Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2013] CSOH 88
P481/13	OPINION OF LORD McEWAN in the Petition of N A H G Petitioner; for Judicial Review of the actions and proposed actions of Andrew Watson, Shane Watson, Richard Bagley, Jeff Prowse and Garry Russell relative to the purported operation of the disciplinary processes of BLUK against the petitioner ________________

Petitioner: Sandison QC; Ms Cullen, sol adv; Brodies LLP

For third, fourth and fifth Respondents and first and second interested parties: Currie QC; Marney; DWF Biggart Baillie;

For first and second respondents and third interested party: Lord Davidson of Glen Clova, QC; Ms Ower; Dundas & Wilson

31 May 2013

[1] The petitioner before me appeared on 21 May 2013 on a motion for interim orders. There are as yet no answers and no first hearing has taken place. On that date Mr Sandison appeared for the petitioner. Mr Marney appeared for BLUK and GROUP and for three shareholders in GROUP Messrs Bagley, Prowse and Russell. Lord Davidson appeared for Andrew and Shane Watson and Allan Leddra. I heard parties again on 29 May when Mr Currie replaced Mr Marney. The petition seeks reduction, suspension and interdict in respect of certain disciplinary actions taken against a company director with further proceedings in contemplation against him. The background is a complex corporate struggle in a group of companies involving a number of individuals who are now very much at arms length. There has already been one petition before this court under the Companies Act 2006. That, I was told was caused by an audit proposed of one of the group in Asia which, it was alleged, was obstructed (no. 6/5 of process). Some compromise was reached but there remains a dispute in fact about this. The UK company is referred to as BLUK and the parent or holding company is referred to as GROUP. The boards of both have a majority whose interests are opposed to the petitioner and one other director, a Mr Haldane. There is even another action ongoing in the Virgin Islands.

[2] What has brought matters to a head is an allegation that the petitioner is involved in or has failed to stop an expense account ("CFT") for an individual who may have used £400,000 for travel and entertainment. There are allegations of bribery and the Crown Office has had some involvement, though what, is as yet unknown. It is alleged that two other compearing parties knew about the account. However, the petitioner claims that he has been ousted by an inept procedure to get his shares at a gross undervalue and prevent him raising any more petitions. During the argument a number of cases were canvassed, viz, Kanda v Government of Malaya [1962] AC 322; Anisminic v Foreign Compensation Commission [1969] 2 AC 147; R (Queen Mary University of London) v HEFC [2008] EWHC 1472 (Admin); Dimes v Proprietors of Grand Junction Canal (1852) 3 HL Cas  759; R v Gough [1993] AC 646; R v Secretary of State for the Environment, ex parte Kirkstall Valley Campaign [1996] 3 All ER 304; Belize Bank Ltd v Attorney General [2011] UKPC 36; West v Secretary of State for Scotland 1992 SC 385; Blair v Lochaber District Council 1995 SLT 407; Jackson v Secretary of State for Scotland 1992 SLT 572; Davidson v Scottish Ministers [2005] UKHL 74; Malloch v Aberdeen Corporation1971 SC (HL) 85; Murray v Dumbarton County Council 1935 SLT 239. The Encyclopaedia Article on Employment was also referred to.

[3] I first deal with the argument for the petitioner submitted by Mr Sandison. Having given the introduction I have already mentioned he looked at no. 6/3 of process which was the petitioner's contract. The only person who could deal with discipline was the Chairman of the Board and that was himself unless someone else had been appointed. That had not happened but the first two respondents and Leddra appointed themselves to the board of BLUK and the next day suspended the petitioner as managing director. They then decided to investigate him although that came partly unstuck when it was realised that Andrew Watson himself might have to be investigated. He, however, continued to investigate including, presumably, about himself. This led to the April hearing with reports by solicitors and accountants and shortly thereafter to his dismissal. This was all narrated in article 7. No party acting had power to do as they did. There had been no action by any "Chairman". Thus acting without powers rendered the suspension and dismissal a nullity. The Appeal board was three minority shareholders and that was also outside the terms of his contract. These decisions were a nullity and counsel referred me to Kanda; Anisminic and Queen Mary University. Further, said Mr Sandison, the respondents had behaved with bias and their behaviour could ultimately force him to sell his shares at an undervalue as a "bad leaver". He referred me to Dimes; Gough and Kirkstall Valley. Apart from pure bias, there was a real possibility of bias (Belize Bank cit sup at pages 34 and 35. The action was competent and in spite of West the change to the Rules of Court (RC 58.12) meant the argument should be about substance, not form. What was complained of was a pretended exercise of a jurisdiction created by contract. There were at least three parties involved if not four. Blair and Jackson were referred to. The balance of convenience favoured returning the status quo ante. The company could have done things properly. Any evidence gathered had been preserved. There was a serious risk of share expropriation at an undervalue. Any later attempt to compute then recover damages might not compensate the petitioner.

[4] Merging, and in summary, the argument of Mr Marney and Mr Currie was to this effect. The dispute was contractual and did not engage public law remedies. I was referred to the case of Blair at pages 408 to 410L. In any case all powers were vested in GROUP not BLUK. There was no third party body and everything depended on the employer. The petitioner had, in any case, other adequate remedies under his contract. Granting the remedies sought would compel continuation of employment and, in a situation where allegations of bribery were made, that would be quite wrong. None of the cases, beginning with Kanda was in point. They were all public law cases. When the contract was properly looked at, it could not be said that the suspension and dismissal was unlawful. He had been suspended by his employer and the Board Committee made a proper investigation and was entitled to act on the information before it and call the disciplinary hearing. It was a fair and proper thing to set up an appeal panel of three independent shareholders. On balance the evidence was strong that he was complicit in the operation of the CFT account - and that would lead to police investigation. In any event if the companies had wronged the petitioner he had ample other remedies both under general employment law and the Companies Acts.

[5] Lord Davidson lodged a helpful, succinct written submission to which he referred me. In addition he pointed to the seriousness of the allegation of bribery and the passing of the Bribery Act 2010. In the present case there was a risk of prosecution of the companies and individuals. It could be expensive and the self reporting might not attract much mitigation. To restore the petitioner as a director against that background would be wrong. Here there was no independent third party. BLUK had surrendered its decision taking to GROUP and the petitioner was at the meeting when this was proposed, and he agreed to it. Rule of Court 58.12 did not just allow a transfer over of remedies. There were no specific rules about his dismissal in the contract and even yet he was not prevented from raising other section 994 petitions.

[6] I do not intend to undertake any exhaustive analysis of the various cases or the few documents produced. They do not present me with a complete picture. One was much redacted and the other not available to me. Without answers lodged and more disclosure I am quite unable to conclude that there is a strong or any case against the petitioner to justify what has happened, and so at present in relation to the CFT account the petitioner is entitled again to say "Who is my accuser?. What is your evidence?".

[7] I further think, from what is averred and what I was told, that any neutral informed observer would conclude that a number of persons with an adverse interest to him have altered the rules about discipline and have accused and judged the petitioner. The placing of three minority shareholders on the appeal committee merely compounds this.

[8] It was said in relation to the remedy that review would only be available in private contract if a third party was involved who was independent. It was said that there was none and that it was "all the company". That could be said but it does not face the reality of what has occurred. Although they all have connection to the company there is a serious risk of actual bias and others have acted outwith what the contract the petitioner had with the company provides. Although not the type of traditional third party seen in the public law cases; the reality is that that is what they are. The company is a legal persona and all these people are distinct from it.

[9] That alone in my view is enough to allow judicial review which in Scotland has never been confined to public law matters. However, the matter does not end there.

[10] Rule of Court 58.12 governs a case like this and I venture to question whether, now, cases like West and Blair would be decided so strictly. There is nothing unusual about the remedies sought - they are all common law remedies. I propose to grant (in three parts) suspension against the relevant named respondents ad interim; of the decisions to suspend the petitioner; the decision to convene the disciplinary hearing against him; and the decision to dismiss him. As far as interdict is concerned I think there is a serious risk he will suffer greater harm than will the respondents if he is allowed to be reinstated. No appeal committee should therefore meet. That is consistent with the other orders and pendent lite nihil innovandum. The balance of convenience, I hold, at present favours the petitioner. I will also ad interim

grant interdict against the relevant respondents or any of them from constituting any appeal committee or conducting any appeal hearing in relation to the petitioner.

[11] I appreciate that matters will now have to proceed to a first hearing and things may change or appear differently; but that is for another day.