Scottish Court of Session Decisions

You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Orr & Anor, Re Orders Under The Companies Act 2006 in respect of DS Orr & Sons (Holdings) Ltd [2013] ScotCS CSOH_116 (09 July 2013)
URL: http://www.bailii.org/scot/cases/ScotCS/2013/2013CSOH116.html
Cite as: [2013] ScotCS CSOH_116

[New search] [Help]

OUTER HOUSE, COURT OF SESSION

[2013] CSOH 116

P1769/08

OPINION OF LORD DOHERTY

in the Petition of

(1) THOMAS ORR and (2) JAMES ORR

Petitioner;

for orders under section 996 of the Companies Act 2006 in respect of

D. S. ORR & SONS (HOLDINGS) LIMITED and D.S. ORR & SONS LIMITED

________________

Petitioner: Howlin QC, McColl; Lindsays

Second respondent: Party

Third respondent: Party

Fourth respondent: Party

9 July 2013

Introduction

[1] The first petitioner is Thomas Orr. The second petitioner is James Orr. The first respondent is D.S. Orr & Sons (Holdings) Limited ("Holdings"). The second respondent is Duncan Stewart Orr. The third respondent is Andrew Orr. The fourth respondent is Janet Orr. The fifth respondent is D.S. Orr & Sons Limited ("Orr"). The sixth respondent is Raj Jandoo. The petitioners and the second, third and fourth respondents are siblings.

[2] The Orr family have for many years carried on the business of farming, principally at Sunwick Farm and Greenwood Farm in Berwickshire and at Randerston Farm in Fife. From 1965 the business had been carried on through Orr. Prior to a reorganisation in 2002/3 each of the petitioners and the second and third respondents held 23% of the ordinary shares in Orr and the fourth respondent held the remaining 8%. The directors of Orr were the petitioners and the second and third respondents.

[3] In 2002/3 the family reorganised the businesses. The reorganisation was implemented by means of a series of agreements (being a Reorganisation Agreement, a Share Exchange Agreement and a Sale/Purchase Agreement) which were entered into on 14 February 2003 and were effective from 30 September 2002. Four new companies were incorporated, one for each of the farming businesses (J. Orr & Company limited ("JO"), T Orr & Company Limited ("TOCL") and Sunwick Farm Limited ("Sunwick") and a fourth company, Holdings, as a non-trading holding company for the three farming companies and Orr. Orr and the three farming companies became wholly owned subsidiaries of Holdings. The farm farmed by each of the farming companies was sold to it by Orr. Certain property interests (the "retained property") were retained by Orr. In order to ensure that each of the three separate farming businesses was controlled and managed by the individual, or group of individuals, who had managed it before the reorganisation the shares in Holdings were subdivided into "A", "B", and "C" class shares, each class of shares conferring upon its holder or holders control of the relevant farming business. The shares were allotted in proportions which replicated precisely the proportions in which the issued shares of Orr had been held. The first petitioner was allotted 41,430 "A" shares; the second petitioner was allotted 41,430 "B" shares; the second respondent was allotted 41,430 "C" shares; the third respondent was allotted 41,430 "C" shares; and the fourth respondent was allotted 14,280 "C" shares. The retained property comprised a terrace of cottages, the former farmhouse and relative ground at Randerston Farm; two fields at Overton Farm; a right of pre-emption over land at Riggonhead, Tranent; a right to share in any development uplift at Sunwick and Greenwood Farms; a right to share in any development uplift at Randerston Farm; a right to share in any development uplift at Overton farm; and a right to share in any development uplift at Kingsbarns Golf Course, Fife. In terms of clause 7.1 of the Sale/Purchase Agreement JO has a right of pre-emption should Orr wish to dispose of all or any part of the retained property. In terms of clause 7.3 Orr requires the prior consent of JO to sell retained property.

[4] In terms of the articles of Orr the quorum necessary for the transaction of directors' business is two. In the event of an even division in voting the chairman has a second, or casting, vote.

[5] Disputes developed between the petitioners on the one hand and the second and third respondents on the other hand as to the management of Orr and Holdings. The petitioners and the second and third respondents were the directors of Orr. Each had a single vote at board meetings. Because the board was equally divided, it proved impossible to elect a chairman.

[6] On 24 October 2008 the petitioners presented the present petition for orders under the Companies Act 2006, section 996.

The petitioners' averments

[7] In view of the history of the proceedings, and the way matters developed at the hearing, it is appropriate to set out material parts of the petitioners' averments. (Those averments include several typographical and grammatical errors). The petitioners aver:

"The March 2008 Interdict proceedings

15. That in March 2008 matters reached a critical point. On or about the 13^th March 2008 the petitioners raised interdict proceedings against Holdings, Orr and the second, third and fourth respondents. This sought interdict in respect of two extraordinary general meetings requisitioned by the second, third and fourth respondents, one of Holdings and the other of Orr and scheduled for 14 March 2008. Notice of the meetings was received by the petitioners on or about 14 February 2008 and, taken together, indicated that at each meeting a resolution for the removal of the petitioners as directors of Holdings and of Orr would be considered...

16. That as a result of that petition formal undertakings were given to the court by Orr and the second, third and fourth respondents. The second, third and fourth respondents undertook that they would not, either in person or by means of proxy, move the resolutions to remove the petitioners from the office of director of Holdings at the meeting on 14^th March 2008. The fifth respondent, Orr, also undertook not to hold an extraordinary general meeting on the 14^th March 2008 to remove the petitioners as directors of Orr...

17. That the extraordinary general meetings of Holdings and Orr did not take place on the 14^th March 2008 and the resolutions to remove the petitioners as directors of Holdings and of Orr were not moved...

The Board meetings of 17 March 2008

18. That the petitioners had attended a board meeting of Orr on 21 February 2008 where it was inter alia resolved to fix 17 March 2008 as the date of the next board meeting of Orr. A board meeting for Holdings was also set down for 11 a.m. on 17 March 2008 with the board meeting for Orr at 2 p.m. the same day. No notice of these meetings was issued and no agenda or notice of any resolutions was intimated to the petitioners in respect of either board meeting. The petitioners understood that these meeting would be routine meetings to discuss the ongoing business of Orr and Holdings. Explained and averred that prior to reorganisation in 2002 the business of the petitioners and of the second, third and fourth respondents was conducted in a fairly informal manner, often by way of telephone calls among the parties. Following reorganisation in 2002 and in particular following the involvement of the sixth respondent, company business was conducted more formally and agendas and resolutions were intimated...

19. That the petitioners attended with their solicitor Anthony Murray of Lindsays, Solicitors at 10.55 a.m. on the 17^th March 2008 for board meeting of Holdings. They were called in to the meeting at approximately 11.20am. It became apparent that the meeting had already commenced. The meeting degenerated into argument and Mr Murray was later advised by Mr Mark Ralston (a solicitor and partner in the firm of Messrs Wright & Crawford, Paisley who were at the time the company secretary of Orr) that it was to be considered null and void...

20. That the petitioners thereafter attended with their solicitor Anthony Murray at 2pm on 17 March 2008 for the scheduled board meeting of Orr. The meeting was convened and an agenda was provided at the meeting. The agenda is produced. The meeting was chaired by a Mr Ralston. The first item on the agenda was the interdict proceedings referred to in statement 15 above. Given the petitioners role in those proceedings they were asked to leave the board meeting whilst the interdict proceedings were discussed. They agreed to do so. Thereafter the meeting concluded without either of the petitioners or Mr Murray being invited to re-join the meeting. Mr Ralston on leaving the meeting advised Mr Murray that no further business had been conducted at the meeting...

The 19 March 2008 Orr board meeting

21. That the further board meeting of Orr took place as scheduled at 12 noon on 19 March 2008. No agenda or notice of any resolutions were intimated to the petitioners. The meeting was chaired by Mr Ralston. The second petitioner attended that meeting. The first petitioner was unwell and unable to attend the meeting. The first part of the meeting was a continuation of an emergency board meeting of Orr of 10 March 2008. Because of the absence of the first petitioner it was agreed that the meeting be adjourned to 30 April 2008...

22. That the parties reconvened at 12 noon to continue the Orr board meeting of 17 March 2008 referred to above. The first petitioner was not present. An agenda was provided at the meeting. At the conclusion of the meeting, under "AOCB" the board resolved to fix a further board meeting for 30 April 2008. The third respondent then indicated that he had further business to raise. After some discussion the chairman allowed the third respondent to proceed...

23. That the third respondent proposed inter alia a resolution to confirm the appointment of Janet Orr, the fourth respondent, as a director of Orr...

24. That the second respondent seconded the resolution to appoint Janet Orr a director. A vote was taken and the second and third respondents voted in favour of the resolution. The second petitioner voted against the resolution to appoint Janet Orr a director as he considered that her appointment as a director would shift the balance of power on the board in favour of the second and third respondents, who would then abuse their power. The resolution was held to have been duly passed by a majority. The second petitioner vehemently objected to the proceedings and an altercation took place. The meeting closed...

The Board Minutes of 17 March 2008

25. That on or about 20 March 2008 following both board meetings the petitioners received copies of what purported to be the minutes of the board meetings referred to above...

26. That the minutes of 17 March 2008 meeting of Orr report four items of business. Under the third item there is reported the exclusion of the petitioners from the meeting to discuss agenda item 1, being the interdict proceedings referred to above. Thereafter, the minutes at paragraph 4 report that the third respondent raised two items of business under "AOCB". The Chair suggested the matter be raised at the continued meeting on 19 March 2008 but the third respondent refused to agree to this and the Chair allowed him to proceed...

27. That the minutes record that the third respondent then moved that the fourth respondent, Janet Orr, be appointed as a director of Orr. This motion was seconded by the second respondent. The minutes report that Orr thus resolved to appoint Janet Orr a director of Orr...

28. That the receipt of this board minute was the first indication the petitioners had of the business that had purportedly taken place at 17 March 2008 meeting from which they had been excluded. Neither petitioner was present when the resolution to appoint Janet Orr the fourth respondent were purportedly passed. The petitioners had no notice of such resolution and had no opportunity to vote...

The Board Minutes of 19 March 2008

29. That the board minute of Orr of 19 March 2008 reports the business of Orr at the meeting at which, as mentioned above, the second petitioner was not present. It reports the purported appointment (again) of the fourth respondent as a director of Orr. Given the recent interdict proceedings and the history of dispute in Orr, the second, third, fourth and sixth respondents, being aware of the express views of the petitioners, contrived to conduct important business, being the appointment of the fourth respondent, at a time when one or both of the petitioners were not present. Those respondents were well aware that had the petitioners been given notice of the resolutions to be proposed at either board meetings that the petitioners would have voted against the resolution to appoint the fourth respondent and thus defeated it. Explained and averred that given her involvement in the dispute and her position in support of the second and third respondents, it was in all the circumstances unreasonable and unfairly prejudicial to the interests of the petitioners for the second and third respondents to seek to have the fourth respondent appointed as a director and for her to accept such an appointment...

Purported suspension of the second petitioner

30. That on 19 March 2008, following the meeting of that date, the petitioner's solicitor, Anthony Murray, received an e-mail ... from the chairman of the meeting, Mr Ralston. The e-mail purports to suspend the second petitioner as a director of Orr in respect of an alleged assault by him upon the second respondent at the board meeting on 19 March 2008. It purports to suspend his directorship with immediate effect and to remove his entitlement to conduct any business on behalf of Orr and to attend any board meetings of either Orr or Holdings...

31. That Orr has no power to suspend a director. Orr may only remove directors on giving special notice in accordance with its articles, in particular paragraph 96 of Table A. There is no power of suspension...

The Floating Charge purportedly granted by Orr

32. That on 11 July 2008, the petitioners solicitor, Anthony Murray, attended on their behalf a board meeting of Orr at 120 George Street, Edinburgh. The agenda for the meeting was provided to Mr Murray at the commencement of the meeting. Following that meeting the petitioners became aware, on checking the register at Companies House, that on 15 July 2008 a floating charge had purportedly been granted by Orr in favour of the sixth respondent, Raj Jandoo. The grant of a floating charge was no part of the business conducted at the board meeting on 11 July 2008. Orr is the family company which, following reorganisation, holds valuable property...

33. That the grant of a floating charge by Orr was not considered by the board of Orr or of Holdings. It was not authorized by a properly convened board of the directors of Orr. The petitioners as directors have received no notice of any board meeting at which the grant of the floating charge was to be considered. The petitioners have not been made aware of any resolution to grant a floating charge over the valuable assets of Orr. The petitioners are unaware of any lending arrangements between Orr and the sixth respondent. They have no knowledge of the basis for granting such a security. The floating charge is invalid and falls to be reduced...

The Cottages at Randerston

34. That Orr are seeking to recover insurance proceeds from J Orr & Company Limited ("JO"), being the subsidiary company of which James Orr, the second petitioner is the A director, in respect of damage to a cottage owned by Orr at Randerston. JO and Orr are members of the same group of companies and have a long-standing agreement whereby the rents and any insurance proceeds from the cottages at Randerston are paid to JO (which is based at Randerston.) JO pays the insurance premiums for the cottages. It was agreed that any such sums in respect of the cottages would be paid to JO and "ring-fenced" in JO for the upkeep of the cottages on which they were duly spent. The third respondent was reminded of this arrangement by e-mails of dated 17^th and 31^st January 2008. The rents are in shown in the trading profit and loss account of Orr for the period 1^st April 2006 to 28^th February 2008. All money paid into JO in respect of the cottages is shown as an asset of Orr in the group accounts. There is no apparent need to divert the rents. The Petitioners were not party to any decision to divert rents from JO to Orr. The petitioners as directors have received no notice of any board meeting at which this issue was to be considered...

35. That in addition, Orr have threatened court proceedings to evict the tenants from the cottages at Randerston. They have issued notices of eviction... This has been done without the board approval of Orr. The petitioners as directors have received no notice of any board meeting at which this issue was to be considered...

Court action by Orr

36. That the petitioners have been informed that Orr have appointed Wright & Crawford to act as solicitors for Orr in respect of court action by Orr against JO. This has been done without board approval of Orr. The petitioners as directors have received no notice of any board meeting at which this issue was to be considered...

The purported termination of the petitioners' directorships in Orr

37. That the petitioners learned on 6 October 2008, on checking the register at Companies House, that at the board meeting of Orr on 23 September 2008 resolutions had purportedly been passed to remove them as directors of Orr and to appoint the sixth respondent as a director. The forms 288 were signed by the third respondent and lodged at Companies House on 6 October 2008. The petitioners as directors received a notice of the meeting and an agenda. However, no notice was given of any resolutions for the removal or appointment of directors. They have received no notice of any board meeting at which such resolutions were to be considered. The petitioners have not been provided with a copy of the board minutes. The petitioners were not in attendance. The directors of Orr have no authority to remove the petitioners as directors without special notice to them. Reference is made to sections 168 and 169 of the Companies Act 2006. The said meeting not having been validly convened, no proper notice having been given to the petitioners as directors, the business purportedly conducted is a nullity...

38. That article 88(f) of the articles of association of Orr does allow a director to be removed from office if he has been absent from the directors' meetings for more than six months without the permission of the directors. That article does not apply in the circumstances. The directors of Orr wrote to the first petitioner on 12 May 2008 telling him not to participate in the business of Holdings unless he produced a medical certificate to say that he was fit to do so. The second petitioner received a fax from Mr Ralston of Wright & Crawford dated 19 March 2008 informing him that, under instruction of his co- directors, he was forbidden from attending any future board meetings of Orr. Accordingly, the first respondent has express permission from the directors to refrain from attending any board meetings and the second respondent is forbidden from doing so. In any event, no proper notice having been given of the business of the meeting, the purported appointment of the sixth respondent, and the removal of the petitioners, as directors are invalid. The business purportedly conducted at the meeting is a nullity...

39. That in relation to Orr, the sole member of the company is Holdings. To the knowledge of the petitioners, who are directors of Holdings, Holdings has not authorised any person to propose or vote in favour of any resolutions to appoint or remove directors or to grant a floating charge. Reference is made to section 323 of the Companies Act 2006...

The Undertakings, Changes to the Bank Mandate and Withdrawal of Funds

40. That on 28 October 2008 the second and third respondents gave an undertaking to this Court that no business of Orr would be conducted without due and proper notice being given to the petitioners. The petitioners subsequently learned from Orr's bankers, Bank of Scotland, that cheques totalling £95,350.00 had been drawn on Orr's bank account removing that sum from Orr. The petitioners were signatories on that account along with the other directors. Following service upon the bank of a copy of this petition and particulars of the undertakings given to the court on 28 October 2008, the bank placed a "stop" on the account to prevent any further intromissions with the account. It has become apparent that on the 1 December 2008 two cheques drawn on the account of Orr, totaling £95,350 and payable to Sunwick Farms Limited, were presented to the bank. Both cheques were signed by the third and fourth respondents. Sunwick Farm is the farm operated by the second and third respondents. Further cheques payable to legal agents were also drawn on the account of Orr and signed by the third and fourth respondents. Those cheques were not honoured by the bank, given the "stop" placed on the account. Thereafter, a new bank mandate dated 18 December 2008 and signed by the second and third respondents on behalf of Orr was presented to the bank. That mandate states inter alia in respect of those signing that:

'On behalf of the company, we confirm that in accordance with all the provisions (statutory and otherwise) which govern the company , it has been validly resolved on behalf of the company that.. 3. Any person whose name and specimen signature appears on the list of authorised persons is authorised to sign all appropriate documentation in relation to the operation of, and any services, facilities or card transactions connected with the accounts.'

The mandate attaches the signing authorities and the specimen signatures of the second and third respondents only and entitles each to sign alone. As a result, those two respondents have removed the petitioners' authority to sign in respect of the Orr account and constituted themselves as the only two authorised signatories on the account. On 29 December 2008 two further cheques payable to Sunwick Farms Limited and totalling £95,350.00 were drawn on the Orr account and presented. Those cheques were honoured by the bank and that sum was paid over to Sunwick Farms Limited from the Orr bank account. The petitioners are not aware of any reason why that sum would be legitimately due to Sunwick farms Limited, and despite requests for clarification, none has been forthcoming. The terms of the bank mandate signed by the second and third respondents do not reflect the true position. The second and third respondents have knowingly misrepresented the position of Orr to the bank. The confirmation in the mandate is untrue. No such resolution has been validly passed by Orr. The petitioners have received no notice of any such resolution. In any event, any such resolution is not in accordance with the provisions of the articles of the company and, given the lack of any notice to the petitioners, any purported passing of the resolution is a breach by the second and third respondents of their undertakings given to this court on 24 October 2008. The fourth respondent is also in breach of her undertakings, given that her signature appears on the face of the four cheques of 1 December 2008. The petitioners reasonably believe that the cheques referred to are simply a means by the said respondents of unlawfully removing and thus diminishing Orr's assets all to the prejudice of the petitioners and Orr. With reference to the respondents' averments in answer, explained and averred that Orr is a company merely holding assets whose value was not readily ascertainable at the time of the reorganisation in 2002. It is not, and never has been, the practice of Orr to pay for cattle feed in respect of cattle owned by Sunwick Farm Limited ("Sunwick"). The farms trade and operate separately. There is no arrangement whereby Orr pays for goods and services supplied to Sunwick or vice versa. No agreement has ever been reached between Orr and Sunwick for Orr to pay for Sunwick's cattle feed. The handwritten invoice by Sunwick is dated 26 March 2008 and purports to relate to the feeding of cattle from November 2006. No sums are shown as due by Orr to Sunwick in the accounts for Orr for the period 1 April 2006 to 28 February. The payment of £30,000 in March 2007 referred to b the respondents was a one-off payment made by Orr to Sunwick as part of the arrangements for the anticipated sale of Orr to a company called Galliard de Quincy Limited, a British Virgin Islands registered company of which the sixth respondent is a director. That sale never completed. With reference to the bank mandate, at no time were any of the invoices intimated to the petitioners, nor was payment sought from Orr. The petitioners have no knowledge of the invoices, the tax due or of the legal services allegedly provided to Orr. Although the petitioners are directors of Orr, along with the second and third respondents, they were not advised by those respondents of the sums said to be due by Orr. The petitioners have been excluded by the second and third respondents from the management of Orr for more than two years. A simple request for payment was all that was required. Such a request was never made by Sunwick or by any of the respondents. Any sums properly due by Orr would have been authorised by the petitioners and paid. The said respondents instead chose, without notice to the petitioners, to change the bank mandate covertly, in the process unnecessarily removing the petitioners as authorised signatories for Orr, and then to take the monies claimed as due. It is submitted that the respondents' conduct and that set out above was in bad faith and constitutes further examples of unfairly prejudicial conduct by those respondents. The respondents are called upon to produce receipted fee notes in respect of the legal fees paid by Orr indicating clearly the identity of the party on behalf of whom work was undertaken and full details of that work. As a result of these events the second, third, fourth and sixth respondents again gave undertakings to this Court on 21 April 2009 not to conduct any business of D.S. Orr & Sons Limited or D.S. Orr & Sons (Holdings) Limited without due and proper notice being given to the petitioners and not to intromit with the bank accounts of D.S Orr & Sons Limited without notice to the petitioners' agents, all as more fully set out in the Minute of Proceedings...

The 2007 'Audited' Accounts for Orr

41 That on 7 May 2009 the accountants acting for the petitioners received intimation of what purported to be audited accounts for DSO for the year end 31 March 2007. Those accounts are produced. The report of the directors appears at page 2 and was signed by the third respondent, Andrew Orr ("AO") 'On behalf of the Board' on 7 May 2009. The auditor's report is signed by Gall Robertson, Chartered Accountants, Galashiels, also on 7 May 2009. Despite the terms of the directors' report within those accounts, to the knowledge of the petitioners no board meeting of DSO had taken place to approve the accounts and, in any event, the approval of those accounts was neither sought nor obtained from the petitioners. In fact the accounts were not approved by the board of DSO and AO, despite his signature, was fully aware that the accounts were not approved The approval of the accounts of DSO is business of the company and such business requires to be conducted by and agreed upon by the board of directors. No such business or approval took place. The uttering as genuine of the purported audited accounts of Orr for 2007 without the knowledge of the petitioners or the approval of the board, despite the signature thereon of the third respondent, is conduct which would be prejudicial to the petitioners given, in particular, the potential for a tax liability to arise in respect of the company's activities, for which the petitioners are responsible along with the other members and directors, on the basis of accounts which may be materially incorrect. The business of Holdings and of Orr continues to be operated without due and proper notice to the petitioners even during the currency of these proceedings and in breach of undertakings given by the respondents to this Court. These are further examples of the conduct of the second, third and fourth respondents of which the petitioners complain. The petitioners consented to the lodging of the above-mentioned accounts with the registrar of companies in order to prevent Orr from being struck off the Register...

Events in 2010 and 2011 - The 2010 Orr Accounts

42. That the proceedings in this petition were continued without order between July 2010 and June 2011 in anticipation of an extra-judicial settlement. Settlement has not occurred. During that period further events have occurred. In the draft 2010 accounts for Orr the second, third and fourth respondents have made claims for directors' and secretarial fees which total £47,000 plus VAT. It has never been the practice of the company to pay fees at such a level to any directors. The practice had been to pay a minimal amount of approximately £10,000 to directors, if at all, and no payments have been made since the reorganisation in 2002. There is no vouching for any such payments. No such payments were discussed or agreed at any board meetings or otherwise agreed to by the petitioners. Substantial legal fees in the sum of £35,463 have been charged to Orr and appear in the 2010 accounts. It would appear that Orr are being charged for the legal costs of the second, third and fourth respondents in this process. In the circumstances such payments are a misappropriation of Orr's funds and, in any event, no approval for such payments has been sought from or given by the petitioners...

Floating charge and the sixth respondent

43. That following the reorganisation mentioned above, a Supplemental Agreement was drafted with a view to "unwinding" the group of companies. The agreement was originally drafted by Brodies LLP but was not signed by the parties. In 2010 the Supplemental Agreement was reworked by Murray Beith Murray and again not signed. It seeks to provide each of the petitioners and the second and third respondents with autonomy over their farms. It transfers out of Orr all of the remaining rights to each of the shareholder‑owned companies. In addition, land at Overton owned by Orr was to be sold to the first petitioner at an agreed market price. The sale of Overton could be completed only once the sixth respondent issued a formal letter of non-crystallisation in respect of the floating charge purportedly granted to him by Orr. It is believed and averred that the sixth respondent refused to issue such a letter. As a result the planned sale of Overton cannot proceed. Furthermore, the purported existence of the floating charge, as recorded by the Registrar of Companies, constitutes a hindrance in any transaction with Scottish Coal regarding the surrender of Orr's right of pre-emption over the land at Riggonhead...

Breach of Duty

44. That in these circumstances the second and third respondents are in breach of their duties as directors of Orr. The second and sixth respondents are in breach of those duties in respect of Holdings. All are in breach of their fiduciary duties in respect of those companies. They have acted in bad faith and have continued to do so throughout these proceedings. They are in persistent breach of their duties to act in accordance with the companies' respective constitutions and to exercise the powers of directors only for the purposes for which they were conferred. Reference is made to sections 170, 171 and 172 of the Companies Act 2006...

Deadlock

45. That the ill-will generated by the conduct of the second, third, fourth and sixth respondents has led to deadlock in the conduct of important transactions in which the petitioners are interested. In particular, the siblings have been unable to agree upon a unified response to the offer by Scottish Coal to pay upwards of £8.8 million to Orr as consideration for the discharge of Orr's option over land at Riggonhead. The acceptance of such an offer would be beneficial to all the siblings, as profits arising therefrom in Orr could be paid by way of dividend to Holdings and thence, to the extent permitted by the law relating to the distributable profits of a company, by Holdings to the siblings themselves, in the respective proportions in which they hold their shares in Holdings. A meeting of the board of directors of Orr was held as recently as 18 April 2011. The matters sought to be discussed at that meeting included the following:

(1) Orr's position regarding Scottish Coal's proposal to purchase from Orr a surrender of the option over the subjects at Riggonhead;

(2) the sale of the subjects at Overton to Thomas Orr & Company Limited;

(3) the value of the develop rights of subjects owned by Orr and whether those rights should be sold to Sunwick Farm Limited;

(4) whether or not the substance of the Supplemental Agreement mentioned above had in fact been agreed upon;

(5) whether or not the second respondent, Duncan Orr, was entitled to act as the chairman of the meeting and, as such chairman, have a casting vote. Because of the ill-will mentioned above, it proved impossible to reach any decision on any of those matters...

Unfairly prejudicial conduct

46. That in the following respects, at least, the affairs of Holdings, including those of its subsidiary, Orr, have been and are being conducted in a manner which is unfairly prejudicial to the interests of the petitioners as members of Holdings.

(i) The manner in which the board meetings of Holdings and Orr of 17 and 19 March, 11 July and 23 September 2008 have been repeatedly convened and conducted with no proper notice to the petitioners of the business to be conducted thereat;

(ii) The exclusion of the petitioners from the Orr board meeting of 17 March 2008 on a false pretext;

(iii) The continued conduct of significant business by the board of Orr and Holdings without proper notice to the petitioners;

(iv) The purported appointment of the fourth respondent as a director of Orr on 17 and 19^th March 2008;

(v) The purported suspension of the second petitioner as a director of Orr.

(vi) The diverting of the rents for Randerston by Orr from JO

(vii) The raising of court action and eviction proceedings by Orr against tenants at Randerston without any notice to the petitioners.

(viii) The repeated wrongful attempts to remove the petitioners as directors of Orr in March 2008 and again in October 2008.

(ix) The purported granting of a floating charge by Orr to the sixth respondent.

(x) The purported appointment of the sixth respondent as a director of Orr

(xi) The issuing of purported board approved and audited company accounts for Orr for 2007 without the knowledge or approval of the petitioners.

(xii) The alteration of the Bank of Scotland mandate for Orr removing the petitioners as signatories and representing to the bank that such was authorised by the petitioners and the making of payments therefrom without the knowledge or approval of the petitioners.

(xiii) The submission of substantial invoices to the respondents as directors of Orr without the knowledge or approval of the petitioners

(xiv) The apparent payment of the second, third and fourth respondents' legal costs in this process by Orr

(xv) Causing Orr to incur liabilities to Messrs Davidson Chalmers in respect of legal services which were rendered, not to Orr, but to the second, third and fourth respondents in their personal capacities...

47. That the conduct of the affairs of Holdings and of Orr, culminating in the purported removal of the petitioners as directors of Orr, is a deliberate attempt to exclude the petitioners from any meaningful or effective involvement in the affairs of the family business of Orr and of Holdings. The repeated exclusion and the deception of the petitioners in respect of the board meetings of 17 March, 19 March, 11 July and 23 September 2008 is conduct which is unfairly prejudicial to the interests of the petitioners. The petitioners have been and continue to be excluded from participation in the family business previously operated through Orr, and since the reorganisation through Holdings...

48. That immediately before the reorganisation the petitioners and the second, third and fourth respondents all participated as shareholders in Orr whose business included both farming and land development. The reorganisation did not involve any abdication by any of them of their entitlement to participate fully in the family business retained in Orr. That entitlement is expressed in the articles of Holdings which alone, as sole member, is entitled to vote at meetings of Orr. By virtue of their attempted removal of the first and second petitioners as directors of Orr, the purported appointment of the sixth respondent, Raj Jandoo, as a director of Orr and the alteration of Orr's bank mandate, the second and third respondents have attempted to gain control of Orr and thus, through Orr, to gain control both of its assets in general (which, as averred in statement 8 above, have a very substantial value) and of the amount standing to the credit of Orr's bank account. Having sought to gain such control, they then misappropriated those assets in drawing cheques on the bank account in the manner complained of above and in purporting to grant a floating charge to the sixth respondent. Such conduct on the part of the second, third and fourth respondents, in particular, is entirely contrary to the spirit of the reorganisation which was effected in 2003. Those respondents have conducted the affairs of Holdings - including the affairs of Orr - in a manner which is unfairly prejudicial to the interests of the petitioners in their capacity as members of Holdings. That conduct is also contrary to the spirit, although not the letter, of the undertakings given to the court on 13^th March 2008. Reference is also made to the repeated undertakings given to this court by the respondents on 24^th October 2008 and again on 21^st April 2009 as regards the conduct of the business of Orr. In these circumstances the petitioners seek relief in terms of section 996 of the Companies Act 2006..."

History of the proceedings

[8] These petition proceedings have a lengthy history. For present purposes it is unnecessary to recount most of it.

[9] On 30 October 2012 the court pronounced the following interlocutor:

"30 October 2012

Lord Hodge

Act: Howlin Q.C.

Alt: Party 2^nd and 3^rd Respondents

Bovey Q.C. (4^th Respondent)

The Lord Ordinary, having heard counsel by order:

1. appoints the second, third and fourth respondents to disclose by 14 December 2012 whether they dispute the allegation that there was unfair prejudice;

2. appoints parties to exchange by 25 January 2013 all documents upon which they seek to rely;

3. appoints parties to exchange by 15 February 2013, and subsequently lodge in process, full signed statements from all witnesses whose evidence is sought to be adduced, such statements to stand as their evidence in chief, subject to such further examination as may be allowed by the court;

4. appoints parties to lodge in process any supplementary statements by 1 March 2013;

5. appoints parties to lodge in process by 4 June 2013 a joint bundle of productions (in chronological order, or such other order as will facilitate the efficient conduct of the proof, with each document tabbed and the whole bundle paginated from start to finish);

6. appoints parties to be heard by order on 8 March 2013, between the hours of 9.00 a.m. and 10 a.m. where parties will provide the court with a timetable for the conduct of the proof.

P.S. Hodge"

[10] By letter of 14 December 2012 the third respondent wrote, on behalf of himself and the third respondent, to the petitioners' solicitor. The letter included the following admission:

"Duncan and I admit to having acted in a prejudicial manner but in all honesty we are not sure as to what, when and where and in what form our admission needs to be made to the Court of Session."

[11] By letter dated 14 December 2012 the fourth respondent's solicitors wrote to the petitioners' solicitors. The letter included the following admission:

"In order to comply with paragraph 1 of the Interlocutor dated 30 October 2012, Janet Orr states that she does not dispute the allegation that there was unfair prejudice."

[12] On 27 February 2013 the petitioners enrolled the following motion:

"On behalf of the Petitioners to ordain the Fourth Respondent to appear before the court to explain her failure to properly obtemper the first part of the Court's Interlocutor of 30 October 2012 and to ordain her to state to the Court whether or not she admits the unfair prejudice alleged in terms of the Petition."

The solicitors for the fourth respondent marked the motion as opposed, the basis of opposition noted being:

"The motion is not necessary. The Fourth Respondent has complied with the terms of paragraph 1 of the court's Interlocutor dated 30 October 2012."

[13] On 26 February 2013 the fourth respondent enrolled a motion "for further case management directions in light of the second to fourth respondents' admissions of unfair prejudice and the deadlock in the management of the companies..."

[14] On 8 March 2013 the court pronounced the following interlocutor:

"8 March 2013

Lord Hodge

Act: G. Dalgleish

Alt: Party Second and Third Respondents

M. Bovey Q.C. (Fourth Respondent)

The Lord Ordinary, having heard parties by order:

1. refuses parties' respective motions in hoc statu;

2. quoad ultra makes no order meantime.

P.S. Hodge"

The corresponding entry in the Minute of Proceedings recorded:

"The court indicated that because the respondents have failed to comply with the interlocutor of 30 October 2012 they will be unable to lead any evidence in chief in order to contest the merits of the claim in respect of unfair prejudice.

The court reserves its position in respect of whether the respondent will be allowed to lead evidence in respect of the question of remedy."

[15] On 17 May 2013 the fourth respondent enrolled the undernoted motion:

"On behalf of the fourth respondent (1) to allow the List of Witnesses and witness statements of Walter Semple and Janet Orr to be received late; (2) to allow the Inventory of Productions for the fourth respondent to be received late; (3) to allow a further 7 days for the parties, if so advised, to lodge witness statements of accountants."

The motion was opposed by the petitioners. A motion enrolled by the second and third respondents was dealt with at the same time. On 29 May 2013 the court allowed parts (1) and (2) of the fourth respondent's motion. It continued the cause "to a hearing on the issue of remedy". The Minute of Proceedings recorded:

"The Court was informed that the issue of unfair prejudice was no longer a matter in dispute and that the hearing before Lord Doherty would deal with the issue of remedy only."

The hearing
Appearance and representation

[16] At the hearing before me the petitioners were represented by counsel and the second, third and fourth respondents appeared as parties. The sixth respondent did not take part in the hearing. He had resigned as a director of Orr in February 2011. On 7 June 2011 he had assigned to the fourth respondent the floating charge which had been granted to him.

Common ground

[17] It became evident during the course of the hearing that certain matters are likely to be capable of being agreed by the parties without the court being asked to make orders relating to them, viz.

1. That the farming companies TOCL, JO and Sunwick, which at present are subsidiaries of Holdings, be demerged so that they are directly owned by Thomas (in the case of TOCL), James (in the case of JO) and Andrew, Duncan and Janet (in the case of Sunwick (though if any of the parties wish to set up an intermediate holding company to hold the shares in his or their farming company that is up to them). The precise mechanics of any demerger may need to be the subject of an application for Revenue clearance.

2. That Orr be demerged by converting its share capital into A, B and C shares which will be issued to Thomas, to James and to Andrew, Duncan and Janet in precisely the same proportions as their present shareholdings in Holdings. Again, the precise mechanisms may require an application for Revenue clearance.

3. That after the above demergers, Holdings could be dissolved.

The hearing proceeded on the basis that agreement could be reached on those matters. That was part of the context in which the court was asked to approach the issue of what, if any, orders the court should make by way of relief. The petitioners were content that demerger be accomplished by consent, rather than by way of order of the court (unless circumstances changed).

Evidence

[18] Both of the petitioners gave evidence. They indicated that so far as they were concerned the matters listed in paragraph 17 were part of the way forward. In addition, they indicated that Orr ought to continue in existence until its affairs had been sorted out, and that for that to be achieved control of Orr should to be vested in them. That could be done either (i) by excluding the second and third respondents from membership of the board of Orr, leaving the petitioners as the sole directors, or (ii) by allowing the second and third respondents to continue to be directors together with the petitioners but ensuring that any deadlock on the board could be broken by a casting vote vested in either of the petitioners (but not in the second respondent or third respondent) as chairman. In view of the history of conflict the petitioners' preference was for option (i). The second, third and fourth respondents did not give evidence themselves and they did they lead any other witnesses.

The petitioners' submissions

[19] Mr Howlin reminded me that sections 994 and 996 of the Companies Act 2006 provide that a member of a company may seek relief from the court where he has suffered unfair prejudice to his interests as a result of the way in which the affairs of the company have been conducted; and that these provisions are the successors to those previously found in sections 459 and 461 of the Companies Act 1985. For a petition to be well founded, the petitioner requires to establish that: (a) the acts or omissions complained about by the petitioner relate to the management of the affairs of the company in question; (b) the conduct of those affairs has caused prejudice to the petitioner's interests as a member; and (c) the prejudice is unfair (Re Neath Rugby Club Limited (No 2) [2008] BCC 390, per Lewison J at paragraph 202). A member of a company is 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 (O'Neill v Phillips [1999] 1 WLR 1092, per Lord Hoffman at paragraph 1099; Re Phoenix Office Supplies Limited [2003] 1 BCLC 76, per Auld LJ at 85h; Wilson v Jaymarke Estates Limited and Others 2006 SCLR 510, paragraph 10). In a quasi-partnership company legitimate expectations may exist and may render the use of powers otherwise available to directors (or members) unfairly prejudicial to the interest of certain members (Re Legal Costs Negotiators Limited [1999] 2 BCLC 171, per Peter Gibson LJ at 199 b-c; Ebrahimi v Westbourne Galleries Limited [1973] AC 360). For example, exclusion from management or the removal from the board of a member who had a legitimate expectation that he will participate in management or be a director was likely to amount to unfairly prejudicial conduct (Re Guidezone Limited [2000] 2 BCLC 321 at paragraph 175). The concept of "the company's affairs" falls to be given a broad interpretation and could, for example, include the wrongful exercise of management powers in relation to subsidiary companies of the company in which the petitioner is a member (Joffe et al, Minority Shareholders (4^th ed), paragraph 7.23; Oak Investment Partners XII, Limited Partnership v Boughtwood [2009] 1 BCLC 453, [2010] EWCA Civ 23). In appropriate circumstances, the affairs of a subsidiary company may also amount to the affairs of the parent company for the purposes of section 994 of the 2006 Act (Joffe et al, op cit, paragraph 7.42). This was particularly the case where the directors of the holding company are also the directors of the subsidiary company (Rackind v Gross [2005] 1 WLR 3505; Irvine v Irvine (No 1) [2007] BCLC 349, at para [259]; cf Re Grandactual Limited [2006] BCC 73). Mr Howlin submitted that it was clear that in the present case Holdings and Orr were quasi-partnership companies, and that the petitioners had had a legitimate expectation that they would participate in the management of the companies and be directors. Their exclusion from management and their removal as directors had been unfairly prejudicial conduct. In any case it was a matter of admission by the second, third and fourth respondents that the affairs of Holdings and Orr had been conducted in a manner which was unfairly prejudicial to the petitioners as members of Holdings in the respects specified in the petition. The purpose of the hearing was to decide upon appropriate relief.

[20] Section 996(1) of the 2006 Act gave the Court power to make "such order as it thinks fit" by way of relief. Accordingly, the court had a very wide discretion to do what it 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 a petitioner has suffered at the hands of the other shareholders of the company (Re Bird Precision Bellows Limited [1986] Ch 658 at 669 d-e; Wilson v Jaymarke Estates Limited and Ors, paragraph 12). Where unfair prejudice has been established, the Court is obliged to consider the whole range of possible remedies and choose the one which, on an assessment of the current state of relations between the parties, is most likely to remedy the unfair prejudice and deal fairly with the situation which has occurred (Joffe et al, op cit, paragraph 7.228). The court may include in its order any terms which it thinks appropriate in respect of the matters of which complaint has been made (Re Bird Precision Bellows Limited at 669 e‑f). The order made should look to address the practicalities of the situation, and attempt to deal with likely future prejudice that may arise in the absence of an appropriate order:

"Once unfair prejudice is established, the court is given a wide discretion as to the relief which should be granted. Although [section 996(1) of the 2006 Act] speaks in terms of relief being granted "in respect of the matters complained of", the court has to look at all the relevant circumstances in deciding what kind of order it is fair to make. It is not limited merely to reversing or putting right the immediate conduct which has justified the making of the order. In Re Bird Precision Bellows Ltd [1986] Ch 658, Oliver LJ described the appropriate remedy as one which would "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". The prospective nature of the jurisdiction is reflected in the fact that the court must assess the appropriateness of any particular remedy as at the date of the hearing and not at the date of presentation of the petition; and may even take into account the conduct which has occurred between those two dates. The court is entitled to look at the reality and practicalities of the overall situation, past, present and future."

(Grace v Biagioli [2006] 2 BCLC 70, at para [73])

[21] In light of the breadth of discretion afforded the court, it may sometimes be necessary to make orders of complexity and creativity with a view to addressing ongoing dysfunctional corporate relationships (Re Neath Rugby Limited (No 2) [2009] 2 BCLC 427 at paragraph 82; cf Music Sales Limited v Shapiro Bornstein & Co Inc [2006] 1 BCLC 371).

[22] Mr Howlin maintained that the history of the second, third and fourth petitioners' misconduct demonstrated that they could not be trusted with the management of Orr or Holdings. A voluntary demerger of the various interests was desirable, but it was necessary to put in place proper mechanisms for the management of the companies in the meantime. It was not in the interests of the petitioners that the companies be wound up. That would not result in an orderly, or best, realisation of assets; and it would result in further detriment to the petitioners by, e.g., rendering pre-emption rights worthless. The remedies should recognise: (1) the status of Orr as the jewel in the crown (because of the retained properties and rights still vested in Orr); (2) the fact that, although all the siblings are interested in the retained property, it is the petitioners, and particularly the second petitioner through JO by reason of that company's pre-emption rights, that are principally interested in Orr's retained property; (3) as a consequence, the fact that the petitioners should not merely be restored to participation at board level in the management of Orr and Holdings but should, in fact, be given that management to the exclusion of the second, third and fourth respondents (they having amply demonstrated that they cannot be trusted to act properly as directors of either company), or at least in such a manner as will prevent those respondents from causing deadlock. A remedy which placed the petitioners in control of Orr - either by excluding the second, third and fourth respondents from the right to appoint directors or by giving the petitioners the power to break any deadlock on the board - would be the appropriate remedy in the circumstances.

[23] During the course of submissions, in response to an intervention from the court, Mr Howlin accepted that if the petitioners were to be given control of Holdings and Orr it should be for a determinate period. He suggested that two years would be appropriate to facilitate an agreed demerger and the well-ordered realisation of assets.

The second, third and fourth respondents' submissions

[24] In response the second, third and fourth respondents maintained that the 2002/3 reorganisation had been detrimental to their interests, and unfair; and that the responsibility for that rested with the petitioners. (It was clear that that belief was a deeply held one).

[25] While they had accepted there had been unfair prejudice to the petitioners, they had not admitted, and did not admit, all of the petitioners' allegations. Indeed, the only conduct which was conceded to have been unfairly prejudicial to the petitioners was the grant of the floating charge to the sixth respondent. In consequence reduction of the charge was not opposed.

[26] In the second to fourth respondents' view the only way the deadlock could be resolved, and the value of the retained property realised and distributed, was through liquidation of Orr. Otherwise the present impasse could continue indefinitely (in view of JO's veto and pre-emption rights, and the petitioners' unwillingness to either buy out the second to fourth respondents, or be bought out by them). The second to fourth respondents recognised that the court had no power to make a winding-up order. They submitted that the correct course would be to make no order for any remedies in these proceedings (other than the reduction of the floating charge). They did not argue in favour of the appointment of an independent chairman to Orr (which was one possible remedy which had been canvassed in the witness statement from Mr Semple Walter which the fourth respondent had lodged in process).

Procedure following submissions

[27] After I heard parties' submissions I adjourned to consider them. On reconvening I gave a brief oral indication of my views. The hearing was then adjourned to enable counsel for the petitioners to prepare draft interlocutors. The court reconvened later to discuss the drafts. Thereafter, counsel for the petitioners prepared further revised drafts and the second, third and fourth respondents had the opportunity to make observations on them.

[28] The orders ultimately sought by the petitioners were:

1. declarator that the affairs of Holdings and Orr have been conducted in a manner which is unfairly prejudicial to the interests of the petitioners as members of Holdings.

2. interdicts prohibiting Holdings, the second, third and fourth respondents (i) from holding any meeting or conducting any business of Orr or Holdings unless due and proper notice of the meeting and business has been given to the petitioners (ii) from taking any steps to exclude, prevent or obstruct (or attempt to exclude, prevent or obstruct) the petitioners from exercising any powers vested in them as directors or members of holdings or as directors of Orr.

3. declarators that the purported appointment of the fourth respondent as a director of Orr, and the purported removal of the petitioners as directors of Orr on about 17 or 19 March 2008, were nullities and of no effect.

4. an order ordaining that the registered office of Holdings be situated at the offices of Messrs McLay, McAlister & McGibbon LLP, 145 St Vincent Street, Glasgow.

5. orders designed to ensure that until the second anniversary of the court's Interlocutor the petitioners will have control over the affairs of Holdings and Orr, but that the second and third respondents (or appropriate alternate directors appointed in their place) may continue to participate in the management of those companies; and that the second, third and fourth respondents will be entitled to attend and participate, but not vote, at meetings of Holdings relating to the business of Orr.

6. an order appointing a law accountant as a man of skill to examine all fee notes rendered by Messrs Davidson Chalmers LLP to Holdings or Orr since 1 November 2008 to determine what part if any of the sums brought out in those fee notes is attributable to work performed on behalf of the second, third and fourth respondents or any of them in their private capacities and to report to the Court on the sums, if any, found to be so attributable;

7. an order appointing the petitioners' solicitors to deliver to the Registrar of Companies such forms as shall be requisite to give notice of such of the provisions of the court's interlocutor as determine who does and does not hold office as a director of holdings or Orr;

8. reduction of the floating charge granted on 15 July 2008 by Orr to the sixth respondent, and certain orders ancillary to that;

9. quoad ultra to continue the petition (1) for the purpose of determining any remaining issues between the petitioners and the sixth respondent and (2) to enable the parties (i) to seek Revenue clearance in respect of the demerger of Thomas Orr & Company Limited, James Orr and Company Limited, Sunwick Farm Limited and Sons and (ii) to implement the demerger; and

10. reservation to the petitioners of liberty to apply to the Court for such further or other orders as the circumstances may require in the event of any delay on the part of the second, third and fourth respondents in implementing the terms of the court's interlocutor.

[29] Mr Howlin submitted that the interdicts sought were justified having regard to the history of matters to date. The orders for declarator and reduction redressed unlawful acts. A remit to a man of skill to report in relation to the Davidson Chalmers fees was necessary in order to ascertain the extent to which fees were incurred by the second, third and fourth respondents - or one or more of them - in their private capacities. A law accountant was the appropriate man of skill. The person proposed had previously prepared an account of expenses for the second, third and fourth respondents. If the petitioners were to be in control of the management of both Holdings and Orr for two years it would be more convenient for both companies to have their registered office at the same address.

[30] Several of the second to fourth respondents' criticisms of the draft interlocutors were taken on board by the petitioners during the course of their revisal. Apart from the major disputes already described, matters of detail which remained contentious were (i) where the registered office of Holdings should be located, and (ii) whether a law accountant would be an appropriate man of skill to examine the Davidson Chalmers fees. The second to fourth respondents maintained that there was no good reason for moving the registered office; and they suggested that a legally qualified man of skill might be more appropriate than a law accountant.

Discussion

[31] While I was left in no doubt that the second, third and fourth respondents feel a sense of grievance in connection with the reorganisation of 2002/3, the moral rights and wrongs of those changes are not germane to the inquiry before me. The various agreements were entered into freely by the parties, and bind them.

[32] Section 994 of the 2006 Act provides:

"(1) A member of a company may apply to the court by petition for an order under this Part on the ground-

(a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or

(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial..."

[33] Section 996 of the 2006 Act addresses the matter of the remedies available where unfair prejudice has been established. It provides:

"(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.

(2) Without prejudice to the generality of subsection (1), the court's order may-

(a) regulate the conduct of the company's affairs in the future;

(b) require the company-

(i) to refrain from doing or continuing an act complained of, or

(ii) to do an act that the petitioner has complained it has omitted to do;

(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct;

(d) require the company not to make any, or any specified, alterations in its articles without the leave of the court;

(e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly."

[35] I do not take issue with any part of Mr Howlin's exposition of the law relating to section 994 and section 996. I am in no doubt that the petitioners' averments disclose a relevant case of Holdings' affairs having been conducted (through Orr) in a manner that was unfairly prejudicial to the interests of the petitioners as members. Moreover, and importantly, I am clear that the second, third and fourth respondents' admissions provide a sufficient basis - for the purposes of these proceedings - for finding that that Holdings' affairs have been conducted in a manner unfairly prejudicial to the petitioners; and that the relief I propose to grant is appropriate in view of that unfairly prejudicial conduct.

[35] When the admissions were made they were not qualified in any way. If the position of the second to fourth respondents was that they were only admitting unfairly prejudicial conduct in certain very limited respects, and were not admitting much of what the petitioners averred in relation to unfairly prejudicial conduct, it was incumbent upon them when admissions were made to state those qualifications. It is not open to them, at this late stage, to seek to withdraw, or restrict the ambit and effect of, the admissions. The petitioners and the court have acted on the basis of the unqualified admissions. This hearing - restricted to remedy - was fixed. The petitioners prepared and conducted their case accordingly.

[36] Nevertheless, had the relief I was asked to grant included orders seeking restitution, without further inquiry, of monies averred to have been misapplied (see the petition, statements of fact 34; 40; 42; 46(vi), (xii), (xiii), (xiv), (xv)), I would not have treated the admissions as a sound basis for granting that relief. I think it almost inconceivable that the second, third and fourth respondents intended to admit such misapplication of funds. In this respect I make some allowance for the fact that at the times of the admissions the second and third respondents were party litigants.

[37] However, no order for restitution without further inquiry is sought by the petitioners. The only order which concerns funds relates to the Davidson Chalmers fee-notes. In that connection, further inquiry by way of a report from a man of skill is sought in order to determine what part, if any, of the sums brought out in the fee-notes is attributable to work performed on behalf of the second, third and fourth respondents, or any of them, in their private capacities. I have no reservations about treating the admissions as providing a good basis for such an inquiry.

[38] I approach matters therefore, as indicated, on the footing that for the purposes of these proceedings the admissions provide a sufficient basis (i) for a finding that the affairs of Holdings and Orr have been conducted in a manner which is unfairly prejudicial to the interests of the petitioners as members of Holdings (ii) for granting the relief that I propose to grant. I turn then to what that relief should be.

[39] Simply reducing the floating charge and making no other order would not provide the petitioners with adequate relief. Nor would merely restoring them as directors: that would not remove the risk of the second, third and fourth respondents, as majority shareholders in Holdings, acting (or seeking to act) in ways which are unfairly prejudicial to the interests of the petitioners as members of Holdings. Given the history of matters to date that risk must be viewed as a real one. Moreover, the second, third and fourth respondents have made clear their aim to have Orr put into liquidation. That, of course, would defeat JO's right to veto a sale of retained property, and would render its pre-emption rights worthless. The grant of those rights to JO was an integral part of the package of mutual and interlocking rights and obligations which the parties agreed at the time of reorganisation.

[40] I have given careful consideration to the possibility of making provision for the appointment of an independent chairman of Orr and Holdings (with a casting vote). Neither the petitioners nor the second, third and fourth respondents advocated that course or expressed any enthusiasm for it. Mr Howlin submitted, without contradiction, that the only persons likely to be acceptable to the parties and prepared to accept such a role would be professional practitioners. The necessary professional remuneration would be not insignificant and would be a further drain on the companies' resources. He submitted that, on the other hand, there were no grounds for hesitation or doubt in relation to the petitioners' probity and suitability to manage the companies. They would take appropriate advice and would duly perform their duties.

[41] I am persuaded (for the reasons Mr Howlin outlined, and because of the lack of enthusiasm for it from both sides) that the independent chairman option is not the appropriate remedy here.

[42] In the rather unusual circumstances of this case I am satisfied, with one exception and some relatively minor alterations, that the remedies sought by the petitioners are indeed the appropriate ones.

[43] Giving the petitioners control of Holdings and Orr is undoubtedly a radical step: but in my opinion it is not a step which the second, third and fourth respondents may legitimately complain of given the history of unfair prejudice. The fact of the matter is that the petitioners are the innocent parties. I have no reason to doubt they would discharge with propriety their duties to the companies and the shareholders. I take account of the need not only to redress the unfairly prejudicial conduct which has occurred to date, but to put right and cure things for the future. One consideration is that under the relief which I shall order the second and third respondents can remain as directors of Holdings and Orr and can continue to participate with the petitioners in the companies' affairs. Another important factor is that the period during which the petitioners will have control is limited to two years. The prospect of loss of control at the end of that period is likely to discourage inaction. On the other hand, two years should be sufficient to allow the demerger to be agreed and to take place; and to permit an orderly realisation of assets for the benefit of the companies and the shareholders.

[44] In my opinion the interdicts sought are justified having regard to the history of matters to date. The orders for declarator and reduction provide appropriate redress for the unlawful acts they relate to. I agree with the petitioners that a remit to a man of skill to report in relation to the Davidson Chalmers fees is an apposite way to proceed, and that the man of skill should be a law accountant. However, I am not convinced that the relief the court orders need include moving the registered office of Holdings.

Disposal

[45] I shall grant the following remedies:

1. declarator that the affairs of Holdings have been conducted in a manner which is unfairly prejudicial to the interests of the petitioners as members of Holdings;

2. interdict of Holdings, the second respondent Duncan Stewart Orr, the third respondent Andrew Orr and the fourth respondent Janet Orr, their agents or employees or anyone acting on their behalf from holding any meeting or conducting any business of Orr or of Holdings unless due and proper notice of the meeting and of the business to be conducted thereat has been given in writing to the petitioners;

3. interdict of Holdings, the second respondent Duncan Stewart Orr, the third respondent Andrew Orr and the fourth respondent Janet Orr, their agents or employees or anyone acting on their behalf from taking any steps to exclude, prevent or obstruct or attempting to exclude, prevent or obstruct the petitioners from exercising any rights or powers vested in them as directors or as members of Holdings or as directors of Orr;

4. declarator that the purported appointment of the fourth respondent Janet Orr as a director of Orr on or about 17 or 19 March 2008 is a nullity and was, is and shall be of no effect, and reduction of the Form 288a lodged with the Registrar of Companies on 17 March 2008 purporting to give notice of the appointment of Janet Orr as a director of Orr;

5. declarator that the purported removal of the petitioners as directors of Orr on or around 23 September 2008 is a nullity and was, is and shall be of no effect, and reduction of the two Forms 288b lodged with the Registrar of Companies on 6 October 2008 purporting to give notice of the termination of the appointments of the petitioners as directors of Orr;

6. an order ordaining that until the second anniversary of the date of this interlocutor and notwithstanding anything to the contrary in the articles of association of Holdings the following shall have effect with respect to Holdings, for the purpose of considering and if thought fit resolving upon any business of Holdings which relates to the affairs of Orr:

(1) the only members of Holdings who shall be entitled to vote at a meeting of members of Holdings shall be the holders of A Shares and the holders of B Shares and the quorum for the conduct of business at such a meeting shall be two members of whom one shall be the holder of at least one A share and the other shall be the holder of at least one B Share;

(2) the number of directors shall be four, of whom one shall be the first petitioner Thomas Hamilton Orr, one shall be the second petitioner James Orr, one shall be the second respondent Duncan Stewart Orr and one shall be the third respondent Andrew Orr;

(3) the quorum for the conduct of business at a meeting of the board of directors shall be two directors of whom one shall be either Thomas Hamilton Orr or James Orr;

(4) the chairman of a meeting of the board of directors shall be either Thomas Hamilton Orr or James Orr, as they may mutually agree, and failing any agreement on their part shall be Thomas Hamilton Orr;

(5) in the event of an equality of votes upon any resolution considered by the directors the chairman shall have a second or casting vote; and

(6) each of the directors shall be entitled at any time and from time to time, by notice in writing given to Holdings and without requiring the consent of the board, to appoint another person to be his alternate director and to remove the alternate director so appointed, provided that no person who is not already a director or who is not an adult child of Thomas Hamilton Orr, James Orr, Duncan Stewart Orr, or Andrew Orr may be appointed as an alternate director unless he or she is qualified as a solicitor or an accountant or has retired voluntarily from practice having formerly been so qualified.

7. an order ordaining that until the second anniversary of the date of this interlocutor and notwithstanding anything to the contrary in the articles of association of Orr the following shall have effect with respect to Orr.

(1) the number of directors shall be four, of whom one shall be the first petitioner Thomas Hamilton Orr, one shall be the second petitioner James Orr, one shall be the second respondent Duncan Stewart Orr and one shall be the third respondent Andrew Orr.

(2) the quorum for the conduct of business at any meeting of the board of directors shall be two directors of whom one shall be either Thomas Hamilton Orr or James Orr.

(3) the chairman of any meeting of the board of directors shall be either Thomas Hamilton Orr or James Orr, as they may mutually agree, and failing any agreement on their part shall be Thomas Hamilton Orr.

(4) in the event of an equality of votes upon any resolution considered by the directors the chairman shall have a second or casting vote.

(5) each of the directors shall be entitled at any time and from time to time, by notice in writing given to Orr and without requiring the consent of the board, to appoint another person to be his alternate director and to remove the alternate director so appointed, provided that no person who is not already a director or who is not an adult child of Thomas Hamilton Orr, James Orr, Duncan Stewart Orr or Andrew Orr may be appointed as an alternate director unless he or she is qualified as a solicitor or an accountant or has retired voluntarily from practice having formerly been so qualified.

8. an order appointing Alistair Greig, Law Accountant, Paterson House, Eskmills Park, Station Road, Musselburgh, EH21 7PQ to be a man of skill to examine all fee notes rendered by Messrs Davidson Chalmers LLP of 12 Hope Street, Edinburgh EH2 4DB to Holdings or to Orr since 1 November 2008, to determine what part if any of the sums brought out in those fee notes is attributable to work performed on behalf of the second, third and fourth respondents or any of them in their private capacities and to report to the Court on the sums, if any, found to be so attributable; and declares for the avoidance of doubt that references herein to an individual's private capacity shall include the capacity of that individual as a holder of C Shares in the capital of Holdings and his or her capacity as a respondent to the petition;

9. an order appointing Messrs Lindsays, as agents for the petitioners, to deliver to the Registrar of Companies such forms as shall be requisite to give notice of such of the foregoing provisions of this interlocutor as determine who does, and who does not, hold office as a director of Holdings or as the case may be of Orr, together with a notice in the form appended to the court's interlocutor.

10. reduction of the floating charge purportedly granted by Orr in favour of the sixth respondent and the relative Form 410 and Certificate of Registration.

[46] Quoad ultra I shall continue the petition (1) for the purpose of determining any remaining issues between the petitioners and the sixth respondent and (2) to enable the parties (i) to seek clearance from Her Majesty's Revenue and Customs in respect of the demerger of TOCL, JO, Sunwick and Orr and (ii) to implement the demerger. I shall reserve all questions of expenses meantime. I shall also reserve liberty to the petitioners to apply to the court for such further or other orders as the circumstances may require in the event of any delay on the part of the second, third and fourth respondents in implementing the terms of the court's interlocutors.