Saturday, 9 June 2012

Edinburgh United Breweries' litigation (part two)

Persistent. Edinburgh United Breweries were certainly that in pursuit of poor Mr. Molleson. They didn't give up when their case was thrown out in 1891. They tried again in 1892. Same arguments as first time around. Was this judge more impressed than the first? Read the article:

Lord KYLLACHY gave his judgment in the action by the Edinburgh united Breweries Company and William Henry Dunn, 27 Bishopsgate Street, London, against James Alexander Molleson, C. A,. Edinburgh trustee under a trust deed, by David Nicolson, brewer and wine merchant, Parson's Green, Edinburgh, in which reduction was asked of the minute of agreement for the sale of the Palace Brewery, Edinburgh. The price paid for the brewery and ground was £28,500. It was stated that the sale was a representation by the seller that the profits for the two previous years amounted to £3750, a year, and it was averred that the books of the brewery had been falsified. Defenders stated that the books were examined by accountants, upon whose report the purchase was completed. Lord Kyllachy said the price of the brewery was fixed, not on so many years' purchase of the profits, but with reference to certain valuations of the brewery premises and plant. The agreement was dated 13th November, and the date of settlement was 31st December, 1889. During that interval the purchaser was to have access to the books of the brewery with a view to purifying the profits, and there was an express provision for repayment of the purchaser's deposit in the event of a shortcoming in the profits being ascertained, but there was no corresponding provision for repayment of the price. He preferred to hold that the settlement of the 31st Decemnber foreclosed, and was intended to foreclose, all further reference to the question of profits. But it was said by pursuers that they were entitled to get behind the settlement. The books of the brewery were placed in the hands of the purchasers, and they were examined, first by a firm of accountants in London, and then by a firm of accountants in Edinburgh. Some discussion arose, but the purchaser waived his objection and completed the purchase, and the company which was then formed has since carried on the business of the brewery. In the course of last summer it transpired by the confession of a clerk that the balance-sheet for the year 1888 had beer falsified to the intent of £1000 and that the ledgers had been falsified so as to correspond with the balance-sheet. These falsificationss had been, made by the managing clerk in order to deceive Mr Molleson, and they were made by exaggerating the assets. The frauds were certainly so perpetrated that they were quite likely to be overlooked if the accountants were not suspicious, and did not think it necessary to go into the details of customers' accounts, or only thought it necessary to do so by taking a specimen entry here and there. Pursuers' accountants in fact failed to discover them, and the question was what was the legal result ? Was the purchaser entitled to be restored or was the true view of the matter that both parties being in entire good faith, the seller performed his part of the contract by handing over the books, while, on the other hand, the purchaser took their chance of obtaining from the books the true amount of the profits? The seller did not know, and it was not suggested that he did, that the books were otherwise than correct. The only persons who knew were two clerks, and they Were in no way identified with the seller, and they did not even know that the question of profits entered into the sale. The question therefore was whether it was a condition of the contract, express or implied, that the books of the firm were to contain no errors, or at least no errors that were not easiy discovered. He confessed he saw no sufficient reason for so holding. He could find no standard according to which the purchase examination of the books was to be conducted, and he was therefore not able to hold that the pursuers were entitled to re-open the contract, and to raise now the question of whether a condition as to the amount of the profits had been fulfilled. His decision was that fraud had been disproved, and he granted absolvitor to the defenders, with expenses, under deduction of the expenses of debates in the procedure roll and in the Inner House. "
Glasgow Herald - Thursday 14 July 1892, page 4

Simple answer: no. There were two flaws in their case. First, Molleson hadn't known the books were false. Second, the profits hadn't determined the selling price. That had been based on a valuation of the brewery and its stock.

Did EUB and Dunn get discouraged by this second failure? No. They weren't about to stop now.

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