Sunday, 17 June 2012

Edinburgh United Breweries' litigation (part four)

I told you EUB and Mr. Dunn didn't give up easily. They took their case as far as they could: all the way to the House of Lords, the ultimate court of appeal in the UK.

(Present : The Lord Chancellor and Lords Watson, Ashbourne, Macnaghten, and Morris.)
The Edinburgh United Breweries Company (Limited) and others v. Molleson and another. — This was an appeal from a decision of the First Division of the Court of Session in Scotland. — The Solicitor General (Sir J. Rigby, Q.C), the Solicitor General for Scotland, and Mr. Shaw were counsel for the Appellants ; the Lord Advocate and Mr. Muir for the Respondents.

The question raised by the appeal was whether a contract of sale between oue of the Appellants, William H. Dunn, and the Respondent James A. Molleson ought to be set aside, and the contract price repaid. David Nicholson owned the Palace Brewery Company, Edinburgh, which, in consequence of failing health, he conveyed in 1887 to Molleson, a chartered accountant, as trustee, with a view to its eventual sale. In November, 1889, Molleson sold the property to Dunn for £20,500, and Dunn resold it to the Edinburgh United Breweries Company for £28,500, thus making a profit of £8000. by the re-sale. The contract between Dunn and the company contained a condition that the actual profits from the bnsiness were £3750 a year. It appeared that Dunn employed two firms of accountants to examine the books and verify the profits; but after the Breweries Company entered into possession it was discovered that a clerk employed at the brewery during Molleson's management had falsified the books ; that Dunn's accountants had been misled ; and that the true profits were £1000 less a year than the accoun- tants reported. No blame attached to Molleson, the falsification being made to lead him to believe that the concern was more prosperous than it was in reality. Retention of his own situation and salary was the only motive suggested for the clerk's wrong-doing. Then the Breweries Company and Dunn instituted the present proceedings against Molleson and Nicholson, the original owners, to set aside the contract, and recover back what had been paid. They contended they were both entitled to sue, and that the transac- tion was induced by misrepresentations, for which the Respondents were responsible. The Respondents said that under the peculiar circumstances of the case neither of the Appellants was entitled to sue, Dunn because he suffered no injury, having in fact profited to the extent of £8000, and the company because they had no contract with the Respondents, and had suffered no wrong for which the Respondents were answerable. The First Division of the Court of Session decided the matter in favour of the Respondents — hence the present appeal. Their Lordships, Without calling upon counsel for the Respondents, upheld the decision of the First Division, which was appealed from, and dismissed the appeal with costs. — Appeal dismissed accordingly. "
London Standard - Saturday 10 March 1894, page 2.
Unsurprisingly, the Lords upheld the decisions of the lower courts. How could they have decided otherwise? The facts hadn't changed. Ultimately what buggered EUB and Dunn was the weird way the brewery had first been purchased by Dunn, then sold on to EUB. It meant that there was no connection between EUB and Molleson.

I'd have come to the same decision. What could EUB possibly have been claiming? They'd bought the Palace Brewery from Dunn. How could the books have played any role in that transaction?

It must have cost them a few quid, taking the case through all the courts right up to the House of Lords. Wondering how much? Wonder no longer:

"The annual meeting of the EDINBURGH UNITED BREWERIES (Limited) was held yesterday at Dowell's Rooms, Edinburgh - Sir Walter Dalrymple, Bart., chairman of the directors, presiding. The report of the directors for the year to 13th October stated that the gross profits amounted to £20,385 12s 6d. After providing for upkeep, depreciation, and deducting head office charges, legal expenses, &c., there remains a balance of £23,152 8s., including the amount brought forward from the previous year. It was proposed to complete the dividend on the preference shares, making in all 6 per cent, for the year; to write off the whole expenses incurred in connection wins the Palace Brewery action, £4868 17s 1d ; and to carry forward the balance of £1703 10s 11d. The directors a hoped that their policy in at once wiping off the whole of the expenses of their litigation over the Palace Brewery and not declaring a dividend on the ordinary shares would meet with the approval of the shareholders."
Glasgow Herald - Saturday 29 December 1894, page 7.

They spent £4868 17s 1d. Did they bear all the costs of the action, or did Dunn pay half? Even if Dunn didn't contribute, that's still a hefty sum wasted on the court action. Remember that they bought the Palace Brewery for just £28,500. They would have had to get pretty much all of that refunded for it to have been worth their while. I wouldn't have been very happy, had I been a shareholder.

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