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Cite as: [2023] CSOH 71, [2023] ScotCS CSOH_71

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OUTER HOUSE, COURT OF SESSION

[2023] CSOH 71

CA6/23

OPINION OF LORD BRAID

In the cause

LIVINGSTON FOOTBALL CLUB LIMITED

Pursuer

against

NEIL HOGARTH

Defender

Pursuer: Forsyth; Blackwater Law Limited

Defender: D Thomson KC; Shoosmiths LLP

13 October 2023

Introduction

[1]

In this action, the latest in a series of litigations arising out of the financial travails of

Livingston Football Club (LFC), LFC is suing Mr Hogarth for payment of two sums which it

avers he misappropriated from it: £74,000 and £50,000, which are the sums respectively first

and second concluded for. The action called before me for debate on the adequacy of LFC's

pleadings. In brief, Mr Hogarth's position is that the pleadings are so lacking in

specification that they are irrelevant, and that in any event they fail to give fair notice of the

case against him, such that the action should be dismissed. LFC disputes that, and moves

for a proof before answer to be fixed, so that the court can hear evidence before deciding

how much, if anything, is owed to LFC by Mr Hogarth.

[2]

The case throws into sharp focus the manner in which cases are, and ought to be,

pled in the commercial court, a theme to which I will return.

Procedural history

[3]

It is necessary to say something of the procedural history, to explain how the action

came to be in the commercial court of the Court of Session, and why it would not be

appropriate to give LFC any further opportunity to clarify its pleadings. The action began

life in Livingston Sheriff Court. In its original incarnation the initial writ in that action

sought payment of £74,000 from Mr Hogarth on the basis that as a director of LFC he had

drawn a cheque in his own favour for £74,000, to which he was not entitled. Subsequently,

LFC sought to increase the sum sued for to £148,000, averring that the pursuer had twice

paid himself £74,000 to which he was not entitled, albeit the basis on which the

second £74,000 was sought was, on the pleadings, unclear (and has since been departed

from). Thereafter, LFC sought leave to amend to introduce a much larger claim, in excess

of £609,000, on the ground that Mr Hogarth had breached fiduciary duties owed to LFC by

him as a shadow director, and that he had committed a fraud against the club. That led to

the action being remitted to the Court of Session under section 92(5) of the Courts Reform

(Scotland) Act 2014, in light of its (ostensible) complexity and the sum now sought.

[4]

As I think counsel for LFC accepted at the time, the pleadings when the case arrived

from the sheriff court were not the easiest to follow. After sundry case management

hearings, further adjustment by LFC of its pleadings, complaints by senior counsel from the

defender that he was still unable to understand what LFC's case was, and exhortations from

the court to LFC to clarify its pleadings, a diet of debate was fixed on the relevancy of all

branches of LFC's case. After hearing from senior counsel for Mr Hogarth, counsel for LFC

sought and was granted an overnight adjournment to consider his position; and when the

case called on the following day, he informed me that the averments of breach of fiduciary

duty and fraud were to be deleted and that the action, was to continue only insofar as it

related to the claim that the sums of £74,000 and £50,000 had been misappropriated.

[5]

The rather unsatisfactory result is that the basis upon which the action was remitted

to this court has been swept away, but the court is nonetheless left to adjudicate on an action

which does not now raise any difficult or novel questions of law but in which the sole

question for determination, at this stage, turns on the quality of LFC's pleadings.

The background

[6]

To understand the criticisms made of the pleadings, it is necessary to say something

of the undisputed factual background. LFC has from time to time experienced financial

difficulties and has twice entered administration. Various individuals, including

Mr Hogarth, Gordon McDougall (a former director and chairman of the club), Neil Rankine

(who is currently involved in litigation of his own against LFC, in which he is suing for

payment of sums allegedly due to him: that litigation is being defended by LFC and a proof

has now been fixed) and Gerard Nixon, have from time to time advanced money to the club

to assist it through periods of financial difficulty. Mr Nixon's loan was itself the subject of

previous litigation in this court in 2015, before Lord Tyre, the outcome of which was that

Lord Tyre held that the loan was not repayable on demand ([2015] CSOH 43). Mr Nixon

was found liable in expenses to LFC, which he paid. After deduction of sums owed to LFC's

solicitors, Harper Macleod, the net amount of those expenses held by Harper Macleod in its

client account for LFC, as at May 2016, was £74,000 (the Nixon expenses). In 2016,

Mr McDougall also raised an action against LFC, in the sheriff court, in which he sought

payment of sums due to him under an agreement between him and LFC entered into

in 2013, the detail of which it is unnecessary to go into for present purposes.

[7]

At this point, Mr Hogarth enters the story. Although the circumstances leading up to

it are not agreed, it is not disputed that Mr McDougall granted him an Assignation and

Waiver dated 31 May 2016 and 3 June 2016 whereby Mr McDougall agreed to assign his

claims against LFC in return for payment of £125,000; it was further agreed that payment of

that sum was to be funded by (a) a payment of £20,000 already made; (b) a payment

of £80,000 (£6,000 by personal cheque, and £74,000 by the transfer of that sum from the client

account of Harper Macleod to the client account of Mr McDougall's solicitor (in other words,

the Nixon expenses)); and (c) a balancing payment of £20,000.

[8]

One might ask how the Nixon expenses, a sum which was being held for LFC, could

be used to fund, in part, an acquisition of a debt by Mr Hogarth for his own benefit, not least

as the debt in question was owed by LFC in the first place. That is explained by a letter of

23 May 2016, written by LFC to Harper Macleod, signed by Mr Robert Wilson, an LFC

director. That letter instructs Harper Macleod to pay the sum of £74,000 to Mr McDougall's

solicitors, that payment being made to reflect and implement the following transactions:

(i)

repayment of loans of up to £74,000 by LFC to Neil Rankine;

(ii)

a loan of £74,000 by Mr Rankine to Mr Hogarth;

(iii)

payment of £74,000 by Mr Hogarth to Mr McDougall.

The effect of the letter of 23 May 2016 was of course that the Nixon expenses were being

used not to fund the acquisition of the debt but, on the instructions of LFC, to repay a loan

owed by LCF to Mr Rankine. It should be noted that LFC does not seek to impugn or reduce

either the Assignation and Waiver, or the letter of 23 May 2016.

[9]

It is also not in dispute that Mr Hogarth has made payments to LFC totalling £74,000,

nor does Mr Hogarth dispute that in 2019 he drew a cheque in his own favour for that sum.

Thereafter, little if anything is agreed and it is now appropriate to turn to the pleadings to

see what the basis is for LFC's claim against Mr Hogarth.

LFC's pleadings

[10]

It is convenient to take the pleadings out of order, for a better understanding of

LFC's case. The starting point is the alleged misappropriation of £74,000 by cheque, alluded

to above, averments about which now appear in article 7 of condescendence ("the pursuer"

being LFC, and "the defender" Mr Hogarth):

"On or around 3 December 2019 the pursuer's employee, Karen White discovered a

debit in the amount of £74,000 in the pursuer's online banking system. At the time,

she thought it was a fraudulent transaction. She investigated further and discovered

that the transaction had been made using a cheque from an old cheque book

belonging to the pursuer. The cheque book was kept in a back office and thought by

the pursuer's staff to have been empty. The cheque number of the cheque in

question was 011845. The cheques either side of the cashed cheque were from 2016.

Cheque 011844 was dated 23 May 2016 and cheque 011846 was dated 15 June 2016.

The cheque stub of cheque 011845 was originally made out to `Harper McLeod' in the

sum of £4,210.00. Both the name of the payee and the sum had been scored out."

The averments are elaborated upon in article 8:

"The pursuer's David Martindale then phoned the defender to request that he

contact the bank to investigate why the cheque had been cashed. A short time later,

the defender came to Mr Martindale's office and explained that he had cashed the

cheque. He stated that he had taken the money in settlement of his loan account. The

defender at that time had no repayable loan account in that sum. The funds taken by

the defender belonged to the pursuer and was not the defender's to take. The

defender's misappropriation of the funds has caused the pursuer loss and damage.

But for the defender's misappropriation of the funds, the pursuer would not have

sustained loss and damage. The amount of such loss and damage is £74,000 as first

concluded for and £50,000 as second concluded for which are sums taken by the

defender."

Thus, LFC's position, on these averments, is that the defender paid himself £74,000 which he

justified as being in settlement of his loan account, but that he had no repayable loan

account "in that sum", without stating what the true balance was. While that explains, to an

extent, the sum first concluded for, it is unclear why cashing a cheque for £74,000 which was

not due would have caused loss of £50,000, as the averments would have it.

[11]

I now turn to the averments which appear earlier in the summons. Article 3 begins

by referring to the debt owed to Mr McDougall, and the court action raised by him against

the club. The averments then continue:

"In or about May 2016 Mr David Martindale negotiated a settlement of the dispute

whereby in return for payment of £125,000 lump sum the McDougall debt would be

entirely extinguished. The consideration was to be provided by the pursuer via inter

alia a release of an arrestment in relation to the same case. Such a course of action

would have been in the best interests of the pursuer. The agreement was to settle

and extinguish the McDougall debt...The settlement of the McDougall debt was

agreed to be with the pursuer. This is what was negotiated and understood by

Mr David Martindale the pursuer's football manager who negotiated the settlement

of the McDougall debt for £125,000."

Pausing there, these averments give rise to at least three difficulties. First, there appears to

be an oblique suggestion that Mr Hogarth diverted the benefit of an agreement between

Mr McDougall and LFC to himself, but standing the fact that LFC is challenging neither the

Assignation and Waiver, nor LFC's subsequent instruction to Harper Macleod as to

disbursement of the Nixon expenses of £74,000 it is unclear what relevance, if any, these

averments could ever have. The second, more concerning, difficulty is that in a passage of

pleading deleted by adjustment, LFC previously gave further specification of the averment

about Mr Martindale's supposed understanding by reference to an email from

Mr Martindale dated 20 May 2016 in which he stated:

"Neil Hogarth is purchasing Gordon McDougall's full outstanding loan account

balance as per the club's audited accounts 30 June 2015. The purchase price as

previously agreed will be £125K minus any monies that Mr McDougall has received

in regards towards this account."

Presumably the reference to that email was deleted because it does not support the general

averment that Mr Martindale believed that the settlement was agreed to be with LFC but the

deletion does not save the inadequacy of the pleadings in this passage. The averment which

remains about Mr Martindale is not only irrelevant, but also hopelessly lacking in

specification, since no particularisation is given of how he reached his understanding, even

if his understanding was relevant. Standing the email it seems that there is no proper basis

for making the averment; at any rate, no explanation is offered by LFC of the apparent

discrepancy. The third difficulty is that these averments appear (or at least, appeared before

the debate) to have more relevance to the fraud case which was previously, but is no longer,

advanced against Mr Hogarth; and it is likely that they are a throwback to that case.

[12]

The next material passage of averment is also in article 3:

"When John Ward a director made an inquiry in November 2016 as to the

provenance of payments into the pursuer from the defender including £41,200 in

August 2016 he was informed by the company secretary by email dated

12 November 2016 `Memory tells me that this was an amount that Neil deposited as

part of the [Nixon] court costs award. £30,000 contra for cash put in

previously, £2,800 paid by Neil's personal cheque to me to pay SFA fine. I paid it to

meet SFA deadline and £41,200 was the balance. Think it was paid via Neil's bank

account. Total balance £74,000.......'. That sum amounted exactly to the net

expenses in the Nixon case...The defender and Mr Neil Rankine had the £74,000

Nixon expenses diverted to Mr McDougall's solicitor rather than being paid first

into the pursuer's bank account. A balance of 74,000 was paid in 2016 to balance

the account in 2016 and was held out as payment of the Nixon costs as

condescended upon."

Here, LFC acknowledges that Mr Hogarth paid three sums to it, totalling £74,000. The

averment that the defender (Mr Hogarth) and Mr Rankine diverted the Nixon expenses to

Mr McDougall's solicitor is subject to the same criticism as I have made of the averments at

the beginning of article 3, namely that no explanation is given as to how it can be reconciled

with the Assignation and Waiver and LFC's instruction to its solicitors, and the averment

again appears to be no more than a throwback to the now-departed fraud case (indeed there

was, until the debate, a passage which immediately followed the foregoing averments,

beginning "believed and averred", which purported to explain why the payments were

made, namely, to conceal the 2016 transaction). The averments nowhere deal with, or

explain away, the basic and fundamental point that using the Nixon expenses to meet a debt

due by LFC to Mr Rankine in no way involved "diverting" that sum from LFC. There is

nothing wrong with, or sinister, per se, in mandating payment of a sum held by one's

solicitors to a third party in payment of a debt.

[13]

Moving on to article 4 of condescendence, it begins by making a further reference to

the use of the Nixon expenses as part consideration for the acquisition of the McDougall

debt by Mr Hogarth. The averments continue:

"The defender paid a balance of £50,000 to Mr Gordon McDougall but opened a

loan account in this amount with the pursuer for which he has been repaid. It is

understood Mr Neil Rankine paid a balance of £1,000...At about the time and

shortly after the transfer of the £74,000 of the Nixon expenses the defender made

payments collectively amounting to exactly £74,000 to the pursuer. These payments

were not allocated to any loan account of the defender at the time...The payments

by the defender in 2016 were not loans but intended and allocated to cover the

diversion of the £74,000 of pursuer's funds to Mr Gordon McDougall's solicitors."

As will be seen, these averments contain a further reference to the supposed diversion of

funds, which is subject to the same criticisms as made above. It will also be noted that no

specification is given as to how, or when, the £50,000 was repaid to Mr Hogarth. Indeed, the

suggestion that Mr Hogarth never made a loan of £50,000 to LFC (because it is said to have

been a payment to Mr McDougall) is inconsistent with the averment that the loan has been

repaid. What is LFC's position: that there was never a loan of £50,000; or that it has been

repaid? It cannot be both.

[14]

Thus far the averments in articles 3 and 4 all appear designed to make a case that the

sum of £74,000 admittedly paid to LFC was not a loan. Thereafter, LFC makes averments

about what the position would be on the hypothesis that the £74,000 was a loan:

"The defender supplied the pursuer with a detailed written breakdown of the sums

he claimed he personally loaned to the pursuer and sums he claimed were

repayments by letter to Mr Wilson dated 7/1/21."

There then follow detailed averments about what Mr Hogarth claimed in the letter; in brief,

that he had made emergency loans totalling £125,000 to LFC. It is averred that three of the

payments making up that £125,000, amounting collectively to £50,000, were sums paid by

him directly to Mr McDougall by virtue of the Assignation, which could not therefore be

sums advanced to LFC. (This may be the £50,000 already referred to, but that is unclear).

Mr Hogarth is also said to have claimed, in the letter, that £95,000 of the emergency loans

had been returned, which figure included the £74,000 paid by the cheque he drew in his own

favour. Although Mr Hogarth's letter is incorporated into the pleadings, LFC does not offer

to prove that its contents were true. In what might be seen as the nub of LFC's case, the

averments then continue:

"In fact the accounts of the pursuer regarding sums due even allowing for three

payments amounting to £74,000 being loans (which is denied) are grossly overstated.

A balance of £25,000 is brought forward as at 30 June 2017 but then double counted

in the collective claims of £125,000. A further sum of £10,000 is included as a loan in

the accounts ended 30 June 2017 but is unvouched, unclaimed and has no apparent

basis. The £125,000 requires deduction of the £51,000 consideration for the private

purchase of the McDougall assignation by the defender. Accordingly, the loan

balance would have stood at £74,000 at year end 30 June 2018. Thereafter in the next

year to 30 June 2019 a further £70,000 is deducted from the defender's loan account

representing re-payments and re-allocations to a company called Braidwood.

Accordingly, the balance (if any) on 20 June 2019 would have stood at no more

than £4,000. As a director the defender would have been well aware of this at the

time. Accordingly, upon his own hypothesis (which is denied) that the £74,000 was

loaned by him in 2016, he has misappropriated at least £70,000 to the loss of the

pursuer. Esto the sum of £74,000 was due by way of loan in December 2019 no

demand for payment had been made. The defender subsequently

misappropriated £74,000 on 3 December 2019 as hereinafter condescended upon

which is the sum first concluded for. The defender has also misappropriated £50,000

of the pursuer's funds by creating a false loan account which was paid by

December 2019 which is the sum second concluded for."

In other words, LFC's position is that Mr Hogarth misappropriated at least £70,000; but also

that the sum misappropriated was £74,000; and that he misappropriated £50,000. There is

also a suggestion, not developed in the pleadings, that even if Mr Hogarth had advanced a

loan of £74,000 to LFC it could not be due for repayment because no demand had been

made. I deal with adequacy of these averments below.

[15]

Finally there are these somewhat confusing averments in article 5 of condescendence:

"The defender purported to assign his interest in the McDougall debt to Mr Neil

Rankine...by assignation dated 11 November 2019...The assignation provided for

repayment of the £50,000 by Mr Neil Rankine to the defender which he had already

been `repaid' by the pursuer"

It is unclear from this passage what is "the" £50,000 referred to; in what sense, and how,

that had already been "repaid" by LFC, (and why that word is in quotation marks); or

indeed why having been paid £50,000 by Mr Rankine should affect in any way Mr Hogarth's

entitlement to receive £50,000 from LFC, if such entitlement there was, or indeed, whether

this is the same £50,000 referred to elsewhere, or a different £50,000.

Submissions

[16]

Senior counsel for Mr Hogarth acknowledged that the court would be slow to

dismiss an action in the commercial court on pure specification points but submitted that the

pleadings were so lacking in specification as to be irrelevant and they did not allow

Mr Hogarth to understand what the case against him was. There were three broad strands

to senior counsel's submission. First, to the extent that LFC pled that the £74,000 admittedly

paid to it by Mr Hogarth was not a loan, but had a different purpose, that case was not

adequately explained or set up: in particular, there were no averments explaining the

contradiction between that alleged position, and the instruction given by LFC to its solicitors

as to how to disburse the Nixon expenses and for what purpose. Second, although LFC was

offering to prove that Mr Hogarth's loan account was overdrawn, it was not offering to

prove what the true position on the loan account was. The single averment about

misappropriation of the £50,000 was also wholly lacking in specification. Third, LFC placed

reliance on Mr Hogarth's letter, without offering to prove that what he said was correct.

Overall, LFC's position in substance was that Mr Hogarth had stolen money from it.

Mr Hogarth was entitled to fair notice of why that was so, which he did not have. LFC

ought to be able to aver how much money had been advanced to it by Mr Hogarth; how

much he had been repaid; and how much it was due; but this it had not done.

[17]

Counsel for LFC began by taking me to various documents: first to Mr Hogarth's

letter referred to in the pleadings, in an attempt to show that the £74,000 paid by

Mr Hogarth to the club was "allocated to the Nixon expenses" (which I take to mean, paid to

cover up the fact that the Nixon expenses had been used, on LFC's version, to pay for the

McDougall assignation); and to explain why the total sum of £125,000 referred to by

Mr Hogarth in the letter could not have been a loan to LFC; and, second, to a letter by

Mr Wilson setting out a different position as to what the balance of the loan account was. In

relation to the £50,000 counsel stated, as I have him noted, that LFC did not accept that

Mr Hogarth received £50,000 from Mr Rankine. He then attempted to explain how the

liability to pay £50,000 had arisen: the fault may be mine, but I found the explanation as

baffling as the pleadings. (One point which counsel made repeatedly, which I did follow,

was that £51,000 of the £125,000 was part of the consideration which was paid to

Mr McDougall, and therefore could not have been a loan to LFC; but that does no more

than explain why Mr Hogarth was repaid only £74,000 rather than £125,000, and does not

advance LFC's case.) Overall, counsel for LFC submitted that the averments made LFC's

position sufficiently clear as to justify a proof before answer, and that the court could decide

how much was due by Mr Hogarth only after hearing evidence.

Decision

The function of written pleadings

[18]

The function of written pleadings is to explain what a party's case is about, as a

matter of basic fairness to the other party and to allow the court to know what case it has to

adjudicate: D v Lothian Health Board 2018 SCLR 1, Lord Brodie at para [32]. It is a minimum

requirement of pleadings that they are intelligible and give proper notice of the line to be

taken and main facts founded on: Tods Murray WS v Arakin Ltd 2011 SCLR 37,

Lord Woolman at para [127] (referring to defences, but the principle applies equally to a

pursuer's pleadings).

Pleadings in commercial actions

[19]

In a commercial action, the circumstances out of which the action arises should be

"summarised" (RCS 47.3(2)(c). The rule applicable to averments in an ordinary action do

not normally apply with the same rigour: Marine & Offshore (Scotland) Ltd v Hill 2018

SLT 239, per Lord President Carloway at 143. Nonetheless, fair notice must still be given,

and it must still be possible to discern from the pleadings what each party's case is (even if

that might involve some "clearing of the narrative mist" created by pleadings which serve

"largely to obscure rather than clarify the facts" as the Lord President put it in Marine &

Offshore (Scotland)). Paragraphs 13 and 14 of Practice Note no 1 of 2017 explain that

pleadings in a traditional form are not normally required or encouraged in a commercial

action, but that is an exhortation of brevity and conciseness, not prolixity. Parties to a

commercial action may, in their pleadings, make more use of extraneous documents, such as

expert reports or Scott Schedules, than in a "traditional" action, but the purpose of that

relaxation is to enable the written pleadings to be shorter, not to enable a party whose

pleadings are unintelligible to argue that the case should nonetheless be allowed to go to

proof in the hope that a relevant case might be divined from documents.

LFC's pleadings

[20]

It will be apparent from the comments I have already made on LFC's pleadings that I

consider them to be deficient in a number of respects. In summary, they are diffuse, lengthy,

disjointed, contradictory, lacking in specification and, to an extent (in relation to the

equivalence of the Nixon expenses, and the sums paid to LFC by Mr Hogarth) rely on

innuendo. Overall, the averments tend to obfuscate rather than clarify what the issues in the

case are. Although the case did not originate in the commercial court, LFC was given the

opportunity, in effect, to start again, when the case was remitted here; and short focussed

paragraphs, set out in a logical order without repetition would have done much to improve

the clarity of its case.

[21]

However, it does not necessarily follow that the action falls to be dismissed. If a

relevant case can be discerned through the narrative mist, in other words if the key facts can

be gleaned from the pleadings, and if Mr Hogarth has fair notice of the case against him,

then the court could properly fix a proof before answer.

[22]

Applying this approach, and dealing first with the second conclusion for payment

of £50,000, neither LFC's pleadings, nor the documents referred to by counsel for the

pursuer, nor the explanation tendered by him in the course of submissions (even if it were

legitimate to have regard to that in deciding whether a relevant case is pled), give fair or

intelligible notice to Mr Hogarth, or for that matter the court, as to how that liability is said

to arise. The averment that Mr Hogarth misappropriated £50,000 of the pursuer's funds by

creating a false loan account which was paid by December 2019 is hopelessly lacking in

specification. Although senior counsel for Mr Hogarth submitted that that was the only

reference to the defender having misappropriated £50,000, which is strictly correct, there are

other references to that sum, to which I have drawn attention above. However, these tend to

obfuscate rather than clarify LFC's position: for example, the averment that £50,000 was

misappropriated and the averment that it was a loss which arose from the encashment of the

cheque for £74,000 are mutually inconsistent. The averment that there never was a loan

of £50,000 is inconsistent with the averment that it has been repaid. The averment in

article 5 does nothing to clarify matters. I therefore have little difficulty in holding that the

averments in support of the second conclusion are so hopelessly lacking in specification as

to be irrelevant, and that the action falls to be dismissed as regards that conclusion.

[23]

The position is less clear-cut when one turns to the first conclusion, and the

averments in support of it. This branch of the case falls to be considered in two stages,

namely in relation to LFC's primary case that Mr Hogarth did not make a loan of £74,000 to

it; and its secondary case that even if he did, he has received repayment of more than that

sum (or, perhaps, just £70,000).

[24]

As regards the former, I agree with senior counsel for Mr Hogarth that LFC's case is,

at best for it, inadequately explained, and in the context of such of the background as is

undisputed, they do not give fair notice to Mr Hogarth of the case against him. The

averments make repeated insinuations that there is, for want of a better term, a suspicious

link between the fact that the Nixon expenses amounted to £74,000 and that Mr Hogarth

paid sums of exactly that amount to the club, which I concede may be an unusual

coincidence; but, standing the instruction given by LFC to Harper MacLeod which explains

the chain of transactions by which that money found its way to Mr McDougall's solicitors, I

consider that these averments are all irrelevant at least in the absence of an explanation from

LFC as to how it is that Mr Hogarth is said to have diverted the agreement or the expenses

for his own benefit and what is the basis in law for the remedy sought. Having accepted

that it received sums amounting to £74,000 from Mr Hogarth, it is incumbent upon LFC to

aver why those sums were not loans, and this it does not do. There is no purpose in

allowing a proof on this issue, since there is no prospect of LFC proving, on its present

averments, either that the benefit of the agreement with Mr McDougall was unlawfully

diverted for Mr Hogarth's benefit, or that the sums totalling £74,000 paid by him to LFC

were not loans. It follows that none of the averments directed towards showing that

the £74,000 paid by Mr Hogarth to LFC was not a loan can be admitted to probation.

[25]

Turning then to LFC's fall-back case that Mr Hogarth has been overpaid, there is the

kernel of a case in article 4 in the passage which I have described in para [14] as being the

nub of LFC's case. On one view, these averments could be read as amounting to an offer to

prove that of the £125,000 which Mr Hogarth claimed to have loaned to LFC, £25,000 had

been double counted; £10,000 was not due because it was "unvouched and

unclaimed"; £51,000 was not in fact a loan because it was part of the consideration paid for

the McDougall assignation; and that £70,000 which was repaid and re-allocated to

Braidwood (a company owned by Mr Hogarth). However, there are difficulties in this

approach. First, it really will not do, in the Court of Session, for LFC to frame its case by

reference to what Mr Hogarth stated in a letter which it does not offer to prove was factually

accurate (and which he now avers contained errors). Second, the offer to prove that

Mr Hogarth's director's loan account was "grossly overstated" is wholly lacking in

specification, and leaves it unclear whether it is alleged to have been overstated in ways

other than those listed. Third, despite the prolixity elsewhere, no explanation is given in the

pleadings of how the alleged double accounting arose; what is the significance of

the £10,000 being unvouched and unclaimed; and why payments allocated to Braidwood

(apparently a separate entity) should be reallocated to Mr Hogarth. Had the action been at

an early stage, doubtless some or all of these points could have been dealt with by the

court's extensive case management powers. If LFC claims that what is averred in

Mr Hogarth's letter is factually accurate, it could aver that. It could be ordained to give

further specification of the various points just mentioned. However, the action is not at an

early stage, and LFC has already had every opportunity to set forth its stall. As senior

counsel for Mr Hogarth submitted, if LFC's case is that Mr Hogarth has received more than

he was entitled to, it ought to have been a simple matter for it to aver what the correct

balance of his director's loan account was and how it was arrived at; and what sums he has

received.

[26]

Accordingly, I have come to the view that it is not appropriate to exercise my case

management powers at this stage by affording LFC a further opportunity to rectify the

defects in its pleadings. It follows that the entire action falls to be dismissed as irrelevant

and lacking in specification. I reach this view in some respects reluctantly, inasmuch as

there does appear to be a genuine dispute between the parties as to whether Mr Hogarth

might have been overpaid and LFC, if it can plead a relevant and specific case, will now

require to raise a fresh action. On the other hand, my reluctance is assuaged to an extent by

the fact that it seems likely that the true value of any claim (leaving the £50,000 out of

account) will be less than £100,000 and that the natural forum for this dispute is the sheriff

court, where it began.

Disposal

[27]

I have sustained Mr Hogarth's first plea-in-law and dismissed the action, reserving

all questions of expenses.