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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> MacDonald v Brough [2001] ScotCS 273 (28 November 2001) URL: http://www.bailii.org/scot/cases/ScotCS/2001/273.html Cite as: [2001] ScotCS 273

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[1] At procedure roll on 9 November 2001 I was invited by Miss Shand to sustain the defender's first plea-in-law to the extent of withholding from probation the pursuer's averments from page 10B, "The pursuer's father, Angus Macdonald was the sole proprietor..." to the end of Article 4 of Condescendence and quoad ultra to allow parties a proof. Mr Kinroy invited me to repel the defender's first plea-in-law and to allow a proof, or alternatively to leave that plea standing and allow a proof before answer. Bearing in mind that the collision occurred in March 1990, that the action was raised early in 1993, that liability has been admitted from the outset and that the interlocutors indicate that for this case the year 2000 may have been a sabbatical year, I hope that parties' representatives will make every effort to have the inevitable proof heard at an early date.

[2] The pursuer sustained serious injuries of which the most significant was a severe fracture of the shaft of the right femur. That required further remedial surgery in November 1995 and March 1996. Following upon that surgery the pursuer formulated the claim for loss of income that has been expanded upon in extensive pleadings. His father and a business associate, John Weidner, co-operated in operating two businesses. One was owned by the pursuer's father and was known as "MWF". The other was a limited company incorporated by both men in which each of them had a 50% shareholding and which was known as "SCL". The pursuer says that he would have been trained to replace his father in the businesses and claims loss of income based on the total income that he would have received from these two businesses, which he claims he would have run and run more successfully than their founders. Miss Shand maintained that the pursuer's averments in relation to the income he would have had are irrelevant in relation to both businesses, in respect that they fail to give proper notice of the basis on which that income has been computed, with the result that the defender is not in a position to make adequate preparations for proof. There were a number of criticisms.

[3] On pages 10 and 11 the pursuer makes averments about the basis on which his father and Mr Weidner were remunerated from the two businesses. After stating their agreement that they should be rewarded about equally from the whole businesses of MWF and SCL and that that involved adjusting the directors' salaries and emoluments from SCL, the pursuer avers that, after sharing dividends paid by SCL, the net income of his father and Mr Weidner was about equal in the years 1991 to 1997. Miss Shand maintained that that was far too vague for proof. There must have been an agreement about the adjustment of elements of income in the two businesses to produce a more or less equal result. The pursuer was bound to give the defenders notice of the terms of the agreement. Mr Kinroy on the other hand maintained that, where as here two business associates conducted their affairs on the basis of trust born of long experience of operating together, it was easy to see that their agreement about remuneration might not be capable of being pled more precisely. He pointed to averments that the pursuer's father was the sole proprietor of MWF, that in 1986 he commenced a business relationship with Mr Weidner, and that they incorporated SCL in which each of them had a 50% shareholding. The work of the businesses is said to have been complementary, the one carrying out welding and fabrication work and the other the design and installation of hydraulic systems. The pursuer then avers that there was and remained a good relationship between the two men. Mr Kinroy further explained that the defender had access to the books and records of these businesses.

[4] I consider that the pursuer's averments give adequate notice to the defender of the basis on which his father and Mr Weidner were remunerated from the two businesses and in particular from SCL. The pursuer then explains how he would have fitted into this arrangement. He avers that his father would have conveyed to him the whole business of MWF and his shareholding in SCL and that he and Mr Weidner would have conducted, and have been remunerated from, the two businesses as previously the pursuer's father and Mr Weidner had. Recognising the possibility that Mr Weidner might have ceased active involvement in the work of SCL, since he had decided to pursue divinity studies and training, the pursuer avers that in these circumstances he would have employed a substitute. Although there is no reference to the fate of Mr Weidner's shares in SCL in the record, I was advised in the course of the debate that his shareholding would have been transferred to the pursuer. Be that as it may, the record plainly proceeds on the basis that the business would have continued to operate. These averments are in my opinion adequate notice to the defender of the case they have to meet in relation to the basis on which the pursuer's overall income package from the two businesses would have been constructed.

[5] Miss Shand had a number of criticisms of the averments relating to the computation of income in each of the separate businesses. She dealt first of all with SCL.

[6] The pursuer maintains at page 22 that initially he would have received a salary from SCL. The figures suggested for the years ending 31 March 1993 and 31 March 1994 are £20,000 and £25,000 respectively. In averring that the company could afford that, the pursuer sets out the average turnover in the three years ending on 31 March 1993 as £204,418 and the average gross profit in those years as 53.5% of turnover. The pursuer claims that he would have been paid these salaries even if the business had not been expanded. However, he goes on to aver his estimation that, due to his work on behalf of SCL, the turnover of business would have been increased by about 35% in each of these years. That figure then provides a basis for his claim at page 12 that he would have received significantly higher dividends than had previously been paid to his father and Mr Weidner. Miss Shand submitted that, before the defender could hope to prepare to meet this assertion that the business would have been increased, he would have to know the anticipated source of the increase, ie. was it the expansion of work with existing customers or the cultivation of new customers or a combination of both or whatever? Mr Kinroy pointed to averments at page 23 which he maintained gave adequate notice of the basis for the pursuer's reasonable estimate of the likely increase in business. He avers that, having first started to work for SCL prior to the accident, by 1993 and 1994 he would have built up considerable practical experience of the business, established good trade connections and acquired considerable management skills, and that he would have gone about his work with vigour and enthusiasm. It was on the basis of these factors and qualities that the pursuer would present his case, giving evidence from his own experience of the business environment in which SCL operated and relying also on evidence of their experience and knowledge from his father and Mr Weidner to provide a basis for accountants to make calculations. Miss Shand was anxious that the pursuer might lead evidence from businessmen who would say that they would have provided orders or more orders for the businesses. Mr Kinroy made it clear that the pursuer had no intention of leading evidence from such sources and that his averments were not based on enquiries of that nature. He described it as "unrealistic" to expect the pursuer to construct and present a case in that way. It was the experience of those involved in the businesses to which the pursuer would have succeeded, having regard to the factors and qualities averred, that would provide the factual basis which the defender claimed was necessary for his assertion of a 35% increase.

[7] In my opinion the pursuer is entitled to try to prove that, with his knowledge and experience of the business of SCL and with his particular qualities, he would have been able to increase the turnover and hence the income. He has set out plainly the case he makes and the basis on which he makes it. It is a matter for the defender to decide how to prepare to counter that. It was actually made clear in the course of the debate that both the pursuer's father and Mr Weidner are quite willing to be precognosced by those acting for the defender. If the defender seeks to establish a trading environment in the area that would have made such increases unlikely, then he can make appropriate inquiries. He has access to the books and records of SCL. He has adequate notice of the case he faces.

[8] In conjunction with this argument Miss Shand made submissions about inconsistent averments relating to the circumstances in which both businesses eventually ceased to trade. At page 16 the pursuer accepts that his father and Mr Weidner resolved in 1996 to wind up the businesses, whereas at page 22 the pursuer refers to the trading results of SCL being reduced by its business being "wound down" from 1 April 1994. It was suggested that these averments were inconsistent with each other and further clouded the issue of the source from which the pursuer claimed that the increase in turnover would come. I do not agree. The concepts of "winding down" and "winding up" a business are quite distinct. The former does not presuppose a cessation in trading and a termination of the business. The latter requires both. There is no inconsistency between these respective averments.

[9] Associated with these submissions was one to the effect that the pursuer had failed to recognise that the payment to the pursuer in the early years of a salary would have an impact on the remuneration of the directors and in particular that of his father and to aver what that impact would be. In addition to the salaries for 1993 and 1994 referred to above the pursuer also avers at page 11D-E that he would have had a basic salary for the year ending 31 March 1992 of £12,600 which with overtime would have risen to £15,370. Miss Shand's submission was that there should be averments reflecting the impact of these various salaries on the pursuer's father's income and thus on the pursuer's anticipated income. I do not agree that fair notice to the defenders requires averments in such detail. The pursuer states clearly at page 11D-E the agreement between his father and Mr Weidner about payment of a salary for the year ending 31 March 1992. I have summarised the averments in relation to the following two years at paragraph 6 above. The pursuer has given notice of the figures on which he relies. He has set out an adequate framework to entitle him to try to prove the amount of income, if any, which he has lost from not being involved in the business of SCL.

[10] A number of criticisms were made of specific averments relating to the position of SCL. Between 31 March 1994 and 31 March 1997 the pursuer's father continued to receive part of the dividends from SCL; that was clear from page 18. Just as he was going to gift his interest in SCL to the pursuer, he could also have gifted the income. Accordingly there was no loss to the pursuer. The fallacy of that argument is that the pursuer's father's intention was to gift his interest in SCL to the pursuer so that the pursuer could earn his livelihood from his active involvement in the affairs of that business. In the absence of his son the pursuer's father continued his own personal involvement. The income he received reflected that. The situation was no different from that where an employee who sustains serious injury is replaced by another fit employee. It would never be suggested in that situation that there was no loss because someone else had done the work and earned the wage of the injured employee.

[11] It was also suggested that the averments about Mr Weidner's future are vague in the extreme. At page 20 it is said that Mr Weidner would continue to give training and guidance part-time while he was a divinity student, but thereafter nothing is said about his involvement once he had qualified. The averments about the employment of a substitute in the event that Mr Weidner ceased to work for SCL added nothing. No indication was given of whether Mr Weidner would receive anything from the business nor of the role the substitute would play and the remuneration he would receive and how that would affect the pursuer's financial situation. In my opinion the pursuer's averments give adequate notice of the course he would follow in the absence of Mr Weidner as an active participant in the business. To expect more to be pled would be unrealistic.

[12] Miss Shand was also critical of the averments in relation to the income which the pursuer would have received from MWF. As she pointed out, in this instance there is not even reference to the percentage by which the pursuer anticipated increasing the business. The pursuer confines his averments to saying that he would have expanded its business so increasing its net profit. I do not think it unreasonable to regard the averments about the pursuer's acquisition of practical experience and management skills and his establishment of good trade connections and his personal quality of working with vigour and enthusiasm as applying equally to his role with MWF. Miss Shand's criticism was not of the absence of such averments but, as in the case of SCL, of the absence of averments of the commercial source of additional turnover and hence additional profit. What the pursuer has done is state the figures for sales and work done for each of the years form 1990 to 1996, explain the circumstances which led to a reduction in work done by the pursuer's father and ultimately the winding up of that business, and then assert that by his own labour he would have realised additional turnover and profit in that business. As with the averments relating to SCL I consider that adequate notice has been given to the defender to enable him to answer the case which the pursuer intends to present. The defender has access to the books and accounts of MWF and has seen the accountant's report on which the pursuer founds. I do not consider that any further detail is required.

[13] Since I have decided in respect of each point of criticism that the pursuer has given adequate notice of the case to be made, that exhausts the issues to which the defender's first plea is directed. I shall accordingly repel the plea and allow parties a proof.