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CA/15/14/97

OPINION OF LORD MACFADYEN

in the causes

(1) EUAN WALLACE & PARTNERS,

Pursuers;

against

WESTSCOT HOMES plc,

Defenders:

(2) WILLIAM EUAN ADDISON

WALLACE, Pursuer;

against

JOHN FORSYTH LOUGHRAY,

Defender:

(3) JOHN FORSYTH LOUGHRAY,

Pursuer;

against

WILLIAM EUAN ADDISON WALLACE,

Defender:

(4) WESTSCOT HOMES plc, Pursuers;

against

EUAN WALLACE & PARTNERS and OTHERS,

Defenders:

(5) WESTSCOT HOMES II plc,

Pursuers;

against

EUAN WALLACE & PARTNERS and OTHERS,

Defenders:

________________

Pursuers: A.F. Stewart (for E.W. and E.W.P); Henderson Boyd Jackson, W.S.

Defenders: D Williamson, Solicitor (for W.H., W.H.II and J.L.); McGrigor Donald

23 April 1999

Introduction

The five actions with which this Opinion is concerned arise out of the affairs of two companies set up under the Business Expansion Scheme (BES), namely Westscot Homes plc (WH or "the company") and Westscot Homes II plc (WH II). Their principal activity was the letting of residential property. The prime mover in setting up each of these companies was William Euan Addison Wallace (EW), a Chartered Surveyor. He became managing director of both WH and WH II. At all material times EW was also senior partner in the firm of Euan Wallace & Partners (EWP), Chartered Surveyors. EWP were engaged as property managers by both WH and WH II. The Chairman of WH and WH II from their formation was John Forsyth Loughray (JL). The other directors of WH and WH II were Mr Philip Dry, the companies' solicitor, and Mrs Eileen Goodearl, a partner in EWP. In late May 1996 there developed contention as to the way in which EW and EWP had behaved in relation to the affairs of WH and WH II. In the result, EW resigned his positions as managing director of WH and WH II, and EWP resigned their positions as property managers of WH and WH II. Agreement was reached that EWP would reimburse certain fees which they had charged to WH. In order to enable that to be done JL lent EW the sum of £120,000. EW granted in favour of JL a personal bond in respect of that loan. Various claims and counterclaims were thereafter made, and in that connection the five actions now before me were raised. After sundry procedure they all came to be in dependence on the commercial roll. In each action a proof before answer was allowed, reserving (where there were monetary claims) all questions of quantum. By agreement, a single proof was led dealing with all five actions.

The Claims

It is convenient to summarise at this stage the nature of the claims made in each of the five actions.

(1) In the action at the instance of EWP against WH (the EWP action), EWP conclude -

(a) for declarator that verbal agreements between EWP and WH made on

31 May and 4 June 1996 relating to the reimbursement of fees by EWP to WH were null and void due to force and fear;

(b) for payment by WH to EWP of £187,413 (the amount of the

reimbursed fees) with interest,

(i) on the ground that the reimbursement had been induced by

force and fear, thus entitling EWP to repetition, or

(ii) on the ground that it was agreed that the reimbursed fees

would ultimately be repaid to EWP, or

(iii) on the ground that that sum is due as the agreed, or

alternatively reasonable, remuneration for services rendered; and

or alternatively reasonable, remuneration for further services rendered.

(2) In the action at the instance of EW against JL (the EW action), EW concludes for -

(a) reduction of the personal bond, and of a standard security granted by

EW and his wife in security of the loan, on the ground that they were induced by force and fear;

(b) for reduction of the personal bond so far as it incorporated consent to

registration for execution, on the ground that that consent was given under error induced by misrepresentation,

interdict against further diligence thereon, and for interim suspension and interdict; and

(d) for interdict against enforcement of the standard security, and for

interim interdict.

(3) In the action at the instance of JL against EW (the JL action) -

(a) JL concludes for payment of £120,000, with interest from the date

of citation, as the sum due by EW under the personal bond, and

(b) EW counterclaims for rectification of the personal bond so as to

provide for repayment only on payment by WH to EWP of the fees concluded for in the second conclusion of the EWP action.

(4) In the action at the instance of WH against EWP and EW (the WH action) -

(a) WH craves payment by EWP of £31,534.90, with interest, as the

aggregate of sums allegedly due on various grounds,

(b) EWP counterclaim for payment of £105,253, with interest, as fees

allegedly remaining due under the Property Management Agreement between them and WH, and

expenses allegedly remaining due under the Service Agreement between him and WH.

(5) In the action at the instance of WH II against EWP and EW (the WH II action) -

(a) WH II craves payment by EWP of £23,538, with interest, as the

aggregate of sums allegedly due on various grounds,

(b) EWP counterclaim for payment of £55,900, with interest, as fees

allegedly remaining due under the Property Management Agreement between them and WH II, and

expenses allegedly remaining due under the Service Agreement between him and WH II.

Background

To a substantial extent the background circumstances out of which the disputes with which the present actions are concerned were not in dispute.

In the first place, it is convenient to note the terms on which EW was engaged as managing director of WH and WH II. There were two Service Agreements (documents A1 and A2) in substantially the same terms. Each provided that EW should not be entitled to any remuneration for his service thereunder. That was a BES requirement. Each also provided that EW should be reimbursed all reasonable travelling expenses which he might from time to time be authorised by the board to incur in the execution of his duties. It is unnecessary to set out their other terms.

In the second place, it is convenient to note certain provisions of the Property Management Agreements (documents A3 and A4) by which EWP were engaged by WH and WH II as property managers. Again the two agreements were in generally similar terms. The clauses relating to remuneration contained inter alia provisions which may be summarised as providing for the following fees:

(1) An annual fee of 0.5% of the greater of the capital value of the company's properties or its authorised capital, in respect of the provision and maintenance of various services, payable three monthly in arrears on receipt of a VAT invoice (clause 7.1);

(2) In respect of each residential property purchased by the company on EWP's advice a fee related to the purchase price, falling from 11/2% for one property, through 1% for two or three properties, to 0.75% for four or more properties (clause 7.2);

(3) For each annual valuation report a fee equal to 0.25% of the reported capital value of the properties (clause 7.3); and

(4) For all other work not covered by clauses 7.1 to 7.7 a fee equal to 8% of the rents collected, payable monthly in arrears on presentation of a VAT invoice, with an additional 3% of rents collected payable annually in certain defined events (clause 7.8).

Certain shareholders were concerned about the level of the fees which EWP were receiving from WH. When the initial five year period of the company's trading was drawing to an end, it was necessary to consider what strategy should be adopted in connection with the company's future business. The arrangements required to include an "exit route" by which shareholders who did not wish to retain their investment in the company could realise it. The board of directors took the view that it would be in the best interests of the company and its shareholders to diversify into commercial property. That was not a view with which all shareholders agreed, and in consequence two attempts to deal differently with the company's future were faced by the board. One was an attempt by certain shareholders to secure the carrying at an EGM of a resolution to wind the company up. The other was a hostile take-over bid. Certain work was carried out by EWP for the company in respect of these two matters. The work was not of such a nature that there was provision in the Property Management Agreement for EWP to be remunerated for it. Ad hoc arrangements for such remuneration were made by the board. It is unnecessary to discuss the detail of these arrangements. Once the take-over bid and the winding-up resolution had been defeated, the board was able to resume consideration of future strategy. The course which was ultimately determined upon involved the acquisition of a portfolio of commercial and industrial properties from Allied London & Scottish Properties plc for a consideration of about £12,000,000. That transaction ("the ALP transaction") was to involve a partial buy-back of existing ordinary shares and an underwritten placing of new preference shares for which shareholders were to have priority rights to subscribe. The consideration for the properties to be acquired was to be a mixture of cash and new ordinary shares, and the cash requirement was to be satisfied from bank borrowing and from the proceeds of the preference share issue. It was in the charging of fees by EWP in respect of work allegedly undertaken by them in connection with the development of the strategy that led ultimately to the ALP transaction ("strategy fees") that the principal dispute which underlies the present actions had its origin.

Strategy Fees

It is convenient to begin by recording the strategy fees which were in fact charged by EWP. Between 20 April 1995 and 22 May 1996 some twenty five sums were drawn by EWP on WH. The individual dates and amounts are set out in documents F1 and F2. The total, as shown in document F1, was £187,413 (£159,500 plus VAT). The individual invoices generated by EWP (with the exception of the one in respect of the payment of £8812 (£7500 plus VAT) on 3 April 1996, which appears to be missing) constitute documents F3.1 to F3.25. In each invoice the principal sum claimed (excluding VAT) was a round sum of hundreds or thousands of pounds, and the narrative was in general terms, such as "Additional work re. strategy". The sums were paid by cheques drawn on WH's bank account, and the cheques were signed by EW and Mrs Goodearl (who undertook the day to day property management work on behalf of WH and WH II) as directors of WH. There had at one time been a practice adopted by WH that cheques in favour of EWP had to be countersigned by a non-executive director of WH (normally Mr Dry), but it was accepted that by the material time that practice had been allowed to fall into desuetude. No point was made of the fact that the cheques by which the strategy fees were paid were signed by the directors of WH who were also partners in EWP, except that in these circumstances the mere drawing of the cheques did not bring the making of the payments to the attention of the non-executive directors.

It was EW's evidence that the strategy work was done by EWP. He pointed to the fact that WH had no employees other than himself, and said that the work, so far as done by him, was done in his capacity as a partner in EWP, WH's property advisers, and, so far as not done by him personally, was done by employees of EWP. The work in question involved the inspection and valuation of properties which were being investigated with a view to acquisition in connection with possible diversification of the company's activities, and what EW described as "number crunching". It was illustrated in the section headed "General Matters" in the minute of the board meeting of 22 February 1995 (document C10). It was, EW said, essentially "property advisory work", undertaken for WH by EWP as the company's property advisors. It was not a matter of dispute that EW had undertaken a material amount of work in investigating matters related to the determination of the future strategy to be adopted by WH. It was not, however, accepted by WH that he had undertaken that work in his capacity, through EWP, as the company's property advisor rather than as part of his duties as managing director of the company.

The fundamental dispute about the strategy fees relates to whether the taking of those fees was authorised by the board of WH. It was EW's contention that it was so authorised. Those members of the board who were not also partners in EWP, namely JL and Mr Dry, maintained that there had been no such authorisation. It is necessary to examine in some detail the evidence which bears on that issue. EW relied on three strands of evidence, relating respectively to (i) general discussions at board meetings, (ii) discussions between EW and JL and (iii) the minute of the board meeting of 27 April 1995 (document C2).

EW's position in evidence was that at board meetings he regularly reported on property work which he was undertaking in relation to strategy, and drew attention to the fact that the work had to be done by him and his staff at EWP and that EWP could not undertake such work on a contingency basis, and would therefore have to be remunerated as it was undertaken. He said that these points were received "sympathetically" by the board. He sought to explain the general absence of reference to the matter of strategy fees for EWP in the minutes of board meetings by reference to the fact that the minutes were generally of a formal nature, recording decisions but not the detail of discussion. He was, he said, content to leave the matter on the basis that it had been discussed in general terms.

EW also gave evidence of discussions which he said took place between him and JL at the latter's home. As JL accepted, EW called in at JL's house on the way home from the office quite regularly, and discussion of WH's business took place. There was, however, a substantial difference between EW's evidence and JL's evidence about what was discussed on these occasions. EW said that he kept JL up to date with the strategy work which was being undertaken, and that the question of the payment of fees for that work was addressed. His position appeared to be that by receiving information about the work done, and by doing nothing to stop its continuation, JL impliedly gave authority both for the carrying out of the work and for the charging of fees for it by EWP. JL's evidence, however, was that there was no discussion of the charging of fees by EWP for strategy work, and that he gave no authority for such fees to be charged. Mr Stewart for EWP recognised that there was a clear conflict between EW's evidence and that of JL on this point, and submitted that I should in general prefer the evidence of EW. He submitted that JL's evidence was in general unreliable, and instanced a number of respects in which his memory could be seen to have been defective.

The one board minute on which Mr Stewart relied in support of EWP's contention that the strategy fees had been authorised was that relating to the meeting of 27 April 1995 (document C2). Item 3 of the minute deals with "Managing Director's Report (orally)", and contains a section sub-headed "EGM/Bid Defence/Strategy Costs" which is in the following terms:

"As previously discussed, it was still impossible to quantify bid defence and strategy costs. The meeting agreed that the Chairman [JL] and Managing Director [EW] be authorised to negotiate and agree the fees of all professional advisors in connection with the bid defence and future strategy development. They will also agree, in consultation with the auditors, how best to apportion these fees in year end accounts and the accounts for the year to 1996".

Item 5 of the minute, under the heading "Any other competent business", is in the following terms:

"Mr Wallace raised with the Board the question of additional fees for Euan Wallace and Partners in connection with the exceptional work involved in the EGM and Bid Defence. The Board noted that Euan Wallace and Partners had for a number of years waived part of their full entitlement to fees for services under their contract with the Company and it was agreed that they should be permitted to bill additional fees as appropriate equating to the fees waived in prior years".

EW's contention was that the first of those two items in the minute constituted the origin of authority given to charge strategy fees. With the exception of one fee of £8750 plus VAT taken on 20 April 1995, strategy fees were not drawn until after the date of that meeting. He accepted that bid defence fees of £25,000 plus VAT, for which item 5 of the minute gave authority, were drawn down before the meeting (see document F1). The contention that item 3 was authority for strategy fees to be charged by EWP depended on the view that EWP was one of the professional advisors mentioned therein. If that view is correct, there is an overlap between item 3 and item 5, since both would in that event deal with inter alia EWP's bid defence fees. Mr Stewart's solution for that conflict was to submit that item 5 operated as a cap on the fees to be negotiated for EWP under item 3. EW and JL were in agreement in their evidence that after the meeting discussions took place between them which led to the agreement of the fees to be charged by other professional advisors. EW's evidence was that these discussions included the strategy fees to be charged by EWP. JL did not accept that. EW contended that in discussion between them it was agreed (i) that EWP would be entitled to charge for EW's work at the same hourly rate as was agreed for the services to WH of Mr Tony Lang, who had been engaged as a financial consultant to the company, and (ii) that EWP would be entitled to charge for work done by others of its employees at "appropriate rates".

As Mr Stewart was constrained to accept, the case that authority for EWP to charge and take payment of fees for strategy work had been given depended crucially on the acceptance of EW as a credible and reliable witness on these matters and on the rejection of JL's evidence. Although he made submissions attacking the reliability of JL's recollection in a number of points of detail, and sought to draw a more general inference that his evidence should be regarded as unreliable, he did not attack his credibility or make any detailed positive submissions as to why EW should be accepted as credible and reliable. Mr Williamson for WH, on the other hand, made extensive submissions to the effect that EW was not a credible witness, and should in general not be accepted on matters in which there was other evidence to the contrary of his. Although some of the points made related to other aspects of EW's evidence, it is convenient at this stage, before going on to consider Mr Williamson's substantive arguments against there having been authority given for the taking of the strategy fees, to note some at least of his criticisms of EW's credibility.

In the first place, Mr Williamson submitted that EW's evidence was not given in a credible manner. He dissembled, did not give straight answers to straight questions, shifted his ground, and sought to "hedge his bets". In major respects his evidence was highly improbable. EW (although supported in some respects in rather vague terms by Mrs Goodearl) was in general contradicted on important matters by the other witnesses in the case, including a number of witnesses who could be regarded as "independent" in the sense of bringing a measure of professional detachment to their evidence, such as Mr Kevin Sweeney, a very experienced solicitor and partner in WH's legal advisers, McGrigor Donald; Mr Philip Dry, a non-executive director of WH and also a very experienced solicitor, who had for many years been a friend of EW; and Mr Ian Jones, the Chief Executive of Quayle Munro Ltd, WH's financial advisers. More particularly, Mr Williamson impugned EW's probity by reference to the evidence which he gave about the management fees drawn by EWP in advance of the due dates (see document H1). EW explained the early drawing of those fees by reference to the need to assist EWP's cash flow. That, said Mr Williamson, showed that EW was a man prepared to take money to which he was not (yet) entitled simply because it suited his own interests to do so. He thus showed himself to be untrustworthy. In addition, Mr Williamson submitted, further unfavourable light was cast on EW by his correspondence with a shareholder, Mr Blackburn, in May 1996 (document F6). As the fifth paragraph of that letter shows, Mr Blackburn had been complaining about EWP's fees being too high. EW wrote:

"The basis of the firm's fees was set out in the prospectus and in fact the amounts paid to the firm have always been less than its entitlement under the management agreement."

By that date strategy fees, for which there was no authority in the management agreement, had been drawn to a total of over £150,000 plus VAT. EW explained the absence of reference to the strategy fees on the basis that it would have been inappropriate to impart such information to one shareholder in isolation, but Mr Williamson submitted that the letter was nevertheless misleading. Further, against the background that no regular management accounts were laid before the board by EW as chief executive, Mr Williamson drew attention to the fact that EW did not at any stage in his evidence suggest that the specific amounts being drawn from time to time as strategy fees were brought to the attention of the other members of the board, although he did assert in general terms that they were aware that such fees were being drawn. When it would have been so easy to report each drawing as it was made, the absence of such steps tended, it was submitted, to support an inference of irregularity. Similarly, the total absence of (i) any specification of the make up of the sums mentioned in the various invoices and (ii) any records showing the work done from time to time by EW and the staff of EWP, cast great doubt on the credibility of EW's evidence of having agreed that his own time would be charged at the same rate as Mr Lang's and that his staff's time would be charged at appropriate rates. How was that to be done without records? The contrast with the care with which Mr Lang's invoices (documents E1.3 et seq.) set out the detail of the work which he did was striking.

Turning from matters bearing on EW's credibility or probity, Mr Williamson went on to develop the grounds on which he submitted that I should reject EW's contention that the strategy fees which EWP drew between April 1995 and May 1996 were authorised. He characterised EW's contention as being that there had been an unrecorded oral agreement between him and JL, which was neither communicated to the other directors of WH nor recorded in any document. He invited me to accept from the evidence of Mr Dry that until 31 May 1996 he (Mr Dry) knew nothing of the strategy fees. Mr Dry's evidence to that effect was reinforced by his reaction to the news on that date, when he saw what EW had been doing as akin to the type of conduct with which, as a member of the Council of the Law Society of Scotland, he had experience of dealing in connection with the Guarantee Fund. If Mr Dry knew nothing of the matter, it resolved into a conflict of evidence between JL and EW. The background against which the drawing of strategy fees was to be seen, Mr Williamson submitted, was the history of discontent on the part of shareholders with the level of remuneration being paid by WH to EWP. That history would tend to point to a need for the additional fees, not provided for in the Property Management Agreements of which the shareholders were aware, to be regulated with scrupulous care. The proper approach was to be seen illustrated in document L2, which carefully defined the work to be done and the fees to be received by Quayle Munro as WH's financial advisors in connection with the ALP transaction. Compared with that, EW's evidence that the reason for there being no express agreement on EWP's fees because the amount of work could not be determined in advance was not credible. Mr Williamson invited me to find credible JL's evidence that there was no discussion or agreement of strategy fees or fee rates for EWP with him. He pointed out that JL was a very experienced businessman, who had for many years been a director of Stakis plc. His evidence was that he would never have contemplated reaching agreement on EWP's fees with EW without bringing the matter before the board as a whole. His evidence was that the question of strategy fees for EWP was first raised by EW in May 1996, when he indicated that the firm would require to be paid fees for all the work it had been doing, to which he gave a generally sympathetic answer. There was no indication, however, then or at any time before that, that fees had been being taken throughout the previous year. That evidence was wholly inconsistent with that of EW. The contention that item 3 of the minute of the meeting of 27 April 1995 (document C2) dealt with EWP's fees was, Mr Williamson submitted, plain nonsense. JL's evidence was that it related to the professional advisors, including solicitors, accountants, Mr Lang and Quayle Munro, but there was no question of its applying to EWP. Even if it did apply to them, that was of no avail in the absence of agreement on rates with JL. The way the fees were drawn by EWP was inconsistent with a properly regulated arrangement for interim fees to be charged at agreed rates. The sums taken were random round sums, for which no detailed narrative or computation was offered.

A decisive point destructive of the credibility of EW's evidence, and demonstrative of the truth of JL's evidence, Mr Williamson submitted, came in the evidence of what happened at the meeting which took place in the morning of 30 May 1996. EW's evidence was that he had no recollection of such a meeting. A note of the meeting (document D5) was, however, prepared by Ms Ailsa Mapplebeck, a solicitor in the employment of McGrigor Donald, the solicitors acting for WH in connection with the ALP transaction. I have no reason to doubt the essential accuracy of that note, which accorded with the evidence of others present at the meeting. The purpose of the meeting, as recorded in the note, was:

"to discuss the revelation that prepayments amounting to approximately £120,000 had been made to [EWP] during the course of the accounting period to the end of February 1996. JL explained that he had only within the last few days become aware that these payments had been made by [WH] to [EWP]."

(The figure under discussion was £120,000 rather than £187,000 because at that stage attention was focused on the year ended 28 February 1996.) JL's position as expressed in the note was graphically confirmed in Mr Lang's evidence, when he spoke of asking JL shortly before that meeting about the fees paid to EWP, of receiving the response "Management fees?", of replying "No, strategy fees", and of finding that JL did not know what he was talking about. Further, the note of the meeting of 30 May records EW's response in the following terms:

"EW responded that [EWP] had a Management Agreement with [WH] whereby a fee of 11/2% of the value of the transaction would be payable on completion. EW said that he looked upon the invoices that had been rendered as early payment of this agreed sum and thought that there had been sympathy among the board that [EWP] being a small firm, could not be expected to carry [WH] in this transaction."

That attempted reliance on the Management Agreement was misconceived, because the provision in question, Clause 7.2, related only to acquisitions of residential property; but the fact that that was the explanation put forward is confirmed by the fact that the advice tendered by McGrigor Donald on the following day proceeded on the assumption that what was under consideration was an advance payment of fees. However, the point of greater significance was that EW's attempt to rely on the Management Agreement as the justification for the fees drawn between April 1995 and February 1996 which were under discussion was wholly inconsistent with the contention which he advanced in evidence that he had board authority for drawing those fees, calculated principally by reference to an hourly rate for his own services, independent of the Management Agreement. If the explanation now tendered in evidence as the justification for drawing those fees was genuine, the failure to mention that justification at the meeting on 30 May was inexplicable. Although EW attributed his failure to advance that explanation at the meeting on 31 May (to which I shall return) to the pressure under which he was allegedly put by the threat of reporting his conduct to the criminal authorities, there was no question of his being subjected to force and fear on 30 May, and that explanation was thus of no avail in relation to what he said then.

The meeting of the board of WH which resulted in EW's resignation as managing director of WH and EWP's resignation as property managers took place on 31 May 1996. The minute of that meeting (again prepared by Ms Mapplebeck: document C3) begins with the expression of the opinion formed by McGrigor Donald that:

"a breach of fiduciary duty had taken place when [EWP] had rendered invoices to [WH] and paid these invoices over a period without the knowledge of [JL] or [Mr Dry]".

After various options for action are outlined, the minute continues by recording that:

"EW said that he deeply regretted what he had done and said he had done it from necessity. He had raised the question of [EWP] fees at board meetings and had felt that the board was supportive. [JL] and [Mr Dry] said that they found it difficult to understand why EW went ahead with these payments last year and since the year end. EW said that it had been an error of judgement and did not impinge upon the property transactions."

Mr Williamson submitted that it was incomprehensible that, if EW had had agreement from JL to the drawing of the strategy fees, he should not have made that point forcefully, and reacted angrily to JL's denial. The position he in fact adopted at the meeting was inconsistent with the position which he adopted in evidence, and tended to lend support to the accuracy of JL's evidence. A similar point could be made on the basis of the apology for his "error of judgement" made by EW at the board meeting on 4 June (document C4, paragraph 4) and of the letter of apology which EW wrote to Mr Sweeney of McGrigor Donald on the same date (document D11).

In my opinion EWP have failed to prove that they were entitled to draw the strategy fees which they did in fact draw between April 1995 and May 1996. It is, in my view, highly improbable that if agreement on EWP's entitlement to strategy fees had been reached, it would have gone unrecorded. The absence of any written record means that the issue comes to be one of credibility. In that connection, I did not find EW's evidence satisfactory. He was, in my view, vague to a degree that had an adverse impact on his credibility. The manner in which he gave evidence generally did not impress me as being candid. It seemed to me that there was force in the points made by Mr Williamson against EW's credibility and probity generally. Mrs Goodearl's evidence did not seem to me to afford any truly independent support for EW's position. I can find no reason for rejecting the evidence of Mr Dry that he was unaware of any agreement on strategy fees. His shock at discovering at the end of May 1996 what had been happening was, to my mind, quite obviously genuine. I accept that EW no doubt reported to the board from time to time on the work being done in connection with strategy, but I see no reason to infer from the making of such reports that the other members of the board should have appreciated that EWP would be seeking fees. A perfectly tenable view would be that EW, given his interest in the long term development of WH into a commercial property company, was undertaking that work in his capacity as managing director in his own and the company's long term interests. The matter therefore resolves into a competition between the evidence of EW and that of JL, as to whether strategy fees were actually discussed and authorised. JL impressed me as an honest witness and a very experienced businessman, used to the stringent standards applicable to the administration of a plc. Although there was, in my view, some justification for criticism of the completeness and accuracy of his recollection of matters of detail, I do not consider that there was any warrant for concluding that the whole of his evidence should on that account be regarded as unreliable. There was no attack on his credibility. I believe his evidence that the first he heard of strategy fees being charged was in late April 1996. I reject the submission that item 3 of the minute of the board meeting of 27 April 1995 set up a mechanism for fixing strategy fees for EWP. The terms of item 5 of that minute in my view militate against construing item 3 as applying to EWP's fees. Moreover, I cannot accept that, particularly against the background of shareholder discontent about the level of EWP's remuneration, the board would have agreed to remit to JL and EW to negotiate EWP's fees. Such an arrangement would have involved an obvious conflict of interest for EW. It would have been easy, if strategy fees for EWP had been in contemplation, to set up a different mechanism for negotiating them which would have avoided EW's negotiating with himself. In my view it is clear that item 3 was not intended to cover negotiation of strategy fees for EWP. That fits well with JL's evidence that there was no discussion between him and EW of such fees. I accept JL's evidence that he would not have countenanced agreeing EWP's fees with EW without reference to the board. I accept his evidence that he did not do so, and reject EW's evidence that there was such negotiation. I am inclined to think that at the time EW may well have thought (mistakenly, through overlooking the restriction to residential property in its terms) that EWP would be entitled to a fee under Clause 7.2 of the Management Agreement when the ALP transaction was concluded, and may indeed at the time have sought to justify to himself the taking of the strategy fees as mere advance payment of that fee. That at least would fit better with what he said on 30 and 31 May 1996. I find it quite incredible that, if he

I conclude that EWP were not entitled to take from WH the strategy fees amounting to £187,413 drawn between April 1995 and May 1996.

The Collapse of the ALP Transaction

By May 1996 the ALP transaction had reached a stage at which a detailed timetable had been drawn up for the steps which required to be taken with a view to completion of it by Friday 12 July 1996. Included in those steps was the preparation of audited accounts for the year to 28 February 1996 by WH's auditors, Arthur Andersen & Co. In the course of working on those accounts, Arthur Andersen became aware of the strategy fees taken by EWP. Initially, the amount under discussion was of the order of between £109,000 and £120,000 (both figures being mentioned in the papers), because the focus of attention was on the fees taken in the accounting period in question. £120,000 was the sum discussed at the meeting on the morning of Thursday 30 May 1996 (document D5), when EW gave the explanation about advance Clause 7.2 fees. At that meeting it was decided that Quayle Munro Ltd, who were to underwrite the proposed issue of preference shares, required to be informed about these fees. EW and JL accordingly departed for Edinburgh to have a meeting with Mr Jones of Quayle Munro that afternoon. It was only after the end of the morning meeting that Mr Henderson of Arthur Andersen (who had attended only the latter part of the meeting) realised that JL and Mr Lang were unaware that further strategy fees of over £50,000 had been drawn by EWP after the end of the accounting year. Mr Henderson and Mr Lang consulted Ms Mapplebeck, who advised that JL should be made aware of the full extent of the fees before he met Mr Jones. A telephone call was therefore made to EW's car, and the position was explained to JL.

EW and JL met Mr Jones on the afternoon of 30 May. They explained to him that strategy fees had been paid. It was not, however, drawn to his attention at that stage either that further fees had been drawn after the year end, or that the fees had been taken by EWP without the knowledge of the non-executive directors. As Mr Jones subsequently confirmed in his letter of 4 June 1996 to JL (document D9), at that meeting he presumed that the non-executive directors were aware of the payments. At the meeting, and in a letter written to JL that evening (document D6), Mr Jones expressed the view that it was not appropriate for EWP to have received such a large fee for strategy work, that their future employment prospects with the expanded company should have been sufficient incentive for EW and EWP, that EW was in any event in a position of conflict, that it would be appropriate for JL to take professional advice on the issue and involve Mr Dry, and that his own view was that the strategy fees should be repaid. After the meeting EW and JL returned to Glasgow. JL thought that it was probably in the course of the journey that he raised the possibility of lending money to EW to assist EWP in making repayment of the strategy fees. He thought that there was agreement in principle on the loan (although not necessarily on its precise amount) on the Thursday evening. It was also EW's evidence that the possibility of the loan had been mentioned on the Thursday. On their return to Glasgow there was a further meeting involving EW, JL, Mrs Goodearl, Mr Lang, Mr Sweeney, and Ms Mapplebeck. Mr Sweeney did not, unfortunately, have any clear recollection of what was discussed on that occasion. Mr Jones, however, in his letter of 4 June (document D9) recorded that on the Thursday evening, Mr Sweeney telephoned him and indicated that EW either had repaid or would repay the strategy fees. In the circumstances it seems to me that the probability is that the question of a loan by JL to EW to enable EWP to repay the strategy fees had indeed been discussed in principle on the Thursday evening. A further full board meeting was arranged for the Friday, 31 May.

Between the Thursday evening and the Friday morning, Ms Mapplebeck and Mr Desai of McGrigor Donald applied their minds to the legal position of the strategy fees. They did so in the context of the explanation tendered by EW at the morning meeting on the Thursday, namely on the hypothesis that the strategy fees had been taken as an advance on fees which would become due under the Management Agreement in the event of the ALP transaction going ahead, rather than on the basis that it had been agreed by the Board that EWP would be entitled to charge fees based (so far as EW's own work was concerned) on an hourly rate equivalent to that charged by Mr Lang. The outcome of Ms Mapplebeck's and Mr Desai's research was set out in a paper (document D7) which they presented to the board meeting on 31 May. All four directors of WH were present at that meeting, and in addition there were in attendance Mr Lang, and Mr Sweeney, Ms Mapplebeck and Mr Desai. In summary, Ms Mapplebeck's and Mr Desai's paper concluded that there was no breach of section 317 of the Companies Act 1985, since all the directors were aware of EW's interest in EWP; and that it was possible that the taking of the strategy fees constituted a quasi-loan in contravention of section 330 of the Companies Act; and they made certain comments on the need for disclosure of all relevant circumstances to shareholders in connection with the issue of preference shares. The minute of the meeting of 31 May (document C3) recorded that Ms Mapplebeck and Mr Desai considered that a breach of fiduciary duty took place when EWP took the payments of strategy fees without the knowledge of JL and Mr Dry (paragraph 1), and that there might also be a breach of the quasi-loan provisions of the Companies Acts (paragraph 6). There was a dispute in evidence between EW and Mrs Goodearl, on the one hand, and the other participants in the meeting, on the other, as to the degree of emphasis placed on the view that the taking of the fees might be regarded as a quasi-loan, and as to the extent to which there was discussion of what steps might have to be taken in that connection, in particular whether there was mention of the matter being reported to the Procurator Fiscal. I shall return to that matter in the context of the submissions on EWP's behalf that the agreement to reimburse the strategy fees was extorted by force and fear. What was not disputed was that it was agreed that EWP would indeed reimburse the strategy fees of £187,000 to WH, and that every effort would be made to ensure that the ALP transaction went ahead. On the weight of the evidence, it is clear to me that a substantial part of the meeting, which went on all day, was taken up with practical matters concerned with making progress towards adhering to the timetable for that transaction. It was also not a matter of dispute that JL agreed to lend EW £120,000 to enable the reimbursement to be made by EWP, and that EW accepted the loan. In the course of the afternoon, Mr Desai drafted a personal bond which EW executed in favour of JL in respect of the loan. I shall return to that too, in more detail, in the context of EW's contention that the personal bond did not accurately reflect the terms of the loan as agreed between him and JL. Mr Jones, who was not at the meeting, became concerned that time was being lost, which might prejudice adherence to the timetable for the ALP transaction. He wrote on that subject to EW on Monday 3 June (document D8).

Later on 3 June, Mr Jones (as he recorded in his letter of 4 June to JL, document D9) was informed by Mr Sweeney inter alia that the funds taken by EWP had been repaid (in fact the repayment had been agreed, but had not yet taken place), that the sum involved was not £109,000 (as Mr Jones had thitherto understood) but £173,000 (sic), that the payments had been made without the knowledge of the non-executive directors, and that EW was "very chastened". Mr Jones was "horrified", and immediately indicated that although he would consult with his colleagues, it was highly likely that Quayle Munro would withdraw its underwriting of the issue of preference shares. Mr Jones then did indeed consult with his colleagues and he and they decided to withdraw their underwriting. As recorded in document D9, their view was that:

"[m]anagement had been exposed as fundamentally untrustworthy, perhaps financially unsound. All trust and confidence had been lost. ... The correct steps were to stop all work."

That letter was written by Mr Jones early on the morning of 4 June, before departing for Birmingham where he required to be on business that day. Tentative arrangements had made on the evening of 3 June for a further board meeting, to be attended by Mr Jones, in the late afternoon of 4 June on his return from Birmingham. At certain stages in his evidence EW sought to call in question Mr Jones's motives for withdrawing the underwriting. Certainly Mr Jones had at an earlier stage raised certain queries about aspects of the transaction, but I reject the suggestion that he was simply looking for an excuse to withdraw the underwriting. Mr Williamson suggested that document D9 should be accepted as a very clear and accurate account of how and why matters progressed to the result that underwriting was withdrawn. I do so accept it. It is in my view quite clear that the only reason for the withdrawal of the underwriting was Quayle Munro's loss of confidence in the probity of the management of WH in light of the discovery that EW had drawn very substantial fees in favour of EWP without the knowledge and consent of the non-executive directors. That reason is, in my view, entirely understandable. I have no doubt that Mr Jones's actings were in the circumstances both entirely proper and commercially prudent.

The proposed meeting took place at 6.45 pm on 4 June. All four directors of WH, Mr Lang, Mr Sweeney, Mr Jones and a representative of Arthur Andersen were present. Paragraph 2 of the minute (document C4) records that:

"Ian Jones explained that Quayle Munro's view, as underwriters to the transaction, was that a key component of the transaction was the caliber (sic) of the management of [WH]. His view was that the events of the last few days had revealed a serious breach of trust by some members of the Board of [WH] and that consequently Quayle Munro would no longer support the transaction and would withdraw their underwriting."

There followed some discussion of whether the ALP transaction could go ahead without EW. The meeting ultimately resolved that it should not (document C4, paragraph 10(a) and (b)). It was also agreed that it was inappropriate for EW and Mrs Goodearl to continue as directors of WH, and they tendered their resignations, which were accepted (paragraph 8). It was further agreed that it was inappropriate that EWP should continue to supply management services to the company, and it was agreed that the Property Management Agreement should be terminated. EW and Mrs Goodearl accepted the termination on behalf of EWP. Termination agreements (in respect of both WH and WH II) were subsequently signed on 10 June (documents D18 and D19). Arthur Andersen were instructed to commence an investigative audit of WH from 1 March 1995.

Force and Fear: The Reimbursement of the Strategy Fees

In the first conclusion of the EWP action, EWP seek declarator that the verbal agreements (there described as made on 31 May and 4 June 1996) relating to the reimbursement of fees by EWP to WH were null and void due to force and fear. In making his submissions on this branch of the case, Mr Stewart relied on the review of the law undertaken by Lord Maxwell in Hislop v Dickson Motors (Forres) Limited, 1978 SLT (Notes) 73. It is convenient to quote the following passages from Lord Maxwell's opinion:

"Much of the authority which was cited to me on both sides relates to that aspect of 'force and fear' or as it is perhaps better called 'extortion' (Priestnell v Hutchison (1857) 19 D 495, per Lord Deas) which concerns threats. As regards threats, the pursuer on record relies on alleged threats to report her to the police, with consequent fear of prosecution and damage to reputation. In my opinion the only thing proved which might be construed as a threat was the statement by Mr Thomas Dickson on 19 October that, rather than accept the pursuer's position of admission of liability for false entries in the books while denying actual receipt of the money, he would report the matter to the police. I do not consider however that that was a 'threat' at all in the sense in which the word is used in extortion cases. The characteristic of such a threat is the expression or implication of intention to do something, as for example to report to the police, unless the victim gives way to the extortioner's demand. No doubt there may be cases where the extortionate nature of the transaction is implied rather than expressed in plain terms ..., but I think that extortion by threats involves some contemplation on the part of the extortioner and the victim of the 'buying off' of the thing threatened. ... It may be that the pursuer hoped that admission and repayment would in fact save her from police inquiries and the consequent risk of prosecution and of injury to reputation and also perhaps save her job, but ... there is an important distinction between a hope that, if payment is made, prosecution will be averted, and an agreement to that effect." (pages 74, col. 2, to 75, col. 1);

"In some cases, payment made to 'buy off' a threat of procedure in itself legal, such as a report of a crime to the police, will be recoverable on the ground of extortion. This however in my opinion will not apply when the money paid is no more than is in fact due and where the legal procedure threatened is for the purpose of private recovery of that money or the public prosecution of a criminal act giving rise to the debt. If the threatened action is not itself illegal or unwarrantable ... then it does not found a plea of extortion, if it is only used in good faith to get back that which is due in respect of the matter with regard to which the threat is made." (page 75, col. 1);

"In my opinion when the threat of proceedings is legal and warrantable the onus is on the party seeking repayment to show that the payment was excessive or related to a matter extraneous to the proceedings threatened." (page 75, col. 2);

"While the writers and cases on this branch of the law deal largely with threats, there is a broader underlying principle that deeds will be reducible and payments recoverable when they have been extracted by pressure of a certain degree. In general the pressure must be such as would overpower the mind of a person of ordinary firmness so that there is no true consent. In considering this it is necessary to take into account factors special to the case, such as the sex of the victim and her position relative to the person applying pressure. ... [O]ur law cannot allow a person to extract a payment from another by pressure which the payer could not reasonably be expected to resist and then throw upon the payer the onus of proving that the payment made was not in fact due." (pages 75, col. 2, to 76, col. 1).

The first branch of the case of force and fear made in the pleadings (article 10 of the condescendence in the EWP action) was that EWP had been induced to agree to make the reimbursement by threats to report EW and Mrs Goodearl to the Procurator Fiscal for breach of the provisions as to quasi-loans in section 330 of the Companies Act 1985. Mr Stewart's submission was that a threat to report the matter to the Procurator Fiscal if the strategy fees were not reimbursed was not legitimate (a) because EWP had been authorised to take the strategy fees, and were therefore not obliged to make such reimbursement, so that the sum repaid was not a sum which was due by EWP to WH; and (b) because the threat was ill-founded in law, since there had been no breach of the provisions of section 330 relating to quasi-loans. The second branch of the case was based on the fourth passage from Lord Maxwell's opinion in Hislop quoted above. The proposition was that WH, through its directors and advisers, extracted the reimbursement from EWP by "unwarrantable pressure ... overpowering the mind of [EW] and Mrs Goodearl". Mr Stewart identified the nature of the pressure as being (i) pressure brought to bear by JL to the effect that if the reimbursement was not made, Mr Jones would withdraw the underwriting of the new share issue; (ii) pressure relating to the urgency of the time-scale within which the reimbursement required to be made if the ALP transaction was to be saved; and (iii) added pressure constituted by the offer of the loan by JL. These matters cumulatively were said to amount to unwarrantable pressure on EWP to agree to the reimbursement. Reference was also made to pressure said to have been exerted by Mr Lang to the effect that there was not time for EW to take separate legal advice.

In my opinion the essence of a case of force and fear as a ground for setting aside a transaction lies in one party bringing to bear threats or pressure which are either in themselves illegitimate or are deployed to achieve an illegitimate result, and in the other agreeing to the transaction because of those threats or that pressure (Hislop, per Lord Maxwell at 75, col. 1; Priestnell v Hutcheson, per Lord Deas at 499; Universe Tankships Inc. of Monrovia v International Transport Workers Federation, [1983] AC 336, per Lord Scarman at 401A; Education Authority of Dumfriesshire v Wright 1926 SLT 217, per Lord Constable at 219; Hunter v Bradford Property Trust Limited 1977 SLT (Notes) 33, per Lord Migdale at 33, col. 2). In my view, Lord Maxwell in Hislop was not formulating an exception to that proposition when he said (at 75, col. 2) that there is a broad underlying principle that deeds will be reducible and payments recoverable when they have been extracted by pressure of such a degree as would overpower the mind of a person of ordinary firmness so that there was no true consent. To my mind, his Lordship was making the point that pressure can take forms other than explicit threats. He was not, in my opinion, saying that a case of force and fear can succeed in the absence of some form of unwarrantable conduct on the part of the person alleged to have induced the making of the deed or payment in question.

One way in which threats or pressure can, in my opinion, be illegitimate is if they are deployed to compel the payment of a sum of money which is not properly due. A major element in Mr Stewart's argument was that threats and pressure had in the present case been used to compel EWP to repay strategy fees which had been properly charged, and which EWP were therefore under no obligation to reimburse to WH, and that JL was acting in bad faith in failing to acknowledge that those fees had been authorised. That argument fails for the reasons which I have already set out. Having heard the evidence and made findings in fact, I do not consider that anything turns in this case on where the onus lies on the question of whether there was an obligation to reimburse. I have found as matter of fact that the strategy fees taken by EWP were not authorised by the Board of WH or by JL as Chairman of WH. EWP were therefore not entitled to take those fees, and, when the fact that they had been taken without authority came to light, WH was entitled to demand reimbursement. Any pressure there may have been to make reimbursement therefore did not involve the compulsion of a payment which was not properly due.

There is, in my opinion, force in Mr Stewart's submission that it was erroneous to suggest that there had in the circumstances been a contravention of the provisions of section 330 of the Companies Act relating to quasi-loan. Section 330 lays down restrictions on loans and quasi-loans by companies to directors or persons connected with directors. The section provides inter alia as follows:

"(2)	A company shall not -
	(a)	make a loan to a director of the company or of its holding company; ...
(3)	A relevant company shall not -
	(a)	make a quasi-loan to a director of the company or of its holding company;
	(b)	make a loan or a quasi-loan to a person connected with such a director".

WH, being a public company, was a "relevant company" within the meaning of subsection (3) - see section 331(6). EWP, being a Scottish firm in which EW and Mrs Goodearl were partners, was a person connected with each of them within the meaning of subsection (3)(b) - see section 346(2)(e)(i). It follows that, if the taking of the strategy fees by EWP amounted to a loan or a quasi-loan by WH to EWP, it was prohibited by section 330(3)(b). In that event, EW and Mrs Goodearl would have committed an offence if they authorised or permitted the transaction knowing or having reasonable cause to believe that the company was thereby contravening section 330 - see section 342(1). The view which Ms Mapplebeck and Mr Desai formed, and expressed in their paper (document D7) and at the meeting on 31 May, was that it was possible that in the circumstances WH had made a quasi-loan to EWP. Mr Stewart's submission was that that view was erroneous. The statutory definition of a quasi-loan is contained in section 331(3) and is in the following terms:

"A quasi-loan is a transaction under which one party ('the creditor') agrees to pay, or pays otherwise than in pursuance of an agreement, a sum for another ('the borrower') or agrees to reimburse, or reimburses otherwise than in pursuance of an agreement, expenditure incurred by another party for another ('the borrower') -

on terms that the borrower (or a person on his behalf) will reimburse the creditor; or
in circumstances giving rise to a liability on the borrower to reimburse the creditor."

In light of that definition Mr Stewart made two submissions. One was that, since the taking of the fees had been authorised, there was no obligation to reimburse them, and they therefore could not constitute a quasi-loan. That submission fails by reason of my finding that the taking of the fees was not authorised. Mr Stewart's second submission, however, was that, in accordance with the definition, a quasi-loan involved three parties, the creditor, the borrower, and the person to whom the creditor made the payment for which the borrower was to reimburse the creditor. In the present case, WH was the creditor and EWP the borrower, but there was no third party involved. The payment was to EWP, not to a third party for EWP's benefit. In my opinion that submission is correct. Arguably, the strategy fees, if they had truly involved the prepayment of fees contractually due or likely to become contractually due at a later date, might have been regarded as a loan contravening section 330(3)(b), but that was not a view which Ms Mapplebeck and Mr Desai took. Their view was that what was arguable was that the fees constituted a quasi-loan. I do not consider that that view was correct.

In these circumstances the contention on behalf of EWP was that any threats to report EW and Mrs Goodearl to the Procurator Fiscal for contravention of the prohibition on quasi-loans were unwarranted, and therefore capable of founding a case of force and fear. I am not persuaded that that contention is well founded. I have no doubt that if a party threatened to make a report to the criminal authorities, acting in bad faith, knowing that he had no proper ground for doing so, that would be an illegal and unwarrantable threat, which would be relevant to support a case of extortion (c.f. McIntosh v Chalmers (1883) 11 R 8). The position is, however, in my opinion different where the threat is made in good faith in the belief (albeit subsequently shown to have been erroneous) that the money which the party making the threat seeks to have repaid was indeed taken in circumstances which amounted to the criminal offence which he proposes to report. To put the matter in another way, it is not in my view an illegal or unwarrantable act to report to the prosecution authorities actings which are genuinely believed to be criminal, even if on a correct view of the law they are not (c.f. McIntosh v Chalmers, per Lord Rutherfurd Clark at 16). While Ms Mapplebeck and Mr Desai were, in evidence, unable to explain their view that the strategy fees might be regarded as a quasi-loan in terms which persuaded me that they were correct in that view, I have no hesitation in accepting that at the time they formed that view and expressed it at the meeting on 31 May they genuinely held it. The position of WH thus was that they had taken appropriate professional advice, and had been advised that the taking of the fees might be regarded as an offence under section 330 on the basis that the strategy fees might be regarded as a quasi-loan. I am therefore satisfied that in so far as there was discussion of that matter at the meetings on 31 May and 4 June, the non-executive directors and the advisers of WH were acting in good faith in contemplating the possibility of a report to the Procurator Fiscal. I therefore do not consider that any discussion of that point amounted to a threat to take illegal or unwarrantable action.

In the evidence there was a dispute about the extent to which, if at all, the non-executive directors and advisers of WH threatened to report the supposed breach of the quasi-loan provisions of section 330 to the Procurator Fiscal. EW said that, once the advice about the possible quasi-loan had been given, the matter was returned to again and again in the course of the meeting on 31 May; and that it was indicated that reimbursement would obviate the need to report the matter to the Procurator Fiscal. Mrs Goodearl also spoke to reference being made to the need to report the matter to the Procurator Fiscal, but understood the point which was being made to be that reimbursement would make it less likely that the Procurator Fiscal would think it necessary to take proceedings. JL recalled that the possibility of a report to the Procurator Fiscal was mentioned, but not as a threat. Mr Desai did not recall mention of the Procurator Fiscal on 31 May. Mr Dry's evidence was that the reference to quasi-loan and its criminal implications was not made in a threatening fashion. Mr Sweeney's evidence was to similar effect. My clear impression on the whole evidence about the meeting on 31 May is that the advice about the legal implications of the taking of the strategy fees was given in a calm, unthreatening way; that the advice included, but was not restricted to, the identification of contravention of the quasi-loan provisions of section 330 and the making of the point that it had criminal implications; that the possibility that the matter might, in the company's proper interests, have to be drawn to the attention of the Procurator Fiscal was probably (notwithstanding some evidence that it was not mentioned until 4 June) raised in the course of discussion on 31 May; that EW's and Mrs Goodearl's evidence about repetitive threatening reference to the reporting of the matter to the Procurator Fiscal does not accurately reflect the tone or substance of the discussion; and that it has not been proved that there was any bargain struck to the effect that if the reimbursement was made, no report would be made to the Procurator Fiscal: on the contrary the evidence showed that the question of reporting remained under discussion for some time after 31 May.

My clear impression from the evidence was that EW agreed that EWP would reimburse the strategy fees because that was seen as necessary if the ALP transaction was to proceed. He and the other directors of WH wished the ALP transaction to proceed. From EW's point of view that was the culmination of what he had been working towards for many months, and was the route to accomplishment of his ambition to become the chief executive of a commercial property company. I do not consider that his decision about reimbursement would have been any different if section 330 of the Companies Act and the Procurator Fiscal had never been mentioned. The decision was, in my view, taken by EW on behalf of EWP. Notwithstanding her position as a partner in EWP, I do not consider that the evidence discloses that Mrs Goodearl played any real part in the decision to make the reimbursement. She too wished the ALP transaction to go ahead, but there was no evidence of any discussion between her and EW by which the decision to reimburse was reached. In substance, the decision was made by EW, and was made in order to preserve the prospect that the ALP transaction might still proceed.

I have no doubt that the events of 31 May and the following days were very distressing for Mrs Goodearl. There was clear evidence from a number of witnesses confirming how upset she was, although some evidence identified 4 June rather than 31 May as the date on which she was most distressed. Mrs Goodearl's role in EWP was concerned with the day to day management of the residential properties, rather than directly with matters of strategy. My impression is that she had understood from EW that the strategy fees were duly authorised, and that it came as a shock to her to find on 31 May that the propriety of those payments was under attack, particularly in terms which involved possible criminal liability and the risk of loss of her reputation. But I am not persuaded that that evidence of distress goes far enough to support a case of force and fear undermining the validity of EWP's agreement to reimburse the strategy fees. That is so because I am not satisfied that Mrs Goodearl played any real part in the decision to make the reimbursement, and because I take the view that she would, if the matter had turned on a decision of hers, have agreed to the reimbursement in order to allow the ALP transaction to go ahead, whether or not reference had been made to breach of the quasi-loan provisions and to reports to the Procurator Fiscal.

So far as EW was concerned, his evidence was that after the point had been made about contravention of section 330 and the possibility of a report to the Procurator Fiscal, he was "numbed", and was not thinking logically. I am not prepared to accept that. I do accept that it was no doubt a great shock to him to discover that the project to which he was devoted was at risk because of his actings in taking the strategy fees. But that was not a shock which broke upon him on 31 May. The problem about the strategy fees had been welling up for a number of days, and had been matter of discussion at the various meetings on 30 May. He knew on that date that Mr Jones thought that repayment should be made. He had been contemplating the possibility of reimbursement in the course of the car journey back from Edinburgh that afternoon, because, as he conceded in evidence, the possibility of a loan from JL to facilitate the reimbursement was discussed then. No doubt the precise reference to section 330 and quasi-loan came as news to him on the morning of 31 May, but it seems to me that that was no more than the identification of one specific way in which what he had done was seen to be improper. The impropriety, in general, of having taken unauthorised fees of the size in question from a company with limited resources must, in my view, have been already clear to him before the meeting on 31 May. There was therefore no question, in my view, of the legal advice given on 31 May constituting an overwhelming blow incapacitating him from rational thought. On the contrary, the evidence of the other participants in the meeting on that day did not bear out EW's evidence of the overwhelming effect of the quasi-loan point on him; and the evidence of the steps he took in the course of the day to keep the ALP transaction on track is inconsistent with the sort of prostration which he claimed.

As I have noted, a separate branch of Mr Stewart's argument, independent of the quasi-loan point, was that in other respects EW was subjected to unwarrantable pressure. I have no doubt that he was in a sense under considerable pressure to effect reimbursement. Reference was made in argument to JL putting EW under pressure by emphasising that Mr Jones would withdraw the underwriting if reimbursement was not effected. In my view, however, there was nothing unwarrantable about pointing out to EW, forcefully if need be, that his actings in taking the strategy fees had put the ALP transaction at risk, and that what required to be done if there was to be any prospect of preserving it was that those fees had to be paid back. Nor, in my view, was reference to the tightness of the timetable which required to be adhered to if the ALP transaction was to be saved in any sense unwarrantable. That was simply a matter of commercial reality. There was, in my view, nothing illegitimate about requiring EW to make up his mind about repayment expeditiously. In any event, I do not consider that reference to these points amounted to such pressure as would "overpower the mind of a person of ordinary firmness so that there was no true consent" (Hislop at 75, col. 2) . In my view, EW did truly consent to the agreement to reimburse the strategy fees, and did so because, like all the others involved in the matter, he saw it as desirable that the ALP transaction should proceed if it possibly could.

There is, in my view, no merit in the contention that JL's offer of the loan amounted to, or contributed to, unwarrantable pressure. On the evidence which I heard, it is clear that the offer was made in a spirit of helpfulness, and out of friendship. The fact that it was made in principle on the afternoon of 30 May shows, to my mind, that JL and EW were both quickly contemplating ways of making it practicable to follow the course which Mr Jones had indicated he regarded as necessary if the ALP transaction was to be preserved. EW and EWP did not have the resources to make immediate repayment, and the offer of a loan was a generous gesture on JL's part, which enabled EW, despite the fact that he had seriously let WH down, to attempt to redeem the position. It would, in my view, be a serious distortion of the position to regard the offer of the loan as part of an application of extortionate pressure.

EW acknowledged that in the course of the meeting on 31 May Mr Sweeney several times advised him that he should take separate advice about the situation in which he and EWP found themselves. That was entirely appropriate advice for Mr Sweeney to give, and the evidence showed that, if EW had wished to take up the suggestion, independent advice could have been obtained at short notice. EW chose not to take separate advice. Mr Dry's evidence, which I accept, was that EW said he did not need separate advice, and understood the situation. In argument it was suggested that EW was at least in part dissuaded from taking separate advice by Mr Lang's having said that there was no time to do so. Mr Lang's evidence was that he merely asked "Where will extra legal advice take us?" In the commercial context, I do not find that a surprising question for Mr Lang to have asked. Even if he expressed himself in the more categorical terms spoken to by EW, I am of opinion that that was quite incapable of having amounted to unwarrantable pressure on EW.

To some extent the case made on EWP's behalf was that the unwarrantable pressure continued after 31 May, but I do not regard anything which happened after that date as relevant to the case for setting aside the reimbursement agreement, which was clearly reached on 31 May. In any event, I do not consider that there was any unwarrantable pressure brought to bear after 31 May. There was no doubt, between 31 May and 4 June, an element of commercial pressure on EW to adhere to and implement the agreement he had made on 31 May, but there was in my view nothing unwarrantable about that.

In the result therefore the main elements of my reasons for holding that the agreement by EWP to reimburse the strategy fees of £187,000 to WH was not vitiated by force and fear may be summarised as follows:

(a) The taking of the strategy fees by EWP was unauthorised; they therefore fell to be reimbursed to WH; and there was therefore no question of EW and Mrs Goodearl being compelled by threats to procure the making by EWP of a payment which was not properly due.

(b) Although the view that the taking of the strategy fees amounted to a quasi-loan in contravention of section 330(3)(b) was erroneous, the threat to report the matter to the Procurator Fiscal was not illegal or unwarrantable, since the directors and advisers of WH who raised that possibility believed in good faith that there may have been a contravention of that provision.

(c) The references to the possibility of reporting the matter to the Procurator Fiscal were in any event not made in the repetitive and threatening way described by EW, and there was no agreement that the matter would not be reported to the Procurator Fiscal in return for EWP's agreement to reimburse the strategy fees.

(d) The agreement to effect reimbursement of the strategy fees was made in order to preserve the prospects of proceeding with the ALP transaction, and not because of any threats or pressure applied on 31 May 1996.

(e) All of the other elements of alleged pressure founded upon, including the offer of a loan made by JL and any remarks about the impracticability of obtaining separate legal advice which Mr Lang may have made, did not constitute unwarrantable pressure, were not such as to overpower the mind of a person of ordinary firmness, and did not in fact overpower the mind of EW, by whom the decision that EWP should reimburse the strategy fees was in substance made.

The Claims for Repayment to EWP of the Strategy Fees Reimbursed in June 1996

The second conclusion in the EWP action is for payment by WH to EWP of the sum of £187,413. In the averments and pleas-in-law three separate bases for that claim are set out. The first proposition was that, the reimbursement having been induced by force and fear, EWP were entitled to repetition of the sum they had reimbursed. The second proposition, which was elaborated in article 11 of the condescendence, and proceeded on the hypothesis that the reimbursement was not induced by force and fear, was that it had been agreed at the time of the reimbursement that the reimbursed fees would ultimately be repaid to EWP, unless a lesser amount was agreed between EWP and WH in the event of the ALP transaction being aborted. The third proposition was that WH had contracted with EWP for the strategy services, and EWP were accordingly entitled to reasonable remuneration for them. In my view all three bases of the claim fail.

In so far as the claim was expressed as a claim for repetition of money extorted by force and fear, it fails because I have rejected the submission that the reimbursement was extorted by force and fear. I would only add that, had I held otherwise, I would not have been persuaded that repetition of the full amount sought should follow automatically upon a finding that the reimbursement had been induced by force and fear. No doubt, if it had been clear that the fees taken were properly due, not only in respect that it had been agreed that fees should be charged but also in respect of the amount charged, it is likely that repetition would have been a proper corollary of a finding of force and fear. In the circumstances of the present case, however, I would have taken the view that the onus was on EWP to prove that the fees taken were properly computed, and would have granted repetition only of the amount so justified. That would, therefore, have required to be addressed at a further proof on quantum. In the event, however, since I have rejected the case of force and fear, the point does not arise.

Mr Stewart did not seek to maintain the second basis for the claim, as set out in article 11 of the condescendence. He accepted that since the ALP transaction did not proceed, and since no agreement had been reached on what was referred to in the evidence as an "abort fee", he could not maintain that there was an agreement that in the events which happened the reimbursed fees, or any particular lesser sum, should be repaid.

The third basis for the claim involved the contention that, even if the taking of the strategy fees which were taken had not been authorised, there had been agreement between WH and EWP that EWP would provide strategy services; that strategy work had been done by EWP; that, because of the reimbursement, no payment had been made for that work; and that EWP were accordingly entitled to reasonable remuneration for the work done. Reference was made, in support of that proposition, to McBryde on Contract § 6-45. Mr Stewart accepted that the claim for remuneration quantum meruit depended on there having been a contract for services which did not provide for the amount of remuneration. He submitted that WH knew about the strategy work which was being undertaken, because EW reported on it to the board from time to time, and that by allowing the work to continue WH had accepted the work, and must therefore be taken to have accepted a liability to pay reasonable remuneration.

Mr Williamson's response to that argument was in two parts. He submitted in the first place that the evidence did not support the conclusion that there was an agreement between WH and EWP that EWP would carry out strategy work. Secondly, if that submission failed, he submitted that in the circumstances of this case the normal inference that reasonable remuneration would be payable should not be drawn. I shall deal with these submissions in turn.

Mr Williamson pointed out that what mattered was not whether to the knowledge of the board of WH strategy work was being undertaken, but whether to their knowledge such work was being undertaken by EWP, as property advisers to WH, rather than by EW as managing director of WH. It is clear that EW did report to the board on strategy work which was undertaken (see, for example, documents C9 (the section on pages 3 - 4 on "Clapham Transaction") and C10 (pages 2 - 3 "General Matters")), but Mr Williamson drew attention to the absence of any reference in the minutes to the involvement of EWP in that work. Document C10 is the minute of a meeting which EW chaired in JL's absence, and the section on "General Matters" bears to be a report by EW. By way of example, Mr Williamson pointed to the fourth item in that section, which deals with a meeting which EW attended with Mr Lang (c.f. document E1.3), and which contains nothing to suggest that EW attended as a partner in EWP rather than as managing director of WH. There was, too, an inconsistency between the travelling expenses claims which EW seeks to make under his service contracts in his counterclaims to the WH and WH II actions, and the suggestion that the strategy work was undertaken through EWP rather than by EW as managing director.

I have in an earlier section of this opinion set out my views in relation to the evidence bearing on whether the taking of the strategy fees was authorised. Much of that material also has a bearing on whether there was a contract (albeit silent on the quantification of remuneration) between WH and EWP for the carrying out by EWP of strategy work. My conclusion is that the non-executive directors of WH were aware that strategy work was being undertaken by EW, but that it cannot be inferred that it was undertaken by him in his capacity as a partner in EWP rather than as managing director of WH, still less that the non-executive directors were aware that it was being undertaken on that basis, and consented to that situation. I am therefore not persuaded that EWP have established the existence of a contract for services between EWP and WH, which would be the necessary foundation for a quantum meruit claim.

In light of that finding, Mr Williamson's second submission becomes academic. There is, however, in my view force in at least part of it. The submission was that the entitlement to reasonable remuneration for contractual work for which no amount of remuneration has been agreed is based upon the implication of a term to that effect into the contract. The implication of an entitlement to reasonable remuneration for contractual work was not inevitable (McBryde on Contract § 6-44; Bell v Ogilvie (1863) 2 M 336 at 341), and would yield to indications to the contrary. One circumstance which might exclude the implication of entitlement to a reasonable fee in all events would be the contemplation that any fee would be charged on a contingency basis. Chartered surveyors do on occasion act on a contingency basis. The references in the evidence to an "abort fee" in the event of a transaction not proceeding were consistent with such an approach. I am inclined to accept the generality of that submission, namely that there may be circumstances in which the implication of entitlement to a reasonable fee will be excluded, and I am prepared to admit of the possibility that something less than express provision might effect such exclusion, but I do not consider that in the present case, if I had been satisfied that it had been agreed that EWP would undertake strategy work, there would have been in the evidence quite sufficient to exclude the normal inference of a right to reasonable remuneration. But there are other circumstances which in my view should be regarded as excluding any entitlement to reasonable remuneration which EWP would have had if it had been agreed that they would undertake the strategy work. Mr Williamson sought to draw an analogy with cases in which a contracting party, by rendering performance which was different from that which he had undertaken to render, lost his entitlement to the contractual price, and was left with no claim other than for recompense on a quantum lucratus basis (Ramsay & Son v Brand (1898) 25 R 1212, per Lord President Robertson at 1214; Watson v Shankland (1871) 10 M 142, per Lord President Inglis at 152). In the present case, he submitted, the strategy work undertaken by EWP was rendered wholly worthless by the conduct of EW in taking the strategy fees without authority, and thus causing the collapse of the ALP transaction. In those circumstances, it would be inequitable to allow EWP to recover fees on a quantum meruit basis. I do not consider that Ramsay and Watson are directly in point. I am, however, persuaded that, having regard to the equitable nature of the claim for remuneration quantum meruit, it is legitimate to take into account that the improper actings of the principal of the party making that claim rendered the work performed worthless. In holding the equitable balance between EWP and WH, it would in my view be unfair to allow EWP to recover fees from WH on a quantum meruit basis when, through impropriety on the part of EW (acting as a partner in EWP) in relation to the feeing of that work, the result had been brought about that the strategy work was of no benefit to WH. Accordingly, had I held that there had been an agreement that EWP would undertake strategy work, I would have rejected their claim for reasonable remuneration on that basis.

Had I held that EWP were entitled to reasonable remuneration for the strategy work, I would have allowed a proof on quantum of that claim. In the result, however, I hold that EWP are not entitled either (i) to repetition of the reimbursed fees of £187,413 or any part thereof, or (ii) to reasonable remuneration for strategy work. The claim expressed in the second conclusion of the EWP action therefore fails in its entirety.

The Claim for Further Strategy Fees

In the third conclusion of the EWP action a claim is made for the sum of £144,466. As is averred in article 13 of the condescendence, that claim is in respect of strategy fees which EWP claim to have earned, but which remained uninvoiced at the time of the reimbursement agreement. Mr Stewart accepted, as he inevitably had to do, that that claim stood or fell with the claim for £187,413. Accordingly, for the reasons discussed in the preceding section of this opinion, the claim made in the third conclusion also fails.

The Personal Bond and the Standard Security.

In the course of the meeting on 31 May 1996 EW executed a personal bond in favour of JL (document J2), in terms of which he (i) bound himself to repay to JL on demand the loan of £120,000, (ii) bound himself to procure the grant of securities for the loan by his wife; and (iii) consented to registration for execution. Subsequently EW and his wife executed in favour of JL a standard security (document J1) over their house in Strathblane in security of the loan. In the JL action, JL concludes for payment of the capital of the loan, with interest at 8% from the date of citation. Standing the personal bond in the terms in which it is expressed, there is no defence to that claim. Initially, EW responded by raising the EW action in which he concluded for reduction of the personal bond and the standard security on the ground that he had been induced to grant them by force and fear. The EW action also included conclusions for reduction of the consent to registration for execution contained in the personal bond on the ground of error induced by misrepresentation, for suspension and interdict to prevent further steps being taken in reliance on a charge dated 26 April 1997 which proceeded on the personal bond, and for interdict against enforcement of the standard security. Subsequently, EW lodged a counterclaim in the JL action, in which he sought rectification of the personal bond. The alteration sought was the deletion of the provision that the loan was to be repayable on demand, and the substitution of a provision that the loan was to be repaid "forthwith upon the payment by [WH] to [EWP] of fees amounting to £187,413 (including VAT) or such other sum as may be agreed between [them]". In the course of his submissions Mr Stewart recognised the inconsistency between the conclusion for reduction of the personal bond in the EW action and the conclusion for rectification of it in the counterclaim in the JL action. In the end he did not maintain the conclusion for reduction, and instead relied exclusively on the conclusion for rectification.

In concentrating on the conclusion for rectification, Mr Stewart did not, as I understood him, ultimately seek decree in terms of the second conclusion of the EW action, that is the conclusion for reduction of the personal bond in so far as it incorporated a consent to registration for execution. Lest I have misunderstood him, however, I should indicate the view which I would have reached on that conclusion. Having regard to the evidence of EW and Mr Desai, I would not have been satisfied that EW executed the personal bond under essential error as to the nature of the clause of consent to registration for execution, or that Mr Desai had made any misrepresentation that might have induced such an error. Moreover, I entertain considerable doubt whether reduction to the extent concluded for would have any practical effect where the deed in question has already been registered for execution. That latter point is not, however, a live one.

As I have already noted, the conclusion for rectification is contained in the counterclaim lodged by EW in the JL action. It has come to my notice since the conclusion of the proof that there is thought to be some doubt as to the competency of seeking rectification in a counterclaim. No challenge to the competency of the conclusion for rectification was made, and I heard no argument on the point. It seems to me, however, that it is competent to conclude for rectification in a counterclaim, at least in an action proceeding under Chapter 47 of the Rules of Court. That is, in my view, the effect of reading Rule 73.2(2)(a) with Rule 25.1(1)(a).

In terms of section 8(1)(a) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1985, if I am satisfied that a document intended to express or to give effect to an agreement fails to express accurately the common intention of the parties to the agreement at the date when it was made, I may order rectification to give effect to that intention. The proper approach to the matter is, in my opinion, as set out by Lord Penrose in Rehman v Ahmad 1993 SLT 741 at 751L:

"What is required, in my opinion, is proof of an agreement made independently of, and at or prior to the date of, the document or documents intended to give effect to it, coupled with proof that the writing failed to express accurately the common intention of the parties at the point at which the agreement was made."

(See also Shaw v William Grant (Minerals) Limited 1989 SLT 121, per Lord McCluskey at 121G-H, subject to Lord Penrose's comments in Rehman at 751H-L.) Moreover, the common intention of the parties, in the context of making the agreement, has to be determined objectively (Rehman, per Lord Penrose at 752A). As was pointed out in Huewind Limited v Clydesdale Bank plc 1996 SLT 369 at 375I-J:

"As a matter of relevancy and specification it is for the [party seeking rectification] to specify details of any alterations to the document which they maintain would be required in order to give effect to the alleged common intention of the parties."

It is also necessary to bear in mind that, as Lord Penrose pointed out in Rehman at 746B:

"The presumption that a written document embodies the agreement of the parties is strong. The proponent, if he is to overcome that presumption, requires to prove the series of facts identified in the statute. Given the normal status of the document it will be appropriate to require careful and precise proof of those facts. The presumption in favour of the document must be overcome."

Moreover, that presumption is in my opinion stronger in the case of a formally executed deed than it would be in the case of informal writings.

In the present case there is, as Mr Williamson pointed out, a discrepancy between the terms of the conclusion for rectification and the averments as to the common intention of the parties. The conclusion is, as I have noted above, for deletion of reference to repayment on demand and the substitution of a provision for repayment "forthwith upon payment by [WH] to [EWP] of fees amounting to £187,413 (including VAT) or such other sum as may be agreed between [them]". In statement 8 of the counterclaim, however, the averment is that the parties agreed:

"that said loan would be repaid out of the Fees to be reimbursed by [WH] to EWP at the conclusion of the Transaction in terms of the agreement between EWP and [WH]" (emphasis added).

The latter formulation implies, not merely (as contemplated in the conclusion) that payment of fees by WH to EWP would be the trigger for repayment of the loan, but that the amount of fees so paid would be the measure of the obligation to repay. In the end, Mr Stewart disavowed the restriction implicit in the terms of the averment. I proceed, therefore, on the basis that EW can succeed only of he proves that he and JL had the common intention, at the time when the personal bond was entered into, that repayment in full would become due if and when any sum by way of strategy fees was paid by WH to EWP. The contention for EW must therefore have the consequence that if no strategy fees are paid, the loan does not become repayable. That is a somewhat startling proposition.

Mr Stewart submitted that EW's evidence had been that the purpose of the loan had been to facilitate the implementation of the ALP transaction; that the agreement had been struck on 31 May, when those involved contemplated that the ALP transaction would go ahead, and that in due course EWP would receive repayment of strategy fees; that there was no discussion of repayment by EW prior to receipt by EWP of such fees; and that what had been agreed was that the loan would be repaid on repayment of the strategy fees. He acknowledged that JL's position in evidence had been that it did not occur to him that repayment was to be made when strategy fees were paid to EWP, and that he understood that repayment would in due course be made out of the proceeds of sale of EW's house. Mr Stewart invited me to find that EW's account was more credible than JL's. No other witness gave direct evidence about the parties' common intention. Mr Stewart accepted that Mr Sweeney's evidence, which was that when he took instructions for the personal bond from JL there had been no mention of an agreement as to when the loan would be repaid, was more compatible with JL's evidence than with EW's, but submitted that JL might simply have omitted reference to that part of the arrangement when instructing Mr Sweeney. Mr Desai said that he was instructed by Mr Sweeney to draft an "on demand" personal bond, and there was no indication given to him that any particular event would trigger repayment. Although EW accepted that he read the personal bond before signing it, his evidence was that he understood from Mr Desai that it was merely some sort of receipt for the loan.

Mr Williamson pointed out that the starting point was a probative document, in simple terms, which EW admitted having read before he signed it, and which constituted an obligation to pay on demand. There was a heavy onus on EW to prove not only that there had been an agreement to a different effect, but also precisely what that agreement was. EW's case was wholly dependent on his own evidence. Even that evidence did not quite come up to the terms in which rectification was sought. Having said that repayment of the loan was to come primarily out of the repaid fees, EW went on to say that there was no agreement about repayment of the loan before repayment of the fees. EW said that he had mentioned that the only way he would be able to repay the loan was by selling his house, and he felt JL was not going to turn him and his family out on the street. At the time the loan was thought to be a short term measure. JL on the other hand said that he understood that EW would repay the loan by selling his house. The question of repayment of the loan on repayment of strategy fees was never mentioned. The taking of heritable security for the loan tended to suggest that it was not in contemplation that it would be repaid out of funds coming from WH.

I do not consider that EW has proved that the common intention shared by him and JL was that the loan would be repaid when EWP received payment of strategy fees. At the time when the loan was made, it was a matter of hope rather than certainty that the ALP transaction would go ahead. It therefore seems to me to be intrinsically improbable that JL would have accepted the terms as to repayment for which EW now contends. The personal bond was a formal document, which made provision not only for payment on demand but also contained an undertaking from EW to procure the granting of security by his wife. These factors seem to me to reinforce the presumption in favour of the written agreement. I do not accept EW's evidence that he thought the personal bond was only some form of a receipt, although in a sense that is what it was. However, it provided expressly for payment on demand, and I do not consider that a businessman of EW's experience could have failed to understand that. In a conflict of evidence between EW and JL, I would, because of the views which I have already expressed about their respective credibility, have been inclined to prefer JL's evidence. The evidence of Mr Sweeney and Mr Desai, although indirect, in my view lends support to JL's evidence. On the whole matter, the weight of the evidence is in my view clearly against there having been a common intention that repayment of the loan should be triggered by repayment of the strategy fees. I am therefore of opinion that EW has failed to make out his case for rectification. It follows that decree should be granted in JL's favour for payment by EW of the sum of £120,000. Interest will run, as concluded for, from the date of citation. In these circumstances, no question of suspension and interdict arises.

The Claims for Unpaid Property Management Agreement Fees

In the counterclaim in the WH action EWP crave payment of the sum of £105,253 in respect of arrears of annual valuation fees and occupancy fees allegedly payable under the WH Property Management Agreement (document A3). In the counterclaim in the WH II action they make a similar claim in the sum of £52,900 in respect of such fees under the WH II Property Management Agreement (document A4). The position in respect of those claims is matter of agreement. Mr Stewart conceded that EWP's entitlement to such fees had been waived in respect of the financial years up to and including 1994-95. Mr Williamson accepted that EWP were entitled to such fees in respect of the years from 1995-96 until the termination of the Agreements. A proof on quantum will be required to determine the precise amounts of those fees, if the amounts cannot be agreed.

The Claims for Travelling Expenses

In the counterclaims in the WH and WH II actions EW claims the sums of £11,120 and £2836 respectively as sums due to him as travelling expenses under his Service Agreements (documents A1 and A2). There is no dispute that the contracts make provision for the reimbursement of travelling expenses properly incurred by EW in the execution of his duties. The amount claimed is not, however, admitted, and again a proof on quantum will be required, if the amounts cannot be agreed.

Miscellaneous Claims by WH and WH II

In the WH action there is a single crave for payment by EWP to WH of £31,534.90. That sum is the aggregate of a number of separate claims set out in averment. The claims are made in respect of:

(1) repayment of management fees drawn before termination of the Property Management Agreement (document A3) but in respect of the period after the date of termination;

(2) interest on payments drawn by EWP in respect of management fees under the Property Management Agreement in advance of the dates on which they properly fell due;

(3) interest on the strategy fees of £187,413, calculated by reference to the period between the date on which each instalment was drawn and the date on which the total was reimbursed;

(4) a sum due in respect of the sale of a motor car by WH to EWP; and

(5) sums of rent collected by EWP for WH in the transitional period after termination of the Property Management Agreement.

So far as item (1) is concerned, the fact that management fees were drawn in advance is admitted. In relation to item (2) it is admitted that if that was done without authority, interest is due. The contention for EWP is, however, that the Board were aware that the fees were being drawn early and permitted it to continue. EW gave evidence in support of that contention, but he was contradicted by JL and Mr Dry, and Mrs Goodearl did not deal with the matter. In light of the views which I have formed, and discussed earlier, about the respective credibility of EW on the one hand and JL and Mr Dry on the other when they are in conflict, I am not satisfied that EWP have proved that the advance payments were authorised. In principle therefore, subject to quantification, these aspects of WH's claim are in my view well-founded.

In relation to item (3), it was conceded that if I held that the strategy fees had not been authorised, WH were entitled to interest on the sums drawn for the periods mentioned. In light of my decision that the strategy fees were not authorised, therefore, this aspect of the claim is also, subject to quantification, well founded.

Items (4), and (5) are both admitted to be due. There is no dispute about quantification. They are, however, retained pending resolution of the counterclaim.

In the WH II action there is a single crave for payment by EWP to WH II of £23,538. That sum is the aggregate of three claims:

(a) one for repayment of management fees drawn before termination of the Property Management Agreement (document A4), but relating to the period after termination;

(b) one, analogous to item (1) in the WH action, for interest on fees drawn in advance; and

Items (a) and (b) stand in the same positions respectively as items (1) and (2) in the WH action. They are therefore well-founded in principle, subject to quantification, and to retention against the counterclaim. Item (c) requires to go to proof on quantum if it is not capable of being agreed.

Results

In the result I shall pronounce interlocutors to the following effect.

(1) In the EWP action, I shall sustain the defenders' second plea-in-law, repel the pursuers' pleas-in-law, and assoilzie the defenders from the conclusions of the summons.

(2) In the EW action, I shall sustain the defender's second plea-in-law, repel the pursuer's pleas-in-law, and assoilzie the defender from the conclusions of the summons.

(3) In the counterclaim to the JL action, I shall repel the defender's first plea-in-law, sustain the pursuer's second and third pleas-in-law, and grant decree of absolvitor in respect of the conclusion for rectification. That done, I shall in the principal JL action sustain the pursuer's first and second pleas-in-law, repel the defender's second, third, fourth and fifth pleas-in-law, and grant decree for payment by the defender to the pursuer of the sum of £120,000, with interest thereon at the rate of 8 per cent a year from the date of citation until payment.

(4) In the principal WH action, I shall sustain the pursuers' third and fourth pleas-in-law, and repel the defenders' first to fifth pleas-in-law. In substance, all that remain to be resolved are issues of quantification. In the counterclaim in the WH action, I shall sustain the pursuers' third plea-in-law (waiver) to the extent only that it relates to fees in respect of the financial years up to and including 1994-95, and repel it so far as it relates to fees in respect of the period thereafter, and I shall repel the pursuers' fourth plea-in-law. Although the terms in which parties' pleas-in-law are expressed are not such as to enable me to give full effect to my decision by sustaining or repelling pleas-in-law, the only issues which remain to be resolved in respect of the counterclaim relate to quantification. It may be that a proof on quantum will be required to resolve the outstanding issues in the principle WH action and the relative counterclaim, but at this stage I shall, without allowing a proof, put the case out By Order for the purpose of discussing future procedure.

(5) In the principal WH II action, I shall sustain the pursuers' third and fourth pleas-in-law, and repel the defenders' first to fourth pleas-in-law. Again, all that remain to be resolved are issues of quantification. In the counterclaim in the WH II action, I shall sustain the pursuers' third plea-in-law (waiver) to the extent that it relates to fees in respect of the years up to and including 1994-95, and repel it so far as it relates to fees in respect of the period thereafter. Again, parties' pleas-in-law are not expressed in terms that permit me to give full effect to my decision by sustaining or repelling pleas-in-law, but the only outstanding issues in relation to the counterclaim relate to quantification. Again, rather than allow a proof on quantum at this stage, I shall put this case too out By Order for the purpose of discussing future procedure.

I shall reserve all questions of expenses for future discussion.