SI 2016 LTD; (SECOND) HIGHLAND AND UNIVERSAL SECURITIES LTD; (THIRD) CORRENNIE INVESTMENTS LTD; and (FOURTH) SOUTER F T HOLDINGS LTD AGAINST (FIRST) AMA (NEW TOWN) LTD; (SECOND) AMA (NT) LLP; (THIRD) DR ALI BEHROOZ AFSHAR; (FOURTH) MICHAEL AFSHAR; (SIXTH) BEHNAM AFSHAR [2019] ScotCS CSOH_99 (03 December 2019)

SI 2016 LTD; (SECOND) HIGHLAND AND UNIVERSAL SECURITIES LTD; (THIRD) CORRENNIE INVESTMENTS LTD; and (FOURTH) SOUTER F T HOLDINGS LTD AGAINST (FIRST) AMA (NEW TOWN) LTD; (SECOND) AMA (NT) LLP; (THIRD) DR ALI BEHROOZ AFSHAR; (FOURTH) MICHAEL AFSHAR; (SIXTH) BEHNAM AFSHAR [2019] ScotCS CSOH_99 (03 December 2019)

On a proper construction of the Shareholders’ Agreement and the Agreed NAV Policies and Procedures, no debt adjustment falls to be made when calculating Relevant Profit as at 31 December 2017. The obligation to pay the Profit Payment is not extinguished if a lawful dividend could not be paid on 31 March 2018; the obligation remains contingent and must be fulfilled when lawful.

Citation
[2019] ScotCS CSOH_99
Parties
Pursuer: SI 2016 LIMITED; Pursuer: Highland and Universal Securities Limited; Pursuer: Corrennie Investments Limited; Pursuer: Souter F T Holdings Limited; Defender: AMA (New Town) Limited; Defender: AMA (NT) LLP; Defender: Dr Ali Behrooz Afshar; Defender: Michael Afshar; Defender: Behnam Afshar
Jurisdiction
Scotland
Judgment Date
03 December 2019
Procedural Posture
Commercial Action (contractual Interpretation) / Preliminary Proof Before Answer on Two Issues of Contractual Construction
Outcome
Pursuers absolved from the defenders’ counterclaim; declarator granted in favour of pursuers on both issues.
Legal Topics
Shareholders' Agreements, Contractual Interpretation, Dividend Distribution, Profit Share Mechanisms
Contract Law Commercial Law Shareholders' Agreements Contractual Interpretation Dividend Distribution Profit Share Mechanisms

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Parties

SI 2016 LIMITED

Pursuer

Highland and Universal Securities Limited

Pursuer

Corrennie Investments Limited

Pursuer

Souter F T Holdings Limited

Pursuer

AMA (New Town) Limited

Defender

AMA (NT) LLP

Defender

Dr Ali Behrooz Afshar

Defender

Michael Afshar

Defender

Behnam Afshar

Defender

Procedural Posture

Commercial Action (contractual Interpretation) / Preliminary Proof Before Answer on Two Issues of Contractual Construction

Legal Issues

  1. 1 Whether a debt adjustment should be deducted from the market value of stock and work-in-progress when calculating the Group’s net asset value as at 31 December 2017 under the Shareholders’ Agreement.
  2. 2 Whether, if the Company could not lawfully pay the Profit Payment as a dividend on 31 March 2018, it has a contingent obligation to pay the Profit Payment as and when it is able to do so.

Ratio Decidendi

On a proper construction of the Shareholders’ Agreement and the Agreed NAV Policies and Procedures, no debt adjustment falls to be made when calculating Relevant Profit as at 31 December 2017. The obligation to pay the Profit Payment is not extinguished if a lawful dividend could not be paid on 31 March 2018; the obligation remains contingent and must be fulfilled when lawful.

Court Disposition

Pursuers absolved from the defenders’ counterclaim; declarator granted in favour of pursuers on both issues.

Orders

  • No debt adjustment to be deducted from market value of stock and work-in-progress in the 2017 Balance Sheet for profit calculation.
  • Company’s obligation to pay Profit Payment remains contingent if not lawfully payable as dividend on 31 March 2018.