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Cite as: [2005] ScotCS CSIH_84, [2005] CSIH 84

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

See: [2007] UKHL 29

Lord President

Lord Hamilton

Lord Clarke

[2005CSIH84]

XA164/02

OPINION OF THE COURT

delivered by THE LORD PRESIDENT

APPEAL

From the Sheriffdom of Grampian Highland and Islands at Aberdeen

PETITION

under the Companies Act 1985

ALAN BAXTER WILSON

Petitioner and Respondent;

against

JAYMARKE ESTATES LIMITED

First Respondent and Appellant;

and

JAMES SHAW

Second Respondent and Appellant:

_______

Act: Scott, Q.C., Robertson; Brodies (Clarke & Wallace, Aberdeen) (Petitioner and Respondent)

Alt:; Davidson, Q.C., MacColl; Blacklock Thorley (Raeburn Christie, Aberdeen) (Respondents and Appellants)

25 November 2005

[1] The respondents have appealed against an interlocutor of the sheriff in which she found and declared that the affairs of the first respondent ("Estates") had been conducted in a manner which was unfairly prejudicial to the interests of the petitioner, and ordained the second respondent to purchase the petitioner's shareholding in the company.

Introduction
[2] The petitioner's application to the sheriff court invoked the provisions of Part XVII of the Companies Act 1985. Section 459 provides that a member of a company may apply to the court for an order under that Part on the grounds that the company's affairs have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or some part of its members (including at least himself). Section 461 provides by subsection (1) that, if the court is satisfied that a petition under that Part of the Act is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of. Subsection (2) states, inter alia, that the court may order the purchase of the shares of any members of the company by other members.

[3] Estates was incorporated in 1991, 30% of its shares being issued to the petitioner and 70% to the second respondent. From 1981 the petitioner had been employed by Jaymarke Investments Ltd ("Investments"), later Jaymarke (Northern) Ltd ("Northern"), which provided management services to various Jaymarke companies which had been set up by the second respondent. In the late 1980s the petitioner had acquired a 30% shareholding in certain of the Jaymarke companies. Along with the second respondent he had been involved throughout the 1980s in management decisions in respect of the companies. The sheriff described the petitioner as the director who took responsibility for the financial records, whereas the second respondent thought of himself as "the ideas man, the entrepreneur". From 1991 they were the directors of Estates. However, Estates did not carry on business until the financial year to 30 September 1995 when it became concerned with a single project, at Bucksburn. The petitioner provided his services to Estates and other companies through Wilson Property Management Services (WPMS), a partnership between him and his wife. At the stage when the Bucksburn development began to move forward, the second respondent was not involved in the day-to-day running of Estates. On 8 February 1996 the petitioner resigned as a director of Estates, retaining ownership of his shares in it. The involvement of Estates in the Bucksburn development was brought to a conclusion shortly after that date. Since that time Estates has not done anything of significant value. The petitioner made his application to the sheriff court in 1997.

The sheriff's decision

[4] The sheriff found in fact and in law that Estates was conducted by the petitioner and the second respondent as a quasi partnership. She noted that, although they had very different roles, they worked together on development projects with a view to generating profit in which they would participate. They were from its incorporation the only directors and shareholders of Estates.

[5] The sheriff found that the petitioner had been unfairly prejudiced by the manner in which the affairs of Estates were conducted in a number of respects. The first was that in December 1995 the second respondent withdrew £88,125 from Estates' bank account, and through agents paid it to Lodestar Management Ltd ("Lodestar"), a company with motor racing interests of which his son Mark was a director. The funds of Estates were normally transferred only on the joint instructions of the petitioner and the second respondent. However, this payment had not been instructed by, or discussed with, the petitioner. The petitioner first became aware of a payment of that amount in January 1996 when he saw a bank statement in which it was shown; at that stage he did not know the ultimate destination of the payment. The transfer was in due course shown in the accounts of Estates as a loan. In the accounts of Lodestar it was shown as interest free. It was not a normal part of the business of Estates to lend to other companies. At that time Lodestar was not in a sound financial position. It appeared to the sheriff that there was never any likelihood of repayment. She considered that members of Estates could legitimately expect that its funds would not be distributed to a company such as Lodestar without at least the potential for benefit to Estates. However, this payment, which had not been properly authorised, was of no benefit to Estates. She rejected the suggestion that advertising the Jaymarke name on the side of a motor racing car was of benefit to Estates. She commented that the payment represented nothing more or less than the second respondent using Estates as a banker for his son's motor racing interests. It was "exactly the sort of cavalier conduct by a majority shareholder from which the minority is entitled to be protected". The sheriff observed that the circumstances in which the petitioner resigned were indicative of unfair prejudice in the conduct of the affairs of the Estates. He had been excluded from the decision-making process, and was effectively put in a position vis-à-vis Estates "in which he had no option but to resign".

[6] The second respect in which the sheriff held that the petitioner had been unfairly prejudiced was the levying on Estates of management charges in favour of Northern (£150,000) and another Jaymarke company, Jaymarke Developments Limited ("Developments") (£85,000) in the financial years to September1995 and 1996 respectively. It was not in dispute that, during the period in which the petitioner was a shareholder in, and a director of, certain Jaymarke companies, such charges had been used by the companies, inter alia, to minimise liability to corporation tax, and that the petitioner was aware of that practice. However, the sheriff found that no management services were provided to Estates by either Northern or Developments, and no payments were due by Estates to either company for management charges. Northern, which was wholly owned by the second respondent and his wife, had then no employees, with the possible exception of a company secretary, and was not engaged in any business activity. Such work as was done in the year to 30 September 1995 to advance Estates' development at Bucksburn was carried out by the petitioner through WPMS. The sheriff concluded that there was no commercial reality underlying the charges, which were levied for the benefit of the Jaymarke companies as a whole and could not be said to be in the interests of shareholders who were not shareholders in all the other companies. There was no basis for the suggestion that the management charges had been made to remunerate the second respondent. The fact that the charges were levied to regulate the tax liabilities of the companies as a whole explained why they were not calculated until all other accounting procedures were completed and the accounts were on the point of being signed off. Given that the charges were levied for the benefit of the companies as a whole, and that "fundamentally, Jaymarke is James Shaw", the benefit to him was far greater than to the petitioner. It was conduct from which the petitioner, as a member of Estates, was entitled to be protected. She remarked that "it amounted to nothing more than James Shaw treating the whole companies as his creatures without consideration of the interests of the minority".

[7] The third respect in which the sheriff considered that there had been unfair prejudice was the failure to hold annual general meetings of Estates, and the failure to lodge annual returns for Estates. No such meetings were held after the petitioner's resignation as a director of Estates. The annual accounts for Estates for the years to 30 September 1995, 1996 and 1997 were signed off on 24 June 1997, and 2 April and 14 April 1998. It seemed to the sheriff that these failures were unfairly prejudicial to the minority in Estates. The meetings provided an opportunity for a minority to discuss and question the running of the company. Annual returns were the only means by which the minority could be informed about the financial health of the company and how its business was being conducted.

[8] The sheriff was satisfied that the prejudice which the petitioner had suffered was in his capacity as a member of Estates, since the interests of the shareholders were prejudiced by the diminution of the funds available for distribution to its members. In these circumstances the sheriff concluded that the petitioner was entitled to be bought out of his shareholding. It was not in dispute that the valuation of his shares should be as at 30 September 1996. The loan to Lodestar required to be treated as an asset of the Estates as at that date. The management charges should be added back for the purpose of valuation of the shares. Since Estates operated as a quasi partnership the petitioner's shares should be valued as a proportion of the net asset value of Estates, without discount for the fact that he held only a minority shareholding.

Sections 459 and 461
[9] From the decisions to which the court was referred by the parties a number of general propositions may be derived.

[10] A member of a company will be entitled to complain of unfairness where there has been some breach of the terms on which he agreed that the affairs of the company should be conducted, or where the rules have been used in a manner that equity would regard as contrary to good faith: Lord Hoffmann in O'Neill v Phillips [1999] 1 W.L.R.1092 at page 1099 A. cf Re Phoenix Office Supplies Ltd [2003] 1 BCLC 76, Auld LJ at page 85 h. In a quasi partnership company legitimate expectations can exist and can render the use of powers unfairly prejudicial to the interest of the members: Re Legal Costs Negotiators Limited [1999] 2 BCLC 171, Peter Gibson LJ at page 199b-c. The concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles: Lord Hoffmann in O'Neill v Phillips at page 1098 E.

[11] Unfair prejudice is limited to conduct of the company, as opposed to that of the individual shareholder: Re Legal Costs Negotiators Ltd, Peter Gibson LJ at page 182a. Section 459 is designed for the protection of the members of companies. It is in that capacity that they seek its protection, not as directors or employees: Re Phoenix Office Supplies Ltd, Auld LJ at page 86i. It is not fair to an excluded member to keep his assets locked up in the company. But that does not mean that a member who has not been dismissed or excluded can demand that his shares to be purchased simply because he feels that he has lost trust and confidence in the others: O'Neill v Phillips, Lord Hoffmann at page 1104D-G. The unfairness does not lie in the exclusion alone but in exclusion without a reasonable offer: ib at page 1107 B cf Re Phoenix Office Supplies Ltd, Auld LJ at pages 83h-84c.

[12] Section 461 confers on the court "the widest possible discretion" (Hoffmann J. in Re a company [1986] BCLC 68 at page 70). This means that, even if the facts established are those which the petitioner alleges and can be said to constitute an unfair prejudice, the petitioner must still convince the court that it is fit to make an order granting the relief which he seeks (Antoniades v Wong [1997] 2 BCLC 419, Mummery LJ at page 426). The court has a very wide discretion to do what is considered fair and equitable in all the circumstances of the case in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company. This includes the manner in which the price is to be assessed: In Re Bird Precision Bellows Ltd [1986] 1 Ch 658, Oliver LJ at page 669 D. cf Re Legal Costs Negotiators Ltd, Peter Gibson LJ at page 196d.

[13] The conduct of the petitioner may have rendered the conduct on the other side, even if it is prejudicial, not unfair: cf: Re R A Noble & Sons (Clothing) Ltd [1983] BCLC 273. Even if the conduct on the other side is both prejudicial and unfair, the petitioner's conduct may nevertheless affect the relief which the Court thinks fit to grant. However, there is no independent or overriding requirement that the petitioner should come to the court with clean hands: In Re London School of Electronics Ltd [1986] 1 Ch 211, Nourse J at page 222A-B

The submissions for the respondents

[14] In presenting the appeal counsel conceded that it was no longer in dispute that the sheriff was entitled to regard the payment to Lodestar as unfairly prejudicial to the petitioner. It was accepted that it was in breach of an implied agreement that the company's assets should not be dissipated for personal reasons. However, the sheriff was in error in making the order under section 461. The petitioner was not without a remedy: he could have sought the repayment of the loan, in accordance with the fourth crave (which sought an order on the second respondent to procure payment, which failing himself to make payment, of the sum withdrawn). In any event the sheriff was in error in adding back the management charges in the valuation of the petitioner's shares. If that had not been done, the shares would have had a minus value. Even if the sheriff was entitled to add back the charges, she was in error in not discounting the value by 50% to reflect the fact that the petitioner held only a minority shareholding.

[15] Counsel did not dispute that, for a number of years after its incorporation Estates had been conducted by the petitioner and second respondent as a quasi partnership. At the outset counsel maintained that the quasi partnership had ceased at the latest after the petitioner's resignation in February 1996. However, counsel went on to maintain that it had ceased in May 1995. Accordingly they said that the sheriff had not gone far enough in finding in fact 7, which stated: "The mutual confidence between the petitioner and the second respondent deteriorated during 1995. It broke down in about February 1996". This was of importance not only in regard to the circumstances of the petitioner's resignation in February 1996, but also in regard to the question of remedy, since at the valuation date adopted by the sheriff there no longer was a subsisting quasi partnership. In developing this submission counsel submitted that it was necessary to take adequate account of the whole background. Counsel relied on a number of matters. In 1993 there was a change in the way in which the Jaymarke companies were operated, and the second respondent's involvement in them was reduced. When he resumed an involvement in late 1995, the petitioner resented this. He said that "we did not enjoy Mr Shaw being involved again". It was not clear how long Estates had been trading by then. On 15 May 1995 the petitioner incorporated Landcape Ltd (later known as Palisade Properties Limited), and instructed his friends, Mr and Mrs Dick, to acquire its shares. The petitioner said in evidence: "I think that the mutual trust had waned at that point". That company was concerned with property development, and bought a property in Aberdeen. The petitioner accepted that it was a potential competitor with Jaymarke. The petitioner worked for that company from 1995, and in August 1996 he acquired the shares of the Dicks. Counsel maintained that the petitioner's involvement with this company, which was not known to the second respondent, was inconsistent with the continuance of mutual trust between him and the second respondent. The facts relating to this company did not emerge until the proof when the petitioner became aware that the Dicks had been cited as witnesses. The sheriff had not taken a proper account of these matters. Counsel also observed that the fact that from 1995 the petitioner provided his services to Estates through WPMS in return for payment (over £70,000 in total) was unusual for a quasi partnership. The second respondent received no remuneration.

[16] There was no foundation in the evidence or findings in fact for the sheriff's view (paragraph [9]) that the circumstances in which the petitioner came to resign as a director of Estates were indicative of the existence of unfair prejudice in the conduct of Estates; that the petitioner was excluded from the decision-making process; and that the petitioner had "no option but to resign". His resignation from Estates - and from all the Jaymarke companies of which he was a director - followed a disagreement between him and the second respondent at a meeting concerning a development at Robroyston which had nothing to do with Estates. The payment to Lodestar "did not tell the whole or the accurate story". At no point did the petitioner ask the second respondent about the payment. His decision to resign was voluntary. He was discontented with his share in the Jaymarke companies. Following his resignation he was initially content to sit on as a shareholder, waiting for a deal to be agreed. It did not occur to him that he could avail himself of Article 7 of Estates' Articles of Association, which provided a normal method by which a shareholder could dispose of his shares in a private company. This was a material factor in regard to the exercise by the court of its discretion as to whether or not to make an order under section 461. It was not until after the accounts for the year to 30 September 1995 were signed off that the petitioner appeared to lose confidence in Ernst & Young, the accountants for Estates. It was then that he knew that the payment to Lodestar was a loan, and that the management charges had been levied on Estates. Thereafter he presented his application to the sheriff court.

[17] As regards the management charges, counsel relied on evidence which, they submitted, showed that such charges were levied in accordance with a long-running understanding between the petitioner and the second respondent. In accordance with that understanding, Ernst & Young recommended what was commercially justified. The sheriff had failed to address the matter of the petitioner's involvement in this practice after he had become a director of, and a shareholder in, Jaymarke companies. The evidence of Mr George Burnie of Ernst & Young showed that that "policy" had continued without interruption. There was no support for the view that it did not apply to companies, such as Estates, which were incorporated for the management of individual projects. As an exercise in the mitigation of corporation tax it was of benefit to the petitioner who had a stake in Developments. His complaint was that the charges to Estates did not have a commercial basis.

[18] The sheriff had failed to take into account that, as was common ground between the parties, no AGM had been held since 1993. Further, there was no suggestion that the petitioner had complained about the fact that no AGMs had been held, despite the fact that he considered himself to be "very much in the driving seat". He had not pointed to any contrary practice, or to his having suffered any particular prejudice. After his resignation he was not interested in the pursuing of development, but only in the selling of his shares. As regards annual returns, these were made, although they were late. Once again the petitioner had not complained about this prior to his resignation. He was then intimately involved in the collating of accounting information for Jaymarke companies (including Estates), and accordingly had the information which he might wish. It could not be said to be unfair that it took some time for the audited version of the accounts to be produced. One of the reasons why they were late was that, at the time when the petitioner resigned, the paperwork was not up-to-date and was in some disarray. The sheriff had not addressed this matter.

Discussion
[19] There is no doubt that, as is now conceded by the respondents, the payment to Lodestar was unfairly prejudicial to the petitioner. Before the sheriff the respondents had suggested that the payment was justified. The sheriff rejected that suggestion. The understanding between the petitioner and the second respondent was that their signatures were required for cheques drawn on Estates' bank account (for which the petitioner held cheque book). The petitioner stated in evidence that if the second respondent had forced payment by means of a cheque, he would have resigned. In the event the second respondent took the course of making the payment to Lodestar by means of a bank transfer without reference to the petitioner. The petitioner stated that he would have expected to be consulted about such a payment. He was "not enamoured" by the fact that the transfer had taken place without his knowledge. This transferred the greater part of the sum at credit in the bank account, with a consequent effect on the value of the petitioner's shares in Estates. The payment involved a misapplication of the funds of Estates. cf Re Elgindata Ltd [1991] BCLC 959. It is clear that the payment was inconsistent with the mutual trust that had previously existed between the petitioner and the second respondent. Thus, if a state of quasi partnership subsisted at the time of the payment, the petitioner had a well founded application under section 459.

[20] As we have noted above, the respondents took up the position that the mutual trust on which the existence of a quasi partnership depended came to an end on 15 May 1995 when the petitioner incorporated Landcape Ltd. The first observation which we would make is that this does not appear to be consistent with the concession that the payment to Lodestar in December 1995 was unfairly prejudicial to the petitioner, since the only basis on which it would have been unfair was that it was in conflict with the mutual trust between the petitioner and the second resp[ondent. In the second place, we are not persuaded that there are any grounds for us reaching a different conclusion from that of the sheriff who was the tribunal for the determination of matters of fact. The fact that mutual trust had waned in 1995 does not mean that it must have broken down at that time. The second respondent did not give evidence.

[21] As regards Landcape Ltd, it may be thought that the petitioner was not as frank with the second respondent as he should have been. However, as the petitioner pointed out in his evidence, there was no agreement between him and the second respondent that either of them would not be involved in other businesses. In practice they were so involved. Landcape Ltd was never an actual competitor with Estates. The latter was concerned with only a single project at Bucksburn. There was no evidence that the petitioner's involvement with Landcape Ltd caused any prejudice either to Estates or to the second respondent. The sheriff found that the petitioner's involvement in Landcape Ltd was not in conflict with the duties which he owed to the respondents. In our view she was entitled to so hold. As regards WPMS, the petitioner gave uncontradicted evidence that from 1993 he had provided services to Jaymarke companies with the agreement of the second respondent. The sheriff was entitled to hold, as she did, that the existence of WPMS as a vehicle for paying the petitioner for services to Estates did not undermine or contradict any suggestion of quasi partnership.

[22] During the course of the submissions much attention was devoted by the respondents to the reason or reasons for the petitioner's resignation as a director of Estates in February 1996. One of them appears to have been his disagreement with the second respondent at the meeting concerning the development at Robroyston, which may well have been the catalyst. Another was his reaction to discovering the bank transfer. However, more important than his resignation was the situation in which he found himself in his relationship to the second respondent. In our view counsel for the petitioner was correct in submitting that he had been excluded from his agreed part in the management of Estates, since the affairs of the company were no longer being conducted on the previous consensual basis and his share in the control of the company had been taken away from him. In our opinion the sheriff was entitled to conclude that the petitioner was excluded from the decision making process, and on that basis suffered unfair prejudice to his interests as a member of Estates.

[23] It does not, of course, follow that the petitioner is entitled to any order in his favour under section 461. That depends on the view which is taken by the court, in the exercise of its discretion, having regard to the circumstances and equitable considerations. In his submissions to this court senior counsel for the respondents submitted that the determination of the appeal was "substantially dependent on the assessment of evidence and the equities of the case revealed thereby". However, it requires to be borne in mind that, since the question of any relief under section 461 was a matter for the court of first instance, it is not appropriate for an appellate court to approach matters as if they were at large for it to consider. In Antoniades v Wong Mummery LJ pointed out at page 426:

"An appellate court will not interfere with the exercise of discretion under section 461, unless it has been demonstrated that that discretion has been plainly and wrongly exercised or has been exercised on some erroneous principle of law. It is not sufficient to persuade this court that, if it had been sitting at first instance, it might have exercised the discretion in a different way than the judge did".

[24] To say that the petitioner had the remedy of seeking the repayment of the sum transferred to Lodestar simply does not, in our view, address the need "to put right and cure" the unfair prejudice which was suffered by the petitioner. Quite apart from any other consideration (and it does not appear that the sheriff was invited by the respondents to restrict any remedy to an order for repayment), it is plain that the repayment of the sum was never workable. The sheriff was satisfied that there was no likelihood of repayment. By the time of the proof Lodestar had been dissolved. Likewise we are not satisfied that the suggestion that the petitioner should have utilised article 7 of the Articles of Association was realistic. Counsel for the petitioner correctly submitted that the use of the article did not bind the purchaser, and there was nothing unreasonable in a shareholder in a quasi partnership refusing to take the risk of the value of his share being discounted by reason of the fact that his was only a minority shareholding. As the sheriff pointed out, the price which would have been payable if the petitioner had invoked article 7 would have been affected by the debits to the company funds of which he complained. In In Re Bird Precision Bellows Ltd [1984] 1 Ch 419 Nourse J at page 430 observed in regard to a minority shareholder:

"On the assumption that the unfair prejudice has made it no longer tolerable for him to retain his interest in the company, a sale of his shares will inevitably be his only practical way out short of a winding up. In that kind of case it seems to me that it would not merely not be fair, but most unfair, that he should be bought out on the fictional basis applicable to a free election to sell his shares in accordance with the company's articles of association, or indeed on any other basis which involved a discounted price".

cf Virdi v Abbey Leisure Ltd [1990] BCLC 342, Balcombe LJ at pages 346i-347b.

In the result we are not persuaded that the sheriff's discretion was clearly and wrongly exercised or that it was exercised on any erroneous principle of law.

[25] As regards the management charges, the sheriff was entitled to regard the conduct of Estates in this respect as unfairly prejudicial to the petitioner as a shareholder. The fact that the petitioner's complaint about the charges did not arise before he saw the accounts for the year to 30 September 1995 does not make any difference. It is clear from the evidence that, while the previous practice in regard to debiting management charges to various Jaymarke companies, with the consent of the petitioner, was directed to minimising liability to corporation tax, it rested on a commercial justification, namely the fact that an element of cost had been borne by the company to which the charge was credited. In about 1993 the companies which had borne such costs were in financial difficulties. Certain Jaymarke companies, including Northern, were run down to release assets. Thereafter separate companies, such as Estates, were set up for individual developments, and costs were handled in a different way. The charges debited to Estates were substantial, and no services were provided to it by either Northern or Developments. Northern was not even trading. There is no question of there being evidence that the petitioner agreed to there being charges where no service had been provided. In our view the sheriff was entitled to hold that these charges should be added back. The point of the petitioner's complaint in regard to the failure to hold AGMs and lodge annual returns is that following his resignation there was a failure to respond to his requests for information. It may not add much to the case of unfair prejudice, but it was open to the sheriff to treat these failures as part of the treatment of the petitioner's interest in Estates which began with the unauthorised payment to Lodestar. Accordingly, regard being had to the whole conduct found by the sheriff to have been unfairly prejudicial to the petitioner, she was entitled to afford to him the remedy of an order for the purchase of the shares.

[26] It was not in dispute that 30 September 1996 was the appropriate date for the valuation of the petitioner's shares. It does not matter if there was not a subsisting quasi partnership as at that date, since that date was the end of the financial year in which the quasi partnership was effectively brought to an end by the second respondent. The full picture in regard to the treatment of the petitioner's interest was not revealed to the petitioner until the accounts for that year were produced in June 1997. Accordingly we do not regard this as a case in which a minority shareholder "chose to sit it out". On this account we distinguish the facts of Re D.R. Chemicals (1989) 5 BCC 39 to which we were referred. Assuming that the petitioner's shares fall to be valued as shares in a quasi partnership, it is not in dispute that no discount is appropriate.

[27] Accordingly we adhere to the judgment of the sheriff and refuse the appeal.

[28] We should add that both parties proposed additional "findings of fact". Given that this was not an ordinary action, it was strictly unnecessary for the sheriff to make findings in fact. However, as she has done so, we will indicate the extent to which it is appropriate to add to the findings, namely to -

a. Add at the end of finding 3:

"Prior to his withdrawal the petitioner and the second respondent had agreed major items of expenditure. The signatures of both of them were required for company cheques".

b. Add new findings as follows:

"5. Until about 1993, with the agreement of the petitioner and second respondent and on the basis of advice given by Ernst &Young, management charges were levied against certain companies for the purpose of minimising corporation tax within those companies as a whole. At that time Jaymarke Northern Ltd was credited with management charges, it bearing costs and charges for various companies among whom the management charges were allocated.

6. In 1993 the directors of Jaymarke Walker Street Ltd (formerly Jaymarke Developments Ltd) and Jaymarke Northern Ltd undertook to the Bank of Scotland to realise the remaining assets of those companies and the other companies within the lending umbrella at operating costs.

7. The petitioner and second respondent agreed that any further development was to be placed in newly formed companies. Jaymarke Estates Ltd was one such company. It remained a free-standing company, concerned with a development at Bucksburn, Aberdeen. The petitioner and his second respondent did not authorise or levy management charges against Jaymarke Estates Ltd at any time prior to February 1996"

and renumber the existing findings 5, 6 and 7 as findings 8, 9 and 10.

c. Add a new finding:

"11. All the work which was carried out by the petitioner for the first respondent, otherwise than as a director, was done through Wilson Property Management Services, a partnership between him and his wife. This was done with the knowledge and consent of the second respondent. That partnership was set up in 1993 because of the financial difficulties affecting Jaymarke Northern Ltd and Jaymarke Walker Street Ltd. At about the time when he resigned as a director of Jaymarke Estates Ltd the petitioner resigned as a director from all companies in which he was involved with the second respondent. He did not know at that time to whom the payment of £88,215 had been made. He was later informed that it was a payment to Lodestar Management Ltd. He did not raise this matter with the second respondent until March 1997 when agents acting on his behalf complained about the payment and queried its basis. On 17 May 1995 he had incorporated Landcape Ltd (later Palisade Properties Ltd) to carry out property development in the Aberdeen area. Mr and Mrs Dick, who were friends of the petitioner, were the original shareholders and directors of the company. The petitioner worked for that company from its incorporation in 1995 to carry out property development. The petitioner's activities in relation to Landcape were not known to the second respondent. He did not become a director of Landcape until August 1996. Landscape did not compete with the Jaymarke companies prior to February 1996".

and renumber existing findings 8, 9 and 10 as 12, 13 and 14.

Add at the end of finding 13 (as renumbered):

"No AGMs were held between 1993 and February 1996. While he was a director the petitioner did not complain about this or have this altered. He did not express concerns about the lateness of annual returns".