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OUTER HOUSE, COURT OF SESSION
[2007] CSOH 134
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A1236/03
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OPINION OF LORD
BRACADALE
in the cause
ANGELIKA, COUNTESS
CAWDOR
Pursuer;
against
CAWDOR
CASTLE (TOURISM) LIMITED
Defenders:
________________
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Pursuer:
Sandison; Morton Fraser
Defenders: McNeill, Q.C.; Turcan Connell, W.S.
31 July 2007
Introduction
[1] The
pursuer is the widow of the Sixth Earl Cawdor.
On his death the Sixth Earl was succeeded by the Seventh Earl Cawdor who
was the son of the Sixth Earl by his first wife. The pursuer is the step-mother of the Seventh
Earl. Until 10 October 2002 the pursuer was a director
of the defenders. The other director was
the Seventh Earl Cawdor.
[2] In
this action the pursuer seeks payment by the defenders to her of certain sums
of money. The first of these is the sum
of £77,584 which is the outstanding balance on a loan made to the
defenders. In addition, she seeks
interest on that sum at the rate of 15% per year from 1 May 2001.
The second sum is a sum of £3,452 which the pursuer claims she is
due in unpaid salary as a director. This
head of claim did not feature in the discussion before me. The third sum is a sum of £11,219 which
the pursuer claims the defenders owe her as a payment in lieu of notice with
respect to her resignation.
[3] In
a counterclaim the defenders seek payment from the pursuer of certain sums of
money. They claim that prior to her
resignation the pursuer procured that the defenders incurred expenditure in
relation to gardens at the pursuer's private residence at Auchindoune. They claim that she was unjustly enriched
through receipt of the expenditure. In
conclusion 1 of the counterclaim the defenders conclude for payment of the
sum of £241,170.65. Alternatively,
they claim that between 2000 and 2002 the expenditure on the gardens
at Auchindoune constituted action by the pursuer which was in contravention of
the articles of association of the company and of the Companies Act 1985,
section 317, and that the pursuer was accordingly in breach of her
fiduciary duty as a director. This
alternative sum is £101,217. The
defenders make a similar claim with respect to the expenditure on a greenhouse
at Auchindoune. This claim is valued in
the sum of £43,519.26. The
defenders also claim that the pursuer procured for herself an unauthorised
bonus of £39,165.
[4] The
case came before me on the Procedure Roll.
Mr Sandison, on behalf of the pursuer, moved me to grant decree de plano with
respect to the payment of the sum in the first conclusion, namely the
outstanding sum on the loan, and to restrict probation with respect to matters
raised by the defenders in defence of the claim for payment in lieu of notice. With respect to the counterclaim, Mr Sandison
invited me to refuse probation to the claim based on breach of fiduciary duty
in relation to garden improvements and the greenhouse. Mr McNeill, Q.C., on behalf of the
defenders, moved me to allow a proof before answer on both the action and the
counterclaim.
The loan
[5] There was no dispute as to
the pursuer's entitlement to seek repayment of the loan. Further, there was no dispute that the
capital sum was correctly stated. The
defenders aver three bases on which they say that they should not be required
to repay the loan. The first is that the
terms of the loan were such that the repayment could not presently be
demanded. Secondly, the defenders had a
right of retention, failing which, thirdly, they had a case for compensation.
[6] By
letter dated 31 March 1986
(Production 7/1) the pursuer set out the terms of the loan. The letter which is addressed to the
defenders is in the following terms:
"I confirm that
the amount of my loan to Cawdor Castle
(Tourism) Limited as at 30 September
1985 was £168,052.
No arrangement
for the charging of interest on the loan has yet been formalised.
Repayment of the
loan capital and any interest due will be made in such instalments as may be
agreed from time to time between myself and the company. Always provided that the company's ability to
meet its other liabilities as they fall due would not be adversely affected by
such repayment."
First basis for non-payment: Another liability
[7] The
defenders aver that the principal liability for which they must at present
provide, and which prevents them from repaying the loan, is a potential
liability in case of the eventual success of the pursuer in proceedings in the
Court of Session relating to a pensions claim.
The defenders are one of the associated employers in respect of an
occupational pension scheme. The pursuer
raised proceedings in the Court of Session against the trustees of the pension
scheme seeking payment of certain sums considerably in excess of the amount of
principal outstanding in respect of the loan.
The defenders aver that in the event of success by the pursuer in that
action there will be a significant deficit in the funds of the pension scheme
and the defenders will be obliged to make good a share of that deficit. They aver that the pursuer was a trustee of
the pension fund until about January 2003 when she raised these
proceedings. They aver that as at the
time of her resignation she was fully aware as trustee of the information
available to the trustees as to its funding, and also of the impact on that
funding of having to meet a claim such as that presented in her proceedings in
January 2003. In these
circumstances they aver that the pursuer is not presently entitled to repayment
of the loan.
[8] Mr Sandison
was critical of the vagueness of these averments and submitted that there were
two substantive reasons why the defenders' averments on this matter were
irrelevant. Mr Sandison pointed out
that the defenders were not averring that they had a liability presently
due. It was a potential liability which
might become due. That, said Mr Sandison,
was not a relevant defence with respect to the terms of the 1986 letter. It was not an offer to prove something that
would invoke the condition in the 1986 letter, namely, that there was an
existing liability. The liability would
only come into being on the occurrence of certain contingencies: success by the pursuer in her action; and a deficit in the pension fund. He submitted that if a contingent liability
were to be regarded as invoking the condition, then the loan would never be
repayable so long as the company continued to exist. It would always have contingent liabilities,
even if only the cost of its own winding up.
[9] He
went on to explain that in the pensions claim the pursuer had been successful
before the Lord Ordinary but that the day before the hearing of the Procedure
Roll debate before me the action had been dismissed by the Inner House. Thus, there was no extant action at all. The possibility of an appeal to the House of
Lords was simply a further contingency.
[10] Mr Sandison also submitted that even if a liability which
fell within the terms of the 1986 letter did exist, the defenders had
advanced no claim that they would be unable to meet that liability and the
liability to the pursuer to repay the loan.
Such averments would be required in order to invoke the 1986 letter. At page 12B all the defenders averred
was that they would be "severely compromised" in their ability to meet the
claim if the loan were repaid. All that
meant was that they might or might not be able to meet the claim. This simply underlined the vagueness of the
defenders' averments in attempting to invoke the terms of the 1986 letter.
[11] Mr McNeill conceded that there was no dispute as to the
pursuer's entitlement to seek repayment of the capital sum. On 11 January
2007 the Inner House had found in favour of the trustees and the
actions were dismissed. Thus, the
pursuer had three months in which to decide whether to appeal to the House of
Lords and if she did so decide the potential for liability revived. This merely reflected the fluctuation of
fortune with respect to the existence of the liability. The defenders had to have regard to the
potential re-emergence of the liability.
Because the pursuer had terminated the lease of the castle to the
defenders, the defenders had no other assets on which to trade and no other
source of funds.
[12] As noted, I was advised in the course of the hearing before me
that the Inner House had dismissed the pursuer's claim in the pensions
case. While the case was at avizandum
the period for appeal to the House of Lords expired and I was given to
understand that the pursuer had not marked an appeal. In these circumstances it seems to me that it
is not open to the defenders to claim that there exists a liability that they
require to meet such as to bring them within the terms of production 7/1
and relieve them from the obligation to repay the loan. Accordingly, I shall exclude this defence
from probation.
Second
basis for non-payment: Retention
[13] The defenders aver that they
are entitled to retain any sum due in repayment of the loan pending resolution
of the counterclaim. They aver that the
loan was originally made to the defenders by Trustees of a settlement made in
respect of the Sixth Earl's marriage to his first wife in order to provide
working capital for a new business being run by the beneficiaries of the
trust. The loan was appointed to the
pursuer as the wife of the Sixth Earl and maintained by her to support the
continued financial stability of the company and thereby enhance the
availability of benefits to her by reason of her position as managing director
and the individual in control of the company.
They aver that the amounts counterclaimed arise in respect of the
pursuer's actings and payments taken during her period in office as managing
director. They aver that both the
circumstances giving rise to the amounts counterclaimed, and the circumstances
giving rise to the maintenance of the loan and claim for repayment, relate
directly to the pursuer's employment with the defenders.
[14] Mr Sandison submitted that it was not possible save in the
most unusual circumstances to retain sums due under one contract on the basis
that a claim exists against the person seeking payment based on some other
matter extraneous to that contract. He
submitted that a mere relation between the claims was not enough for the
exceptional application of retention.
[15] Mr McNeill submitted that although the matters pled did
not arise out of the same contract the claims were sufficiently related and
close to liquidation that to refuse the defenders a right of retention would
not be to do justice between the parties.
He submitted that the claim with respect to the loan and the
counterclaims with respect to the expenditure and the bonus both related to the
maintenance of the company for the purpose of the initial beneficiaries under
the initial trust which made the loan.
Both related to the pursuer's role as managing director and controlling
mind of the company.
[16] Further, Mr McNeill submitted that in the present case if
it were not for the pursuer insisting on arguing her pleas the case would be
going to proof before answer on the action and the counterclaim. Accordingly, the counterclaim would be well
in the course of being made liquid.
[17] Where the counter-obligations arise from a single contract the
principle of retention is applicable. I
was referred to the following passage in Walker,
The Law of Civil Remedies in Scotland,
at p.61 under the heading 'Retention of Money until Counter-claim is
Satisfied':
"Where
counter-obligations arise from a single contract, each is dependent and
conditional on the other and if performance on one side is not made, or
defectively made, the other party may
withhold payment until performance is made or his claim for damages for
non-performance or defective performance quantified."
[18] The general rule applicable where claims do not arise out of a
single contract is set out in Gloag on
Contract, p.624 under the heading Breach of Separate Contract:
"As a general
rule, it is no excuse for failure of performance that the other party is in
default on another contract."
However, at p.625, under the
heading 'Claims Immediately Verifiable', Gloag
continues:
"An illiquid
claim has been sustained as a dilatory plea where there were materials for its
instant or easy verification, and where, in the opinion of the Court the ends
of justice would be defeated if it were repelled."
I was referred to the Opinion of
Lord McLaren in Ross v Ross 1895 22 R. 461 at p.464:
"In disposing of
the pleas in this case I think that the Lord Ordinary has rightly dealt with
the plea of compensation, because that is a matter of statutory regulation, and
the plea is confined to cases where both debts are liquid or capable of
immediate ascertainment; but then there
is another principle under which one obligation may be suspended until the
performance of a counter obligation - the principle of retention, and that, not
being subject to the conditions of any statute, must be regarded as an
equitable right to be applied by the court according to the circumstances of
each case as it shall arise. The doctrine
has received much extension in cases of bankruptcy and insolvency, where it is
practically settled that anyone who has a claim against an insolvent estate is
entitled to keep back money which he owes to the estate, and cannot be
compelled to pay in full while he only receives a dividend. But the principle is not limited to
bankruptcy cases, and it seems to me that the circumstances of the present case
constitute a very clear ground for its application..."
[19] Mr McNeil referred to a passage in the opinion of Lord
Curriehill in Munro v Macdonald's Executors
1866 4 McPh. 687 at p. 688:
"I do not think
that we at all go in the face of the very important rule of law, that an illiquid claim cannot be pleaded by
way of compensation to a liquid claim.
As your Lordship has stated, that rule is not without exception. If a claim is in the course of being made
liquid, it may be pleaded by way of compensation. The word statim
in the rule, as expressed in Erskine,
implies some discretion on the part of the court. A great deal of enquiry may be necessary in
order to ascertain and make a claim liquid.
But if it is in the fair course of being made liquid by decree at an
early date, and there is no allegation of unnecessary delay, I think that the
court is entitled to exercise a discretion."
[20] A number of points may be taken from the above authorities in
relation to cases in which the counter-obligations do not arise from a single
contract. Retention operates to suspend
an obligation until counter-obligations are fulfilled. Retention is not restricted to cases where
the counter-obligations arise out of the same contract. In cases where the counter-obligations do not
arise out of a single contract the court has a discretion to apply the
principle of retention as an equitable right.
The court may allow an illiquid claim to be pled against a liquid claim
where the illiquid claim is in fair course of being made liquid by decree. It seems to me that in applying these
considerations to the present case there is force in the submissions of Mr McNeill. Both the claim for repayment of the loan and
the counterclaim are closely related and the counterclaim is well in the course
of being made liquid. I am unable to say
that the defenders have failed to plead a relevant defence of retention and
they should in my opinion be allowed a proof before answer on that defence.
Third
basis for non-payment: Compensation
[21] At p.18D the defenders aver
"separatim, said expenditure and the
unauthorised bonus have repaid any sums due under the loan." There were no further averments in support of
this bald claim. Mr Sandison
submitted that where compensation was to be relied upon it required to be pled
(Stair Encyclopaedia, The Laws of Scotland
Vol.13, para.96). Further, the same
difficulty arose as arose under retention, namely, that the defenders were
trying to set off a liquid debt, the loan, against the debts which are illiquid
regarding, the greenhouse and the bonus.
[22] Under reference to the passage at p.18D and plea-in-law 4,
Mr McNeill submitted that the plea to compensation should not be refused
probation.
[23] In my opinion no relevant defence of compensation has been pled
by the defenders and I shall refuse probation to the defence of compensation.
Interest
[24] The defenders' position with
respect to the interest due on the loan is set out in Answer 2 at
pages 14B-15B. They aver:
"When charged,
the rate of interest used was 10%. This
was in accordance with the said letter signed by the pursuer and dated 31 March 1986 confirming that no
arrangements for charging interest had been formalised and repayment of capital
and interest would be made in such instalments as might be agreed. By memorandum dated 9 June 1986 to F. M. Forbes, Estate
Factor/Accountant the pursuer indicated that she had 'decided to charge a 10%
on my loan to Cawdor Castle
(Tourism) Limited.' There was no company
or board minute. From about the time of
the death of the pursuer's husband the 6th Earl and by which time
the pursuer controlled the company by reason of her shareholding and position and
Managing Director, an annual interest charge of 15% was applied to the amount
of the loan outstanding as no significant repayments of capital were made."
They aver that in accordance with
arrangements approved by the pursuer as Managing Director of the defenders and
as lender, interest payments were made and accepted by the pursuer up until that
for the period May to October 2002.
Mr Sandison pointed out that the defenders did not aver that the
interest rate of 15% had not been agreed.
He suggested that it was difficult to see how the defenders had any
answer to the pursuer's claim to the rate of 15% continuing. The defenders had paid interest up
until 2002 and should pay 15% from 2002 until payment. Alternatively, as a minimum, there should be
payment from the date of citation at the rate of 8%.
[25] Mr McNeill said that the defenders' position was that the
charging of interest at a particular rate had never been formalised. The pursuer's position was set out in Article 1
of Condescendence at page E to 9B where it is averred:
"The memorandum
of 9 June 1986 is similarly referred to, under explanation that the
decision to charge a 10% rate of interest set out in that memorandum, like
all other decisions as to the rate of interest to be charged on the loan from
time to time, was made after informal discussion with, and with the agreement
of, all interested parties, including the directors of and shareholders in the
defenders, at regular meetings of the Cawdor Family Trusts, at which meetings
the affairs of the defenders as a company owned by one of those Trusts and by
family members were habitually discussed and agreed, and that at no point
before the raising of this action did any person claim that the 15% rate
of interest applicable to the loan (being the rate shown as chargeable in the
defenders' audited accounts condescended upon) was being applied other than by
the continuing agreement of the parties."
Mr McNeill submitted that even
although it was a matter of history that a rate of 10% or 15% might be
applicable at a particular stage, there was no averment that the rate of 15%
or any particular rate was agreed as always to be chargeable. It was a matter for the discretion of the
Court as to what rate of interest should be applicable and from what time
interest at the court rate should be applicable. It is averred at pages 16-17 by the
defenders that the rate of 15% had been for many years excessive had it
not been for the benefit of a controlling director:
"Upon the
assumption that the pursuer is entitled to a payment of interest on the amount
of the loan outstanding, she is entitled to no more than a fair rate for the period
in question. A rate of 8 per centum per annum would be
appropriate. Separately, upon the
assumption that the notes to the accounts do not evidence the basis upon which
the loan was maintained, there is no pactional rate of interest to which the
pursuer is entitled."
[26] I am satisfied that in the light of the competing averments of
fact on the question of rates of interest to be charged on the loan it would be
impossible for the court to reach a concluded view on the appropriate rate of
interest without hearing evidence and I shall accordingly allow a proof before
answer on the question of the rate of interest to be applied to repayment of
the loan.
Payment in lieu of notice
[27] Conclusion 3 is for
payment by defenders to the pursuer of the sum of £11,219. Plea-in-law 5 for the pursuer is as follows:
"The defenders
having contracted to pay the pursuer salary in lieu of notice, and having
failed to do so in respect of the period and to the extent condescended upon,
decree should be granted as third concluded for."
[28] In Article 4 of Condescendence, the pursuer avers that the
period of notice stipulated in her contract of employment was 13 weeks. There was provision for the defenders to give
payment in lieu of wages. She avers as
follows:
"By her letter
of resignation as director of the defenders, the pursuer indicated that she was
prepared, and intended to work that notice period. The defenders however, decided that they did
not desire her to work her notice, but that she should cease to be employed as
their managing director immediately."
She avers that the net sum which
she was due for salary in lieu of notice is £11,219.
[29] In answer, the defenders aver that the letter of resignation
sent by the pursuer on 10 October
2002 indicated a decision to resign as a director with immediate
effect. She did not give 13 weeks
notice of termination of her employment.
[30] This dispute turns on the construction of the letter sent by
the pursuer on 10 October 2002
(Production 6/7) and the reply from the defenders (Production 6/1). The letter sent by the pursuer on 10 October 2002 is in the
following terms:
"I am writing to
inform you of my decision to resign as a director of Cawdor
Castle (Tourism) Limited, with
immediate effect.
I appreciate
that I am an employee of the Company and I am quite prepared to carry on
working my notice period of 13 weeks from today's date. Unless I hear from you to the contrary, I
shall continue my employment until the end of my notice period."
In his reply, the Seventh Earl
Cawdor wrote (Production 6/1):
"Thank you for
your letter of 3 October informing me of your resignation as a director of
Cawdor Castle
(Tourism) Limited. I note that you would
be prepared to work out a 13 week notice period. However, I do not believe that would be
desirable. I am therefore treating your
resignation as a director and as managing director of the Company as being effective
from today."
[31] Mr Sandison submitted that when both letters were read as
a whole it was clear that the pursuer's letter of resignation was not
indicating that she was leaving there and then but that she was giving the
appropriate notice. The Earl's reply was
consistent with that interpretation.
That is the obvious construction of the letter. The defenders' averment that the pursuer did
not give 13 weeks notice of termination of her employment is
irreconcilable with the correspondence.
[32] Mr McNeill agreed that the question of the liability to
pay the payment in lieu of notice turned on the construction of the exchange of
letters. He submitted that the defence
was relevant. He submitted that
paragraph 1 of the pursuer's letter of resignation made it clear that she
was resigning with immediate effect.
Paragraph 2 muddied the waters.
Paragraph 2 simply represented an offer to work. It would be a strained view of the
construction of the letter to suggest that she was giving notice. He drew attention to certain averments in the
pursuer's pleadings. At page 6A the
pursuer avers that she gave notice of resignation which was accepted by the
defenders with immediate effect. In
Article 3 of Condescendence at page 18D she avers that she was employed
by the defenders as managing director until she tendered her notice on 10 October 2002 and it was
accepted by the defenders with immediate effect. In Answer 2 to the counter-claim at
page 42C-D she admitted that a letter dated 10 October 2002, she gave notice of her resignation
as a director and employee of the defenders.
Mr McNeill submitted that her case on record was that her
employment terminated on 10 October
2002. Mr McNeill
submitted that the first paragraph of the reply from Earl Cawdor responded
to what she had said in her letter.
[33] It was also important to have regard to the contract itself
(Production 6/4). It was necessary to bear in mind the contractual context
in which the letters were sent and received.
It was also necessary to consider the question of waiver of a right by
an employee who was otherwise entitled to notice. Here there was a specific provision for
waiver. He submitted that the proper
construction of Production 6/1 taken with Production 7/12 was that
there had been waiver of the notice period, the result being that neither party
could claim that the other was in breach of contract. Looking at the terms of the contract what
would have been in the mind of the pursuer was that she appreciated the
existence of the notice period but also thought that she might not be held to
it.
[34] Finally, Mr McNeill submitted that there might be a
question as to whether there was ambiguity in the letters and it might be
necessary to have regard to the surrounding matrix of fact to resolve any
ambiguity.
[35] In my opinion the obvious and straightforward construction of
the correspondence between the pursuer and the Seventh Earl is that for which Mr Sandison
contended. Under the contract of
employment between the pursuer and the defenders the section dealing with
notice in the event of termination of employment is as follows:
"Notice which
will be given by the Company/ employee.
Over 4 weeks
service - 13 weeks.
By mutual
agreement these notices can be waived by either party. Payment in lieu of notice may be given."
In her letter the pursuer
specifically states that she intends to continue her employment until the end
of the period of notice. In this respect
she made it clear that she was prepared to fulfil her contractual obligation to
work her notice. In his reply the
Seventh Earl simply fails to address the issue of payment in lieu at all. It seems to me that the defenders would not
have been in breach of contract if having decided not to insist on the pursuer
working her notice they had instead made a payment in lieu of notice. By simply advising her that she was not to
work her notice while not stating that a payment in lieu of notice would be
made instead and by failing to make a payment in lieu of notice the defenders
put themselves in breach of contract. It
does not seem to me that the various averments made at other points in her
pleadings undermine the position of the pursuer. I am unable to read the correspondence as
implying waiver. Nor does it seem to me
that there is any ambiguity which might require consideration of the factual
matrix. I shall refuse probation to this
defence. This would include the
averments in relation to termination of the lease between pages 24 D-E
and 25 D. Mr Sandison accepted
that the defenders had pled a relevant defence to the claim for payment in lieu
of notice by relying on the principle of retention in relation to the claim by
them that the pursuer had claimed an unauthorised bonus. Accordingly, I shall allow the issue of
payment in lieu of notice to proceed to proof before answer on that limited
basis.
Counterclaim
[36] Mr Sandison accepted that the defenders' case based on
unjustified enrichment was one in which the defender was entitled to a proof
before answer. Mr Sandison attacked
the case made by the defenders based on the breach of fiduciary duty and
section 317 of the Companies Acts 1985. He submitted that these claims were not fit
to be remitted to probation. They were
irrelevant or so lacking in specification as not to give fair notice of the
facts on which the defenders rely.
[37] Mr Sandison pointed out that although there was reference
in the defenders' pleadings in the counterclaim to a breach of the articles of
association, at no point was there any
specification of what these were. Mr Sandison
submitted that in examining a case alleging breach of fiduciary duty in respect
of a transaction between a director and a company, one would expect to see
averments setting out a clear statement on behalf of the company as to the
circumstances in which the payment were made.
For example, one would expect to see specification as to whether it was
claimed that the payment was made without the knowledge of anyone else or
whether anyone else was told and if so, whom.
In relation to section 317 of the Companies Act, one would expect
to see specification as to whether or not other members of the board had been
advised and in relation to the common law requirements whether members of the
company had been advised. One would
expect some specification as to whether these persons expressed a view about
the transaction. Mr Sandison
submitted that without that basic information it was impossible to determine a
relevant case of breach of fiduciary duty or regard what was stated as
amounting to fair notice. The position
in statement 3 of the counter-claim in relation to the greenhouse was
similar.
[38] Mr McNeill submitted that it was important to have regards
to the structure of the defenders' pleadings in statements 2 and 3 of
the counter-claim. In statement 2
at pages 31-33, the defenders set out the case based on unjustified
enrichment. Thereafter the defenders'
responses to the pursuer's answers were averred together with certain calls
made on the pursuer. Later, the issue of
the Minute of Agreement was dealt with. Mr McNeill submitted that a
difficulty which the defenders faced was in anticipating on the pleadings what
the issues to be determined after proof would be. The defenders were under the impression that
there was no signed Minute of Agreement.
That view was shared on record by the pursuer until the surprising
production of the Minute of Agreement in 2005. In these circumstances the court would be
unable to determine the issue as a matter of pleading. There would be different outcomes depending
on whether it was proved that there was or was not a signed Minute of
Agreement. Mr McNeill submitted that there were many different types of
situation in which a breach of fiduciary duty could be demonstrated.
[39] The factual averments setting out the case based on breach of
fiduciary duty are set out in statement II at pages 39ff and in
statement III at page 51. I
recognise that it is necessary to read these averments in the light of the
statements as a whole. While I agree that
the averments in support of breach of fiduciary duty are open to criticism as
being somewhat lacking in specification and would benefit from further
specification, it does seem to me they are sufficient to be allowed to proceed
to probation.
Decision
[40] I allowed certain amendments at the bar in order to deal with a
number of erroneous references in the pleas-in-law in the counterclaim and errors
in the figures in Statement III.
For the reasons set out above I shall allow a proof before answer on the
action and the counterclaim. I shall
partially sustain the pursuer's first plea-in-law in the action and refuse
probation to the following averments of the defenders:
·
In Answer 2 from the words "The principal
liability" where they occur at page 11 D-E to the words "severely
compromised" where they occur at page 12 B.
·
In Answer 2 from the words "Upon the
assumption" where they occur at page 15 B to the words "entitled to
repayment of the loan" where they occur at page 16 D.
·
In Answer 2 the words "Separatim,
said expenditure and the unauthorised bonus have repaid any sums due under the
loan." where they occur at page 18 D.
·
In Answer 4 from the words "On 10 October 2002 where they
occur at page 24 C to the words "to terminate the lease" where they occur
at page 25 D.
I shall reserve the question of
expenses.
