Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2010] CSOH NUMBER
	OPINION OF LORD GLENNIE in the cause STAK REALTY GROUP CO LIMITED (IN ADMINISTRATION) AND JAMES BERNARD STEPHEN AND DAVID JOHN HILL, the Administrators thereof Pursuers; against DIANA MARGARET McKENNA Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Dalgleish; Brodies LLP

Defender: In person

11 March 2010

[1] STAK Realty Group Limited ("STAK") went into administration on 2 October 2008. James Stephen and David Hill were appointed joint administrators. The defender, Diana McKenna ("Mrs McKenna") and her husband ("Mr McKenna") each hold 50% of the shares in the company. Mr and Mrs McKenna were the sole directors of the company at all material times until the commencement of the administration, and Mrs McKenna was the Company Secretary.

[2] By this action brought in the name of STAK and the administrators, the administrators claim payment from Mrs McKenna of the sum of £810,000, together with interest thereon. That sum represents three payments shown in Mrs McKenna's bank statements as having been made to her in 2006 and 2007 by CHAPS: transfer, namely:

(i) £150,000 paid on 24 May 2006;

(ii) £460,000 paid on 5 July 2007; and

(iii) £200,000 paid on 17 September 2007.

The pursuers' case is that there was no basis for those payments to have been made, STAK having been under no obligation to make those payments and there having been no entitlement on the part of Mrs McKenna to receive them. The claim is put first, therefore, on the basis of unjust enrichment. The pursuers also avers that the payments were made to Mrs McKenna within 5 years of the date on which STAK entered administration and at a time when STAK's liabilities exceeded its assets. In those circumstances, having given no adequate consideration to STAK in respect of any of the payments made to her, Mrs McKenna is liable to repay those sums in terms of s.242 of the Insolvency Act 1986.

[3] Mrs McKenna does not dispute that she received those payments. She does seek, however, to justify their receipt. In those circumstances, the onus being on her to show why she was not unjustly enriched and/or, for the purposes of s.242, that STAK's liabilities did not exceed its assets or that she gave adequate consideration for the payments, Mrs McKenna was ordained to lead at proof.

[4] Before turning to consider the evidence and arguments put forward by Mrs McKenna, I should say something about the companies which featured prominently in the narrative. I do so by reference particularly to the evidence of Mr and Mrs McKenna which, on this broad level of generality, was not substantially disputed.

[5] NATCO Group Limited ("NATCO") was incorporated in October 2003 and, until it was wound up in October 2008, carried on business as an electrical engineering and information technology company, fields of business in which Mr McKenna had expertise and experience. Mr and Mrs McKenna each owned 50% of the shares in NATCO and were the sole directors of it. They were also sole shareholders and directors in DMK Design (UK) Limited ("DMK"). In mid-2003, Mr and Mrs McKenna became involved in the purchase of Westburn House in Prestwick, right next to the airport. Their intention was that Westburn House should become the headquarters of NATCO and DMK. It was in connection with the intended acquisition of Westburn House that STAK was incorporated in February 2004.

[6] The Westburn House site was acquired by STAK for £550,000. The sale completed in July 2004. The acquisition was funded with a secured loan of £440,000 from Northern Rock, the balance of £169,000 - there being additional expenditure of something over £59,000 in connection with the purchase, the loan and a lease of the property - being provided by Mr and Mrs McKenna. Of that £169,000 provided by Mr and Mrs McKenna, something over £113,000 was raised by them in the form of a loan secured over the family home at Barnhill Drive, Newton Mearns, Glasgow. The details are set out in a "Statement for STAK Realty Group Limited" prepared, as I understand it, by Messrs Mactaggart & Co, solicitors handling the matter on behalf of STAK and/or the McKennas, confirmed in part by an email from a solicitor at Mactaggart & Co which was lodged in process and spoken to by Mrs McKenna in her evidence.

[7] As I have said, the original intention behind the purchase of Westburn House was for it to become the headquarters of NATCO and DMK. However, Mr and Mrs McKenna perceived there to be a business opportunity which would add value to the site. Part of the site was wooded and other parts were derelict and unkempt. They decided to tidy it up, erecting fencing and changing the road layout within the site. In addition, they thought they spotted a gap in the market for off-site car parking close to the airport. They had used the airport off-site parking on previous occasions and it did not appear to them to be run efficiently. Their idea was to turn the wooded and derelict site surrounding Westburn House into a car park providing long term off-site parking for the airport. Between July 2004 and February or March 2005 they sought and obtained planning permission to develop the site in this way. The process was expensive, involving lawyers and other professionals. According to Mr McKenna, and this was not seriously challenged, those expenses were funded by NATCO and by Mr and Mrs McKenna personally. The development of the site as a car park for off-site airport parking did not simply involve mechanical clearance of the ground, though even that was expensive given that part of the land was woodland which had to be cleared and other parts required to be levelled. Mr McKenna explained in his evidence that there was room only for 56 cars on the site if cars were parked in the available space by their owners. To make the project viable, they had to come up with an system which allowed them to park cars four deep, yet have them available for owners when required. By the use of a sophisticated software system, they were able eventually to make capacity for some 222 car park spaces. The software was developed with the involvement of Mr McKenna. It involved connections to the airport as well as offices at the car park; and the services offered came to include not only car parking but also valeting, "meeting and greeting" customers at the airport, and chauffeur services. It was clearly a costly exercise. Overall, the work was carried out by NATCO, or contractors employed by NATCO, and NATCO itself paid the bills for the work and equipment provided by outside contractors and suppliers. Mr and Mrs McKenna both gave evidence that in their view the work was carried out for STAK..

[8] Another company established by Mr and Mrs McKenna, and of which they were each 50% shareholders and sole directors, was Security Parking International Limited ("SPI"). That company was incorporated in October 2005. It was set up in order to operate the car park in the Westburn House site. It operated from the Coach House, a separate building on the site. As I understood the evidence, that was where most of the sophisticated software equipment was based, and that equipment was operated by or through SPI.

[9] It became clear at some stage in late 2005 or early 2006 that further financing was required. This was obtained in the form of a number of loans to STAK by National Westminster Bank plc ("Nat West"). There were lodged in process, and spoken to by various witnesses, photocopies of extracts from agreements between Nat West and STAK bearing to set out the terms of the loans. None of these documents is complete. Neither are any of the extracts dated. The first loan was in the sum of £1,500,000 and was to refinance the project, inter alia by paying off the Northern Rock loan. That was followed some time after May 2006 by a further loan agreement in the sum of £1,800,000. This replaced the previous loan agreement. The narrative said that it was to be used to refinance the existing investments with the Bank (i.e. the £1.5 million), which had been

"originally utilised to assist with the refinance of Westburn House, Prestwick & assist with construction of a car park adjacent to the site",

with the additional £300,000

"now to be available to repatriate personal monies back to the Directors".

This is clearly a reference to the fact that Mr and Mrs McKenna had spent some of their personal funds in the development of the site. Nat West was therefore advancing money to STAK in part so that the directors could be repaid £300,000 out of the monies advanced. I was told that the £300,000 was never formally "repatriated" to Mr and Mrs McKenna. It appears in Transactional Balance Sheets drawn up later as still being due to them. That loan agreement was followed, in due course, by further loan agreements, one for £2,300,000 and the other for £2,500,000, in each case the purpose being inter alia to refinance the existing indebtedness under the previous loan agreement and to increase the size of the loan. The loan agreement for £2,300,000 also identified, as possible uses for the sums to be advanced, assistance with the development of the property and "general business purposes". It appears that Nat West was willing to advance these sums on the basis that, once the car park had been developed, the property as a whole would be worth about £3,600,000. That valuation was given by Knight Frank LLP in January 2006, on the clearly expressed assumption that the car park, when completed, would be successful in attracting customers.

[10] Unfortunately the business did not develop as planned. It was seen as a threat by the operators of the airport who acted to protect their perceived interest in preventing such competition. Mrs McKenna explained in her evidence that some time during July 2006, just before the car park was due to be launched, the operators of the airport installed a security lock on an access gate through which customers using the car park would otherwise have walked directly to the terminal building, a walk of about 2 minutes. This had a major impact on the car park operation. Customers could no longer make the short journey on foot. Two minibuses had to be purchased to enable customers to be dropped off and picked up at the airport. An operators' licence had to be obtained, and minibus drivers had to be recruited. The software system had to be upgraded to enable customers to be picked up at all times of day and night. Notwithstanding all of that, the business began to take off but was then made the target of aggressive marketing and price cuts by the operators of the airport. This led to litigation with the airport operators. After the attack on Glasgow Airport there were restrictions on drop off and pick up within the airport grounds, all of which caused further difficulties for the business. Attempts to find alternative uses for the site, involving the possible creation of a hotel complex, were met by objections, and planning permission was refused. Soon thereafter Nat West put STAK and SPI into administration.

[11] In considering the evidence placed before the Court at the proof, the Court was faced with a number of difficulties. One of these was that Mrs McKenna represented herself at the proof, though at an earlier stage she had legal representation. This is not to criticise the manner in which she conducted herself or led her evidence. She dealt with matters succinctly and, by and large, to the point. Nonetheless, in part because of not having any legal training and in part as a result of being so closely involved in the relevant events, she was often unable to focus on the legal relationships between various parties and the possible implications to be drawn from the documents.

[12] However, the second, and by far the greater, handicap was the lack of documentation. On Mrs McKenna's explanation of events, she and her husband and NATCO all made payments for goods and services on behalf of STAK. This included payment to those involved in the physical and mechanical operations of site clearance, to electrical and other tradesmen involved in fitting out offices, and to suppliers of computer and other equipment. Within the bundles of documents lodged in process there were photocopy invoices from various tradesmen and suppliers addressed to NATCO, which NATCO paid. But there was nothing in the documentation to show that NATCO incurred or discharged such liabilities on behalf of STAK, rather than on behalf of itself or SPI. There was, in short, no documentation at all identifying the relationship between the three companies in respect of the development work and subsequent use of the premises at Westburn House. It appears that NATCO, SPI and DMK all used Westburn House as their offices, sharing (to some extent at least) the same staff and equipment. In the valuation carried out by Knight Frank LLP there is a reference to the fact that the office property was held under two separate leases on a full repairing and insuring basis by DMK and NATCO, both leases having a 20 year term with DMK paying £25,000 per annum and NATCO paying £50,000 per annum. That information was apparently provided to the person who prepared the valuation by Mr McKenna. But he was not shown copies of the leases, nor were the leases themselves (or even copies) lodged in process. Nor does the analysis of STAK's bank statements show any regular payments of rent in those amounts (there is a single payment for each of them described as "rental" in the course of a three year period). The case of SPI is even less clear: it used the Coach House to run the car park, and ran the car park on the whole of the Westburn House site, but there is no evidence of what arrangement was in place between itself and STAK in relation to these matters. It does not appear to have paid STAK any rent.

[13] The lack of documentation is not limited to leases and other agreements relating to the use of office space or, more generally, the site. No documents at all have been lodged in process or (with the exception of mention of the two leases in the Knight Frank valuation) even spoken to in evidence. In those circumstances, it is quite impossible to make any finding about what the relationships were between the various companies controlled by Mr and Mrs McKenna. In truth, it seems to me that they themselves did not know. Whatever their business acumen, they simply had not addressed their minds to the fact that the companies were separate legal entities, that their relationships inter se required to be regulated by agreements, and that payments from one to the other had to be accounted for. Without knowing what arrangements there were between the companies, or, perhaps more accurately, without there being any such arrangements, it is difficult to know what to make of the various payments made by NATCO in respect of the development of the site. The work may have been done for STAK (as Mr and Mrs McKenna seemed to assume), STAK having an interest in building up the value of the property. But equally some of it may have been done for NATCO's own account, NATCO having an interest in developing the office space of which it was to become a tenant; and some (particularly all the work and expenditure on computer and software equipment, and the work done on the Coach House) may have been done for SPI, who were to operate the car park and, presumably, to take the profits from that operation. There is no basis before me on which any assumption can be made one way or the other. Nor did I find the evidence from Mr and Mrs McKenna that the expenditure was incurred on behalf of STAK at all persuasive, since it was coupled by assertions on a number of occasions that they regarded STAK as "non-trading" or as just a "property holding company". The perception that STAK was non-trading was supported by the statutory returns in the form of Abbreviated Accounts for the years ending 28 February 2005 and 28 February 2006, prepared by Thompsons, STAK's accountants and signed by Mr McKenna as a director on behalf of the board. Those accounts did not refer in any way to the acquisition of Westburn House or to the company having any assets in excess of £100. No income or expenditure was recorded. And in each year's Abbreviated Accounts there was a statement that the company was dormant throughout the period. This does not fit easily with the suggestion that work in developing the house and car park area was being carried out on its behalf. Mr Alan Thompson, who prepared the accounts, acknowledged their deficiencies but was unable to assist the court on the true position. It is of note that although NATCO paid the various tradesmen and suppliers, it did not at the time invoice STAK for the amounts paid. Amongst the invoices in the documents lodged in process and spoken to by Mrs McKenna were documents bearing to be NATCO invoices, invoicing STAK for the amounts paid allegedly on its behalf, but these "invoices" had only recently been created, apparently in an attempt to show the position as Mrs McKenna understood it to be. Neither they, nor any documents on which they were based, had ever been presented to STAK for payment in any fashion.

[14] Nor does the problem stop there. Included within the invoices relied upon by Mrs McKenna were the following four invoices from her husband and herself addressed to STAK:

(i) Invoice DEV 1 dated 31 July 2004 in the sum of £70,000, for consultancy work by Mr and Mrs McKenna in relation to the initial purchase of Westburn House over the period from June 2003 until July 2004.

(ii) Invoice DEV 2 dated 31 January 2006 in the sum of £100,000, for consultancy works in relation to the development of the Westburn site, the obtaining of a valuation of £3,600,000 (up from its initial valuation of £550,000 at the time of purchase), and the obtaining of planning permission for the car park and associated development, all of which had been carried out over a 16 month period between September 2004 and January 2006.

(iii) Invoice DEV 3 dated 31 January 2007 in the sum of £20,000, for consultancy work in relation to the software system for the car park which ultimately added value to the site, over an 18 month period between June 2005 and January 2007.

(iv) Invoice DEV 4 dated 28 February 2006 in the sum of £30,000 for consultancy works in relation to the design and build of the car park, including liaising with architects and various contractors and project managing all works on a daily basis between July 2005 and February 2006.

There are, it is clear, a number of anomalies about these invoices. Invoice DEV 1 covers a period from June 2003 until July 2004, but STAK was only incorporated in February 2004. Invoice DEV 4 bears a date significantly earlier than that borne by DEV 3 (the sequence is therefore wrong). None of the invoices include VAT which, on the basis of the sums claimed, would appear to have been applicable. Nor is there any explanation of the basis upon which Mr and Mrs McKenna, the directors of STAK, were entitled to charge for consultancy and other services to STAK. It is not, of course, impossible for there to be a legitimate agreement to that effect, but none was produced or spoken to. More fundamentally, however, it emerged in Mrs McKenna's own evidence, and that of other witnesses, that (like the NATCO invoices to which I have referred) these four invoices were not original documents in any meaningful sense of the word. They were typed up at the behest of Mrs McKenna after this litigation commenced, either in January 2009 (as Ms Balfour, who typed them, recalled) or November 2009 (as Mrs McKenna thought). The precise date does not matter. Mrs McKenna did not try to conceal this. Her explanation was that there were a number of underlying documents which supported the invoices and gave details of the work done, time spent etc., but they were scrappy and not very legible. She thought it better to type out invoices which, though they were not copies of any earlier handwritten invoices and did not contain the full details recorded on other documents, reflected the work done.

[15] I have no reason to doubt this explanation and, indeed, it was hardly challenged. It leaves the court, however, in the position where it simply cannot make any assessment of the underlying material or of the work which that underlying material may or may not vouch. Furthermore, and this is important, it was clear from the evidence that no invoices for the work allegedly done by Mr and Mrs McKenna (whether earlier versions of DEV 1, 2, 3 and 4 or in some other form) had ever been presented to STAK. In other words, no invoices had been processed within the system within STAK, nor had Mr and Mrs McKenna been listed amongst the creditors of the company in any ledgers or in the statutory accounts.

[16] It is against this background - of a complete lack of any documentation evidencing the relationship between the various companies of which Mr and Mrs McKenna were shareholders and directors, or the arrangements pursuant to which Mr and Mrs McKenna may have rendered services to STAK, or the arrangements whereby NATCO may have carried out work and incurred expenditure on behalf of STAK - that the Court has to assess the explanations put forward by Mrs McKenna in her defences. Her explanation set out in Answer 5 as adjusted was as follows:

"Explained and averred that all payments referred to were made for proper purposes with the full knowledge of the Company's bankers at a time when the Company was solvent. The Company had no business and no assets apart from a site and buildings at Westburn House, Prestwick. The site had been acquired and developed by the Company with a loan of £440,000 from a building society plus advances from the Directors. The Company relied on the activities of associated companies to provide an income to service borrowings and to provide administrative and other services. In particular, the Company relied on the assistance and activities of NATCO Group Limited and Secure Parking International which companies occupied and traded from the building and car park site at Westburn. NATCO Group Limited organised and funded the development of Westburn site on behalf of the Company and Secure Parking International. The businesses of NATCO Group Limited and Secure Parking International had great prospects at the time of the said payments. It was resolved by the Directors of the Company that monies would be borrowed from Nat West and applied to the extent of £300,000 in repayment of advances made by the Directors to the Company. The Directors had paid £169,000 towards the price paid and costs incurred by the Company in the acquisition of Westburn site and had advanced a further £131,000 towards the costs of the development at Westburn. It was appropriate that the Company should repay the Directors those advances. In addition, the Directors of the Company resolved to advance funds to NATCO Group Limited for its purposes which included the assistance of the Company directly by meeting the debts of the Company such as by paying interest on the Company's loan from Nat West; for the assistance and development of the business of Secure Parking International; and also for the assistance and development of the business of NATCO Group Limited. As stated the promotion of the business and interests of NATCO Group Limited and Secure Parking International was directly beneficial to the interests of the Company and was a reasonable and appropriate use of the Company's funds. In addition, it was a reasonable use of the Company's funds to advance them to NATCO Group Limited for its own purposes. Reference is made to the loan agreements between the Company and Nat West and the resolutions of the Directors of the Company which not in her personal capacity and the Defender had no liability to the Company in respect of such payments, any liability being the liability of NATO Group Limited. The Defender duly dispersed the total of the payments made to her in her capacity as a Director of NATCO Group Limited to NATCO Group Limited along with additional funds from her own resources. The Defender and her fellow Director of the Company were not able to utilise the Nat West funding in repayment of their advances of £300,000 to the Company and are still due repayment of the advances".

This explanation in the defences itself raises a number of points. There is no explanation of any contractual arrangements in terms of which NATCO and SPI occupied and traded from Westburn House. Although it is said that NATCO organised and funded the development of the Westburn site, this is said to have been not just on behalf of STAK but on behalf of STAK and SPI. It is not said that any part of the sums sued for in this action were paid to Mrs McKenna as part of the repayment of the amount of £300,000 to which I have referred - indeed it is said that Mr and Mrs McKenna are still due repayment of the advances, by which I take her to mean that sum of £300,000. It is not entirely clear how these defences rely upon the invoices DEV 1, 2, 3 and 4 submitted to STAK on behalf of Mr and Mrs McKenna, which invoices total £220,000. Apart from the £300,000, the gist of the defence appears to be that NATCO had expended monies to assist STAK (and SPI); and that sums paid from STAK to Mrs McKenna were paid on by her to NATCO to reimburse NATCO for such expenditure. This, as I understood it, was the line taken by Mrs McKenna in her evidence to explain why the invoices showing that NATCO had paid various suppliers and tradesmen in respect of the development of the Westburn House site justified her receipt of payments from STAK.

[17] Much attention was focused at the proof on entries in bank accounts for Mr and Mrs McKenna and NATCO. Mrs McKenna had a bank account with the Abbey, another with the Bank of Scotland and two with the Royal Bank of Scotland. Her husband also had a number of bank accounts, variously with Abbey, the Royal Bank of Scotland and Clydesdale Bank. NATCO had a business current account with the Royal Bank of Scotland. No bank accounts for STAK were lodged in process, but an analysis of STAK's bank statement covering the period from 30 June 2005 until 30 June 2008 was lodged and treated as an accurate summary of the transactions on that account. From a comparison of those various accounts, the following picture emerged. In the years 2006 - 2008, payments were made by Mr and Mrs McKenna from their accounts to NATCO. These totalled £975,336.08 over those three years, and break down into £204,523.59 for 2006, £277,491.66 for 2007 and £493,320.83 for 2008. In a summary lodged in process, Mrs McKenna suggested that these monies had been paid into NATCO by her, but an examination of the entries in the bank accounts show that many of the payments came from Mr McKenna. This is another illustration of her failure to distinguish between legal entities. Payments out of NATCO's account are more difficult to follow. There were a number of cheques for cash, often in round figures, which Mrs McKenna said were used to pay wages of NATCO staff and employees. No vouching was produced to support this, but I have no reason to doubt her explanation, though it is unlikely that the wages bill would be a round figure sum on each occasion and there must have been some money left over (possibly only petty cash) which ought to have been accounted for but was not. There were other payments out of the NATCO account which were probably made to suppliers and/or contractors for their work in developing and running Westburn House. There were payments made to DMK totalling just over £99,000, which were not explained; and there were payments out to Mr and/or Mrs McKenna, again totalling in the region of £90,000 (there are one or two cross entries the effect of which is difficult to determine, but the precise figure does not matter for present purposes). In addition, NATCO made five payments directly to STAK, totalling about £140,000 in all. Four of them, totalling about £127,000, seem to have been related to payments of interest by STAK shortly afterwards, possibly examples of NATCO putting STAK in funds to pay the interest on the Nat West loan. The fifth payment, made on 4 July 2007 in the sum of £12,520, was identified as payment of rental by NATCO. This is the only rental payment by NATCO.

[18] Mrs McKenna's case, as I understood it, depended on her being able to say that she received payments from STAK in order to pay NATCO for work done or payments made by NATCO on STAK's behalf or for its benefit. I have already pointed out that many of the payments to NATCO came from Mr, not Mrs McKenna. Quite apart from that, however, I have already explained why I find this justification difficult to accept. In summary, there is no evidence that when NATCO was carrying out the work in developing the Westburn House site, it was doing so on behalf of STAK rather than on its own behalf, on behalf of SPI, or even on behalf of DMK. Neither is it apparent to me that Mrs McKenna's payments to NATCO can be linked to the sums she took from STAK or to sums which NATCO then paid to STAK or on its behalf. For example, amongst the payments made by Mr and Mrs McKenna to NATCO in 2006 is one of £23,000 paid to NATCO on 6 July 2006 from Mr McKenna's account. An equivalent sum (or rather £22,963.70) was immediately paid out from the NATCO account on the same day and paid into STAK's account. On the face of it, that might show that payments to NATCO were being applied for STAK's benefit. Mrs McKenna was asked why, if the intention was to pay the money to STAK, she did not pay STAK directly, rather than pass the money through NATCO. She did not give any explanation other than to suggest that a NATCO cheque had been raised to pay a supplier. This did not appear to me to meet the point or make any sense. An amount of £20,000 was paid into NATCO by Mr McKenna on 29 September 2006. There is a payment out from NATCO's account on the same day of exactly that same sum without any identification of the recipient. Mrs McKenna explained that there would have been a cheque cashed for that sum in order to pay wages in cash. She explained that it probably was not accounted for properly but that was the fault of the book-keeper, Donald Watson. Be that as it may, it is difficult to see how this can link to any payment made to or for the benefit of STAK. A payment of £30,000 was made on 25 October 2007 by Mrs McKenna to NATCO. On the same day NATCO paid STAK a similar amount. This was one of the payments appearing in the analysis of STAK's bank account and appears to be related to the payment of interest by STAK to the bank. That payment was made by Mrs McKenna to STAK within about 5 weeks of her receipt of £200,000 from STAK on 17 September 2007, that being one of the three payments identified in the summons. The problem for Mrs McKenna is that the payment of £30,000 to NATCO from her account was only one of several payments made out of her account following receipt of the £200,000 from STAK. Within three months of receipt of that sum of £200,000, Mrs McKenna had also made payments totalling over £90,000 to herself (at a different account) and to her husband. So it is impossible to trace any consistent pattern of Mrs McKenna receiving the money from STAK and then using it to pay NATCO for work done by NATCO for the benefit of STAK.

[19] Mr Dalgleish, in his closing submissions, said that there was a danger when looking at this material of seeking to create a coherency when there was not one. That point was well made. The true position, so it seems to me, is that in dealing with monies that came into the various companies and were paid out by the various companies, Mrs McKenna did not appear to appreciate the separate legal status of the different companies and the need for keeping records. If, as a result, she is unable to satisfy the burden of proof to show that she gave value to STAK for the payments she received from STAK, she has only herself to blame.

[20] As I have said, throughout the course of the proof the case has been hampered by a lack of record keeping and documentary evidence. However even making every allowance in favour of Mrs McKenna and allowing her explanations to be received despite the lack of any proper documentary trail, I am not persuaded on a balance of probabilities that she has made good her case that she gave value in the manner suggested for the payments which she received from STAK. She may have made payments to NATCO and NATCO may have carried out some work on behalf of STAK (though this is far from clear) that does not mean that Mrs McKenna used the payments she received from STAK for STAK's purposes. NATCO had its own business and incurred its own expenditure; and Mrs McKenna's payments to NATCO could as well have been for NATCO's purposes as for those of STAK. Even if the burden was on the pursuers rather than on Mrs McKenna, which it is not, I would hold that they have established that the payments received by Mrs McKenna were not justified.

[21] All this is subject to one point. I have already referred to the £300,000 which is mentioned in the loan agreement as a sum to be "repatriated" to the directors of STAK, Mr and Mrs McKenna. There is some corroboration for this sum in the Transactional Balance Sheets for the years ending 31 December 2006 to 31 December 2008 prepared for the administrators by Mr Donald Watson, the former book-keeper of STAK. These documents show Mr and Mrs McKenna to be creditors in the sum of the £300,000 to be repatriated. It seems to me that this provides some evidence, indeed persuasive evidence, that Mr and Mrs McKenna advanced at least £300,000 (it may have been more, but there is no evidence for more) of their own monies to assist STAK in purchasing the Westburn House site and to assist with the development. £169,000 of this is recorded in the Statement to which I have referred in para.[6] above. Mrs McKenna spoke of another £131,000 having been spent. I am prepared to make the assumption that this was spent for the benefit of STAK - that assumption may be criticised as being over-generous to Mrs McKenna, but it can be justified by the fact that the Nat West loan to STAK recognises the obligation for STAK to pay the £300,000. Assuming that the £300,000 came equally from Mr and Mrs McKenna, as to which there was no evidence, that suggests that Mrs McKenna gave value to STAK of at least £150,000. Although the sum is shown in the Transactional Balance Sheets as still owing to Mrs McKenna, and Mrs McKenna said in her evidence that the sum had not yet been paid, I do not see why it should not be used to justify £150,000 of the payments made to her by STAK on which the pursuers sue.

[22] Subject to the above, it seems to me that in those circumstances the pursuers' case based upon unjustified enrichment must succeed. Mr Dalgleish referred me to the cases of Dollar Land (Cumbernauld) Ltd v CIN Properties Ltd 1998 SC (HL) 90 and Shilliday v Smith 1998 SC 725 for a summary of the relevant principles. He submitted that there had clearly been an enrichment of Mrs McKenna and that no proper legal justification for that enrichment had been established. In those circumstances the pursuers were entitled to succeed. I accept that submission. In fairness to Mrs McKenna, Mr Dalgleish pointed out that if it could be said that she had received the money from STAK as an agent for NATCO, then STAK's claim would be against NATCO rather than against her personally. But, he submitted, this was not the correct analysis. I agree with that submission too. There were lodged in process three Board Minutes of STAK signed in each case by Mr McKenna as Chairman, in terms of which it was resolved that each of the three payments complained of should be drawn down by Mrs McKenna "to be utilised for the general business purposes of NATCO Group Limited and associated companies". Mrs McKenna explained that this was consistent with the terms of the loan agreement with Nat West to which I have already referred. Be that as it may, the resolutions at the Board meetings of STAK do not, in my view, constitute Mrs McKenna an agent of NATCO to receive the money. Rather it provides that the money be paid to her for her to apply it as she thinks fit for the business purposes of NATCO and other associated companies. In other words, she was to receive the money as principal and to apply it for those purposes as she thought fit. Those minutes in themselves, however, provide further confirmation that the money was not given to her for STAK's own purposes but rather for the purposes of her other business interests.

[23] As to the claim under section 242 of the Insolvency Act 1986, I am satisfied that Mrs McKenna was an associate of STAK for the purposes of section 242(3)(a) - the definition being given by section 74(5) of the Bankruptcy (Scotland) Act 1985 - and it is clear that the payments to her were made not earlier than 5 years before STAK entered administration. In those circumstances, in terms of section 242(4), it is for Mrs McKenna to establish either (a) that immediately, or at any other time after the payments were made to her, STAK's assets were greater than its liabilities or (b) that the payments were made for adequate consideration. I have already dealt with (b) - I have found that, except for the sum of £150,000, the payments were not made for any adequate consideration. As to (a), the only evidence I had as to STAK's balance sheet position was in the form of the Transactional Balance Sheets for the years ended 31 December 2005 - 31 December 2008. Donald Watson, the former book-keeper of STAK, who prepared them, was familiar with the records of STAK, such as they were, and he was in as good a position as any to attempt to recreate STAK's Balance Sheet. These Transactional Balance Sheets for each of those years showed that the liabilities of STAK were greater than its assets. This state of affairs was not in fact challenged by Mrs McKenna in cross examination of Mr Watson. There are, however, two qualifications to be made. First, in each of the Transactional Balance Sheets the property is valued at £456,000. This is nearly £100,000 below the price paid for the Westburn House site in 2004. It does not take into account the valuation carried out by Knight Frank LLP in 2006, though that valuation was prepared on the assumption that the car park business would be successful, whereas in fact it floundered in the face of determined opposition by the airport operators. Be that as it may, the burden is on Mrs McKenna to show that a higher valuation should be added into the Transactional Balance Sheets than that given by Mr Watson, and I am not persuaded that Mr Watson's approach is wrong.

[24] The other qualification is that in the Transactional Balance Sheets for the years ending 31 December 2006 to 31 December 2008 there is the entry, to which I have already referred, showing Mr and Mrs McKenna to be creditors in the sum of £300,000. I am prepared to assume that Mrs McKenna has been repaid and can justify keeping £150,000. That would reduce that figure for creditors to £150,000. But even on this basis the liabilities of STAK exceed its assets.

[25] I shall therefore grant decree in favour of the pursuers for payment of £660,000, that being the sum sued for less £150,000 which I have held can be justified, plus interest as concluded for.

[26] I should just add this. Mrs. McKenna's failure to provide documents in this case has not helped her. Throughout the various stages of the process, she was ordered to produce all the documents on which she intended to rely. Some of these orders were made when she still had legal representation. Others were made later. It was my clear impression that she understood what was required. On more than one occasion hearings had to be discharged because she produced some documentation at the last moment. A motion for summary decree had to be discharged for this reason. The proof had to be continued after one day of evidence because she lodged documents at the last moment. She has persistently maintained that there are documents which she has been prevented from recovering from Westburn House, which is now in new ownership. Having heard evidence on the point, I am satisfied that there is nothing in this. Westburn House was not sold by the administrators until many months after the administration began. Mrs McKenna was pressed for documents repeatedly. Had there been any relevant documents left in Westburn House, she had every opportunity to find and produce them before it was sold. If any are still there, and cannot be found or obtained, she has only herself to blame. I am not persuaded, however, that there are any relevant documents still there.