SCTSPRINT3
Home / Search Judgments / Judgment
 

PETITION OF ANGELA WISHART FOR AN ORDER UNDER AND IN TERMS OF SECTIONS 994 AND 996 OF THE COMPANIES ACT 2006

SHERIFFDOM OF TAYSIDE, CENTRAL AND FIFE AT FORFAR

 

[2016] SC FOR 29

B128/15

JUDGMENT OF SHERIFF S G COLLINS, QC

 

In the petition of

 

Angela Wishart

 

Petitioner;

 

for an order under and in terms of sections 994 and 996 of the Companies Act 2006

 

 

 

Forfar, 3 August 2015

NOTE:

Introduction

1.         This is a petition by Angela Wishart under section 994 of the Companies Act 2006.  She seeks an order under section 996 of this Act on the ground that the affairs of Wishwell Logistics Ltd (hereafter “WWL”) are being or have been conducted in a manner that is unfairly prejudicial to her interests.  At a hearing on 27 July 2015 Mr Young, Advocate, moved me on behalf of the petitioner to allow the petition to be amended in terms of a minute of amendment, and thereafter to grant warrant for diligence by arrestment on the dependence of the action under section 15A of the Debtors (Scotland) Act 1987 as amended.  Mr Openshaw, solicitor, appearing for the respondent Simon Wishart, opposed both parts of the motion.  

 

Background
2.         The background to the application is that the parties were previously married.   The respondent works in the oil and gas sector.  WWL is a service company set up by him to minimise tax liability.  All income to the company is derived from work carried out by the respondent.  The authorised share capital is £100 consisting of 100 ordinary shares of £1 each, all of which have been issued and fully paid.  The respondent is the sole director of the company.  The petitioner was company secretary and an employee.   In 2008, no doubt in order to further reduce tax and national insurance liability on the respondent’s earnings, 50 shares were transferred to the petitioner.   The parties separated on 1 October 2013, but the company was not wound up, and the petitioner continued to be a 50% shareholder. 

3.         Decree of divorce was granted by Sheriff Lewis (as she then was), after proof at Aberdeen Sheriff Court, on 20 November 2014.  Sheriff Lewis found in fact that following the parties’ separation, in or around January 2014 and without warning, the respondent terminated payment of dividends and salary to the petitioner from WWL.  However, he continued to make withdrawals for himself (production 9 for the petitioner, page 4, finding 18), although whether these were by way of salary, directors’ loans and/or dividends was unclear.   He also made payments to the petitioner of nearly £3,000 per month by way of interim aliment (page 4, finding 19).

4.         It is clear that Sheriff Lewis was faced with an acrimonious but somewhat unfocused proof in relation to a number of difficult financial issues, and criticised both parties for their approach to the litigation (production 9, pages 8 - 9, paragraphs 4 - 5).  She found some of the evidence of the petitioner (then the pursuer) to be variously “incredible”, “grossly exaggerated” and “disingenuous” (page 12, paragraph 13).  The sheriff was satisfied that she “had no understanding of her roles with [WWL] but was canny enough to complain about the cessation of salary and dividends…” Although she had on paper received a salary as an employee, it appeared that she had done no work for the company.  On the other hand the respondent (then the defender) was criticised as having been motived by malice, in that as the “controlling mind” of WWL he had “unilaterally stopped all payments from [the company]…  leaving her bereft of funds for which he gave no cogent explanation” (page 13, paragraph 16).  Sheriff Lewis concluded that “the adoption of entrenched positions driven by spite on the part of the [respondent] and by greed on the part of the [petitioner] has added to the length and cost of this litigation” (page 24, paragraph 40). 

5.         It was ultimately a matter of agreement between the parties that Sheriff Lewis should take no account of the value of WWL, the payments made to the defender in lieu of salary, directors’ loans or dividends, and the ‘missing’ payments of salary and dividend due by WWL to the petitioner (production 9, page 14, paragraph 17).  Sheriff Lewis explains her reasons for this at paragraph 30 and 31 of her Note (page 19).  The petitioner’s position was that the WWL was matrimonial property and that she was entitled to a share of its value.  She wished to be extricated from the company in exchange for a payment based on unpaid salary and dividends.  However she did not provide evidence enabling the sheriff to place a valuation on the company.  The respondent’s position was that the petitioner’s interests in WWL should be ordered to be transferred to him, but could not explain any proper legal basis on which such an order could properly be made.   They undertook to the Court that they would resolve all issues associated with the company outwith the divorce action.   Accordingly a division of the matrimonial property was made without reference to the parties’ respective claims and rights in relation to WWL. 

 

The present proceedings

6.         Sadly the parties have been unable to reach agreement in relation to the petitioner’s financial claims regarding WWL.  Instead, a petition was presented to this Court under section 994 of the Companies Act 2006, claiming unfair prejudice to the petitioner’s interests as a member of the company.  It is averred that shortly following the proof the petitioner’s appointment as company secretary was terminated without her knowledge or consent, and that her employment was also terminated, with a P45 being delivered to her.  It is further averred that notwithstanding repeated requests the petitioner has not been provided with accounts detailing unpaid dividends due to her.  More particularly, it is averred that her interests as a member of WWL have been unfairly prejudiced by (i) the withdrawal of a directors’ loan of £17,258 by the respondent without following the procedure required by section 197 of the 2006 Act; and (ii) by withdrawal of large sums of money by the respondent from the company between 6 April 2103 and February 2015 which, insofar as they represent dividend income, has not been accompanied by equal dividend payments to the petitioner.  In the light of these averments, as initially presented, the petitioner sought an order under section 996 ordaining the respondent or WWL to purchase the petitioner’s shareholding at a fair market price.  Interdict was also sought, (i) to prevent the respondent taking any further funds or assets from WWL other than salary, and (ii) from selling or disposing of the parties’ former matrimonial home.

7.         On 22 April 2015, having heard from the petitioner’s agent, the Sheriff granted warrant to serve the petition and meantime granted interim interdict, but only in relation to preventing the respondent taking any further funds or assets from WWL other than a specified salary.  On 4 June 2015 Answers were lodged by the respondent.   He avers that WWL is no longer trading, and that the petitioner has been paid all salary and dividends due to her.  In relation to the directors’ loan, he avers that this loan was an asset of the company and accordingly the petitioner’s shareholding had not been devalued as a result.  In relation to the withdrawals of money from the company in the period 6 April 2013 to 28 February 2015 it is averred that any such withdrawals have not caused unfair prejudice to the petitioner.  The claims for interdict were averred to be incompetent, in part, in that neither the parties’ matrimonial home, nor the domicile of the respondent, are within the sheriffdom.

8.         On 8 June 2015 the sheriff allowed the petitioners until 29 June 2015 to adjust the petition, and thereafter allowed the respondent until 20 July 2015 to adjust his Answers.  On 16 June 2015, however, the petitioner lodged (i) a Minute of Amendment, (ii) a Form G4A Statement under section 15D of the Debtors (Scotland) Act 1987; and (iii) a written motion moving the Court to allow the Minute to be received and the petition to be amended in terms thereof, and to grant warrant for diligence on the dependence of the action under section 15E(1) of the 1987 Act.   The Minute sought to insert a further prayer into the petition seeking payment by the respondent or alternatively by WWL of the sum of £23,334.56, to reflect the sum said to be due to the petitioner as a result of the allegedly unfairly prejudicial conduct complained of between 6 April 2013 and 5 April 2014.   This sum was averred to represent £14,705.56 of dividends due to the petitioner during this period and half the directors’ loan already condescended upon.  The Form G4A sets out the petitioner’s position as to why it is claimed that she has a prima facie case under section 994.  It also details the petitioner’s claims that there is a real and substantial risk that enforcement of any decree in the action would be defeated or prejudiced by the respondent being apparently insolvent, and that there is a likelihood that he would dissipate, remove, dispose, burden, conceal or otherwise deal with all or some of his assets.

9.         A hearing on the petitioner’s motion was fixed for 6 July 2015.  At that hearing it appears that the sheriff raised questions as to the competency of the proposed new prayer which the petitioner sought to insert by amendment, that is, whether it was competent for the court to make an order for payment under section 996 of the 2006 Act.  The motion was continued for parties to further consider their positions, and so called before me on 27 July 2015.  Meantime the respondent lodged adjusted answers on 22 July 2015.  These do not directly address the issues raised in the Minute of Amendment, but provide further elaboration of the respondent’s averments that the petitioner’s claim is ill founded.

 

Submissions for the parties

10.       In opening, Mr Young sought to address the question of competency which he understood had been raised by the sheriff on 6 July 2015.   He explained that he sought a warrant for arrestment on the dependence of the action under section 15A(1) of the 1987 Act.  Such warrant was competent only where the action contains a conclusion for payment of a sum other than by way of expenses:  section 15A(2).  He accepted that as originally presented the petition had not contained such a conclusion.  He therefore now sought to insert this by amendment.  He submitted that a conclusion for payment was competent in a section 994 petition.   This was because, under section 996(1), if the court is satisfied that the petition is well founded “it may make such order as it thinks fit for giving relief in respect of the matters complained of.”  Although section 996(2) specifies particular orders other than an order for payment, this particularisation is without prejudice to the generality of the power under subsection (1).   Reference was made to Wilson v Baxter 2006 SCLR 510 per the Lord President at paragraphs 10 to 12, for the proposition that section 996(1) confers on the court “the widest possible discretion” in granting a remedy to put right and cure any unfair prejudice found to have been suffered.  Relevant examples of the application of this wide discretion were to be found in Allmark v Burham [2006] BCLC 437 at paragraphs 105 – 106, and Atlasview Ltd v Brightview Ltd [2004] BCLC 191 at paragraphs 53 – 55.  In both cases orders were made requiring payment of a sum to the applicant under the statutory predecessor of section 996.  In the latter case it was doubted that this remedy should be labelled as ‘damages’ but might be better described as “financial, or equitable, or even statutory compensation”.  Thus, submitted Mr Young, the petitioner’s proposed crave for payment was competent and if (but only if) amendment were allowed it followed that a warrant for arrestment on the dependence could also competently be granted under section 15A(1).    

11.       Mr Young then turned to address the merits of the motion for diligence.  He confirmed that what was sought was warrant for arrestment on the dependence.  He accepted that in terms of section 15F(3) and (4) of the 1987 Act the petitioner had to satisfy the court (a) that she had a prima facie case on the merits of the action, (b) that there is a real and substantial risk that enforcement of any decree in the action in the petitioner’s favour would be defeated or prejudiced by reason of either (i) the respondent being insolvent or verging on insolvency; or (ii) the likelihood of the respondent removing, disposing of, burdening, concealing or otherwise dealing with all or some of his assets, were warrant for diligence on the dependence not granted; and (c) that it is reasonable in all the circumstances, including the effect granting warrant may have on any person having an interest, to do so.

12.       In relation to prima facie case, Mr Young referred again to Wilson, per the Lord President at paragraph 10, for the proposition there was entitlement to complain of unfair prejudice under section 996 where there has been some breach of the terms on which the applicant 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.  In the present case, it was submitted, there was averred a clear breach of WWL’s Articles of Association.  First, a directors’ loan had been taken without proper authorisation.  Second, payments had been made from the company to the respondent, at least some of which were dividends, without the petitioner being paid the equal share to which she was entitled.   These averments should for the purposes of this motion be taken pro veritate, and set out a prima facie basis for an order under section 996.  Mr Young also referred to an email from the company’s accountants dated 23 September 2014 (production 12 for the petitioner) detailing dividend payments made between April 2013 and April 2014.  Prior to the date of separation in October 2013 the majority of these were made to the parties’ joint bank account.  Thereafter the majority were made to the respondent personally and none were made to the petitioner.  Mr Young further submitted that given the difficulties in valuing the petitioner’s shares in a service company, an order for payment, based on the value of the dividends paid out to the respondent, would be the more appropriate remedy.

13.       In relation to the questions of real and substantial risk, Mr Young referred to the Form G4A.  He submitted that the respondent was either insolvent or verging on insolvency.  In the first place he referred to Sheriff Lewis’ judgment, at paragraph 18(b) (c), (d) and (g) of her Note, as showing that it was established that the respondent had significant personal debts as at the proof in December 2014.   He submitted that the position was now worse for the respondent, because he had been found partially liable in expenses of the divorce action, and also now owed £17,000 to WWL because of the directors’ loan.   He submitted that WWL had other creditors, including HMRC, and that if an attempt were made to wind up the company there was a real risk that the creditors would seek to recover this loan from the respondent.  While the respondent was well paid for his work in the oil and gas sector he was (in the words of the company accountant) “now enduring cutbacks and he faces uncertain future employment” (letter of 22 January 2015, production 8 for the petitioner).  Next, Mr Young noted that the respondent was ordered by Sheriff Lewis to pay a periodical allowance of £2,000 a month, but had recently asked through agents that this be reduced by £100, suggesting he was unable to afford the full payment. 

14.       In relation to the question of the respondent removing or disposing etc. of assets were diligence not granted, Mr Young submitted that the petitioner understood that the respondent intended to leave the country and that there was a risk that he would take assets with him.  He also submitted that WWL had ceased trading and that the respondent had unsuccessfully tried to have the company struck off.  The respondent had set up a new company (Wishwell Logistics (UK) Ltd) and was presumably seeking to channel his current earnings through this company and dissipate them to the prejudice of any order for payment granted in the present petition.  Finally, Mr Young noted that pursuant to Sheriff Lewis’ judgment the parties’ matrimonial home was soon to be sold, and that the petitioner was apprehensive that the respondent would take steps to dissipate the settlement funds which he received from the sale.   Were a warrant granted, he anticipated that arrestment could be made of the respondent’s share of the free sale proceeds in the hands of the selling solicitors. 

15.       In reply, Mr Openshaw did not dispute that an order for payment was a remedy which could competently be granted in a section 994 petition.  However absent actually allowing the petitioner’s minute of amendment today, there was presently no conclusion for payment and so an order under section 15A of the 1987 Act could not be made.  His position was that amendment should not be allowed at this stage.  The appropriate procedure was that the minute of amendment should simply be received, a period allowed for answers and adjustment, and only then should consideration be given to whether the petition should be amended.  To proceed otherwise would be prejudicial to the respondent as regards both fairness and questions of expenses.   The initial conclusions, for purchase of the shares by the company, and for interim interdict in relation to the matrimonial property, had been misconceived.  The petitioner was in effect now accepting that she had got the action wrong first time and was effectively seeking to start again. Her principal order had been sought against the company, now it was against the respondent.  If allowed, the amendment would make this a different action.

16.       Mr Openshaw submitted however, in any event, that even if the amendment was allowed it would still not be competent to grant warrant to arrest under section 15A of the 1987 Act.   He submitted that the petitioner now wanted payment from the respondent personally, in order to found the motion for warrant to arrest.   But if any sums were due at all they could only be due by the company.  There was no averment that the respondent had a personal liability to the petitioner, or that he had any personal obligation to pay the sum sought.  Mr Openshaw therefore submitted that the remedy sought in the Minute of Amendment did not rely on an existing obligation, but rather that the court was being asked to use its discretion under section 996 to create such an obligation.  The diligence provisions were about providing security in relation to payment obligations.  These might be future or contingent obligations, but diligence could not be granted in advance of a payment obligation existing.  Until and unless the court made an order under section 996 requiring payment for sums due by the respondent personally there was no obligation on which interim diligence could be granted. 

17.       Even if a section 15A order was competent, Mr Openshaw submitted that there was a significant hurdle in relation to the prima facie case now being advanced.  A remedy under section 996 was discretionary, and it would be wholly inequitable for the court to grant the order now sought.  Sums were being sought relating to periods both before and after the date of separation.  The petitioner was on the one hand asking the court to pierce the corporate veil by seeking an order against the respondent personally.  On the other, she was seeking to maintain it in order to found a claim in relation to dividends for the period post dating the parties’ separation in October 2013. The first position involved arguing that the sums at issue were truly the respondent’s own assets notwithstanding the existence of the company structure.  The second involved arguing that they were the assets of the company and accordingly ones to which she had a 50% share as a member.    She was therefore trying to have her cake and eat it.  

18.       In relation to the £17,000 directors’ loan, Mr Openshaw submitted that the bottom line was that this was a debt owed to the company and accordingly it was still an asset of the company.  Therefore the petitioner’s shares were not devalued and she had no good claim for unfair prejudice in this respect.  In relation to the increased payments made by the company to the respondent post separation, these represented an increased salary.  Given that this was a service company and the parties had separated the petitioner could have no legitimate expectation that he would not increase his salary following the parties’ separation.  The payments were either balancing payments in relation to payments previously made to the petitioner, or withdrawals by way of salary to which he was entitled.  There was therefore no unfairly prejudicial conduct in relation to the claimed payments made by the company to the respondent.  For these reasons too the court should not be satisfied that the petitioner had a prima facie case.

19.       In relation to the allegations regarding apparent insolvency, Mr Openshaw submitted that there was no evidence to establish this.  In response to the reference to the accountant’s letter of 22 January 2015, he submitted that the respondent had since secured a new contract for offshore work.   The respondent had indeed asked to reduce the periodical allowance, but this was not because he was apparently insolvent.  The matrimonial home was about to be sold.  Even allowing for the payments required of the respondent as a result of the judgment of Sheriff Lewis the respondent would still be entitled to a significant payment from the free sale proceeds.   In relation to the question of possible disposal of assets, Mr Openshaw submitted that this too was not made out.   In particular the respondent had no intention of moving abroad and there was no evidence presented to establish otherwise.   The petitioner had in place the protection of an interdict against further sums being drawn out of WWL and this was all the protection which she required or was entitled to.   Overall the tests in section 15F(3) of the 1987 Act were not made out, and even if the amendment were allowed, and the grant of an warrant to arrest were competent, such warrant should not be granted.

20.       In reply, Mr Young submitted firstly that in relation to procedure it was pointless to allow answers to the Minute.  This would simply mean avoiding the real issue and would mean that the argument now extensively debated would have to be rerun at a later hearing.  Secondly, in relation to Mr Openshaw’s argument on competency, he submitted that there was no authority for the proposition being advanced.  The terms of section 15A(2)(a) were clear.  All that was required as a matter of competency was a crave for payment, and there was no warrant to read in a further competency test.   It was irrelevant that the remedy being sought was discretionary in terms of section 996.  Mr Young submitted, thirdly, that there was nothing antithetical or hypocritical in relation to the petitioner’s position on whether to pierce the corporate veil.  The petitioner would not need to seek the remedy against the respondent if he had paid dividends in accordance with the articles of association.  If in order to remedy that it was necessary to look at the reality behind the corporate structure, this was to do nothing more than was often necessary in unfair prejudice cases. Fourthly, in relation to the prima facie case it was accepted that there were competing arguments, but Mr Openshaw’s submissions were in effect arguments on the facts, and the averments should be taken pro veritate at this stage. 

 

Discussion

21.       The first issue is whether I should allow the petition to be amended at this stage in terms of the minute of amendment, or whether it should simply be allowed to be received, with a period allowed for answers and adjustment, before then deciding whether to allow any amendment to be made.   It seems to me that the starting point is to understand the nature of the proceedings, a matter on which no submissions were made by either side.    Section 994 provides that a member of a company may apply to the court “by petition”.  In the sheriff court however such applications are made by way of summary application.  Procedure thus falls to be determined in accordance with the Act of Sederunt (Summary Applications, Statutory Applications and Appeals etc. Rules) 1999. Matters are to be disposed of summarily, or at least as summarily as the nature and issues in the case will allow consistent with the requirements of fairness.  The particular formalities of Ordinary Cause procedure, including those relating to Minutes of Amendment, do not apply.   Indeed there is no specific procedure for ‘amendment’ of pleadings at all.  The procedure is therefore more flexible than ordinary actions, albeit always subject to the supervision of the Court.  

22.       In the present case the petitioner’s Minute of Amendment was lodged and intimated to the respondent on 16 June 2015.  He therefore had ample opportunity to consider its terms and to give instructions on its content, in fact and law, prior to the hearing on 27 July 2015.  Mr Openshaw was, moreover, clearly well prepared to present his arguments in opposition to the motion for interim diligence, as an esto position, if the Minute were granted.  I agree with Mr Young that there are issues of substance to be determined contingent on permitting the petition to be amended, and that it would be highly undesirable if by refusal of the proposed amendment the substantive argument would have to be re-run in a few weeks, perhaps before a different sheriff.   I do not accept Mr Openshaw’s submission that the respondent would be prejudiced in relation to expenses.  The court can make such awards of expenses as are appropriate, both in relation to consideration of the minute and in preparation for and attendance at the motion to amend the petition in terms thereof. In all these circumstances, I do not accept that the respondent would be unfairly prejudiced by allowing the proposed amendment at this stage.  I am accordingly prepared to allow the petition to be amended in terms of the Minute of Amendment. 

23.       Having done so, the second issue is therefore the competency point addressed by Mr Young, namely whether an order for payment may competently be craved in a petition presented under section 994 of the 2006 Act.  This was not disputed by Mr Openshaw and in my view is supported by the authorities cited.  It is clear that section 996 gives the court the widest possible discretion to grant a remedy where unfair prejudice has been established.   The facts of both the Allmark and Atlasview cases show the practical reach of this power, both being examples of the court tailoring remedies appropriate to the circumstances, including by granting orders for payment against individuals and by so doing looking behind the corporate structures concerned.   I am satisfied that, in principle, the court may make an order for payment pursuant to section 996 of the 2006 Act.

24.       The third issue is the competency point raised by Mr Openshaw, namely whether it is competent to obtain interim diligence under section 15A of the 1987 Act standing the discretionary nature of the remedy available under section 996 and the consequent absence of any identifiable payment obligation on the respondent as an individual.

25.       Section 15A provides (in particular) as follows:

“(1) Subject to subsection (2) below and to sections 15C to 15F of this Act, the Court of Session or the sheriff may grant warrant for diligence by… arrestment … on the dependence of an action.

 

(2) Warrant for … arrestment on the dependence of an action is competent only where the action contains a conclusion for payment of a sum other than by way of expenses…

 

(3) In this Part of this Act, “action” includes, in the sheriff court (a) a summary cause; (b) a small claim; and (c) a summary application, and references to “summons”, “conclusion” and to cognate expressions shall be construed accordingly.”

 

While section 15B provides (again insofar as relevant to arrestment rather than inhibition):

“(1)  Subject to subsection (2) below and to sections 15C to 15F of this Act, the Court of Session may grant warrant for diligence by arrestment… on the dependence of a petition.

 

(2)  Warrant for … arrestment on the dependence of a petition is competent only where the petition contains a prayer for payment of a sum other than by way of expenses…

 

(3)  The provisions of this Act (other than section 15A), of any other enactment and of any rule of law relating to diligence on the dependence of actions shall, in so far as is practicable and unless the contrary intention appears, apply to petitions in relation to which it is competent to grant warrant for such diligence and to the parties to them as they apply to actions and to parties to them.”

 

26.       Accordingly section 15A makes it competent to seek interim diligence in ‘actions’ whether in the Sheriff Court or Court of Session, whereas interim diligence in ‘petitions’ is competent only in the Court of Session.  As already observed, the present application, although a ‘petition’ in terms of section 994, is treated as a summary application and is thus an ‘action’ for the purposes of section 15A and thus one in which it is in principle competent to grant interim diligence.   This was not disputed by either party.  The specific provision for ‘petitions’ in the Court of Session recognises the existence of formal petition procedures in the Rules of that Court, and that remedies for payment may be prayed for in such cases.  Sections 15A to 15N were inserted into the 1987 Act by section 169 of the Bankruptcy and Diligence (Scotland) Act 2007.    Consideration of the background to this change indicates that one of the things in contemplation in enacting section 15B was the possibility that a claim for payment or damages might be made in the context of a petition for judicial review under chapter 58 of the Rules of the Court of Session:  see rule 58.4.  It appears to have been intended that interim diligence would in principle be available in such proceedings: see the Scottish Executive consultation paper Enforcement of Civil Obligations (2002) paragraphs 5.11 – 5.14, following recommendations of the Scottish Law Commission in its Report on Diligence on the Dependence and Admiralty Arrestments (1998).  That is of significance for present purposes, in that the grant of damages in judicial review is a discretionary remedy.  If interim diligence is available where such a remedy is craved in judicial review, it is hard to see that the discretionary nature of the remedy available under section 996 of the 2006 Act would in itself render it incompetent to seek interim diligence in proceedings under section 994, whether in the sheriff court or Court of Session.

27.       But the more fundamental point is simply that, as amended, the present petition now includes a ‘conclusion’ for payment of a sum other than expenses.  That is what section 15A(2) requires as a matter of competency, and in my view that is all that it requires.  Mr Openshaw was unable to offer any authority in support of his submission to the contrary.  Had it been Parliament’s intention to limit the availability of interim diligence dependent on whether the petitioner was seeking to establish the existence of a private law obligation on the respondent to make payment, then I would have expected that to be expressly stated or clearly implied in the statute, and it seems to me that it is not.  I am satisfied that the discretionary nature of the remedy being sought by the petitioner does not have the effect that she cannot in principle obtain an order under section 15A of the 1987 Act.  On this issue I therefore agree with Mr Young, and reject the respondent’s plea to the competency.

28.       The fourth issue is the question of whether the petitioner has “a prima facie case on the merits of the action” per section 15F(3)(a) of the 1987 Act.   The starting point, it seems to me, is that in the light of Sheriff Lewis’ judgment this case falls to be determined as a matter of company law, not the law relating to the division of matrimonial property.    The second point is that it was not disputed that I should proceed on the basis that the petitioner’s averments – as now amended – be taken pro veritate.   Next, consideration of whether there is a prima facie case must, in the circumstances, include not only consideration of whether the petitioner has pled a case of unfair prejudice, but also whether this is a case which gives prima facie grounds for the remedy which she seeks, that is, payment from the respondent as an individual. 

29.       The petitioner’s case has essentially two limbs to it:  that there was an unauthorised directors’ loan, and that dividend payments were made to the respondent without a corresponding payment having been made to the petitioner.  In relation to the first matter, I agree with Mr Openshaw that the want of authorisation does not in itself establish prejudice.  This is because, as he submitted, the loan remains due to WWL and thus an asset of the company.   There is a bald averment in article 5 of condescendence that the taking of the loan has “prejudiced the petitioner’s interest in the company and devalued the petitioner’s shares in the company” but no specification is given as to why or how that is so.  The sum sought by way of payment is said (article 6, as amended) to include a sum representing half the amount of the directors’ loan, but nothing to indicate why the alleged reduction in the value of the petitioner’s shareholding can be simply equated to this amount.  In the circumstances I am not presently satisfied that the petitioner has on this aspect pled a prima facie case of unfair prejudice, or entitling her to the claimed order for payment under section 996 of the 2006 Act.

30.       On the second limb of the matter the petitioner avers in particular that the respondent withdrew large sums of money from WWL between 6 April 2013 and 5 April 2014, additional to the sums accounted for as a directors’ loan, and in excess of his salary.  An email from the company’s accountant dated 23 September 2014, describing these payments as dividends, is produced and incorporated brevitatis causa (production 12 for the petitioner).  On the face of it this suggests that prior to the date of separation dividend payments were very largely paid to the parties’ joint account, but that subsequent to this date they have been very largely paid to the respondent’s personal account.  The petitioner avers that the respondent has been called on to account for these payments but has not done so.   On the face of it the petitioner is entitled to 50% of any dividends paid.   She specifies a sum, £14,705.56, which she claims is the amount of  dividend which she is entitled to be paid for the period in question.  Although the pleadings are not as clear they might be, therefore, I am satisfied that the petitioner has set out a case that she has been unfairly prejudiced by the non payment of a share of dividends to which on the face of it she was entitled, and that there are grounds on which a court might pierce the corporate veil and grant an order for payment representing the unpaid share against the respondent personally.    I acknowledge that the respondent has arguments to make both on the facts (whether the petitioner has in fact been paid all she is due) and as to whether it would be fair and just to make an order against the respondent personally (or put another way, as Mr Openshaw would have it, whether she should be allowed to have her cake and eat it).  But at this stage I am satisfied – just – that the petitioner has in this respect set out a prima facie case for the purpose of section 15F(3)(a).

31.       The fifth issue to consider is therefore whether there is a real and substantial risk that enforcement of a decree of payment of £14,705.56 would be defeated or prejudiced by reason of the respondent being insolvent or verging on insolvency:  section 15F(3)(b)(i).  I am not satisfied that this has been made out.  The onus is on the petitioner to put material before the court in order to establish the relevant risk by reason of insolvency or apparent insolvency and in my view she has not done so.  Mere assertion and speculation will not do.  Certainly there is material in Sheriff Lewis’ judgment which establishes that the respondent has significant personal debt.  But he would appear to continue to have well paid employment in the oil and gas industry.  Mr Young’s suggestion that his employment was under threat was gleaned from a single sentence in a letter from the company accountant at the beginning of this year, but this was insufficient to establish the fact and was in any event disputed.  The parties’ former matrimonial home is shortly to be sold and although no quantification was set out, it appears that the respondent will be entitled to a significant sum by way of his share of free sale proceeds, even allowing for significant deductions.  Overall there simply is insufficient to enable me to conclude that there is a real and substantial risk to enforcement, rather than a speculative possibility, arising from the respondent being insolvent or verging on insolvency. 

32.       The sixth issue is whether, in the alternative, the petitioner has established a real and substantial risk that enforcement would be defeated or prejudiced arising from a likelihood of the respondent removing, disposing of, burdening, concealing or otherwise dealing with all or some of his assets:  section 15F(3)(b)(ii).  Again, in my view, this is simply not made out.   Mr Young’s submissions on this matter seemed to me, with respect, to amount to a series of assertions and speculations not sufficiently backed up by evidence sufficient to support them.  It is said (and not, as I understood it, disputed) that WWL has ceased trading and that the respondent has started a new company.  That does not establish a reasonable apprehension that he is intending to move abroad.  Nor – given the terms of the interim interdict already in place – does it give reasonable apprehension that he intends to transfer the assets of WWL to the new company.  In any event the petitioner is adequately protected against such action by the terms of this interdict.  The setting up of a new service company would appear to be a predictable reaction by the respondent to the petitioner’s ongoing claims to a share of dividend payment from WWL (more than a year after the parties’ separation) and the fact that the respondent has been unable to have WWL struck off.    It does not satisfy me that the tests for interim diligence under this head have been made out. 

33.       The seventh and final issue, which was not directly addressed by either Mr Young or Mr Openshaw, is whether it would be reasonable in all the circumstances to grant a warrant for arrestment on the dependence, including the effect granting warrant may have on any person having an interest: section 15F(3)(c).  I took it from the absence of specific submissions on the topic that neither party wished to rely on any matter going to reasonableness other than those already prayed in aid.  There was no suggestion that the grant of warrant to arrest would have any effect on any third party having an interest.  In all the circumstances, however, the petitioner has not satisfied me that it would be reasonable to grant arrestment on the dependence.    The apparent strength of the petitioner’s case seems to me to be a relevant factor here.  I am satisfied that the petitioner has made out a prima facie case, but as presently pled I cannot say that it is a strong one on the merits, or that the prospects of obtaining the order for payment now sought are sufficiently strong as to justify interim diligence.  An innovative and creative remedy is now being sought and, while competent, there are serious arguments yet to be made against granting it. 

 

Conclusion

34.       For all these reasons therefore I am satisfied that the petitioner’s minute of amendment should be allowed and the petition amended in terms thereof, and that it is competent in principle to grant arrestment on the dependence in this action.  However I am also satisfied that the petitioner has failed to discharge the onus of satisfying me that the statutory grounds for granting the order sought have been made out.   The petitioner’s motion for warrant to arrest on the dependence is accordingly refused.  That being so I consider that the respondent is entitled to his expenses in relation to the preparation for and attendance at the hearing on 27 July 2015. 

35.       In accordance with the joint position of parties the case will be continued to a hearing to enable the respondent to instruct a report from a forensic accountant and to determine further procedure in the light of it.   The date of 28 September 2015 has been identified.  Meantime parties will be permitted to further adjust their pleadings until one week prior to the date of this hearing.