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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> GBF Financial Management Company v Steven Worrallo & Ors [2008] ScotCS CSOH_66 (30 April 2008) URL: https://www.bailii.org/scot/cases/ScotCS/2008/CSOH_66.html Cite as: [2008] CSOH 66, [2008] ScotCS CSOH_66 |
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OUTER HOUSE, COURT OF SESSION [2008] CSOH 66 |
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A183/08 |
OPINION OF LORD BRAILSFORD in the cause GBF FINANCIAL MANAGEMENT COMPANY Pursuer; against (FIRST) STEVEN
WORRALLO; (SECOND) RHODA WORRALLO and
(THIRD) Defenders: ________________ |
Pursuer:
Higgins; Shepherd &
Wedderburn LLP
Defenders: Summers;
McKay & Norwell WS
30 April 2008
[2] On
the basis of the information in the Summons, the pursuer company was a
corporation incorporated under the laws of the State of
[3] On the basis of the information in the Summons, as supplemented by information provided at the bar by counsel representing the pursuers, it would appear that in about July 2007, Hendrikus van Bilsen, the Managing Director of the pursuer, entered into negotiations with the first defender acting in his capacity as a shareholder and Managing Director of the third defender, with a view to acquiring the Island of Little Cumbrae. It is averred that in conducting these negotiations the first defender was acting not only on his own behalf but as agent for his wife, the second defender. I was informed that the negotiations were entirely verbal, albeit I was further informed that Mr van Bilsen tape-recorded the negotiations. Transcripts of the taped conversations were in the possession of agents acting for the pursuer. Miss Higgins, Advocate, who appeared on behalf of the pursuer had heard some, but not all, of these transcripts. It was represented that the interest of the pursuer was to acquire the island and that so far as I can determine, more or less at the outset of negotiations it was determined that the appropriate vehicle to achieve such acquisition would be by the purchase of the entire share capital of the third defender.
[4] The
pursuer's position was that these negotiations proceeded over a period of
months but that on
[5] The
pursuer avers that they continued to attempt to effect funding to complete this
sale in 2008. There had been delays in
effecting funding, but on 5 February 2008 Mr van Bilsen had sent
the first defender a copy of a Syndication Agreement, apparently setting forth
details of proposed funding. There was
produced at the Bar during the hearing a document which was said to be an
extract from the Syndication Agreement.
I am bound to observe that it was far from clear to me what exactly the
document produced could establish at this stage in proceedings. The document that was produced was not said
to be a complete agreement, merely an extract. The portion
of the document produced was not self-explanatory and I received no adequate
explanation as to its meaning. It did not assist me. Chronologically
the next development appears to have been that in about mid-February 2008 the
first defender contacted Mr van Bilsen and advised him that he had
entered into an "exclusivity agreement" with another party and purporting to
terminate his dealings with the pursuer.
The pursuer averred that the transaction with the other party involved a
sale of the shares in the third defender and that that transaction was due to
be completed on
[6] Against the foregoing background the pursuer's position was that there was an enforceable contract between the parties. The defenders' actions in entering into an agreement to sell the shareholding of the third defender to a third party was in breach of that contract. This was not a case where, if the pursuer was correct in its contention that there was a breach of contract, damages would be an appropriate or adequate remedy. There was intrinsic value in the heritable subjects, the island of Cumbrae, which were the principal asset of the third defender. The pursuer had particular reasons for wishing to purchase this heritable property. In those circumstances they were entitled to the protection of interdict ad interim.
[7] Against that background the defenders' position was that whilst they accepted that there had been verbal negotiations between Mr van Bilsen and the first defender in the period stated by the pursuer, there had never been a contract. The matter had never got beyond the stage of negotiations. It was submitted that this was apparent even as a matter of averment. It was submitted that as a matter of language, the averment that "discussions regarding funding could be continued in 2008" was indicative of the lack of consensus and pointed towards the likelihood that the defenders were correct in the contention that there was no concluded contract.
[8] On this basis the defenders maintained that the pursuer had not established a prima facie case and accordingly was not entitled to interdict ad interim as sought in either the second or fourth Conclusions.
[9] As a secondary argument the defenders submitted that even if they were incorrect in relation to a prima facie case, the balance of convenience was in their favour and interdict ad interim should not be pronounced. They submitted that if they were incorrect in relation to the existence of a contract, then the position of the pursuer would be adequately protected by an award of damages. By contrast, an award of interdict ad interim would probably result in the loss of the proposed sale to a third party. This would have extremely adverse consequences for the third defenders. The decision to sell the island of Little Cumbrae was taken by the third defender because it was losing money. The third defender had invested heavily in maintenance and development of the island but this was not giving a viable financial return. The financial position of the third defender deteriorated daily. HSBC Bank had a secured loan of £1.7 million over the island and were concerned about the absence of repayment and servicing of this debt. The Bank had been pressing for a sale of the island since the start of 2007 and I was informed that they were close to the end of their patience in relation to their loan. If a sale could not be achieved in the near future, then the Bank would take steps to enhance its security. In this eventuality there would not only be disadvantage to the third defender but to the first and second defenders. The indebtedness of the third defender was secured by a cross-guarantee network within a group of companies controlled by the first and second defenders. The insolvency of the third defender would have consequent implications which would probably result in the insolvency of the whole group of companies. In all the circumstances I was invited to refuse the motion.
[10] As is often the case with motions for interim interdict before calling, the court was faced with making a decision against the background of inadequate information. In this case I was assisted to some extent by the acceptance by counsel for the defenders that there had, as averred by the pursuer, been negotiations of the type averred in the Summons. In those circumstances the primary question for me appeared to be whether on the information available on averment and supplemented by the information provided by counsel for the pursuer, there could be said to be a contract in existence for the sale of the shares in the third defender to the pursuer. I formed the view that there was sufficient to enable me to form that conclusion. The averments in the Summons, in particular Article 3, were in my view habile to support a contention of consensus conform to the terms of the declaratory conclusion. Moreover, I considered there was sufficient by way of averment and supplemental information to support the proposition that there existed a condition in relation to funding, which condition had been varied on or about 21 December 2007 in the manner averred by the pursuer. In these circumstances I was satisfied that there was a prima facie case.
[11] Having reached that decision, the issue of the balance of convenience required to be determined. I considered that matter to be quite finely balanced. I observe that it would have been open to the defenders to have imposed conditions in relation to the question of timing. Quite simply, the defenders could have stipulated on 21 December 2007 that any contract would be terminated were funding not in place by any given date. Even after 21 December 2007 it would have been open to the defenders to have made timing of the essence by imposing a time limit for the acquisition by the pursuer of funding for the transaction. It would appear that none of these steps were taken and instead the first the pursuer knew of an urgent issue in relation to timing was when they first defender informed them in mid-February 2008 that he had entered into an alternative agreement with another party. Whilst I accept that it would be dangerous, and indeed wrong, to read too much into actings of that sort by the defenders, I consider I am entitled to have at least some regard to the apparent position that no particular problem about funding was raised with the pursuer until the purported termination of the agreement. I further consider that there is considerable force in the pursuer's contention that they would not adequately be protected by the possibility of an award of damages in this case. On the basis of the arguments advanced by the defenders themselves, the financial position of the third defender is precarious. It seems unlikely that the third defender would be able to satisfy any award of damages made against them. Moreover, there does appear to be some force in the pursuer's position that the island of Cumbrae has some intrinsic and unusual value to them. In light of these considerations I was of the view that the balance of convenience favoured the granting of interim interdict.
[12] Having regard to all the foregoing circumstances I pronounced
interdict ad interim in terms of the
first and fourth Conclusions of the Summons.