to in Findings in Fact Nos. 23 and 26 but made no inquiry about what the money was used for. She failed to make any inquiry about the payments of £55,099.32 due to the company which were not credited to the company's bank account and were misappropriated by Colin Todd and Laurence Todd. She now keeps a petty cash book (Production No. 5/45). The records in that book are unsatisfactory. They fail to record accurately transactions on the company's behalf. Entries are not made contemporaneously. Pages have been torn from the book. No explanation for these missing pages has been offered by Margaret Todd.
31. The petitioner took no part in the management of the company between 2000 and 2004; nor did she attempt to. Colin Todd and Laurence Todd did not prevent her being so involved; nor did they encourage her to do so or keep her advised of the company's affairs. No meetings of directors were held and the petitioner received no notice of any. She was not advised of the proposed new extension or of the payment of management fees to Colin Todd. Given the acrimonious nature of the separation from Colin Todd, the petitioner's lack of involvement in the management of the company and the reluctance of Colin Todd and Laurence Todd to be in contact with her was understandable.
32. In early 2004 the petitioner again began to take an interest in the company. She was aware that its financial position had improved. A board meeting was held on 6 April 2004. Colin Todd and Laurence Todd were present. The petitioner did not attend but sent her boyfriend Tony Caplan on her behalf as an alternate director. Mr Caplan is a solicitor who presently acts for the petitioner and who previously acted for the company and for Colin Todd. Gilbert Andrew of BDO was also in attendance. It was proposed by Colin Todd that the company should take a bank loan with Allied Irish Bank to fund an extension to the home. Colin Todd and Laurence Todd voted in favour of this resolution; Mr Caplan voted against. At the meeting, Colin Todd and Laurence Todd also agreed that the petitioner should be permitted to withdraw a personal guarantee which she had granted in respect of the company's borrowings to their bankers. The meeting also approved the payment of a management fee of £26,000 to Colin Todd for the period to 30 June 2003. Colin Todd and Laurence Todd voted in favour of this resolution; Mr Caplan voted against.
33. A further board meeting of the company was held on 5 October 2004. Colin Todd and Laurence Todd were present. Gilbert Andrew was in attendance. The petitioner had been invited to attend the meeting, but again sent Mr Caplan on her behalf as an alternative director. Mr Caplan proposed the payment of a dividend of £100,000. Colin Todd and Laurence Todd voted against this resolution giving as their reason the company's commitment to the construction of the extension to the home; Mr Caplan voted for the resolution. Mr Caplan did not propose the payment of a dividend in any lesser sum. The meeting also approved the payment of a management fee of £30,000 to Colin Todd for the period to 30 June 2004. Colin Todd and Laurence Todd voted in favour of this resolution; Mr Caplan voted against.
34. The company's Articles of Association do not allow for alternative directors. Mr Caplan had no right to attend the meetings on 6 April and 5 October 2004 or to vote as a director of the company.
35. The company's Articles of Association (Art. 2(a) as amended by special resolution dated 3rd February 2003) provide that the directors' power to borrow and grant security for any borrowings may only be exercised unanimously. Without the consent of the petitioner (and contrary to her express opposition) the company has since around April 2004 borrowed in excess of £400,000 from Allied Irish Bank and has granted a standard security over the home.
36. Gilbert Andrew, who is responsible for the preparation of the company's annual accounts, was unaware that the company's Articles of Association do not allow for alternative directors. He was unaware that the directors' power to borrow and grant security for any borrowings may only be exercised unanimously.
37. Since 2000 the petitioner has visited the home on one occasion in about September 2004. She did so together with Mr Caplan. She was not prevented from taking access to the home by its staff. The staff of the home have not been instructed by Colin Todd at this time, or at any other time, to bar the petitioner from the home. The petitioner made a further visit to the home about two or three months later. She asked Moira Prior, the home's nurse manager, to give her access to the company's records. Mrs Prior checked with Colin Todd whether this would be appropriate. The first respondent indicated that Mrs Prior should allow the petitioner to have access to the company's records.
38. Other than the attendance by Mr Caplan at the two board meetings and the visit to the home the petitioner has not attempted to involve herself in the business or management of the company.
39. Since 2004 the petitioner has been invited to all board meetings of the company. She has chosen not to attend. She has taken no steps to try and alter the company's articles of association to permit a proxy or alternate director to attend on her behalf.
40. The respondents have provided the petitioner and her solicitors with all documents and information that they have requested in relation to the affairs of the company.
41. The petitioner has not been excluded from participation in the management of the company.
42. The company is solvent and trading profitably. As at 30th June 2005, the annual accounts record that the company's assets exceeded its liabilities by £274,000 (valuing the home at £843,000). The company employs about 50 people. It is responsible for the care of about 37 patients, and has the capacity to care for up to 45 patients. There is no reason to believe that the company will not continue to trade profitably for the foreseeable future.
43. Following the discovery of the misappropriation of funds by Colin Todd and Laurence Todd BDO restated the company's accounts. BDO also examined the company's records to assess whether any other funds diverted or misappropriated by Colin Todd and Laurence Todd and whether there have been any other material misstatements in the company's accounts in the four years to 30 June 2004. They were provided by Colin Todd with all information which they requested and regarded that information as sufficient to enable them to address these. They produced a formal written report (Production No 6/21). BDO concluded that the £55,099.32 disclosed by Colin Todd and Laurence Todd was an accurate statement of the funds which had been misappropriated and that no further funds had been misappropriated. They also concluded that the accounts were free from any other material misstatements.
44. The conclusions reached by BDO rely on the word of Colin Todd and Laurence Todd regarding the misappropriation of funds, the nature of the payments made from the sums of £31,548 and £27,000 withdrawn from the company's bank account by Colin Todd and the payments of approximately £100,000 made by the company to Belleaire.
45. BDO have valued the company at £591,500. This assumes that the home is worth £1,200,000 and that the company's accounts for 2005 and preceding years (restated to take account of the £55,099 Colin Todd and Laurence Todd misappropriated from the company) are correct. Mr Ranachan valued the home at £1,550,000.
46. The home is now worth between £1,200,000 and £1,550,000.
47. The value of the company exceeds £600,000 by a figure of at least £155,000.
48. By letter dated 7 June 2005 (Production No 6/7), Colin Todd and Laurence Todd (together with their brother, John Todd) offered to purchase the petitioner's shares in the Company at a price of: (a) £125,000, or (b) £100,000 plus an adjustment to reflect the monies diverted from the Company. This offer was rejected by the petitioner. The offer was made again by letter dated 14 June 2005 (Production No 6/8). By letter dated 18 November 2005 (Production No 6/22), the respondents offered to purchase the petitioner's shares at a value to be determined by an independent chartered accountant, to be selected by agreement or, in the event of a failure to agree, by the President of the Institute of Chartered Accountants in Scotland. The costs of the independent accountant were to be borne equally. He was to be given complete and unimpeded access to the Company's books and records and was to be entitled to receive written representations from the auditors of the Company and from any firm appointed to act on her behalf by the petitioner (the auditors and any representative firm also having complete access to the Company's information). The petitioner did not accept this offer. By e-mail dated 24 November 2005 (Production No 6/23), the respondents also offered to purchase the petitioner's shares at a fixed price of £150,000. The petitioner did not accept this offer. Notwithstanding the e-mail of 24 November 2005, the offer to purchase on the basis of an independent valuation remains and Colin Todd and Laurence Todd remain willing to purchase the petitioners' shares on that basis.
49. A discount of 30% would ordinarily be applied to the pro rata valuation of a minority shareholding in a company of the size and nature of the company.
Finds in Fact and in Law:-
1. The petitioner has a justified lack of confidence in the conduct of the company's affairs as a result of the lack of probity on the part of Colin Todd and Laurence Todd.
2. The company is a quasi-partnership.
3. The actings of Colin Todd and Laurence Todd have destroyed the mutual confidence between them and the petitioner.
4. The petitioner is acting reasonably in refusing to accept the offers made to her by the respondents for the purchase of her shares in the company or for the independent valuation of these shares.
Finds in Law:-
1. The petitioner is entitled to seek a winding up of the company in the present proceedings.
2. No other remedy or means for giving relief in respect of the matters complained of by the petitioner save winding-up is available to the petitioner.
3. The petitioner is not acting unreasonably in seeking to have the company wound up rather than pursue any other remedy.
4. It is just and equitable that the company be wound up in accordance with the provisions of section 122(1)(g) of the Insolvency Act 1986.
5. The company's affairs have been conducted in a manner which is unfairly prejudicial to the interests of the petitioner.
THEREFORE Repels the objection taken by counsel for the respondents to the admission of evidence concerning the value of the company; Sustains the third plea in law for the petitioner; Repels, as not insisted upon, the fourth, fifth and sixth pleas in law for the petitioner, Repels the first, second, third, fourth and fifth pleas in law for the respondents; Finds it unnecessary to deal with the parties' remaining pleas in law; Dismisses the second, third, fourth, fifth, sixth, seventh and eighth craves of the petition; Continues further consideration of the cause, and in particular the petitioner's first crave, until 9.45 a.m. on 14 June 2007 to enable parties to be heard on whether or not the parties are in agreement that the order for the winding-up of the company should not be granted on 14 June 2007 and the matter further continued to allow parties the opportunity to resolve the differences between them without the necessity for the making of such a winding-up order; Certifies the cause as suitable for the employment of junior counsel; Meantime Reserves all other questions of expenses and Appoints parties to be heard thereon at 9.45 a.m. on 14 June 2007
Note:
Introduction
[1] In this action the petitioner asks the court to make an order that the company, Sanquhar Home Limited, be wound up in terms of section 122 (1)(g) of the Insolvency Act 1986 ("the 1986 Act") and for a variety of orders in relation to the company in terms of sections 459 and 461 of the Companies Act 1985 ("the 1985 Act"). The first crave is for winding-up in terms of section 122 (1)(g) of the 1986 Act; and that is the petitioner's preferred remedy. In the alternative, in terms of sections 459 and 461 of the 1985 Act, she seeks orders that the first and second respondents repay £55,099.32 to the company together with such interest as the court deems proper; that a firm of accountants should be ordained to carry out a forensic audit of the books of the company; and that the first and second respondents should be liable for the expenses incurred in carrying out that audit. She also seeks interdict against several of the respondents doing various acts in relation to the company. (Ultimately the interdict craves were not insisted on although their justification as interim remedies was maintained.) Finally there is a general crave for such relief in terms of section 459 of the 1985 Act as the court thinks proper to bring to an end the matters complained of by the petitioner.
[2] I heard evidence over six days in March and May 2006; and submissions on behalf of the petitioner on 13 July 2006. The case was then adjourned to hear the submissions for the respondents but before that could happen the petitioner sought to lodge a Minute of Amendment introducing additional averments about the behaviour of the respondents in relation to the company both before and after the dates in March and May when evidence had been heard. Although this came very late in the day, because the proposed amendments appeared to go to the heart of the dispute between the parties, I allowed the Minute of Amendment to be received, Answers to be lodged and adjustment to take place. Ultimately the Record was amended and further proof allowed. That took place over thee days in March and April 2007. Parties completed their submissions on 12 April. Clearly the case has taken much longer than it should; principally because of the difficulty of arranging dates for the hearing of evidence and submissions which suited counsels' diaries but also because of the amendment process. I am sorry also that the issue of this decision has taken longer than my normal practice; a consequence of the protracted nature of the proceedings and their relative complexity but also because of my current commitment to other lengthy proofs.
[3] During the first stage of the proof the petitioner gave evidence and called as a witness George Ranachan, a chartered surveyor with Christie & Co who spoke to a valuation of the home which his firm had carried out. The witnesses for the respondents were Colin Todd, Laurence Todd, Gilbert Andrew, Moira Prior, Janet Dryfe and John Fingland, a chartered accountant and partner in BDO who spoke to the valuation of the company which his firm had carried out. At the further proof the petitioner again gave evidence as did Colin Todd and Laurence Todd. The only additional witness was Margaret Todd.
[4] Because of the length of the proof, but particularly because of the time over which the hearing of evidence extended, the shorthand notes for the first six days of evidence were extended. The continued proof in March and April 2007 was restricted in scope to a series of matters which were examined in some detail but did not, it seemed to me, raise a completely new issue regarding the actings of the respondents or the relationship between the parties. Neither counsel required the extension of these notes to complete their submissions. I felt that my own notes of the evidence were quite adequate to allow me to take the evidence fully into account. In these circumstances I did not feel it necessary to have the notes of the additional three days of evidence extended. Counsel for the petitioner and counsel for the respondent both very helpfully supplied written summaries of their submissions. These are lodged and form, respectively, Nos. X and Y of process. Of course counsel expanded on these written summaries and my summary of their submissions takes that into account. Although the proof was of some length there was much in the evidence which, while requiring to be given and explained, was not controversial or the subject of disagreement. In my examination of the evidence I will concentrate on those areas which were the subject of disagreement and which are determinative of the issues between the parties. For convenience I have noted at this point the statutory provisions and other references founded on or referred to by parties.
Statutory provisions and other authorities referred to
Companies Act 1985
459. - (1) A member of a company may apply to the court by petition for an order under this Part on the ground that the company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. . . .
461. - (1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection (1), the court's order may -
(a) regulate the conduct of the company's affairs in the future,
(b) require the company to refrain from doing or continuing an act complained of by the petitioner or to do an act which the petitioner has complained it omitted to do,
(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct,
(d) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly.
Insolvency Act 1986
122. - (1) A company may be wound up by the court if -
(g) the court is of the opinion that it is just and equitable that the company should be wound up
125. - (2) If the petition is presented by members of the company as contributories on the ground that it is just and equitable that the company should be wound up, the court, if it is of opinion -
(a) that the petitioners are entitled to relief either by winding-up the company or by some other means, and
(b) that in the absence of any other remedy it would be just and equitable that the company should be wound up,
Shall make a winding-up order; but this does not apply if the court is also of the opinion both that some other remedy is available to the petitioners and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy
Textbooks
Gower & Davies: Principles of Modern Company Law (7th Edition)
Law Commission Report, Shareholder Remedies, Cm 3769 (1997)
Jamieson, Summary Applications and Suspensions
Macphail, Sheriff Court Practice (3rd Edition)
Palmer, Company Law (25th Edition)
Cases
Anderson v Hogg 2002 SC 190
Director of Fair Trading v Boswell 1979 S.L.T. (Sh. Ct.) 9
Ebrahimi v Westbourne Galleries Ltd [1973] AC 360
Ferguson v Maclennan Salmon Co. Ltd 1990 SC 658
Hyndman v RC Hyndman Ltd 1989 SCLR 294
Jesner v Jarrad Properties Ltd 1994 SLT 83
Lees v Baird 1924 SC 83
Loch v John Blackwood Limited [1924] AC 783
O'Neill v Phillips [1999] 1 WLR 1092
Re a company (No 003843 of 1986) [1987] BCLC 562
Re Westbourne Galleries Ltd [1973] AC 379
Re Full Cup International Trading Ltd [1995] BCC 682
Re Worldhams Park Golf Course Ltd [1998] 1 BCLC
Third v North East Ice & Cold Storage Co Limited 1997 SLT 1177
Virdi v Abbey Leisure Ltd [1990] BCLC 342
Vujnovich v Vujnovich [1990] BCLC 682
Wilson v Jaymarke Estates Limited and another (unreported, [2005] CSIH 84)
The Evidence
The Witnesses
[5] This was not a case where I found any of the witnesses to be wholly incredible or unreliable. My impression of the petitioner was that she wanted to benefit from the company of which she was a member. She perhaps underemphasised the importance to her of getting a financial return from it. Likewise I felt that she probably painted the blackest picture of the breakdown of her marriage to Colin Todd and emphasised the memories and behaviour which best explained her lack of involvement in the company after 2000. I accepted that she was genuinely shocked and angry about the misappropriation of funds by Colin Todd and Laurence Todd; but also perhaps conveniently forgetful about how the company had operated when she was involved in it before 2000 and, for someone who ran a successful business of her own, deliberately naïve about cash payments for casual work. Although she had good reason not to trust Colin Todd she was inclined to lack objectivity when considering anything which he had done or might do in the future. In assessing her evidence that had to be borne in mind and I have not made Findings in Fact where the petitioner's evidence is the only basis for an impression or opinion or a recollection of what may have happened before 2000.
[6] Colin Todd made no bones about the misappropriation of the company's funds and that this had been wrong. But, of course, after the petitioner had unearthed the discrepancy, he had no choice. I have no doubt that, but for the petitioner's investigations, he would have continued to conceal his wrongdoing both from the petitioner and from the company's accountants. I cannot exclude the possibility that this dishonesty might have continued if it had not been detected. Nor can I ignore his dishonest behaviour in assessing his credibility. A difficulty I had in approaching his evidence is that much of what he said concerning other payments supposedly made on the company's behalf relies entirely on his word. That was clearly also a difficulty which the petitioner had. So where the evidence of Colin Todd is unsupported by other evidence I have been very slow to make any Finding in Fact which is based solely on that evidence. The same difficulties apply to the evidence of Laurence Todd.
[7] Margaret Todd struck me as an honest witness but one who would be slow to accept that either of her sons was mistaken or wrong. I would not go so far as to suggest that she would turn a blind eye to wrongdoing (such as the misappropriation of the company's funds) but her failure to appreciate what was happening to the cheques removed by Colin Todd and Laurence Todd and not lodged in the company's bank account, and the unexplained removal of pages from the company's petty cash book, casts a doubt over her reliability in relation to what her sons may have done or said. I took that into account in assessing her evidence. Where she was speaking to her own actions, however, I accepted her as generally credible and reliable.
[8] Moira Prior and Janet Dryfe were or are employees of the home. They had worked mainly with Colin Todd. I think that their primary loyalty was to him rather than to the petitioner. That was probably reflected in their evidence but I regarded their evidence as credible and reliable.
[9] I had no doubts whatsoever about the credibility of Gilbert Andrew; nor about his reliability in recollecting facts and events. But much of his evidence, particularly about the company's accounts, relied on the evidence of Colin Todd. He was clearly prepared to accept what Colin Todd told him. For the reasons which I have explained I was not. Gilbert Andrew appeared to lack the sort of independent inquiring mind which one might have expected from the company's accountant and adviser. I found it strange that he did not appear to know about the lack of authority in the Articles for either alternate directors or borrowing without the unanimous approval of the directors. So to the extent that Gilbert Andrew's evidence depended on that of Colin Todd, unsupported by other evidence, I regarded it as potentially unreliable.
[10] The evidence of John Fingland suffered from the same disadvantage. Like George Ranachan his evidence was primarily opinion evidence. To the extent that his opinion was based on what Colin Todd had told him and was unsupported by other evidence, I regarded it as potentially unreliable. The evidence of John Fingland and George Ranachan, though speaking largely to the same issue of valuation, was difficult to reconcile. That it is because any valuation is essentially subjective based though it may be on objectively determinable material. But if different valuers take different material into account, make different assumptions and adopt a different approach it is likely, as was the case here, that each will reach a different conclusion. For reasons which I will examine in greater detail, although I regarded both John Fingland and George Ranachan as credible and reliable witnesses, I did not feel I could say, even on the balance of probabilities, that one was "right" and one was "wrong"; particularly in a situation where there was clearly a market which could determine the market value of the home at the present time (rather than in April 2004 which was the basis of Mr Fingland's valuation of the company or January 2006 which was the date of Mr Ranachan's valuation of the home).
Objections to the Evidence
[11] In the course of the proof numerous objections were taken to questions and lines of evidence. Some I sustained or repelled. Others I repelled in hoc statu reserving all questions of competency and relevancy but in submissions the only such objection which was insisted on was where (Notes 70-71) counsel for the respondents had objected to a line of evidence about the valuation of the company (particularly evidence of the BDO Report Production No. 6/20 of process) on the ground that such evidence was irrelevant. The objection was renewed at various points in the evidence. Counsel submitted that the petitioner sought a winding-up order but did not seek the alternative remedy of an order for either the purchase or sale of her shares. Evidence about the company's value might be relevant in support of such craves but not otherwise. Additionally there was no crave directed at obtaining a valuation of the company. In reply counsel for the defender suggested that the evidence was relevant on two grounds. First, while it was true that the principal remedy sought was winding-up, crave 8 was in general terms and sought, in terms of section 459, such order, at the discretion of the court, as would meet the complaints made by the petitioner. Section 459 conferred a complete discretion on the court and that could include orders of the sort referred to by counsel for the respondents. Second, Production No 6/20 had been lodged by the respondents and incorporated into their pleadings brevitatis causa. They could hardly complain if witnesses were asked questions about it. Counsel for the respondents responded by arguing that the context in which reference was made to Production No 6/20 (page 26 of the Record No. 14 of process) was an offer by the respondents to purchase the petitioner's shares. The line of questioning might be unobjectionable in that context but not to open up the whole question of the value of the company. The petitioner could not hide behind crave 8 which was in the most general terms possible. No notice was given in the petitioner's pleadings of any intention to seek an order for the purchase of her shares. There was a lack of fair notice which could give rise to prejudice to the respondents.
[12] Although this was not referred to in the submissions at the end of the evidence, the context of the reference to Production No 6/20 in the Record No. 14 of process had disappeared by that time because of the amendments made by both parties (see pages 33-34 of the Record No. 23 of process). Indeed, on these same pages, the respondents now aver that, "esto the petitioner is entitled to any relief under sections 459 and 461 of the Companies Act 1985 (which is denied) the only equitable and appropriate order would be one for purchase of the petitioner's shares by the Company or, alternatively, the other shareholders". And counsel for the respondent made a submission to that effect. So, on one view, the objection is anachronistic and falls to be repelled for that reason alone. I would, however, have repelled it anyway. In seeking a winding-up the petitioner has to demonstrate, in terms of section 125(2) of the 1986 Act, that she is not acting unreasonably in seeking a winding-up rather than pursuing any other remedy available to her. If that other remedy is a purchase of her shares their price or value will be central to the reasonableness of her decision to accept any offer made. That price or value will depend on the value of the company and its assets. She is entitled to challenge any price or value which is asserted and so evidence about that is relevant. Crave 8 is in general terms but sections 459 and 461 of the 1985 Act confer a wide discretion on the court to give relief to matters complained of (Ferguson v Maclennan Salmon Co. Ltd at 662D). It may be that the court's discretion could not properly include a remedy or order which had not been canvassed as a possibility by either party. It would probably be inappropriate for the court to make an order about which parties had not had the opportunity to make representations. But that is not the position here. The respondents have made an offer to purchase which the petitioner has rejected. They have repeated that offer in the course of their evidence. They have argued, albeit in the alternative, that such a purchase would give relief in respect of the matters complained of by the petitioner. In my opinion, in these circumstances, both crave 8 and the powers contained in sections 459 and 461 are wide enough to allow such an order to be made and for evidence relevant to the question of the reasonableness of the offer to be led and so I have repelled the objection
Disputed Factual Issues
(a) The management of the company before the separation of the petitioner and Colin Todd in 2000
[13] The petitioner's position regarding this was that from 1989 until 2000, apart from the short period between 1991 and 1993 when she first separated from Colin Todd, she was fully involved in the company and the management of the home - particularly on the nursing side. She drew no real distinction between the periods on either side of the separation. Colin Todd said that her involvement was always less than his and that after 1993 she had very little to do with the home's management. The truth lies, I think, between these two positions. Even Colin Todd (Notes 423-4) accepted some involvement after 1993 in relation to nursing matters. So did Laurence Todd (Notes 581) and Moira Prior (Notes 781-6) and Janet Dryfe (Notes 796-806). Margaret Todd was asked about this but the question was objected to and she said virtually nothing about the issue. Colin Todd's involvement was likely to be greater. Nursing was largely delegated to employed staff. The petitioner could be telephoned if advice was required (there was evidence that this happened). Day to day administration of the home was handled on the ground by Margaret Todd. So there was little need for the petitioner to be in regular attendance. After the reconciliation the parties moved to Greenock. They had other businesses there. It is entirely consistent with the evidence on this aspect that the petitioner's concentration was on these in the period up until 2000. What is perhaps of greatest significance about this period is that these other businesses were operated as partnerships. There was no evidence that the company was operated in a way which was different from that. There was no evidence that board meetings were held or any formality consistent with any difference between corporate and partnership status applied or expected by either the petitioner or Colin Todd.
[14] In relation to the informality of book and record keeping by Margaret Todd and the ordering of goods and obtaining of cash from Costcutter I accepted her evidence and that of Colin and Laurence Todd that this had occurred during the period up until 2000. The evidence of the petitioner was vague about that; partly because she seemed reluctant to accept that it had happened but also, it seemed to me, because she was not at the home frequently enough, nor dealing with these matters on a day to day basis, to have a proper recollection of it.
(b) The separation and divorce of the petitioner and Colin Todd and the petitioner's involvement in the company until 2004
[15] If they agreed on nothing else about the period from 2000 until 2004, the petitioner and Colin Todd were at one that their parting was not amicable. The difficulty in establishing what happened between them is that the only evidence about it comes from them. The petitioner removed money from their partnerships. There was no evidence about whether the terms of these relationships entitled her to do so but even if they did it would hardly be surprising if the removal of such substantial funds caused friction with Colin Todd. Likewise it is entirely consistent with what each party required and expected from their separation that their concentration was on the division of the assets in Greenock - the matrimonial home and the nursing homes there. The petitioner had young children and required somewhere to live. Both required an income. There is no evidence that the company had supplied that income. Indeed the bias of the evidence was that, before 2000, it was not very profitable. Colin Todd's mother took to do with the running of the home on a day to day basis and was present there most days. These factors are entirely consistent with what Colin Todd said about the petitioner not playing or seeking to play any role in the company's management; which was what the petitioner accepted she had done after 2000. I am prepared to accept, in the context of the parties' acrimonious separation and in general terms, what the petitioner said about Colin Todd making it clear to her that she should not be involved in the management of the company. But I am unable, in the absence of supporting evidence, to find that what she said about violent threats or locks being changed is established. It is just as probable that her ceasing to play any active role in the company rested on the other factors I have discussed as on any behaviour of Colin Todd.
[16] There is no doubt that the petitioner took no steps to try to revive that involvement until 2004. While it is credible that she might have felt unable to initiate inquiries or seek information directly from Colin Todd in the immediate aftermath of the separation I did not find it convincing that she could not have done so earlier. Gilbert Andrew remained her own accountant as well as that of the company. There was no explanation why she could not have sought legal advice if she had wished to play an active role in the company's management or required the calling of directors' meetings.
(c) The petitioner's involvement in the company from 2004 until the present
[17] There is little factual dispute about this. The petitioner declines to attend board meetings. Why that was so was not clear to me. There was nothing in her presentation as a witness which suggested she would be unable to. I found unconvincing what she said about the presence of Colin Todd and Laurence Todd making that difficult for her. All the meetings about which I heard evidence had taken place at the premises of and in the presence of Gilbert Andrew. She was clearly a capable business woman running two very similar nursing homes. There was nothing in her evidence or any of the evidence which enabled me to find in fact that she could not have attended if she had wished. Certainly Mr Caplan's unauthorised attendance in her place had resulted in the passing of resolutions which he had opposed on her behalf but that is simply the nature of the process in any directors' meeting where there is a difference of opinion. She has been provided with information about the company's affairs and finances. I accepted the evidence of Colin Todd and Moira Prior that no obstacles were put in her way if she wished to visit the home or have access to the company's records. In light of this evidence I am unable to find in fact, as counsel for the petitioner invited me to do, that the petitioner has been excluded from participation in the management of the company. Indeed the evidence points in the opposite direction.
(d) The management of the company after 2000
[18] Effectively this has been by Colin Todd alone. Laurence Todd is also a director and has participated in the board meetings to which I have referred. That has been, on the evidence, his only involvement. Both he (Notes 578) and Colin Todd said that he made up his own mind about matters and I dare say that is how both of them see it. But the evidence is that he has always supported Colin Todd in any vote. He went along with and was complicit in the misappropriation of funds. That hardly indicates an independent mind with the best interests of the company at its forefront. I did not find credible the notion that he would do other than what his brother suggested. There was no evidence that he ever has done. No board meetings were held until April 2004. The informality to which I referred during the period until 2000 has continued. That extends to a lack of interest in and knowledge of the company's Articles by Colin Todd and Laurence Todd and by even by Gilbert Andrew, the company's accountant. Mr Caplan was permitted to attend board meetings when he was not entitled to. The company borrowed substantial sums and granted a security over the home in Sanquhar without the required unanimous agreement of the directors. It seems to me that, as a matter of fact, the company is run like a partnership; and, as I discuss later, as a matter of law is a quasi-partnership.
[19] The extent of Colin Todd's control of the company, and the informality of its financial management because of that, is demonstrated in the misappropriation of the £55,099.32. Counsel for the respondents attempted to categorise this as "the diversion of company funds". That is an inappropriate description. It was dishonesty and I have so found in fact. The method employed was a crude one. Most income of the company for residents at the home came from local authorities which paid by a direct credit to the company's bank account. Some private fees, however, were invoiced and paid by cheque. These invoices were sent out by Margaret Todd. Normally she would receive and bank the cheques. Colin Todd simply removed the cheques (he said when Margaret Todd was not there). It never seems to have occurred to Margaret Todd that the cheques had not been received or to check with Colin Todd if they had been. Her receipt of and reconciliation of the bank statements does not seems to have brought the matter to her attention. Both Colin Todd and Margaret Todd said that she was unaware of the misappropriation of the £55,099.32. I find that inexplicable. What it certainly does is demonstrate an astonishing laxity in the administration of the company's affairs.
[20] That laxity is seen in another area. Margaret Todd was in the habit of giving Colin Todd cheques which he made payable to himself for cash. Between 2000 and 2005 that totalled in excess of £58,000. Colin Todd said that this was used to pay builders and obtain materials for the extension to the home. There was very little evidence, apart from his word, that this had been done. There was a surprising lack of any documentary evidence, such as invoices or time sheets for such a large expenditure. There was an unexplained lack of evidence from any of those who were supposed to have been paid for the building work on the home. While I think that the petitioner was being disingenuous in expressing surprise that invoices were not available for any building work (it is certainly at least within judicial knowledge that cash payments, sometimes unvouched, are common in the building trade) payments on this scale demand some explanation. That was not to be found outwith Colin Todd's evidence. I felt unable to rely on that unsupported evidence and so cannot find in fact either that the payments were used as Colin Todd said or that they were used in some other unexplained way. I might suspect that some were "diverted" in the same way as the £55,099.32 but that is not a conclusion I am prepared to reach on the balance of probabilities. Nor can I find that the money was paid to the builders or suppliers referred to by Colin Todd.
[21] The payments to Belleaire are in the same category. Colin Todd said that they were for shared services or for convenience where the company did not have a credit facility with a particular supplier. The clearest examples he gave were the refund of petrol supplied to builders travelling from Greenock to Sanquhar and charged to a Belleaire petrol account and the refund of the cost of building materials charged to builders merchants' accounts in the name of Belleaire. On the evidence I heard it is probable that some of the payments were of that nature. But Colin Todd's evidence on this was largely unsupported and so I am not prepared to find on the balance of probabilities that all that money was used in that way.
[22] The final three days of the proof were largely concerned with an exhaustive examination of various company cheques paid to Costcutter. (There was also considerable evidence about the further payments by way of cheque of £27,000 and I have already dealt with that aspect.) This evidence is not easy to assess. I thought it probable that the company would buy some goods from Laurence Todd's firm and there was nothing inherently improbable about Laurence Todd delivering items to his mother to take to the home. Although some of the invoices contained what appeared to be very large quantities of, for example eggs and batteries, I did not find the evidence of Laurence Todd on these matters, supported as it was by that of Margaret Todd, to be incredible. Likewise, although it seemed unusual that many of the invoices were consecutively numbered, though issued over a period of several months, the explanation which he gave about that (the invoice book was really only used for that purpose) was believable. Despite her failure to keep a proper track of the company's receipts and payments (particularly the misappropriated funds) I do not believe that Margaret Todd would be an active party to what was suggested by the petitioner - the creation and payment of false invoices. The same applied to the evidence about Costcutter providing petty cash in exchange for cheques. It might not be the usual way for a business to obtain petty cash but it made some sense given that the company's bank was in Glasgow and Margaret Todd saw Laurence Todd almost every day. The amounts involved did not seem excessive and there was evidence that such petty cash was required for payments such as casual kitchen staff. There was really no contrary evidence that there was anything irregular about these payments. The three miscellaneous payments prayed in aid by the petitioner (these are referred to in Finding in Fact No. 24) all had a credible explanation. On balance I did not feel able to find in fact that these payments, in themselves, pointed to further misappropriation on the part of Colin Todd and Laurence Todd.
[23] What the payments did demonstrate, however, was the casual way in which the company operated its affairs. The record keeping of Margaret Todd, as revealed in the company's cash book and ledger, was not adequate to keep a proper record of the transactions involved. Many of the payments were made after the interim interdicts obtained by the petitioner (Finding in Fact No. 25) and, as payments to a firm of which Laurence Todd was a member together with his brother and payments for cash, were clearly in breach of its first leg. (I did not accept the submission by counsel for the respondents that because the payments were to a partnership rather than individuals that did not breach the interdict. Nor did I accept the submission by counsel for the petitioner that the petty cash transactions were outwith the ordinary course of the business of the company. The method might have been unusual but there is nothing extraordinary in a company obtaining petty cash.)
[24] The issue of management fees paid to Colin Todd was also an aspect of the company's management which was criticised by the petitioner. Although it was not entirely clear, these payments appear to have started in 2001. But there was evidence from the petitioner (Notes 34) Colin Todd (Notes 360 & 535) and from Laurence Todd (Notes 570) that similar payments had been made as far back as 1989. The petitioner did not dispute that some payment was due for the work which Colin Todd performed for the company. It was the size of the payments and their apparently rapid escalation in size (87.5% over three years) which was challenged as unreasonable. The increase does seem to be in excess of what most people in employment or self employed might have expected over a similar period but the only independent evidence about the reasonableness of the payments came from Gilbert Andrew. He said the payments were within the range of what might reasonably be charged in similar companies. There was no evidence to contradict that save the petitioner's own opinion but, of course, in giving his opinion, Gilbert Andrew was relying on information provided to him by Colin Todd as to the time spent on the company's business. In these circumstances I am unable to find in fact whether or not the fees paid are reasonable.
[25] Another area of criticism by the petitioner was the way in which the company accounted for the PAYE due by its employees. It was undisputed that this was underpaid during each financial year resulting in the need for a balancing payment after the year end and the payment of interest to the Inland Revenue. The evidence was that Colin Todd operated a "Sage" accounting system which calculated the monthly payment due. For reasons which were unexplained that figure was not passed monthly to Margaret Todd who made the payments. Sometimes substantial arrears accrued. This was yet another aspect of the casual management of the company's affairs.
[26] After the discovery of the misappropriation of funds BDO required to restate the company's accounts for the relevant years. They also prepared a report (Production No. 6/2) which examined the issue of whether there have been any other funds diverted and whether there have been any other material misstatements in the Company's accounts in the four years to 30 June 2004. The conclusions of the report were that the £55,099.32 disclosed by Colin Todd and Laurence Todd was an accurate statement of the funds that had been misappropriated and that no further funds had been misappropriated and that the accounts were free from any other material misstatements. Counsel for the respondents submitted that I should find in fact that these conclusions were accurate. I am not prepared to do that. The BDO report relies heavily on the information provided by Colin Todd who had, of course, concealed the misappropriation in the first place. It records that the accounting records of the company are extremely basic and that there was "in the main no documentary evidence to back up the expenditure" in cash to pay sub-contractors. There was no evidence that any substantial independent checks into the considerable expenditure involved (£31,548) had been made. I also had regard to the fact that, in terms of section 249A(1) of the 1985 Act the company did not have its financial statements audited. I accepted Mr Andrew's evidence that this was now normal for small companies such as the company. But it does have the disadvantage that a less rigorous standard of examination of the company's records takes place. Much dependence is placed on the information provided by directors. That makes it easier for dishonest misappropriation to go unnoticed; as happened in the case of the company between 2001 and 2004. In all these circumstances, while it is certainly possible that the BDO conclusions are accurate it cannot, on balance, be said to be probable.
(e) The value of the company
[27] Parties differed as to the value to be placed on the company. Both led evidence in support of different values. (It was conceded by the respondents, as a matter of fact though not of law, that, if any order for the purchase of the petitioner's shares was made, their value should not be discounted to take account of the fact that she had a minority holding.) The evidence about value came almost exclusively from two sources, Mr Ranachan and Mr Fingland. It was not easy to assess for a variety of reasons. Although each was valuing essentially the same entity they approached their task from different directions.
[28] Mr Fingland valued the company whose only real asset was the home. His valuation was set out in his report (Production No. 6/20) and valued the company at £591,500 as at 24 November 2005. He did not depart from that valuation as at the date of his evidence on 31 May 2006. His methodology was to value the company on both an earnings basis and an asset basis and to average these. The earnings basis was an estimate of the price which a willing buyer would pay a willing seller for the company. It was a multiple of the anticipated future profits of the company (its future maintainable earnings) which Mr Fingland estimated at £100,000. To that figure was applied a multiplier (a price/earnings ratio) which took into account the risks associated with buying the company. Mr Fingland calculated that from a consideration of his own firm's Private Company Price Index which drew on data relating to sales of private companies. Although the latest data (for the second quarter of 2005) indicated an average price/earnings ratio of 14, Mr Fingland was of the opinion that the appropriate figure for the company would be 6 because of risks associated with a small company with a single outlet. The earnings basis valuation was accordingly £600,000. The asset basis valuation was arrived at by taking the latest balance sheet information (as at 30 June 2005) and adjusting any book values to reflect the position at the date of valuation. The most significant of these was the value of the Sanquhar premises which had been valued by D M Hall & Son, Chartered Surveyors on 29 April 2004 at £1,200,000 (Production No 6/11). Following these adjustments the net asset value of the company was £583,000. Mr Fingland was of the opinion that a weighting of 50% should be given to each of the valuation methods producing a value for the company of £591,500.
[29] Mr Ranachan's approach was different and is contained in his report (Production No. 5/30). This valued the market value of the home ("market value" being defined as "the estimated amount for which a property would exchange on the date of the valuation, between a willing buyer and willing seller in an arms-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and without compulsion") at £1,550,000 as at 30 January 2006. Mr Ranachan gave his evidence on 30 May 2006 and did not suggest that the passage of time since January had materially altered his valuation. He made various assumptions about bed occupancy in the home and the rates charged for that occupancy. He relied on prices obtained from sales of broadly similar homes in other parts of Scotland as a comparison as a basis for his opinion of the value of the Sanquhar home. Like Mr Fingland, Mr Ranachan relied on his company's own index of average sale prices which had shown significant rises in recent years (2003 and 2004). His methodology was a variation of the earnings basis which had formed part of Mr Fingland's calculation. Mr Ranachan extrapolated from the turnover to June 2005 (£790,215) a likely future turnover (£826,524) which was in turn reduced to a figure of £217,524 which represented "earnings before interest, taxes, depreciation and amortization". He then applied to that figure a multiplier of 7.1 (equating to a 14.1% yield) arriving at the value of £1,550,000. The multiplier was, he said, based on his knowledge of the market but with particular reference to the recent sales of two other nursing homes where multipliers of 7.27 and 7.2 had been achieved.
[30] Much of the examination and cross examination of Mr Fingland and Mr Ranachan and the analysis of their evidence by both counsel consisted of testing, challenging and comparing their respective methodologies, and the assumptions which they had made. Differences of the timing of their valuations were raised. For example, Mr Fingland's choice of multiplier was criticised because of the generality of the base sample on which his firm's index relied. It did not relate solely to nursing home businesses. But there was also criticism of the narrow base of comparatives used by Mr Ranachan - one in Dumfries and one in Fortrose. There was clearly a considerable difference (£350,000) in the value of the main asset - the home itself. In part that may be explained by the difference in the valuation dates, 29 April 2004 and 30 January 2006, but there was also the factor that the D M Hall valuation had assumed the completion of the new extension while Mr Ranachan's had the apparent advantage of its being completed.
[31] There was no question of either of these witnesses being incredible, in the sense of not telling the truth, or unreliable, in the sense of either proceeding on the basis of wholly unsupportable assumptions. The differences between them were very much those of emphasis and a difference of professional opinion. Each was able to explain why their methodology and assumptions were to be preferred and why those of the other witness should not be. An unconvincing aspect of Mr Fingland's evidence was why he had chosen a multiplier of 6. It was considerably at variance with the average which his firm's survey produced. On the other hand the evidence about the comparatives used by Mr Ranachan did not suggest that either was directly comparable to the Sanquhar home. The one in Dumfries seemed to be of a different character and the other was in a very different part of Scotland. Another significant aspect of trying to assess all this evidence was, inevitably given the period over which the proof extended, the passage of time and the effect which that might have on both valuations. Mr Ranachan's evidence was of growth in the market for nursing homes. Mr Fingland had not revisited that issue either with D M Hall in 2005 or since producing his report.
[32] Given this evidential background I am hesitant about making any finding in fact about the present value of the company. I think it is probable that it is worth more than the £591,000 placed on it by Mr Fingland or the £600,000 which formed the basis of the respondents' offer. I reach that conclusion because of the more up to date valuation of the business relied on by Mr Ranachan and the fact that it is supported, whatever the imperfections, by comparatives in the same sector of business. If accepted, that would add, even allowing for capital gains tax on disposal, about £200,000 to Mr Fingland's asset valuation. Similarly, while Mr Fingland reached a different future sustainable profits figure (£100,000) than Mr Ranachan's analogous figure for "earnings before interest, taxes, depreciation and amortization" (£217,524) there was no convincing explanation why he had chosen a multiplier of 6. If Mr Ranachan's 7.1 had been applied that would have produced an earnings valuation of £710,000, and increase of £110,000. Applying the same weighting between the valuations would have increased the company's value by £155,000. I set the matter out in this way not to reach any definite conclusion that these calculations, with their various permutations, are the answer to finding a definitive "value" for the company but to illustrate the difficulty in establishing that "value" with any accuracy where there are genuine disagreements between experts made in good faith. All any expert can do, and this is inherent in any "willing buyer and willing seller" approach, is give an informed opinion about what price might be reached in the market.
[33] Overlying all this is a general assumption made by both Mr Fingland and Mr Ranachan that the company's accounts accurately represent the financial position of the company. As I have already discussed that is dependent on the information supplied to the company's accountants by Colin Todd. Again for the reasons I have discussed that is an assumption which, on the balance of probabilities, I am not prepared to regard as accurate. It casts further doubt on both valuations which were spoken to the extent that neither is likely to be an underestimate of the company's value.
[34] For these reasons I have restricted my findings about the company's likely value to Findings in Fact Nos 45- 48.
(f) The respondents' offers to purchase the petitioner's shares and her response to that
[35] Soon after the discovery of the misappropriation by Colin Todd and Laurence Todd, they attempted to resolve the dispute with the petitioner by offering to buy her shares. The history of these attempts is set out in Finding in Fact No. 49. There is little dispute about what has been offered. The petitioner has refused to accept the best and most recent of these offers, £150,000, which is based on Mr Fingland's valuation of the company. As already discussed that offer values the petitioner's 25% share pro rata with no discount to reflect her minority holding. The principal area of dispute is whether the petitioner is acting reasonably in refusing that offer. This raises several issues. Firstly what is the petitioner's attitude to the offer and what underlies her refusal and secondly, which is properly a mixed question of fact and law, whether that attitude and refusal are reasonable. As to the first, her evidence was quite uncompromising that she did not want to accept the offer but was more ambivalent about whether the offer was reasonable. She simply did not believe and, it was quite clear from her evidence, would never accept that Colin Todd was telling the truth about the payments which he said had been made on the company's behalf. She did not believe that the company's accounts correctly represented the company's financial position; nor did she trust Colin Todd not to abuse company funds in the future. On the other hand she herself had sought to purchase the respondents' shares in the company (Notes 180-189 and Production No. 6/) and so had placed a value on it. Her offer seems to have been based on the earlier offer from the respondents of £100,000. But the passages of evidence to which I have referred raised the question of what was the petitioner's true motivation in pursuing the present action, the suggestion being that this was not to realise the value of her interest in the company but to gain control of it. I think there is an element of truth in that. But the two issues cannot be separated. She wants her value but she clearly feels that this can only properly be assessed and realised by the liquidation of the company or the sale of its business. That might provide her with the opportunity of acquiring the business at a value tested by exposure to the market.
[36] The reasonableness of the petitioner's position has to be viewed against the factual background of the management of the company which I have described; particularly where that management can be said to affect the company's value or affect the view which a reasonable observer might take of that. The test has to be an objective one, putting aside the parties' personal relationship. The principal factors which the objective observer would properly have in mind are (a) the dishonest actings of those who controlled the company at the time and continue to do so, (b) the way the company continues to be run and the possibility for future irregularity, (c) the mixed and irreconcilable evidence about the value of the company and the business which it runs, (d) the reliance in fixing any such value on the assurances of the principal author of the misappropriation and, to some extent at least, (e) the historical nature of some of the factual assumptions lying behind any valuation. I suppose that, in certain circumstances, these might be balanced by the fact that no discount was being applied to reflect the petitioner's minority holding but, given the concession made by counsel for the respondents, that is not something which is relevant here if the other factors, in themselves, point to the reasonableness of the petitioner's attitude. In my opinion they do. There are reasonable doubts about the company's value at the present time. There is disagreement between experts who have considered the issue. There are question marks about the validity of the information provided by or which might be provided by the present directors to whoever has carried out or might carry out any valuation. Any reasonable person would be entitled to entertain a serious doubt about whether the present offer of £150,000 properly represented the company's value or their interest in it. Viewed in that light the petitioner's refusal of the offer of £150,000 is not unreasonable.
[37] Of course the present offer of £150,000 goes beyond that. The respondents hold out the further offer of an independent valuation. Is the petitioner reasonable to reject that? For largely the same reasons I have just discussed I think she is. Any such valuation would again have to rely on the assurances of Colin Todd about the substantial un-vouched expenditure which is a striking feature of the conduct of the company's affairs. I think that I am entitled to infer that any independent or third party accountant would be in no better position to resolve that matter than was Mr Andrew or, indeed, the court after an opportunity for the presentation of evidence on these matters which extended over thirteen months.
(g) Potential consequences of any liquidation
[38] It was submitted by counsel for the respondents that the winding-up of the company would result in the extinction of a viable and profitable company which employs about 50 people and cares for about 37 residents. There was no evidence to support that. A liquidator can continue a company's business. Certainly any liquidator would require to consider whether or not to sell the business which the company runs. If he were to do that as a going concern retention of the staff and the residents would be likely. The D M Hall report (Production No. 6/11) shows a considerable difference in the likely value of the business if the home was sold as a going concern (£1,200,000) and with the business closed (£575,000). On that evidence is not possible to infer that the appointment of a liquidator is likely to result in the closure of the business. Indeed it is difficult to see that any liquidator would be carrying out his duties to any creditors of the company or the shareholders by doing so.
Disputed Issues of Law and the Remedies Sought by the Petitioner
(a) The irrelevance and incompetence of the petitioner's crave for the liquidation of the company
Parties' Submissions
[39] It is perhaps convenient to deal first of all with the respondents' argument that the petitioner's crave for the winding-up of the company is both irrelevant and incompetent in the context of the present proceedings. Counsel's argument was that the present application was unambiguously framed as a petition for relief under and in terms of section 459 of the 1985 Act (Article 1 of the condescendence). However, the principal remedy sought by the petitioner was the winding-up of the company. That remedy was not available under sections 459 and 461 of the 1985 Act (Gower & Davies p526 and Law Commission Report, Shareholder Remedies para 4.24). Accordingly the winding-up remedy was excluded and the petitioner's case, in so far as directed towards achieving this remedy, was irrelevant. Although the petitioner made reference to section 122(1)(g) of the 1986 Act in her pleadings, such an application would have to be brought by way of a petition under the Sheriff Court Company Insolvency Rules 1986, and not by way of a summary application as with the matter presently before the court (cf Jamieson para 17-23). While the petitioner submitted that the second, third and fourth craves (and the pleadings supporting them) amounted to an "alternative" case under section 459 of 1985 Act (presumably in contradistinction to a case for winding-up), the petition has not been pled in this manner. It was, in its totality, an application under section 459 of the 1985 Act.
[40] Counsel for the respondents accepted that winding-up was not a remedy available in terms of section 459. He also accepted that article 1 of the condescendence, which deals with jurisdiction, referred only to section 459 and not to section 122(1)(g). But that could not be looked at in isolation. Crave 1, in which the winding-up order was sought made reference to section 122(1)(g); as did article 10 of the condescendence; and the petitioner's third plea in law was founded on it. The respondents were well aware that the remedy was sought and dealt with the matter in their fourth and fifth pleas in law. Both the 1985 Act and the 1986 Act referred to "petitions". In the Sheriff Court "petitions" proceeded as summary applications. There was no objection to combining a request for remedies under both Acts in one petition. That had been done in, for example, Jesner v Jarrad Properties Ltd.
Discussion
[41] In my opinion the point taken by counsel for the respondents has no merit. A petition for the winding-up of a company in terms of section 122(1)(g) of the 1986 Act is properly brought as a summary application; and the same petition can seek relief in terms of section 459 of the 1985 Act. It is probably true that the petitioner's pleadings directed to jurisdiction should have referred to all the statutory provisions which underlay the petition; so that the matter is precisely pled and that any preliminary challenge (as in fact occurred in the present case) can be clearly identified and dealt with at the start of proceedings without unnecessary expense bring incurred. But if the petition is viewed as a whole the winding-up remedy and its basis is clear. The commentary in Gower & Davies, it seems to me, is designed to make clear that, despite the apparent generality of the discretion accorded to the court in section 461 (2) of the 1986 Act, it does not extend to winding-up. (It may be worth noting, however that in Re Full Cup International Trading Ltd), an application for relief in terms of sections 459 and 461, the High Court in England (Ferris J) held that no relief would meet the justice of the cause or be more advantageous other a winding-up and the petitioner was allowed to amend his petition to seek a winding-up order.) In my opinion the restriction of the court's discretion referred to in Gower & Davies does not mean that the alternative remedy of winding-up cannot be sought at the same time and in the same process if that is procedurally possible. In my opinion it is.
[42] The wide jurisdiction of the Sheriff Court to deal with a great variety of business in a summary manner is referred to in Macphail (paras 5.09 and 26.01). Many such applications are statutory. Sometimes the statute refers specifically to review or appeal by way of summary application; sometimes it does not (Jamieson para 17-01). The Act of Sederunt (Summary Application, Statutory Application and Appeals etc. Rules) 1999 lays down the procedure which such applications should follow. It contains general provisions which apply to all such applications and provisions relevant to applications brought under particular statutes (including prescribing information which such applications shall contain). Sometimes these provisions are supplemented by provisions in the principal statute or other subordinate legislation. Both section 459 and section 122(1)(g) provide that the remedies which they allow shall be by way of petition. No further provision is made as to form except that, for petitions to wind up a company, rule 18 of the Sheriff Court Insolvency Rules 1986 prescribes certain information which any such petition shall contain (in much the same manner as does the 1999 Act of Sederunt for a variety of other statutory applications).
[43] The reference in Jamieson (para 17-23) to section 459 petitions being summary applications does not, in my opinion, exclude petitions under section 122(1)(g) being such. They are simply referred to by the author as an example. In para 17-21 he states that most applications under the 1985 Act are made by way of summary application despite there being no direction in the Act that they be treated as such. I see no reason to treat applications under the 1986 Act differently. They are applications under statute. Most statutory applications to the Sheriff Court are treated as summary applications. There is no provision that they are to be otherwise treated. The label of "petition" is irrelevant as petitions under section 459 show.
[44] Even if I am mistaken as to the character of a petition for winding-up in terms of section 122(1)(g) of the 1986 Act, a request for that remedy may competently be sought in and combined with a petition for relief under section 459. That is exactly what we have here. The factual background on which both the remedies are said to be based is largely the same. There would be little sense in compelling the petitioner to raise two separate actions by differing procedures. That would involve unnecessary additional expense in an area where the courts should encourage the parties to avoid "the expense of money and spirit" (cf. ONeill v Philips per Lord Hoffmann at 1107 H). There is no reason why the request for such remedies cannot be combined and the summary application procedure applicable to at least one followed. Any difficulty caused by the fact that evidence is not normally recorded in summary applications and any consequent restriction on an appeal on questions of fact is easily dealt with (cf. Director of Fair Trading v Boswell 1979 S.L.T. (Sh. Ct.) 9 per Sheriff Principal Reid at page 11); and that in fact happened in the present case.
(b) The petitioner's crave for liquidation
Parties' Submissions
[45] Counsel for the petitioner submitted, by reference to section 122 of the 1986 Act, that it was just and equitable that the company should be wound up. That could be established if there was a justifiable lack of confidence on the part of the petitioning member in the conduct and management of the company's affairs resulting from a lack of probity or material disregard for the terms of the company's articles (Palmer 8.1004; Loch v Blackwood and Lees v Baird). These principles applied to any company. Any shareholder was entitled to expect certain standards. The misappropriation of the funds clearly demonstrated a lack of probity. That was not disputed. There had been a failure to pay a dividend. The company had been managed by Colin Todd as if it were his own company as evidenced by the payments to Belleaire, the informality of paying contractors, the lack of proper record keeping and the unjustified management fees. In addition Colin Todd's persistent failure to distinguish in his actings between the interests and assets of the company and his personal interests and assets, his disregard of the company's obligation to pay PAYE timeously and his responsibility for the company incurring annual liabilities to the Revenue for interest, Colin Todd and Laurence Todd's approval of the breach of the interim interdicts granted by the Court and their conduct in participating in, or approving, the various transactions in which payments were made to Costcutter during 2006. In light of the previous admitted misappropriation of funds belonging to the company, it was difficult to conceive of conduct more calculated to destroy any remnant of trust the petitioner may have had in the proper conduct of the company's affairs than those payments to Costcutter and the failure to provide any adequate accounting for those funds. These facts on their own established lack of probity and made it just and equitable to wind up the company.
[46] Additionally, even if there was no improbity or breach of the articles, winding-up would be just and equitable if the company was formed or continued as a quasi partnership and either the petitioner has been excluded from the management of the company or the mutual confidence between the petitioner and the majority shareholders has been destroyed (Ebrahimi v Westbourne Galleries Ltd and Jesner v Jarrad Properties Ltd). The petitioner's confidence had been lost because of the actings of the other shareholders and directors. In Jesner v Jarrad Properties Ltd the defenders had been prepared to give an undertaking for the future that the company would be run in accordance with the principles of company law. That had not persuaded the minority shareholders that they could be confident in the future management of the company. Suspicions still existed. In these circumstances the court ordered the winding-up of the company. The position was similar in the present case. It was clear from the petitioner's evidence that there was an irretrievable break down of confidence and trust because of the actings of the majority shareholders. In addition it was submitted that the petitioner had been excluded from the management of the company.
[47] Counsel recognised that, in terms of section 125 of the 1986 Act, the petitioner was not entitled to a winding-up order if there was another remedy available to her and that she was acting unreasonably in seeking to have the company wound up rather than pursue that other remedy. That other remedy was, as offered by the respondents, the purchase of her shares. Counsel submitted, however, that it was not unreasonable for the petitioner to refuse such an offer and seek winding-up if there had been a complete breakdown in confidence between the parties as a result of the conduct of the majority (Palmer para 8.1007, Vujnovich -v- Vujnovich, Hyndman -v- RC Hyndman Ltd. And Re Worldhams Park Golf Course Ltd). That breakdown was clear from the petitioner's evidence. It was justified by the behaviour of the respondents. Any suggestion that the withdrawal of funds from the partnership between the petitioner and Colin Todd when they separated in 2000 was relevant was mistaken. There was no evidence that it was improper and it was not causative in relation to the company and the breakdown of confidence on the petitioner's part. It was reasonable for the court to take the view that even if there was a counter allegation against the petitioner, and mutual confidence had been destroyed, an order for the purchase of shares was not reasonable; and so it was not unreasonable for the petitioner to seek winding-up. (Vujnovich 232b-233b). If the circumstances clearly justified winding-up, as in the present case where there was a clear lack of probity, it was not reasonable to require the petitioner to pursue an order for the purchase of her shares. The circumstances indicated that winding-up was both appropriate and inevitable. In Hyndman the only crave was for a winding-up order. It was held not unreasonable to insist on that. In Worldhams Park Golf Course Ltd there was dishonest taking of money which was the property of the company. It was held that this alone "without further ado" (555h) would justify the winding-up of the company. Gross misconduct, of the sort practised by the respondents in the present case, justified winding-up. In these circumstances it was not unreasonable for the petitioner to insist on winding-up whether or not another remedy existed.
[48] The situation where a complete breakdown of confidence resulting from gross misconduct, dishonesty or improbity had to be contrasted with other circumstances in which it might be unreasonable to insist upon winding-up although such an order might be just and reasonable. That could be the situation if an offer has been made by the majority to purchase the petitioner's shares. But if the offer was either at a fixed price or at a price to be determined by some mechanism proposed by the majority and (i) the fixed price was unreasonable or (ii) the mechanism proposed was less suitable than liquidation for the determination of disputes between the parties as to the true assets and value of the company or (iii) an offer made after proceedings have been instituted did not include the expenses of the petition to date it would not be unreasonable to refuse it and insist on winding-up (O'Neill -v- Phillips, Virdi -v- Abbey Leisure Ltd and Re Full Cup International Trading Ltd). The petitioner had received two offers. That for £125,000 was clearly unreasonable as demonstrated by the valuation of the company by BDO and the later increased offer of £150,000. So the relevant offer was that for £150,000 or the offer of a valuation by a chartered accountant. There was no evidence that the expenses of the petition to date had ever been offered. In O'Neill -v- Phillips the petitioner was not seeking the liquidation of the company but relief under section 459. Improbity or breach of any agreement was not established but Lord Hoffman (1101 H) said that a power to wind up on the just and equitable ground would exist if "a majority had used its legal powers to maintain the association in circumstances to which the minority can reasonably say it did not agree". That was not the position in O'Neill -v- Phillips where what was established was a simple breakdown in trust and confidence between the parties which could not be attributed to the conduct of the majority. But Lord Hoffman said that in such circumstances, where the majority shareholder wants to put an end to the association, "it will almost always be unfair for the minority shareholder to be excluded without an offer to buy his shares or some other fair arrangement........If the respondent to a petition has plainly made a reasonable offer, then the exclusion as such will not be unfairly prejudicial" (1107A-C). The requisites of such a reasonable offer were set out by Lord Hoffman at 1107C to 1108 B. These included an offer of costs. Counsel also submitted that the valuation method referred to by Lord Hoffman presupposed that there was no material legal question about what the company's assets were or what they were worth. In the present case there had been no offer of costs and there was a dispute about the value of the nursing home and whether all the sums said to have been expended on the extension had in fact been spent for that purpose. In these circumstances the price offered could not be reasonable. Such disputes existed in Virdi -v- Abbey Leisure Ltd where the court granted the winding-up order. Balcome LJ said (350 b) "There is machinery available in a winding-up of the company for the proper determination of these claims. This must be preferable to the estimate of their worth by an accountant". The nature of the dispute in Virdi -v- Abbey Leisure Ltd differed from the present case but the circumstances here were more compelling. One of the matters in dispute was whether large sums had in fact been paid for the company's benefit or for that of the majority shareholders or one of them. A liquidator was equipped to determine that matter in a way in which an independent accountant acting as an expert could not. The difficulties of the court attempting to determine a value for the company's assets were illustrated by Re Full Cup International Trading Ltd. That too was a petition under section 459 where an order for the purchase of shares was sought. Ferris J concluded (694 B-C) that "a liquidator would, in my view, be in a better position to carry out investigations into the facts and to arrive at the proper return (if any) which is due to the petitioner that the court would be in as a result of an order under s. 461 directing the necessary accounts and enquiries". Given the dispute over the value of the nursing home and over the unvouched payments made at the time of the extension of the home, the court could not and should not determine these matters but allow a liquidator to do so.
[49] In summary counsel submitted that it was not unreasonable of the petitioner to refuse the offers to purchase her shares made by the respondents as (a) the valuation of her shares at £150,000 is unreasonable. It undervalued the home as an asset and was dependent on the assurance of Colin Todd that the company's accounts now present a true and fair view of its financial position. In fact the value of the home was at least £1,500,000 and the petitioner could not in the circumstances reasonably be expected to rely upon the unvouched assurance of Colin Todd that the accounts are accurate, (b) an independent accountant appointed in the circumstances proposed would be in no better a position that BDO to investigate the transactions challenged by the petitioner, would have no power to recover funds improperly taken from the company, and would have no power to question witnesses (only a liquidator would have the powers required to enable the company's true financial position to be established) and (c) neither offer makes provision for the petitioner's expenses.
[50] It was true that the company was solvent but that was not a factor weighing against it being just and equitable to wind up the company but rather is a necessary condition of the petitioner's entitlement to seek that remedy (Palmer para 15.228).
[51] Counsel for the respondents did not seek to argue that the misappropriation of the funds by Colin Todd and Laurence Todd demonstrated other than a lack of probity. He submitted, however, that winding-up would be an inappropriate remedy in the circumstances of the case. Section 125(2) imposed several hurdles for anyone seeking a winding-up on a joint and several basis. First, the petitioner must establish grounds that the court recognised as founding a relevant case for a just and equitable winding-up. Second, if the petitioner had another remedy which would achieve the same end, the court would only grant the winding-up if the petitioner was not acting unreasonably in failing to pursue that alternative remedy (Palmer para 8.1008). In the present circumstances, the petitioner had alternative remedies and was unreasonable in not pursuing them. Palmer spoke of "a heavy onus on the petitioner under section 122(1)(g) to explain why it is reasonable for him to proceed with the winding-up claim where a section 459 order is available as well". While the petitioner maintained that her purpose in bringing the present application was to try to bring her involvement in the company (at least as presently constituted) to an end there are, however, alternative remedies open to her to achieve this end. It would be open to her (a) to seek to sell her shares in accordance with the offer to purchase made by the first and second respondents on 18 November 2005, (b) to seek to have her shares purchased in accordance with Article 4 of the company's Articles of Association, or (c) on the basis that she maintains that she has been unfairly prejudiced by the actions of the respondents, to seek an order for her shares to be purchased under section 461 of the 1985 Act. The petitioner's insistence upon a winding-up rather than taking any of those alternative routes was also unreasonable. It would result in the extinction of a viable and profitable company, which employs about 50 people and cares for about 37 residents. It was also unreasonable standing the offer that has been made to her to have her shares purchased (Re a company (No 003843 of 1986) per Millet J at 566 e-i and 571 c-f). The petitioner had failed to meet the test imposed by section 125 and was barred from insisting on the winding-up.
[52] Counsel further submitted that it would not be just and equitable to wind up the company. The respondents accepted that it could be a ground for winding-up a company that a member can demonstrate a justifiable lack of confidence in the conduct of the management and affairs of the company in question (Loch v John Blackwood Limited at page 788). However, in the circumstances of the present case any lack of confidence on the part of the petitioner was not justified. The first and second respondents had acknowledged their wrongful act in diverting funds from the company and had put in place procedures to preclude such activities in the future. The petitioner's apparent ongoing concerns with regard to the management of the company's affairs were simply baseless suspicions that would not be accepted by a reasonable person - her ongoing lack of confidence was not justified by the facts. In any event, it was submitted that it would not be just and equitable to have the company wound up, standing that the petitioner seeks to use the winding-up procedure as a mechanism for obtaining control over the company.
[53] Counsel accepted that, where the court was dealing with a quasi-partnership company, an exclusion from management or a destruction of mutual confidence between the shareholders could, in some circumstances, found a case for a winding-up under section 122(1)(g). However, in the present case, the company was not a quasi-partnership. The respondents accepted that, when the parties first became involved with the company in 1989, it was operated as a quasi-partnership. However, the company ceased to be a quasi-partnership in the course of 1991 (at the time of the first separation of the petitioner and first respondent) or, alternatively, it ceased to be a quasi-partnership in September 2000, when the petitioner left the first respondent for a second time and walked away from her involvement with the company. Accordingly, the company was not a quasi-partnership at the date of the unfairly prejudicial act complained of or at the date of the presentation of the petition (Third v North East Ice & Cold Storage Co Limited per Lord Coulsfield at 1179 B-C to 1180 C). Nor had the petitioner been excluded from the management of the company. The opportunity to be involved was there but she refused to attend meetings. She had simply absented herself from the company's affairs and business; and well before the unauthorised diversion of the funds. Any loss of confidence that she may be able to assert was unjustified and unreasonable and had no proper basis in fact.
Discussion
[54] I appreciate that the evidence in this case was substantial and that I had the benefit of detailed submissions by counsel on both sides which dealt extensively with the relevant law. But underlying the petitioner's case is the stark and simple fact of the indisputable dishonesty of Colin Todd and Laurence Todd in relation to the funds of the company. The petitioner avers "misappropriation" by Colin Todd and Laurence Todd. Counsel for the respondents described what they did as "diversion". That is simply the wrong word to describe their actions. In Re Worldhams Park Golf Course Ltd at 555h Neuberger J characterised "misappropriation" (accurately in my view) as "dishonestly taking money ............which money was the property of the company and which money [the dishonest director] had no right to take". That is exactly the position in the present case. It seems to me that the actions of Colin Todd and Laurence Todd clearly amount to gross misconduct demonstrating a lack of probity in the conduct and management of the company's affairs. It is difficult to see that, in the face of these actions, any member of a company could have confidence, in the future, in the conduct and management of the company's affairs where that conduct and management lies in the hands of those who had misappropriated money on the scale and in the circumstances which existed here. The position might not be the same if future management had been delegated to others or other directors had been appointed in place of Colin Todd and Laurence Todd. But that is very different from the petitioner accepting their evidence that they promise not to act in that way in the future. Nor does the replacement of the funds undo what has happened. The petitioner's lack of confidence is grounded in the conduct of Colin Todd and Laurence Todd in "regard to the company's business" and does not spring "from dissatisfaction from being outvoted on the business affairs or on what is called the domestic policy of the company" (Loch v John Blackwood Limited at 788). For the petitioner any such dissatisfaction came when she attempted to involve herself in board meetings and was outvoted on issues such as Colin Todd's management fee or the payment of a dividend. I agree with Neuberger J (Re Worldhams Park Golf Course Ltd at 555h) that what Colin Todd and Laurence Todd did "in itself, to my mind, without further ado, would justify winding-up the company". It would appear to be just and equitable to do so unless, of course, winding-up was an inappropriate remedy in terms of section 125(2) of the 1986 Act. In reaching this conclusion I follow the approach of Sheriff Evans in Hyndman v RC Hyndman Ltd which, at page 299, he describes as follows:
"The first matter for consideration is whether or not, irrespective of the necessity or reasonableness of seeking a winding-up order, it appears prima facie just and equitable to do so. I realise that the necessity and reasonableness of the order are factors that have a bearing on the ultimate view I take of the matter, but I consider it permissible to form a provisional view on the general equities of the situation before putting these other factors into the balance."
[55] The preliminary conclusion which I have reached that the winding-up of the company is just and equitable has an alternative basis if the company can be regarded as a quasi-partnership. It was accepted on behalf of the respondents that this was the position until the first separation of the petitioner and Colin Todd in 1991 and, possibly until their final separation in 2000. So there is at least an evidential onus on the respondents to lay before the court evidence from which it could be inferred that the position had changed. What characterises the quasi-partnership nature of a company will depend on the circumstances of each case. Relevant considerations are discussed by Lord Coulsfield in Third v North East Ice & Cold Storage Co Limited (1179B-1180B) where he analyses what was said by Lord Wilberforce in Re Westbourne Galleries. At (1179K) he identifies as important "the existence of some form of personal relationship which at least can be seen to give rise to a right in all shareholders, or at least in the petitioners' shareholders, to participate in the conduct of the business." In Third v North East Ice & Cold Storage Co Limited that relationship, and the right of participation which it gave rise to, had been altered by the grant of service contracts to the petitioners which conferred on the majority shareholders the right to exclude the petitioners from involvement in the management of the company by dismissing them. That is quite different from the circumstances of the present case. The petitioner was a party to the purchase of shares in the company when it was acquired. She was involved in its affairs and those of the business which it runs. She remains as a director. No attempt has been made to remove her. The respondents strongly deny that they wish to exclude the petitioner from the management of the company or have ever done so. They have allowed her to participate as a director, albeit on the mistaken basis that Mr Caplan could act as her alternate at board meetings. They insist that she is welcome to attend such meetings in the future. It was only in 2004, after the petitioner resumed her active interest in the company's affairs that she ceased to guarantee personally some of its obligations. All that is quite inconsistent with the notion that there has been such a change in the relationship of the petitioner and the respondents vis-a vis the company which alters its previously accepted quasi-partnership nature.
[56] For a company which is a quasi-partnership the party petitioning for a winding-up does not require to prove the improbity which I have found existed in the behaviour of Colin Todd and Laurence Todd. It is sufficient that the petitioner establishes a genuine breakdown in mutual confidence due to actings of the respondents for which the petitioner is not responsible (Jesner v Jarrad Properties Ltd per Lord Morrison at 93 A-B). I agree with the conclusion of Sheriff Evans in Hyndman v RC Hyndman Ltd (page 298) that "mere suspicion of wrongdoing may suffice if it leads to a justified lack of confidence in the way the company is being run". Of course proof of improbity will confirm such suspicion. In the present case, the petitioner offers to prove more. There is the general informality with which the company's affairs are conducted. No dividend has been paid although Colin Todd receives substantial management fees. Substantial payments are made by the company which are difficult or impossible to vouch. These include payments to another business run by Colin Todd where what many of the payments represent is vouched only by what he says. There is no satisfactory explanation for the damage to and disappearance of parts of the company's petty cash book. A system of purchasing goods and obtaining petty cash continues to be operated against the background of proved circumstances (the admitted misappropriation of the company's money) where suspicion of wrongdoing is difficult to exclude and so may reasonably arise; and in defiance of an interim interdict which restrained such transactions. None of these are the responsibility of the petitioner. In my opinion, though no actual wrongdoing has been established, these various acts on their own would justify the petitioner's lack of confidence in Colin Todd and Laurence Todd and the way they run the company and the genuine breakdown in mutual confidence referred to in Jesner v Jarrad Properties Ltd. Combined with and set against the background of the proven wrongdoing any confidence which the petitioner might have had has genuinely broken down and can fairly be described as justifiably destroyed.
[57] I have found in fact that the petitioner was not excluded from the management of the company and so do not need to consider if that circumstance would have led to the conclusion that it was just and equitable that the company be wound up.
[58] Before a final conclusion can be reached that it is just and equitable to wind up the company the provisions of section 125(2) of the 1986 Act must be applied. Is the petitioner entitled to relief by any other means or is there any remedy available to her? If so, is she acting unreasonably in seeking to have the company wound up rather that pursue that other remedy? The remedy suggested by the respondents is that they should purchase the petitioner's shares and they have offered to do so either for £150,000 or as independently valued. In many cases it might be regarded as unreasonable for the petitioner to refuse such an offer and insist on winding-up. That was the position in Re a company (No 003843 of 1986) where Millet J refused to allow the winding-up. His reasons are found at 571a-e:
"I turn to the application to stay the petition on the ground that the offer ought to be taken up. I will deal first of all with the application for winding-up; in my judgment, it is now manifestly unreasonable for the petitioners to continue to press for a winding-up order. That would give them a financial remedy only, but it would be a financial remedy which would inevitably result in a later payment of a lesser sum that could be obtained from the offer that has been made. For authority that the court will intervene in a situation like the present to stay the proceedings once an offer to buy out has been made, see Re a company (No 002567 of 1982) [1983] BCLC 151, 2 All ER 854, a decision of Vinelott J.
In answer to that counsel for the petitioners (Mr Jefferis), argued that, because there was suspicion of misfeasance and misappropriation, it was not possible to say that the petitioners had made a fair offer. In my judgment there is nothing in that point. The terms of the offer that I have read ensure that both sides will have an opportunity to have access to all the company's books and papers and to make whatever representations they wish to the independent accountants. In case there is any doubt about it, I should make it absolutely clear that, in my judgment, if the accountants have any reason to think that there has been any misappropriation or misapplication of the company's assets which would have the effect of depreciating the value of the petitioner's interest, then they will have to take that into account in valuing the company. So I would unquestionably stay or adjourn the petition in so far as it seeks a winding-up."
Superficially Millet J's reasoning might seem to apply to the present case. But there are significant differences. While the petitioner is seeking a financial remedy in the sense of the full value of her interest in the company, it is not the case that winding-up would inevitably result in payment of a lesser sum. There are genuine issues and differences about the value of the company and its assets which could result in the value of her interest being more than the sum offered. There is more that a suspicion of misappropriation in the present case. It has happened. And the difficulty for any accountant in valuing the company accurately is the need to rely on the word of Colin Todd against a background of previous dishonesty and unvouched expenditure in circumstances and working practices where further misappropriation is at least possible.
[59] In my opinion it is not unreasonable for the petitioner to reject the offers made and insist on winding-up. The petitioner cannot tell and may never know if the offer made is reasonable or represents a fair value. There is opinion evidence which suggests otherwise and which, in my opinion, provides as probable an estimate of the company's value as the valuation on which the offer is made. The need to rely on the word of Colin Todd and the informal and unvouched way in which company funds have been disbursed ensure that. It is another aspect of the complete breakdown in confidence to which I have already referred. In such circumstances a refusal to accept the purchase offer is not unreasonable (Palmer, Para 8.1007). As to the further offer of valuation by an independent accountant in my view the petitioner's rejection of that cannot be said to be unreasonable. Any such accountant would be in no better position than BDO to go behind what Colin Todd might tell them about the company's expenditure and financial position. He would really be in no better position to resolve the differences of opinion which exist about the value of the company's assets. As was pointed out in Virdi v Abbey Leisure Ltd (Balcolmbe LJ at 348e) he would not be obliged to hear and determine any disputes between the petitioner and the respondents. I respectfully agree with Ferris J in Re Full Cup International Trading Ltd where he says at 694B:
"I do not suggest that a liquidation would be straightforward, but a liquidator would, in my view, be in a better position to carry out investigations into the facts and arrive at the proper return (if any) which is due to the petitioner than the court would be as a result of an order under s. 461 directing the necessary accounts and enquiries."
It seems to me that these remarks apply with equal force to any accountant appointed as suggested by the respondents or appointed by the court. And, of course, a liquidator could resolve any doubt about market value by selling the company's business on the open market to a willing buyer. That is also a factor which the petitioner is entitled to take into account in the circumstances of this case.
[60] A further aspect of the unreasonableness of the petitioner's refusal of the respondents' offer is the question of expenses. Any offer to purchase made after proceedings have been commenced should generally be accompanied by an offer of costs (O'Neill v Phillips per Lord Hoffman at 1171A). That may not always be necessary but in the present case there seems no reason why the petitioner could not reasonably have expected such an offer. It could have been made at any time in the proceedings but was not. On its own the failure to offer costs might not have been sufficient to entitle the petitioner reasonably to refuse the respondents' offer but it is an additional factor which goes to establish that her refusal is not unreasonable.
(c) The petitioner's craves in terms of section 459 for the appointment of PKF, Chartered Accountants, to carry out a forensic audit of the company, for the respondents to meet the expenses of that and for payment of interest.
Parties' submissions
[61] As to the petitioner's alternative case under section 459 of the Companies Act 1985, counsel submitted that the petitioner was entitled to insist upon a remedy under section 461 notwithstanding an offer by the majority to purchase her shares if (a) the offer is not reasonable or (b) the offer is made in the course of the proceedings and does not include expenses (O'Neill -v- Phillips). Unauthorised payments to himself by Colin Todd from the company funds controlled by him would amount to conduct unfairly prejudicial to the petitioner (Anderson -v- Hogg). As in Anderson -v- Hogg the payment of the misappropriated funds was not authorised formally or informally. Neither were the unvouched payments in connection with the extension. Nor were the management fees before the matter was considered at the directors' meeting attended by Mr Caplan in 2005.
[62] Counsel submitted that the powers of the Court to grant a remedy under s.461 to a successful petitioner were characterised by their extreme flexibility (Ferguson -v- Maclennan Salmon Co. Ltd 662 D-E). If the court considered that relief ought to be granted under section 459 than it was open to the court to appoint an accountant to audit the accounts of the company. There was a degree of uncertainty as to the company's accounts. Accurate accounts would be required for any proper valuation of the petitioner's shares whether she wished to seek a purchase order or to negotiate a sale. Only an accountant appointed by the court could carry out a proper audit because he would be acting with the authority of the court, particularly in any dealings with third parties. An accountant so appointed would be entitled to apply to the Court subsequently for any additional powers he may consider necessary for the proper fulfilment of his duties, including the power to require production of documents or to examine witnesses. The expenses of the accountant ought to be borne by the first and second respondents as the parties responsible for the appointment being necessary.
[63] Counsel for the respondents submitted that, standing the respondents' offer to purchase the petitioner's shares, the remedies sought under section 459 should be refused. The respondents made an offer to purchase the petitioner's share at a fair price to be determined by an independent expert. The petitioner accepted that the offer made would have resulted in a fair resolution of her dispute with the respondents, but had refused the offer. That was the preferred method of resolving disputes such as had arisen in the present case as was clear in Gower & Davies at page 524:
"...the courts themselves have developed a technique for encouraging an agreed solution to unfair prejudice claims. Where it is clear, as it will normally be, that the relationship between the petitioner and the remainder of the members cannot be reconstituted by the court and that the only effective remedy available to the minority is to have their shares purchased at a fair price, then if a suitable ad hoc offer is made to the petitioner for the purchase of the shares or there is a suitable mechanism to this effect in the company's articles, that will be an abuse of process of the court and the petition will be struck out."
In O'Neill v Phillips Lord Hoffmann (at 1106 H to 1108 C) had set out the criteria for determining what counted as a reasonable offer. These were met in the present case except, perhaps, that relating to an offer of expenses. But that was not always necessary. Firstly, because O'Neill v Phillips makes clear that the need to include expenses within such an offer will depend upon the particular facts and circumstances of the case. Secondly, because in the particular circumstances of the present case the respondents were justified in not including an offer of expenses. The petition was raised without warning and in circumstances in which the respondents, through their agents, had previously suggested attempting to resolve matters by negotiation. The petition, as raised, was incompetent, having been raised in the wrong court - the respondents were entitled to have this point taken before making their formal offer. The petition, as raised, and even once it was in the correct forum, was irrelevant - the petitioner required fundamentally to alter her pleadings before the petition could be addressed and again, the respondents were entitled to have this resolved before making their formal offer. Standing all of this, the respondents were justified in not making their latter offers until they did; in these circumstances, there was no need for the respondents to include a provision for expenses in the offer. At the very most, the respondents submitted that, if the court took the view that the respondents should have addressed the issue of expenses, this should not wholly invalidate the impact of the offer upon these proceedings. Rather, the offer should still bar the petition from insisting upon the winding-up (and the other orders sought), but the court should exercise its discretion with regard to the appropriate award of expenses - for example, ordering that both parties should bear their own expenses or, alternatively, that the petitioner should be entitled to her expenses to the date of the offer and the respondents to the expenses thereafter.
[64] Counsel further submitted that even if the petitioner had established unfair prejudice, which was denied, any remedy must be directed to that prejudice (section 461(1). Accordingly, in determining the nature of the relief, if any, which should be granted under section 461, the Court must address itself to the issue of what is appropriate to relieve the particular prejudice which has been found to exist (Wilson v Jaymarke Estates Limited and another at para [12]). In the present case, the unfairly prejudicial act complained of by the petitioner is the diversion of funds from the company to the benefit of the first and second respondents (and their brother). This prejudice, however, has already been remedied by the repayment of the funds, the undertaking by the first and second respondents to meet any additional tax, interest and penalties and the production of the BDO Stoy Hayward report into the company's accounts. In light of these actions, the craves for the payment of interest, the carrying out of a forensic audit and payment of the costs of that were unnecessary and should be refused.
[65] With particular reference to the additional evidence heard most recently counsel submitted that this added nothing to the principal ground (the diversion of funds) to suggest that the petitioner had been unfairly prejudiced. The petitioner had sought to raise certain suspicions in relation to the conduct of the company's affairs. However, as was plain from the largely unchallenged evidence of the respondents and the evidence of the petitioner herself, the conduct complained of (the use of Costcutter for the purchase of goods and the provision of petty cash, the making of payments without express board authorisation, the payment of PAYE and so forth) was simply a continuation of company practices which were in place when the petitioner was an active director. She did not object to those practices at that time and had taken no steps to have them altered since. In these circumstances, the petitioner had acquiesced in these ongoing practices and was, therefore, not now entitled to complain that they are unfair (Gower & Davies, pages 522-3and Wilson v Jaymarke Estates Limited and another at paras [10]and [13]).
[66] Accordingly, as the prejudice complained of has either been remedied or was not unfairly prejudicial, the petitioner is not entitled to any relief from the Court and the petition falls to be refused.
[67] As a further alternative to the winding-up of the company the petitioner sought payment of interest on (i) the sum of £3,025.39 from 5th June 2002 until 15th August 2005; (ii) the sum of £14,856.85 from 24th April 2003 until 15th August 2005 ; (iii) the sum of £23,640.54 from 11th June 2004 until 15th August 2005; and (iv) the sum of £13,577.54 from 12th November 2004 until 15th August 2005, all at the rate of 8 per cent a year. Counsel for the petitioner submitted that decree in those terms was still appropriate. The petitioner had been unfairly prejudiced by the actings of Colin Todd and Laurence Todd in misappropriating at least £55,099.52. That principal sum had been repaid but no interest has been paid to the company for the period when the company was deprived of the benefit of those funds. The petitioner was entitled to an order that interest is now paid.
[68] Counsel for the respondents deployed the same arguments in relation to this remedy as to the crave for the forensic audit. The prejudice complained of has either been remedied or was not unfairly prejudicial, the petitioner is not entitled to any relief from the Court and the petition fell to be refused.
Discussion
[69] The petitioner's claims for relief in terms of section 459 are in the alternative to seeking a winding-up order. That applies to the crave for payment of interest on the misappropriated funds. I did not understand counsel for the petitioner to be seeking that order in addition to winding-up despite that fact that, though promised, Colin Todd and Laurence Todd had not paid interest to the company. As I intend to grant the winding-up order it is, strictly speaking, unnecessary for me to deal with these alternative arguments. In fact several overlap with the submissions which I have already discussed in relation to winding-up. In case I am mistaken in granting the winding-up order I will deal briefly with them. In my opinion the petitioner has been unfairly prejudiced by the actings of Colin Todd and Laurence Todd. These have affected the accounts of the company and the petitioner's ability accurately to establish what her interest in the company is worth. While the misappropriated funds have been repaid it is not possible to say, even on the balance of probabilities, that the prejudice has been removed. To the extent that the company still lacks the interest on these funds it has not. An order to repay that interest would give relief but would not remedy entirely what the petitioner complains of. I have already explained why, in the context of the petitioner's refusal of the respondents' offer to purchase her shares, the appointment of a liquidator is preferable to establish properly the company's value and realise that for the petitioner. In the absence of a winding-up, however, the appointment of an independent accountant would give some alternative if limited relief in respect of the doubts which the petitioner reasonably harbours about the company's accounts and value. What I have already said about the reasonableness of the petitioner's refusal of the respondents' offers and the lack of an offer of expenses applies with equal force to the application for a section 459 remedy. So, if I had refused the crave for winding-up I would, despite its disadvantages, have ordered the audit the petitioner craves. I would also have ordered repayment to the company of the interest on the misappropriated funds
(d) The petitioner's craves for interdict and interim interdict
[70] Counsel for the petitioner did not seek decree here but submitted that the interim interdicts previously claimed had been necessary and justified. In the context of the substantive remedy now sought permanent interdict was no longer necessary. Counsel for the respondents submitted that the evidence had not established that there was any reasonable basis for seeking the orders; and the petitioner now accepted that they should be refused.
Summary and Result
[71] The petitioner is entitled to seek the winding-up of the company in the present proceedings. The respondents Colin Todd and Laurence Todd have acted in a manner in relation to the management of the company which demonstrates lack of probity. It is just and equitable that the company should be wound up. The company is a quasi-partnership. There has been a complete breakdown of confidence, resulting from the acts of Colin Todd and Laurence Todd, between the petitioner and the majority shareholders. On that basis also it is just and equitable that the company should be wound up. The petitioner is not being unreasonable in insisting on winding-up rather than accepting the offers made to purchase. Accordingly I will repel the respondents' preliminary plea. I will sustain the third plea in law for the petitioner and order that the company be wound up in terms of the first crave of the petition. The remaining pleas in law for the respondents fall to be repelled as do those of the petitioner relating to the interdicts no longer insisted upon. It is unnecessary to deal with the parties remaining pleas in law and the petitioner's remaining craves fall to be dismissed.
[72] I am conscious that the liquidation of the company is likely to be expensive and take some time. That will both delay the realisation of the interest of both the petitioner and the respondent shareholders and diminish to some extent, the value of that interest. Although parties did not press or suggest such a course on me I was attracted by the approach of the court in Jesner v Jarrad Properties Ltd (at 91G-I) to allow, following intimation of my decision and the order that I intend to make, a short period for parties to consider their positions in light of that decision. If, at the continued hearing on expenses, I am asked by both parties in agreement that I should not make the winding-up order I will delay doing so. Otherwise the order will be made.
Expenses
[73] Counsel for the petitioner submitted that the petitioner was entitled to the expenses of the petition if she succeeded either in obtaining the winding-up order or any alternative remedy under section 459. If the respondents succeeded, and no order was made under the petition, the question of expenses should be reserved and a hearing appointed; particularly if the basis of the decision was that the petitioner should have accepted one or other of the offers made to her. The date of any such offer would be of importance in relation to expenses. Counsel for the respondents asked me to reserve the question of expenses. I think that it is better to do that and have fixed a hearing. Both counsel were at one that I should certify the cause as suitable for the employment of junior counsel. I agree that the cause is suitable and have so certified.