"1. For decree ordaining the defender forthwith to implement and fulfil his part of the Shareholders' Agreement entered into between the Pursuer and the Defender, Mrs. Simmers, Charles Simmers, Brian Simmers and Scotpigs Limited dated 18 December 1998 whereby pursuant to clause 10 thereof the defender agreed to sell and the pursuer agreed to purchase the Buy-out shares and the Buy-out properties defined therein at the Buy-out price being £400,000 for the Buy-out shares and £2,100,000 for the Buy-out properties and in particular to execute and deliver a valid disposition, a stock transfer form, warranty and discharges of the Buy-out properties securities in exchange for payment of said price.

2. Alternatively (in the event the Buy-out Valuation is invalid which is denied) for decree ordaining the Defender to implement and fulfil his part of the Shareholders' Agreement entered into between the Pursuer and the Defender, Mrs. Simmers, Charles Simmers, Brian Simmers and Scotpigs Limited dated 18 December 1998 whereby pursuant to clause 10 thereof the defender agreed to sell and the pursuer agreed to purchase the Buy-out shares and the Buy-out properties defined therein at the Buy-out price, being in respect of the Buy-out shares price £400,000 and in respect of the Buy-out properties price such figure as [is] validly determined, all within such time as the court may appoint from the date of decree, and in particular to join in instructing the valuer to determine the Buy-out Valuation, execute and deliver a valid disposition, a stock transfer form, warranty and discharges of the Buy-out properties securities in exchange for payment of the price.

3. For an order pursuant to section 47(2) of the Court of Session Act 1988 ordaining the Defender to execute and deliver (i) the disposition, stock transfer form and warranty provided to the Defender on 31 March 2004 under cover of the Pursuer's solicitor's letter of 31 March 2004 addressed to the Defenders' solicitors; (ii) the discharge of the securities over the Buy-out properties; all in exchange for payment by the pursuer of the Buy-out price being £400,000 for the Buy-out shares and £2,100,000 for the Buy-out properties. ... ".

"Whereas: (A) The Company has been formed by the parties for the purpose, inter alia of acquiring the Properties and the Business of the Simmers Companies, disposing of certain of the Properties and carrying on business in its own right. (B) The parties have agreed to subscribe for shares in the Company and wish to enter into this Agreement for the purpose of recording the terms and conditions of their Joint Venture and of regulating their relationship with each other and certain aspects of the affairs of, and their dealings with, the Company and the Company has agreed with the parties that it will comply with the terms and conditions of this Agreement in so far as they relate to the Company. Now therefore it is contracted upon and agreed between the parties as follows: ... ".

Clause 1 of the Shareholders' Agreement provides definitions of expressions used in it. For present purposes, it is necessary to notice the following:

"'the Base Properties Price' means two million one hundred thousand pounds (£2,100,000) sterling;

'the Business' means the business and undertaking of the Simmers Companies relating to pig, cattle and general farming, ownership and turning to account of properties and equipment for farming purposes and all related activities all as more particularly set out in the missives;

'the Buy-Out' means the simultaneous purchase by or on behalf [sic] Mr. Simmers of the Buy-Out Shares and of the Buy-Out Properties from Mr. Innes on the Buy-Out Date;

'the Buy-Out Date' means 31 March 2004;

'the Buy-Out Price' means the aggregate of the Buy-Out Shares Price and the Buy-Out Properties Price;

'the Buy-Out Properties' means the heritable subjects more particularly described in Part 2 of the Schedule less those or parts thereof that have been subject of a Part Sale;

'the Buy-Out Properties Price; means (a) the price payable by Mr. Simmers or his nominees to Mr. Innes on the Buy-Out Date being the higher of (i) the Base Properties Price; or (ii) the aggregate of the Base Properties Price and an amount equal to the figure brought out by the following formula: 1/2 x (Buy-Out Valuation - £2.1m) or (b) in the event that there has been a Part Sale, the Base Properties Price shall be adjusted as ascertained in clause 9 hereof;

'the Buy-Out Shares' means the 400,000 'A' Shares held by Mr. Innes and/or his permitted transferees in terms of the Articles;

'the Buy-Out Shares Price' means the price payable for the Buy-Out Shares being the higher of (i) four hundred thousand pounds (£400,000) sterling or (ii) four hundred thousand pounds (£400,000) sterling plus half [of] any [gain] in the net asset value of the Company as disclosed by the balance sheet produced to 31 March 2004 up to a maximum half share gain of four hundred thousand pounds (£400,000) sterling;

'the Buy-Out Valuation' means the valuation carried out by a valuer to be agreed between the 'A' Director [Mr Innes] and the 'B' Director [Mr Simmers] on or within one month prior to the Buy-Out Date; ...

'Joint Venture' means the joint venture created by this Agreement and as may be varied by any Agreement(s) supplemental to it executed by the parties; ...

'Joint Venture Objective's; means the objects set out at Part 1 of the Schedule;

'the Lease' means the lease to be entered into between Mr. Innes and the Limited Partnership a copy of which is reproduced at Part 4 of the Schedule;

'the Limited Partnership; means the Limited Partnership to be entered into between the Company and Mr. Innes at Completion, a copy of the Limited Partnership Agreement being reproduced in Part 5 of the Schedule; ...

'Valuation; means the valuation of the Properties carried out by Aberdeen & Northern Estates Limited on 2 December 1998 a copy of which is reproduced at Part 10 of the Schedule."

"The objects of the Joint Venture are:

1. The acquisition of the Properties and the Business.

2. The sale by the Company of the Buy-Out Properties to Mr. Innes and the sale of other properties or parts thereof remaining in the ownership of the Company that the Directors of the Company agree from time to time.

3. Forming the Limited Partnership.

4. Leasing the Buy-Out Properties from the Limited Partnership.

5. Conducting the Business in a profitable manner.

6. Completing the Buy-Out.

7. The doing of such acts, matters and things as the Directors may consider incidental to the attainment of any of the foregoing objects."

"2(1) The parties hereby agree with one another to enter into the Joint Venture for the purposes of the Joint Venture Objectives and for no other purpose; no party shall hold out that the Joint Venture extends to any other property or business. None of the provisions of this Agreement shall be deemed to constitute a partnership between the parties hereto and no party hereto shall hold himself out as an agent or partner of any other party hereto. ...

4. Completion ...

(2) At Completion the parties shall do or procure the doing of the following:

(a) the parties shall subscribe at par for a total of 800,000 shares in the

following proportions:

...

5. Onward Purchase by Innes

On the Completion Date immediately following the acquisition by the Company of the Properties and the Business the parties shall procure that the Company shall sell the Buy-Out Properties to Mr. Innes or his nominees for the Base Properties Price and on the further terms and conditions set out in the Innes Missives ...

6. Limited Partnership

On the Completion Date, the parties shall procure that the Company and Mr. Innes shall enter into the Limited Partnership with the Company being the general partner and Mr Innes being the limited partner.

...

8 Part Sales

Mr. Innes or his nominees shall be entitled to effect a Part Sale at any time during this Agreement without requiring the consent of the Company provided he shall first offer the Part Sale Subjects to Mr. Simmers on the same terms and conditions as could be achieved on the open market ...

9. Part Sales Price Reduction

In the event that a Part Sale is effected prior to the Buy-Out Date then the Base Properties Price shall be reduced by (i) in the event of a Part Sale Profit, the Part Sale Price less half the Part Sale Profit and (ii) in the event of a Part Sale Loss, the Part Sale Price plus half the Part Sale Loss.

10. Buy-Out by Mr. Simmers

On the Buy-Out Date, Mr. Simmers shall be entitled to effect the Buy-Out and acquire the Buy-Out Shares and the Buy-Out Properties in exchange for payment by way of telegraphic transfer of the Buy-Out Price, and the Buy-Out Expenses to Mr. Innes or his nominees. In exchange Mr. Innes shall execute all transfers, conveyances, deeds, and documents as shall be reasonably required to constitute Mr. Simmers as owner of the 'A' Shares and the Properties. Mr. Simmers shall however amend at his own expense any defects in the title that exist at the date of conclusion of the Innes Missives and continue to exist as at the Buy-Out Date.

...

14. Auditors, Bankers, Registered Office etc

Unless otherwise agreed in writing between the Shareholders:-

(1) the Auditors of the Company shall be Ernst & Young,

Chartered Accountants, ...

(4) the Accounting Reference Date of the Company shall be 31st

March in each year, the first such date being 31st March 2000 ...

21. Duration and Winding-up

The terms of this Agreement shall remain in full force and effect for a period of five years expiring on 31st March 2004. If Mr. Simmers has not served on Mr. Innes a notice intimating his intention to effect the Buy-Out prior to the Buy-Out Date, then this Agreement shall terminate automatically without the requirement of any party to serve notice. Termination of this Agreement with respect to any or all of the parties shall be without prejudice to the rights of any party accrued prior to such termination or under any provision which is expressly stated not to be affected by such termination.

...

24. Good Faith

Each of the parties agree with each other that: (a) during the continuance of this Agreement, all transactions entered into between any of them on the one hand and the Company on the other shall be conducted in good faith and on the basis set out or referred to in this Agreement or, if not provided for in this Agreement as may be on an arms length basis; (b) each of them shall at all times act in good faith towards the others and shall use all reasonable endeavours to ensure the observance of this Agreement; (c) no party will seek to increase its profit or reduce its loss at the expense of another; and (d) each of them will do all things necessary or desirable to give effect to the spirit and intention of this Agreement. ... "

The events leading up to the present proceedings

"On behalf of and as instructed by Arthur Simmers, we hereby give notice that in terms of clause 10 of the Shareholders' Agreement in respect of Scotpigs Limited dated 18 December 1998, Arthur Simmers intends to effect the buyout of the buyout Shares and buyout properties as at the buyout date being 31 March 2004 all in accordance with the terms of the Shareholders' Agreement.

Mr. Simmers proposes that James Galbraith of Messrs. C.K.D. Galbraith, Chartered Surveyors, be appointed Valuer to carry out the buyout valuation in terms of the Agreement. You are called upon to confirm your agreement to the said proposal as soon as possible."

The pursuer's solicitors also sent a copy of the formal intimation to the defender's solicitors, Messrs. Brodies, under cover of a letter, dated 10 February 2004, which is No. 44/11 of process. It is in the following terms:

"We attach a copy Notice served by us on behalf of Arthur Simmers on your client, James Innes in terms of the Shareholders' Agreement in respect of Scotpigs Limited dated 18 December 1998.

A Valuer requires to be appointed in terms of the Shareholders' Agreement to carry out the buyout valuation and a proposal is made on behalf of Mr. Simmers for agreement by Mr. Innes. It is further proposed that the company's auditors be instructed to prepare a balance sheet as at 31 March 2004 for calculation of the buyout shares price.

If the buyout is to be effected on 31 March 2004, in accordance with clause 10 of the Agreement, steps will require to be taken without delay to agree the terms of missives and prepare the necessary conveyancing documentation. Accordingly we would ask you to provide us with title deeds in respect of the buyout properties to enable work to get started."

"We refer to your telephone call on Friday. The title numbers so far as can be made out at this stage are as undernoted. ... A copy of the lease identifying the subjects by their previous Sasine descriptions follows with the hard copy version of this letter.

Please note however that if the petition for winding up of Scotpigs Ltd. which is presently at avizandum following the hearing on 12 and 13 February is successful then the buyback option to your client falls as it is in a Shareholders' Agreement focused round the shares. If the company to which the Shareholders' Agreement relates has gone into liquidation then the option flies off.

The option is for a floor of £400,000 on the shares and £2.1 million plus half the gain on the valuation from that figure to now. If the valuation were say £4 million then the entitlement to our client would be £3.05 million for the properties, £400,000 for the shares and a retention of Pollswells Mill to which the option does not extend. The speculative development value of the rest of Ormiston would have to be valued.

Before we set about contingent implementation, the Shareholders' Agreement states that the parties must agree a valuer by 28 February 2004. Mr. Simmers has already proposed Cluttons through Maclay Murray & Spens. We propose Aberdeen and Northern Estates. A copy of their 1998 valuation is attached with the hard copy showing that they are familiar with the subjects, and of course they are familiar more so than any other valuers, with the north east market. Wording of a joint remit would require to be agreed.

In view of the difficulties that have attended the relationship between our respective clients up till now we are not prepared to enter into contractual and conveyancing details without sight of a clear and unequivocal letter of intent from Mr. Simmers' lenders referring to the winding-up petition and stating their awareness of the actions for debt against Scotpigs Ltd. and the inhibition or inhibitions lodged, but saying that they are nevertheless prepared in principle to lend."

The Lord Ordinary observes that, notwithstanding what was said in the first paragraph of the foregoing letter, the remainder of it advances a more conditional approach and, indeed, a view as to whether the Buy-Out option fell to operate, if the company went into liquidation. Whatever may have been the reason for the remainder of that letter being written in that way, it was departed from in a faxed letter of the following day, 25 February 2004, sent from Messrs. Clark & Wallace to Mr. Tim Edward, a partner in Messrs. Maclay Murray & Spens, acting for the pursuer, which is No. 44/16 of process. It states:

"I refer to a fax dated 24 February 2004 addressed to Carol Crowther at Stronachs, which my colleague wrote. Unfortunately, certain parts of that letter are inaccurate and do not represent our client's position. I would therefore ask you to completely disregard that letter save in so far as it identifies the Title which relates to the buyout properties. For the sake of completeness, we would confirm that agreement has been reached in relation to Aberdeen & Northern Marts subject to a remit and level of fee being agreed. We understand that you have been asked for a copy of any Valuation or Fee Quote from the surveyor that Mr. Simmers had intended to appoint. I look forward to hearing from you in early course. In the meantime, as indicated above, the letter of 24 February 2004 was written in error and should not be founded upon in any Court or other legal proceedings."

"We attach a draft Remit for the agreed Valuer appointed in terms of the Shareholders' Agreement. Please confirm as soon as possible that the terms are agreed. You should have copies of all the Appendices. We would suggest that the Valuer makes a start on the Valuation as soon as possible and he is welcome to make contact directly with Mr. Simmers regarding access."

The draft remit referred to in that fax was the document already referred to prepared by Mr. Galbraith, part of No. 44/20 of process. Paragraph 4 of that draft remit, headed "The Interest to be Valued" stated:

"The interest to be valued is the freehold of the Buy-Out Properties subject to a lease in favour of the firm of Scotpigs and Company. The terms of the lease are incorporated into Appendix II attached to this instruction.

The firm of Scotpigs & Co. is a Limited Partnership between Mr. Innes and Scotpigs Ltd., a copy of which is attached at Appendix III to this instruction. Notice to terminate the Partnership has been served by the Limited Partner (Mr. Innes), a copy of which is attached at Appendix IV.

The General Partner has contested the Notice to Terminate the Partnership and the matter has been referred to the Land Court. A copy of the Proceedings is attached at Appendix V."

Paragraph 5 of the draft remit headed "Basis of Valuation", states:

"The basis of valuation is the Market Value as defined by the RICS Appraisal and Valuation standards (fifth edition) as follows: 'The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties have acted knowledgably, prudently and without compulsion'."

Paragraph 6 of the same document provided that the date of valuation was to be within one month prior to 31 March 2004.

"We refer to our fax of 1 March 2004. In the absence of any response, we have sent the draft remit to John Rhind as agreed Valuer. Please let him have any comments as soon as possible. We attach Adjustments to the Land Court Defences which we shall be seeking to have incorporated in the Pleadings. We shall request a four week adjustment period to enable you to respond. We have provided these Adjustments with the remit to the Valuer."

On the same day, Mr. Edward sent a fax to Mr. John Rhind, the agreed valuer, No. 44/20 of process, in the following terms:

"We attach a draft Remit for Valuation. The terms have yet to be agreed by Mr. Innes' solicitors."

Accompanying that fax was Mr. Galbraith's document "Instructions for the Valuations Known as Innes Farms" and various appendices. Mr. Rhind himself sent a fax to the pursuer on 4 March 2004, No. 44/21 of process, in the following terms:

"Further to receipt of the valuation instructions this morning, I write to enclose summary I have prepared showing all the properties and land we are to inspect. Can you confirm that we have identified the subjects correctly? I assume that we will be valuing the land together with the subsidy entitlement. Have you worked out a rough figure for this? I look forward to receiving written instructions as to how we are to carry out the valuations. Do we value Mains of Cairnbrogle has [sic] a working pig farm? What is the planning position with regard to: (a) Mill of Cavil Steading? (b) Mineral extraction/reinstatement at Greendams?"

"I confirm my telephone call today that fax instructions you have had from Maclay Murray and Spens acting for Arthur Simmers, originally intended to be on a joint remit basis, for the valuation of the subjects at the above address, require to be augmented.

I confirm that their draft instructions were not assented to by us as a result of which the fax is unilateral from Arthur Simmers' side. I therefore confirm that so far as Jim Innes is concerned, the words 'the value is nevertheless the open market vacant possession value', should be added at the end of paragraph 4 ('The Interest to be Valued') of the instructions. At the end of paragraph 5 ('Basis of Valuation') again the words should be added 'For the avoidance of doubt, the valuation will be on a vacant possession basis.'

A valuation allowing any discount for tenants rights is incorrect in law so far as Mr. Innes is concerned. It is not our view in any case that Mr. Simmers has any authority to give instructions on behalf of Scotpigs Ltd., far less the limited partnership of Scotpigs and Co. which is the tenant, being a partnership of Mr. Innes (the limited partner) and of the company Scotpigs Limited."

"I acknowledge receipt of your fax of 5 March copying to me your letter of that date to John Rhind.

We have consulted with Senior Counsel on the issue of Valuation and although the Shareholders' Agreement does not clearly specify the basis of Valuation, it is our view that the proper interpretation of the buy-out Valuation in terms of the Agreement is a Valuation of your client's interest in the land as it exists at 31 March 2004.

Although clearly the issue is a matter of dispute before the Land Court, it remains the position of our client that there is an ongoing tenancy and that the buy-out Valuation must take account of this.

In any event, the priority is at this stage to move matters forward and the only sensible way to do so would seem to be to have the Valuation carried out on alternative bases as instructed by us and by you. If necessary, the issue of basis of Valuation can then be referred to the court for resolution. I attach a copy of a further letter I have sent to John Rhind providing this instruction and should be grateful if you would confirm your agreement with this course of action to him."

The copy fax sent by Mr. Edward to Mr. Rhind, No. 44/27 of process, was in the following terms:

"I refer to letter dated 5 March 2004 from Neil Allan of Clark & Wallace to you. For the avoidance of doubt it is the position of Mr. Simmers that the interest to be valued is Mr. Innes' interests in the property as it exists at 31 March 2004 or in other words, the interests subject to the existing tenancy. There is nothing in the Shareholders' Agreement which provides that the valuation will be on a vacant possession basis.

Clearly this issue is a legal issue which will require to be resolved in due course. With a view to progressing matters we would suggest that you should carry out the Valuation for the moment both on the basis set out in the remit which we provided and on a vacant possession basis. I am copying this letter to Clark & Wallace and I am going to ask them to confirm this to you."

"I have discussed the issue of Valuation with Senior Counsel and he has confirmed that rather than providing alternative Valuations, you should proceed to provide one Valuation as stipulated in the Shareholders' Agreement, taking into account all factors. Clearly, the view expressed by Clark & Wallace that the Valuation must be on the basis of vacant possession would have to be taken into account, but equally the reality of the existing Tenancy (subject to the uncertainty of the Land Court proceedings), would have to be taken into account. I trust that this clarifies the situation. I look forward to receiving your Valuation as soon as possible."

The subject-matter of that fax was referred to in a file note of Mr. Edward, No. 44/29 of process, of a telephone conversation that he had had with Mr. Rhind on 12 March 2004. That note states:

"Telephone discussion with John Rhind of Aberdeen & Northern. I explained that rather than produce alternative Valuations what is required of him is to produce a single Valuation taking into account the contentions put forward by both parties. He would have to look at the position as it exists now with regard to the tenancy and the proceedings challenging the tenancy in the Land Court. He said that this would be a difficult task and I acknowledged that but indicated that nonetheless this is what he had to do. I said that if it would help he could speak to James Galbraith who had considered the matter and would provide his views on the remit."

"Notwithstanding this, it is Mr. Simmers' instruction that you proceed with the valuation of the buy-out land as previously advised. His position is that the appointment of Provisional Liquidators does not affect the tenancy and this should be taken into account in the valuation."

That was, of course, a unilateral instruction given by Mr. Edward on behalf of the pursuer, which was never communicated to the defender, or to those acting on his behalf.

"Our purpose in writing to you is to re-affirm Mr. Simmers' intention to effect the Buy-Out and to seek your confirmation that in exchange for the Buy-Out Price and the Buy-Out Expenses Mr. Innes will be in a position to deliver the following:

(i) executed Conveyances in favour of Mr. Simmers or his nominees of

the Buy-Out Properties;

(ii) executed Discharges of all securities affecting the Buy-Out Properties;

(iii) executed Transfers in favour of Mr. Simmers or his nominees of the

Buy-Out Shares;

(iv) the Share Certificate(s) representing the Buy-Out Shares (failing which

a Lost Share Certificate Indemnity in a form satisfactory to Mr. Simmers); and

(v) such other deeds and documents as Mr. Simmers shall reasonably

require to constitute him or his nominees as owners of the Buy-Out Properties and the Buy-Out Shares respectively.

We look forward to hearing from you."

"1. Buy-out Date

This is defined in the Shareholders' Agreement as being 31 March

2004. We do not consider that any other date is provided for. Do you agree?

2. Valuation of Buy-out Properties

(a) Please let us have a copy of the instruction by Maclay Murray & Spens

to John Rhind. This was referred to in Court last week, but we have not, as yet, received a copy.

(b) We submit that Mr. Rhind should finalise his report on the basis of an

open market value on a vacant possession basis.

(c) Mr. Rhind's Report will require to be paid by Mr. Simmers. We

understand that Mr. Rhind will not release the Report until he has been paid by Mr. Simmers. Do you have a note of his costs?

...

5. Funding of Buy-out Price

(a) We assume that Mr. Simmers has procured the requisite funding?

Please confirm the identity of the lender(s).

(b) The Titles will require to be passed not only to yourselves, but also to

the lender's agents for consideration. We have the Title Deeds within our Office, with the exception of the Titles in respect of Mill of Caval [sic]. Please confirm the agents acting on behalf of the lenders, so that we can, if required, provide them with copies of the requisite Titles.

(c) The buy-out properties are currently secured to the Clydesdale Bank.

They are separately represented by Messrs. Dundas & Wilson in Glasgow. We understand that the Clydesdale Bank will not consent to the discharge of the properties, without repayment of all sums due in respect of those Securities. We await confirmation of exactly what is required to be repaid.

We look forward to hearing from you as soon as possible in relation to the points raised above, to enable us to consider matters and how best to progress matters for 31 March 2004."

"Innes Farms, Mains of Cairnbrogie, Oldmeldrum, Little Woodlands, Mill of Cavil/Longbog

In accordance with instructions received from Messrs. Maclay Murray & Spens, Solicitors, Edinburgh dated 5 March, and instructions from Clark & Wallace, Solicitors, Aberdeen also dated 5 March, we have inspected the above properties and now write to advise you as to our opinion of value.

Our instructions

Our instructions are to value (the Buy-Out properties) as described in Appendix 1 attached to the instructions received from Messrs. Maclay Murray & Spens and also described in Appendix 1attached to this report.

Our instructions are also to carry out the valuation on the basis of the instructions set out in Appendix II attached to this report. This includes an instruction to value the properties subject to a lease in favour of the firm of Scotpigs & Co.

The basis of the valuation is to be the estimated amount for which a property should exchange on the day of valuation between a willing buyer and a willing seller, in an arms length transaction after proper marketing wherein the parties have acted knowledgeably, prudently and without compulsion.

...

Valuation

Our approach to the valuation of the properties has been to first work out how much each farm would realise if placed on the open market for sale. From this we have then deducted the cost of any tenants' improvements and fixtures and then applied an appropriate discount to the resultant value. Our discount figure is based on current market evidence. ... We therefore value the three farms as follows:

J.E. Rhind F.R.I.C.S.

...

Appendix II

Instructions for the valuations known as Innes Farms, Aberdeenshire

...

2. Purpose of Valuation

Whereas the subjects of valuation (referred to below) are currently owned by Mr. Innes, Mr. Simmers has an option to require [sic] the said subject at valuation as at 31 March 2004 (Buy-Out Date). Accordingly, the parties require a valuation to be carried out by a valuer on or within one month prior to the Buy-Out Date.

...

4. The interest to be valued

The interest to be valued is the freehold of the Buy-Out Properties subject to a lease in favour of The Firm of Scotpigs and Co. The terms of the lease are incorporated into Appendix II attached to this instruction.

The firm of Scotpigs & Co. is a Limited Partnership between Mr. Innes and Scotpigs Ltd., a copy of which is attached at Appendix III to this instruction. Notice to terminate the Partnership has been served by the limited partner (Mr. Innes), a copy of which is attached at Appendix IV.

The General Partner has contested the Notice to Terminate the Partnership and the matter has been referred to the Land Court. A copy of the proceedings is attached at appendix V.

... ".

"We confirm Mr. Simmers intends to proceed with the Buy-Out in accordance with Clause 10 of the Shareholders' Agreement. We enclose the following

·        a Disposition of the Buy-Out Properties in favour of Mr. Simmers for execution by Mr. Innes ('the Disposition')

·        a Stock Transfer Form in respect of the Buy-Out Shares in favour of Mr. Simmers for execution by Mr. Innes ('the Stock Transfer Form')

We will forward to you within one hour the following:

·        a Warranty by Mr. Innes to Mr. Simmers in respect of the Buy-Out Properties and the Buy-Out Shares respectively for execution by Mr. Innes ('the Warranty').

As set out in our letter yesterday the Buy-Out Price is £2,500,000. You previously indicated you are not yet in possession of executed discharges of all securities affecting the Buy-Out Properties ('the Buy-Out Properties Securities'). Please clarify your position on this point by return fax and in any event no later than 10.45 am this morning. Any failure to do so may be founded upon. We still await from you a note of the Buy-Out Expenses - please provide this immediately today.

Mr. Simmers has finance available to complete the Buy-Out in exchange for delivery to us of the following items:

1. The Disposition duly executed by Mr. Innes;

2. The Stock Transfer Form duly executed by Mr. Innes;

3 The Warranty duly executed by Mr. Innes; and

4. Executed discharges of the Buy-Out Properties Securities.

As stated above, subject to and in exchange for delivery to us of the foregoing items 1-4. Mr. Simmers will pay the Buy-Out Price and the Buy-Out Expenses to Mr. Innes or his nominees. In terms of the Shareholders' Agreement payment is to be made by way of telegraphic transfer - please provide us with the bank account details of Mr. Innes or his nominees (as the case may be)."

"We have your letters of 30 and 31 March. We do not propose to complete the transaction as we dispute the validity of the purported buyout valuation. We propose to raise legal proceedings to set it aside."

The decision of the Lord Ordinary

"It was clearly accepted up until 12 March by those acting for the pursuer, and in my judgment correctly, that the instructions to the valuer had to be on an agreed basis. For all the foregoing reasons it follows, in my judgement, that one of the essential prerequisites for the buy-out, namely the production of a single figure valuation by the agreed valuer never materialised by 31 March, and indeed has not materialised to this date. For that reason alone, the pursuer's claim in this action has a baseless foundation and the defender is entitled to be assoilzied."

"If, contrary to my clear view, as expressed above, 44/34 of process did provide, a single figure valuation, then I agree with the submissions made on behalf of the defender that it would, nevertheless, fall to be disregarded."

That conclusion was reached because the Lord Ordinary considered that Mr Rhind's arrival at a single figure must have involved his having adjudicated upon a legal dispute between the parties as to the proper basis of the valuation. In that situation, the Lord Ordinary was persuaded that the submission made to him on behalf of the defender was well founded, to the effect that Mr Rhind's decision could be set aside on what were described as "judicial review grounds". Considering those matters, the Lord Ordinary concluded that the valuation would fall to be set aside on account of Mr Rhind's failure to take into account relevant factors and on account of his taking into account irrelevant factors.

"(1) The shareholders' agreement had placed a tight timetable upon the pursuer;

(2) The pursuer and his advisers left the commencement of the process somewhat late in the day;

(3) The process was not helped by

(a) the pursuer having no fewer than three sets of solicitors,

(b) the fact that there were other issues between the parties and

(c) the fact that there was confusion and overlap of roles as between the various solicitors acting for the pursuer;

(4) As a result of the foregoing, the pursuer did not have a concluded and binding unconditional agreement with lenders to provide him with the buy out price on 31 March 2004 to enable him to make a telegraphic transfer to the defender."

"On the basis of the evidence the pursuer, in my judgment, could not have paid the buy out price (as he understood it to be) on 31 March 2004. That situation was not caused by any breach of contract by the defender, in particular in relation to any delay in the production of the principal title deeds or some more general failure in the duty to co-operate, as was suggested from time to time in the pursuer's case. The situation was that the parties' relationship had broken down completely by the time the buy out option fell to be exercised. The shareholders' agreement provides for strict requirements to be met for the buy out option to be exercised and I do not read the agreement as providing any room for any modification of those requirements due to the provisions which refer to co-operation and good faith. I am satisfied that the inability to pay the buy out price on 31 March meant that the right to exercise the buy out option, as a matter of contract, expired thereafter. I agree with the submissions of senior counsel for the defender that 31 March was a material date in terms of the contract and was of its essence. As senior counsel for the defender correctly observed, there was no submission made on behalf of the pursuer to the opposite effect. It was clear that all the various representatives of the pursuer were acting on the basis that 31 March was of the essence. It was the date on which Clause 10 required certain things to be carried out. It was a potential date for the termination of the limited partnership. It was the date for the termination of the shareholders' agreement if no notice of exercise of the option had been given (Clause 21 of the agreement). It was the date to which a balance sheet had to [be] produced to bring about the buy out price for the shares. I am satisfied, therefore, in all the circumstances of the present case, in particular having regard to the nature of the contractual provisions just referred to, the stipulation as to when the option exercise had to be carried out was material and required strict compliance if the option was to be validly exercised. - (See Visionhire Ltd per Lord President Hope page 888D-I.). The present case, in my judgment, is distinguishable from the position in Stone v McDonald. In the present case the agreement unequivocally, and unconditionally, provided that the option could be exercised on one day and one day only."

Grounds of Appeal for the Pursuer and Reclaimer

"1. The Lord Ordinary erred in holding at paragraph 58 that it was of the essence of the contract that the Buy Out had to be carried out on 31 March 2004. On a sound construction of the Shareholders' Agreement, the Buy-Out Date, namely 31 March 2004, was not of the essence of the contract. Time was not of the essence.

2. The Lord Ordinary erred in holding that the Shareholders' Agreement provided no basis for a valuation to be carried out unless parties entered into an agreed remit. A correct interpretation of Clause 10 and the relative definitions does not provide [that] such an agreed remit is a prerequisite to a valid valuation.

3. The Lord Ordinary erred in holding at paragraph 56 that the Rhind valuation did not contain a single valuation figure as stipulated for in the Shareholders' Agreement and as instructed by the Maclay Murray & Spens letter of 12 March 2004.

4. The Lord Ordinary erred in holding at paragraph 57 that a single figure valuation must have involved Mr Rhind adjudicating upon a legal dispute. Such a view is not consistent with the basis of his instruction nor the actual content of the Rhind valuation. Mr Rhind in his evidence gave no basis for such a conclusion by the Lord Ordinary.

5. The Lord Ordinary erred at paragraph 58 in giving no apparent weight to the defender's inability to complete the buy-out on 31 March 2004 due to the presence of securities over the Buy-Out Properties. As a result of the defender's absence of any attempt to obtain a discharge and the defender's inability to obtain discharge of the securities over the Buy-Out Properties, the defender was in breach of his obligations in respect of the Buy-Out. The defender has declined to operate the contractually provided mechanism for the Buy-Out.

6. The Lord Ordinary erred at paragraph 60 in holding that no price was arrived at for the Buy-Out Properties pursuant to the Shareholders' Agreement and at paragraph 61 that the pursuer ran out of time on 31 March 2004. The contractually stipulated price for the Buy-Out Properties was set by the Rhind valuation and the failure of the completion of the buy-out was precipitated by the defender. Accordingly the Lord Ordinary erred in granting absolvitor. Decree in favour of the pursuer should have been pronounced.

7. The Lord Ordinary, in reducing Mr Rhind's Report (44/32 [sic] of process) ope exceptionis, erred in law by taking into account evidence, other than the Report itself, relating to (a) the approach to the valuation exercise, and (b) the findings and reasoning contained in the Report. In determining the validity of the Report, he ought, in relation to these matters, to have confined himself to the terms of the Report. (Paragraphs 20-26 and 55-57). The Report fell within the requirements of the Shareholders' Agreement (44/1 of process). The correct subjects were valued and a fair and reasonable valuation was produced. Any dispute about the precise terms of Mr Rhind's instructions was irrelevant.

8. If the valuation was invalid, the consequence was that, in the absence of agreement between the parties, the sale of the Buy-Out Properties and the Buy-Out Shares could not be completed on 31 March 2004. The contract machinery for determining the price of the Buy-Out Properties had broken down. In these circumstances, the court should have fixed (and still can fix) a fair price by one means or another, and the time for payment of the price so fixed.

9. If the valuation is valid, the pursuer is entitled to implement including delivery of the Buy-Out Shares and a valid disposition of the Buy-Out Properties, containing all the usual and necessary clauses, and all other necessary documents, all adjusted at the sight of the court, within such reasonable time as the court specifies, in exchange for payment of the price of £2.5 m.."

Submissions of Junior Counsel for the Pursuer

(1) That the defender had withdrawn from the Shareholders' Agreement and, in doing so, was in material breach of it;

(2) That the pursuer's counter obligations were "suspended" until the defender indicated that he was prepared to perform his obligations;

(3) That the Rhind valuation was valid under the Shareholders' Agreement and hence determined the price to be paid under it;

(4) Accordingly specific implement of the Shareholders' Agreement should be ordered;

(5) Upon the assumption that the Rhind valuation was not valid, that the machinery for the fixing of a price provided for the in the Shareholders' Agreement had broken down, with the consequence that the court should now provide suitable machinery, following the operation of which, specific implement should be ordered; and

(6) That time was not of the essence of the Shareholders' Agreement.

Submissions by junior counsel for the defender

Submissions by senior counsel for the pursuer

Agreement.

Submissions of Senior Counsel for the Defender

The Decision

[102] In the light of the acknowledged facts and of the foregoing arguments, it appears to us that there are two crucial areas of controversy which we must consider. These are: (1) The proper interpretation of the Shareholders' Agreement as regards the time of performance on the exercise by the pursuer of the Buy-Out option created by Clause 10 of the Agreement; and (2) Whether the Rhind report, dated 26 March 2004, can properly be regarded as "the Buy-Out Valuation" for the purposes of the Shareholders' Agreement. These questions are crucial because there is no doubt that the Buy-Out was not effected on the Buy-Out Date, 31 March 2004 by the pursuer, if for no other reason, because payment to an appropriate extent was not made by the pursuer on that date to the defender, or his nominees. So, if on a proper interpretation of the contract the Buy-Out could have been effected only upon that date, the result must be that the Buy-Out cannot now be effected at all and that no remedies can be granted to the pursuer in the present proceedings. If, however, on a proper interpretation of the contract, the Buy-Out can be effected subsequently to 31 March 2004, an appropriate remedy may be available to the pursuer. Whether it could, or not, would then depend, in the first instance, upon the issue of whether the Rhind report can properly be regarded as "the Buy-Out Valuation" for the purposes of the Shareholders' Agreement. If it can, then an appropriate remedy may be granted to the pursuer. If it cannot, there would open up a further question of whether the court could furnish means whereby the Buy-Out Price could now be ascertained and the Buy-Out could be effected. We now turn then to consider these two crucial questions.

The proper interpretation of the Shareholders' Agreement as regards the time for performance on the exercise of the buy-out option

[103] In Rodger (Builders) Ltd v Fawdry and Others, at page 492 the court was concerned with the significance of the failure of a purchaser of heritable property to pay a balance of the purchase price on the date of entry. At page 492, the Lord Ordinary, Lord Sorn, said this:

"The law which governs the question at issue was not to any material extent in dispute and may be shortly stated. In a contract for the sale of heritage, where it is stipulated that the price is to be paid on a particular date, payment of the price on the appointed date is not, in general, an essential condition of the contract, and failure to pay on that date does not entitle the seller to rescind. But payment of the price by a fixed date may be made an essential condition of such contract. If there is unnecessary or unjustifiable delay on the part of the purchaser in paying the price, the seller may limit a time within which payment must be made, and, provided the time limited is a reasonable one in the circumstances, failure to pay within that time will be treated as breach of an essential condition entitling the seller to rescind."

That part of the Lord Ordinary's judgment was not challenged on appeal, nor, in the opinion of the Second Division expressed at page 498, could it have been. The presumption that time was not of the essence for the performance of contractual obligations was considered in Visionhire Limited v Britel Fund Trustees Ltd at page 886. That case was concerned with certain rent review provisions in a lease, in a situation where the landlords had failed to make application within the timetable set out in the rent review clause for the appointment of an arbiter. The Court decided that the general rule of construction in Scots Law, as in English Law, was that contractual stipulations as to time, including the particular instance of rent review clauses in commercial long leases, were not intended to be strictly enforced unless the wording of the contract indicated expressly, or by necessary implication, that this was intended by the parties. The nature of the rule was described by Lord President Hope, as he then was, at page 888 in this way;

"It seems to me, therefore, that there is no essential difference between the positions adopted in the two countries and that the rules which according to English law are stated as presumptions are really to be seen as rules of construction which take their place along with various other rules in order to ascertain what the intention of the parties truly was in order that the contract which they had made should be enforced."

Accordingly, in any particular case, such as this, the question must be whether the particular wording of the contract under consideration, either expressly or by necessary implication, would displace the rule of construction just referred to. It is upon that enquiry that we now enter. In doing so, we do, of course, follow the principles of the modern construction of contractual documents described by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society at pages 912 to 913.

"If Mr Simmers has not served on Mr Innes a notice intimating his intention to effect the Buy-Out prior to the Buy-Out Date, then this Agreement shall terminate automatically without the requirement of any party to serve notice."

Two points seem to us to emerge from this provision. First, the parties contemplated that Mr Simmers might serve a notice intimating his intention to effect the Buy-Out at any time prior to the 31 March 2004, that is to say at any time up to and including 30 March 2004. If that is what was contemplated by the parties, it seems to us to be inevitable that the Buy-Out transaction could not be completed on 31 March 2004, the Buy-Out Date. The second point of importance is that, in the absence of such a notice served by the pursuer, the Agreement was provided to terminate automatically. If such a notice had been timeously served, as happened here on 11 February 2004, we read this clause as providing that the Shareholders' Agreement would not terminate automatically on 31 March 2004. The implication is that the Agreement would survive beyond 31 March 2004, as we would see it, for the purpose of enabling the Buy-Out transaction to be completed. So we regard the terms of Clause 21 as confirming the operation of the rule of interpretation to which we have referred in relation to the Agreement. It appears to us further that the notice to be given by the pursuer in terms of Clause 21 must be seen as an act having legal consequences, not merely an indication of intention; the consequence being that, by service of the notice, the pursuer has exercised the option available to him and thus prevented the automatic termination of the Agreement. We refer to this last point again at paragraph [109] below.

Whether the Rhind Report can properly be regarded as "the Buy-Out Valuation" for the purposes of the Shareholders' Agreement

"(i) the Base Properties Price; or (ii) the aggregate of the Base Properties Price and an amount equal to the figure brought out by the following formula:
1/2 x (Buy-Out Valuation - £2.1 million) ...".

The "Base Properties Price" is, of course, specified as being £2.1 million. That figure is derived from the valuation that was conducted by Mr Rhind, who was responsible for the valuation dated 22 December 1998, to be found in the Appendix to the Shareholders' Agreement. That valuation was conducted on the basis that it was to be the "current open market value of the above holdings with vacant possession, as between a willing buyer and willing seller as at today's date". Having regard to the provisions particularly of Clauses 5, 6 and 7 of the Shareholders' Agreement, it was inevitable that the Base Properties Price should be based upon the value of the properties with vacant possession, since Clauses 5, 6 and 7 contemplated a sequence of events involving the acquisition of the Buy-Out Properties by the defender, or his nominees, for the Base Properties Price, then the subsequent formation of the limited partnership referred to in Clause 6, and thereafter the leasing by the defender of the Buy-Out Properties to the limited partnership. Plainly in order to achieve such an arrangement, vacant possession of the properties must have been available to the defender.

"In any event, the priority is at this stage to move matters forward and the only sensible way to do so would seem to be to have the Valuation carried out on alternative bases as instructed by us and by you. If necessary, the issue of basis of Valuation can then be referred to the court for resolution."

That document is No. 44/26 of process. At the same time the same view was communicated to Mr Rhind in No. 44/27 of process, suggesting a valuation both on the basis of the pursuer's original remit and also on a vacant possession basis. However, that position was modified in the communication from Messrs. Maclay Murray and Spens to Mr Rhind, dated 12 March 2004, No. 44/28 of process in which the writer said:

"I have discussed the issue of Valuation with Senior Counsel and he has confirmed that rather than providing alternative Valuations, you should proceed to provide one Valuation as stipulated in the Shareholders' Agreement, taking into account all factors. Clearly, the view expressed by Clark & Wallace that the Valuation must be on the basis of vacant possession would have to be taken into account, but equally the reality of the existing Tenancy (subject to the uncertainty of the Land Court proceedings), would have to be taken into account."