Terms of Appointment 1 . I was appointed on the twenty-fifth day of May 1964 in the following terms: Whereas St. Martin Preserving Company Limited, by special resolution dated 25th Novem- ber 1963, has declared that its affairs ought to be investigated by an inspector appointed by the Board of Trade. Now, therefore, the Board of Trade, pursuant to the provisions of section 165(a) (i) of the Companies Act 1948, hereby appoint Mr. John Dennis Russell, M.A., F.c.A. of 121 Queen Victoria Street, London EC 4 to act as inspector to investigate the affairs of the above-named company and to report thereon in such manner as the Board may direct. Background to Appointment 2. The Company was formed in 1927 as Branston Artificial Silk Company Limited to undertake the manufacture of rayon textiles. Market quotations for the whole of the Company’s share capital were obtained at the time. The textile business ceased in January 1937 when the factory was sold to the Government. Jn November 1937 the Company acquired the whole of the under- taking of Slough Preserving Company Limited, and its name was changed to St. Martin Pre- serving Company Limited (‘St. Martin’). Through a series of acquisitions and mergers between 1937 and 1963 St. Martin became the holding company in a group of companies whose subsidiary relationship is set out in appendix A annexed hereto. All the companies, with two exceptions, are or were engaged in the food industry. 3. This report is mainly concerned with the four principal companies in the group, namely St. Martin and T. G. Tickler Limited (‘Tickler’), both preserve manufacturers, Foster Clark Limited (‘Foster Clark’), canners of fruit and vegetables, and Atholl Houses Limited (‘Atholl’), building contractors. 4. The various transactions by which the principal companies were merged into one group with St. Martin as the holding company covered a period of a little over four years from 1956 to early in 1960, and I refer later in this report (paragraphs 65 to 89) to the steps by which the com- panies were brought together. At one time in 1959 the price of St. Martin’s shares on the Stock Exchange, London indicated a value for the group of over £1,500,000. The Stock Exchange quotation was cancelled on 3rd April 1964. 5. In 1961 the group began to experience financial difficulties which increased during 1962. Substantial trading losses were suffered and by the end of 1962 St. Martin, Foster Clark and Atholl were all heavily indebted to their respective banks. The overdrafts of St. Martin and Foster Clark were secured by debentures. Early in 1963 Mr. S. R. Hogg, d.s.o., M.C., F.c.A. was appointed receiver and manager of St. Martin by The National Commercial Bank of Scotland Limited and Mr. C. E. M. Hardie, c.b.b., f.c.a. was appointed receiver and manager of Foster Clark by Westminster Bank Limited. Another bank, namely the Bank of Scotland, had advanced substantial sums to Atholl without security, and held a guarantee from St. Martin. 6. Mr. Hogg, as receiver and manager of St. Martin, has continued that company’s business of preserve manufacturing through the medium of its 99 per cent owned subsidiary Tickler, to which had been transferred St. Martin’s goodwill and undertaking, including all its trading assets. A scheme of arrangement under section 206 of the Companies Act 1948, effecting a reduction of the Tickler share capital, was approved in 1965. 7. Mr. Hardie, as receiver and manager, continued the food canning business of Foster Clark until 1965 when that company’s trading stock and other assets in the United Kingdom were sold. 8. In the course of his duties as receiver and manager of St. Martin, Mr. Hogg realised the group’s investment in Atholl, the whole of whose share capital was held by Tickler and this transaction has been severely criticised by Mr. R. N. Scott, chairman of St. Martin. Mr. Scott’s desire for an independent investigation into the circumstances and the terms of this transaction led to the following special resolution which was passed by the members of St. Martin on 25th November 1963: That the company declares that its affairs ought to be investigated by an Inspector appointed by the Board of Trade pursuant to section 164 or 165 of the Companies Act 1948 by reason of matters set out in the circular to members dated the 2nd November 1963 and with particular reference to the sale of Atholl Houses Ltd., the settlement of that company’s debts, any agree- ments, arrangements or unwritten understanding with the Bank of Scotland or any insurer of the creditors of Atholl Houses Ltd. 1 Printed image digitised by the University of Southampton Library Digitisation Unit The circular to which reference is made in the above resolution accompanied the notice of the meeting and was signed by Mr. Scott as chairman of St. Martin. A copy of the circular is annexed hereto marked appendix B. 9. In the view of the Board of Trade an investigation to discover whether a receiver has exceeded or abused the powers conferred on him by a debenture was not within either section 164 or section 165 of the Companies Act 1948 and they indicated that they had no power to appoint an Inspector for this purpose. On application by St. Martin to the High Court, however, judgment was given on 5th May 1964 requiring the Board of Trade to appoint an inspector pursuant to section 165(a) (i) — that is to say, following a special resolution by the company — and, as stated above, I was appointed inspector on 25th May 1964. 10. It should be noted that the terms of my appointment were not limited to investigation of the sale of Atholl shares. Nevertheless, in view of the origin of my appointment I have directed my attention primarily to, and the greater part of my report is concerned solely with, the Atholl transaction. The remainder of my report deals with the steps by which the principal companies in the Group were brought together. The sale of Atholl Houses Limited Result of Investigation 1 1. My conclusions on the Atholl transaction are summarised in paragraph 64 of this report. After considerable investigation I have formed the opinion that Mr. Scott’s criticisms of the transaction were not justified. Background to the transaction 12. In order to appreciate the need for a sale and the terms of the sale of the shares of Atholl in 1963 it is necessary to put the transaction in perspective by referring to some of the events leading up to it. 13. Atholl was formed in 1944 for the purpose of building contracting and I am informed that by 1955 it had established a good reputation in the building industry in Scotland. The share capital of Atholl was acquired by Mr. Scott in 1956, and he subsequently transferred his shares to Tickler, which is now a subsidiary of St. Martin. 14. During the period of about 10 years up to 1962 Atholl was largely engaged in substantial development work for local authorities, mainly in the Glasgow area. It also undertook a small amount of private speculative building. Atholl’s main source of finance was the Bank of Scotland which had been its bankers for many years, but, as might be expected, the contracts with local authorities provided for substantial interim payments on account of work in progress. 15. Atholl’s scale of operations increased substantially in 1960, and by 1962 the cumulative value of work in progress (before deducting cash received on account) was understood to be in the region of £11,000,000. By the end of 1962 overdraft facilities granted by the Bank of Scotland had been increased by stages to £1,000,000. This liability was unsecured but it was guaranteed by St. Martin up to £900,000, and St. Martin had also made substantial direct advances to Atholl, but the amounts so advanced were unknown to the bank. 16. The Bank of Scotland, which was accustomed to receiving regular information about Atholl’s activities and financial position before Mr. Scott acquired the share capital, found it increasingly difficult to obtain up-to-date information on which to base credit decisions. At the end of 1962 Atholl was seeking a further increase in its overdraft facilities and in this con- nection the Bank of Scotland appointed Messrs. Thomson McLintock & Co., Glasgow, chartered accountants, to examine and report on Atholl’s financial position. 17. In an interim report dated 15th January 1963 Thomson McLintock & Co. stated that the financial position of Atholl depended to a critical extent on the value of the work in progress and that they were unable to express any worth-while opinion of that value. Draft accounts at 31st March 1962 submitted by Atholl, showed total net assets of £259,000 but this figure was arrived at after taking into account cumulative work in progress valued by Atholl at about £11,000,000 (before deducting cash received on account) and only a very small percentage reduction in the value of the cumulative work in progress would have eliminated the shareholders’ funds in Atholl. Accordingly, the Bank of Scotland requested Messrs. John Dansken & Purdie, chartered quantity surveyors, to examine the basis of Atholl’s valuation of work in progress. In a first report dated 4th February 1963 John Dansken & Purdie concluded their preliminary observations by stating: ‘It appears that the balance sheet amounts are optimisti- cally presented’. 2 Printed image digitised by the University of Southampton Library Digitisation Unit 18. In February 1963 there was no doubt that Atholl was in a serious financial position through lack of working capital. Trade creditors were pressing and many had issued writs against Atholl. Sub-contractors were complaining that they had not received their share of the pro- gress payments made to Atholl. It was feared that, if the local authorities enforced their rights to take over the work in progress, substantial claims for damages would arise. 19. By this time the bank overdraft had increased to £1,169,000 and direct advances by St. Martin had increased to about £745,000. The Bank of Scotland was not willing to provide further finance for Atholl, and Mr. Hogg, who had by this time been appointed receiver and manager of St. Martin, had no funds available for the purpose. On the other hand it was evident to both that in the interest of creditors liquidation of Atholl must be avoided if at all possible. 20. Accordingly it was agreed between the bank and Mr. Hogg that the creditors should be asked to accept a moratorium for two months to give more time for a detailed examination of Atholl’s financial position on which to base a future course of action. The Bank of Scotland agreed to provide further finance on certain conditions during the moratorium. 21. In a circular to the creditors of Atholl dated 26th February 1963 Mr. Hogg outlined the facts as he had found them on his appointment and asked for agreement to a moratorium until 30th April 1963. This circular referred to arrangements made for John Dansken & Purdie to examine the work in progress and Thomson McLintock & Co. to prepare a statement of affairs forthwith. The creditors agreed to this moratorium. Financial position of Atholl at 28th February 1963 22. On 10th April 1963 John Dansken & Purdie submitted to the Bank of Scotland a report on the work in progress at 28th February 1963, valuing it at £699,365 (after deducting cash received on account). Thomson McLintock & Co. prepared a further report dated 16th April in- corporating an approximate balance sheet of Atholl as a going concern at 28th February 1963 which, taking work in progress into account at John Dansken & Purdie’s valuation, showed a. deficiency of assets amounting to £1,517,519. This approximate balance sheet may be sum- marised as follows : £ Fixed assets, including loose tools and shares in subsidiary, at net book values . . . 219,065 Work in progress ... 699,365 Other current assets 143,631 1,062,061 Lew Current liabilities, including bank overdraft 2,579,580 Deficiency of assets to meet liabilities £1,517,519 23. In addition, Thomson McLintock & Co. submitted on 17th April a draft statement of affairs at 28th February 1963 on a liquidation basis assuming loss of retention monies and making provision for substantial claims which might be expected to arise in a winding up. This statement of affairs showed a deficiency of £11,000 as regards preferential creditors (including the bank at £318,000), and a deficiency of £2,711,000 as regards unsecured creditors. 24. It was clear to the bank and to Mr. Hogg that the financial position of Atholl was desperate. Not only did it appear that Atholl was completely insolvent but current work could not be com- pleted without considerable further funds. It seemed inevitable that Atholl would have to go into liquidation with consequent heavy losses to trade creditors, the Bank of Scotland and St. Martin. 25. The evidence which I have received leads me to think that one reason for Atholl’s serious financial position was that the company tendered for and undertook substantial building contracts on terms which were unremunerative. In addition, however, I have no doubt that Atholl was trading on a scale which was not only beyond its financial resources, but also beyond the capacity of its management and organisation. Atholl had no proper costing system for recording expenditure on individual contracts. Impending liquidation of Atholl 26. Towards the end of April 1963 Mr. Hugh C. Stenhouse, o.b.e., of Glasgow, who had previously been approached by Mr. Scott in the hope that he might put up some funds to assist Atholl, came forward with proposals for purchase of the shares at a purely nominal sum in the hope of saving creditors from the serious consequences of liquidation. These proposals, which 3 Printed image digitised by the University of Southampton Library Digitisation Unit were somewhat similar to those which were subsequently agreed for the sale of Athol 1 referred to below, were explained in Mr. Hogg’s circular letter to creditors dated 29th April 1963, a copy of which is annexed hereto marked appendix C. The circular incorporates a statement of assets and liabilities showing comparative figures (a) based on the approximate balance sheet on a going concern basis and (b) based on the draft statement of affairs on a liquidation basis, at 28th February 1963, prepared by Thomson McLintock & Co. for the Bank of Scotland. One of the conditions precedent to an offer by Mr. Stenhouse was that Mr. Scott should resign from the board of Atholl, but Mr. Scott refused to do so and the proposals were withdrawn. 27. At the beginning of May 1963 the Bank of Scotland approached Sagit Trust Co. Limited (‘Sagit’), an industrial holding company in London which is a substantial shareholder in A. A. Stuart & Sons (Contractors) Limited (‘Stuart’), a public company engaged in building contracting in the West of Scotland, with a view to the possibility of Stuart buying Atholl. After some hesitation the management of Stuart agreed to make an offer provided that Mr. Scott first resigned from the board of Atholl. The management of Stuart have informed me that although they hoped that by purchasing Atholl their company might eventually make some profit out of the transaction, their principal desire was to avoid the liquidation of Atholl which might have had an adverse effect on their own business. 28. The moratorium during which the bank advanced £183,000 ended on 30th April 1963. Thereafter the bank met various specific requests for further finance until it was agreed on 8th May that the bank would pay wages for the three weeks ending 10th, 17th and 24th May 1963 and provide up to £10,000 for purchases from sub-contractors and suppliers during that period. This post-moratorium finance totalled £30,000. A creditors’ committee which had been formed made it known to Mr. Scott that unless he resigned from the board of Atholl liquidation proceedings would be started. Mr. Scott did not resign and on 24th May 1963 Mr. John Waldie, c.a., the partner in Thomson McLintock & Co. who had been consulted by the bank, was appointed provisional liquidator of Atholl on the petition of the Inland Revenue. 29. Through lapse of time the bank’s potential preferential claim of £318,000 at 28th February had been reduced by 24th May 1 963 to about £246,000, which appeared to be covered by avail- able assets. After this reduction (assuming that moratorium and post-moratorium bank finance produced additional assets of equivalent realisable value), unsecured creditors might have received a dividend of 1 s. 5d. in the £ but much would have depended on negotiations with local authorities in connection with damages for failure to complete work on hand. On the basis of a dividend of Is. 5d. in the £, and taking into account the bank’s preferential claim and priority for repayment of moratorium and post-moratorium finance, it appears that the bank might have recovered in a liquidation a maximum of £356,000 out of total advances of about £1,382,000. The bank placed little value on the guarantee by St. Martin and was anxious to avoid liquidation of Atholl which might have had serious repercussions on those of the bank’s customers who were unsecured creditors. The Sale Agreement 30. The suggested transaction for the sale of Atholl was referred by the Bank of Scotland to Mr. Hogg, and was approved by him. The terms may be summarised as follows : (i) Stuart to purchase from Tickler all the issued shares of Atholl for a total of £1. (ii) Tickler to pay Atholl £81,000 in settlement of the amount owing to Atholl of approxi- mately this amount. (iii) Atholl to pay to St. Martin £81,000 in settlement of the amount owing to St. Martin of approximately £745,000. (iv) Stuart to pay 5s. in the £ to the trade creditors of Atholl including other companies in the St. Martin Group. (v) The Bank of Scotland to agree to a reduction in its unsecured guarantee by St. Martin of AtholPs overdraft from £900,000 to £500,000. This transaction did not involve any reduction in the overdraft. As indicated in paragraph 55, however, an arrangement for further finance provided for deferment of all existing bank advances. 31. It will be seen that the transaction depended on the acceptance by trade creditors of 5s. in the £ of their claims against Atholl. In a circular letter to the creditors dated 7th June 1963, which is reproduced at Appendix D, the solicitors acting for the creditors’ committee gave details of the proposals to pay them out and recommended acceptance. By 18th June 1963 over 90 per cent of the creditors had indicated approval. 32. On 21st June 1963 Mr. Scott was removed from the board of Atholl by a special resolution passed by the shareholders of Atholl. Thereupon Stuart finally agreed to purchase Atholl and 4 Printed image digitised by the University of Southampton Library Digitisation Unit on 29th June 1963 made a firm offer to the creditors of Atholl to acquire their claims for 5s. in the £ which was accepted. The sale agreement whereby Stuart acquired the share capital of Atholl was executed on 30th July 1963 between Tickler and St. Martin (by its agent Mr. Hogg as receiver) on the one hand, and Stuart on the other. A copy of the sale agreement is annexed hereto at appendix E. On the signing of this agreement Mr. Waldie retired from his appoint- ment as provisional liquidator. Criticisms by Mr. Scott 33. From the time when consideration was first given to the disposal of Atholl up to completion of the sale, and even thereafter, Mr. Scott made many comments and complaints about the transaction to the various parties concerned. He set out his criticisms in the circular to share- holders dated 2nd November 1963 (reproduced in appendix B). 34. Mr. Scott challenged the transaction on the grounds that, although St. Martin received £81,000 in settlement of its large claim against Atholl and a reduction of £400,000 in its liability under guarantee to the bank, the group was not receiving a fair price for the shares. He criticised various aspects of the transaction but he placed the greatest emphasis on what he regarded as too low a value for work in progress which was taken into consideration when the terms of the sale were agreed. Valuation of work in progress 35. The valuation of work in progress is normally based primarily on, and does not usually exceed, the costs actually incurred, deduction being made for cash received on account, but in the case of work done under long term contracts it may also be reasonable to include a pro- portion of the profit earned to date. In all cases it is important to provide for losses by ensuring that the valuation does not exceed the proceeds of sale after making full provision for expenses of completion, sale and distribution, or installation, as the case may be. Accordingly, for any but the simplest operations a reliable valuation of work in progress depends to a large extent on the availability of detailed records. AtholPs records at 28th February 1963 were not adequate for this purpose. 36. John Dansken & Purdie examined such of AtholPs records as were available but in the absence of reliable costs and estimates they thought it best to base their valuation on certificates of the value of measured work obtained by Atholl from employers’ (customers’) surveyors for the purpose of interim payments. Their valuation (referred to in paragraph 22) may be sum- marised as follows : Work in progress representing retentions and outstanding amounts £699,365 37. Interim certificates on which John Dansken & Purdie based their valuation took no account of unmeasured work, which would vary from time to time, and according to John Dansken & Purdie this might amount to as much as 4 per cent of the total work measured, i.e. in this case a maximum of £442,500. Having been given no detailed estimates of further expenditure to complete the contracts or of the likely profit or loss on each contract, John Dansken & Purdie thought it best to make no addition for unmeasured work in their valuation. They made the position clear in their report and in the circumstances I find no grounds for criticism of the procedure which they adopted. 38. The report by Thomson McLintock & Co. dated 16th April 1963 did not repeat the references made by John Dansken & Purdie to unmeasured work but the bank had received the report of John Dansken & Purdie and a copy was sent to Mr. Hogg who was therefore aware of the position. 39. The valuation by John Dansken & Purdie of work in progress at £699,365 was taken into account in the terms of the sale of Atholl. Mr. Scott’s main criticism of the transaction is that by disregarding the value of unmeasured work to which he attributed a value of over £1,000,000 the St. Martin Group did not receive a fair price. 40. For the purpose of demonstrating that an insufficient value was attributed to work in progress Mr. Scott adopted a different approach and calculated the value by reference to Measured work based on interim valuations Less cash received on account £ 11,064,025 10,381,006 Amounts outstanding on finally settled contracts 683,019 16,346 5 Printed image digitised by the University of Southampton Library Digitisation Unit tender prices and estimated costs of completion. His calculations, set out in a letter to Mr Hogg dated 10th July 1963 may be summarised as follows: Aggregate tender values of contracts 14,847,514 Less Amounts certified 10,318,170 4,529,344 Less Estimated costs of completion 3,255,000 1,274,344 Less 10 % contingency for variations 127,434 Unmeasured work 1,146,910 Add retentions and current amounts due 710,433 Work in progress ... £1,857,343 These figures are not entirely comparable with those of John Dansken & Purdie who included certain contracts which were treated by Mr. Scott as completed. It will be seen, however, that Mr. Scott’s valuation at £1,857,343 exceeds that arrived at by John Dansken & Purdie by some £1,158,000 and that the value which he attributes to unmeasured work is over 1 1 per cent of the value certified. 41 . If the basic information were reliable, Mr. Scott’s method of valuation would be acceptable, subject to deduction being made for profit carried forward and profit not yet earned on work still to be done. The contracts in question, however, were made at fixed prices and the evidence which I have seen leads me to think that they were unprofitable; if this were so such a method of valuation would have the merit of making provision for losses. On the other hand, a valuation by this method depends very largely on the accuracy with which costs of completion can be assessed and although Mr. Scott has produced an analysis of the other figures, contract by contract, I have seen no detailed working papers to support Mr. Scott’s estimate of the costs of completion. 42. In Mr. Scott’s circular of 2nd November 1963 (reproduced in appendix B) he includes work in progress at 28th February 1963 in estimate A, at the valuation made by John Dansken & Purdie plus an allowance for unmeasured work at 4 per cent, and in estimate B, at figures put forward by himself totalling £1,856,865. The ‘profit to purchaser’ shown in Mr. Scott’s estimates A and B depends on substantial allowances for unmeasured work which he describes as ‘estimated work in progress’. 43. The contracts which were in progress at the time of the Atholl transaction have now nearly all been completed under Stuart’s management and it has been possible to establish within reasonable limits the eventual proceeds and the further expenditure which was required, with a view to obtaining a retrospective valuation of the work in progress at 28th February 1963. In this I have been assisted by Mr. Waldie of Thomson McLintock & Co. and Mr. J. E. Hiscock, managing director of Stuart. By applying Mr. Scott’s method of calculation to the figures as they were seen to be materialising at 30th September 1965 work in progress at 28th February 1963 is now calculated to have had a negative value of £247,713. My revised cal- culation is shown below, with comparative figures from Mr. Scott’s calculation for easy reference: Mr. Scott’s figures £ 14,847,514 127,434 Aggregate tender value of contracts Less variations Revised calculation £ 15,349,565 1,217,626 14,720,080 14,131,939 10,318,170 Less amounts certified . 10,913,176 4,401,910 3,218,763 3,255,000 Less costs of completion 4,176,909 1,146,910 710,433 Retentions and current amounts due Minus 958,146 710,433 £1,857,343 Work in progress at 28th February 1963 ... Minus £247,713 6 Printed image digitised by the University of Southampton Library Digitisation Unit 44. The revised aggregate tender value of contracts includes certain contracts in progress which Mr. Scott treated as completed for the purpose of his calculation. The amounts certified have been increased accordingly. The variations represent differences in specification and measurement from those on which tenders were based and these involved reductions sub- stantially greater than the contingency provision made by Mr. Scott. 45. Costs of completion have also proved to be substantially greater than Mr. Scott’s estimate. Messrs. W. M. Kesson & Co., chartered accountants, the present auditors of Atholl, have confirmed to me that the expenditure charged against these contracts since the Stuart manage- ment took over in 1963 includes only charges which may be properly made against these con- tracts and that no expenditure properly chargeable to other companies or other work has been included in the figure of £4,176,909. 46. Although the above calculation indicates that work in progress had a negative value of £247,713 it would not be reasonable to accept this figure without reservation when judging the propriety of the Atholl transaction. The contracts were all undertaken at fixed prices which should have allowed for increases in cost in the normal course of completion. The difficulties of 1962 and 1963, however, delayed the work considerably and inflation will have had a much greater effect than might reasonably have been expected at the time of the sale. It is impossible to be precise but if an allowance of, say £625,000, i.e. about 15 per cent of the total expenditure, is made for additional costs arising from unforeseeable circumstances, it appears reasonable to regard a maximum of about £380,000 as the value attributable to work in progress at 28th February 1963 for the purpose of the Atholl transaction. 47. For certain contracts final accounts have not yet been agreed and the maintenance period has not yet expired so that the final outcome still cannot be calculated precisely. Nevertheless, it appears to me that the value of work in progress which was taken into consideration at £699,365 on the basis of information available when the terms of the sale of shares were agreed can now be regarded as excessive to the extent of at least £300,000. I am satisfied that the consideration for the sale was not too low on account of the value attributed to work in progress. Continuance of bank guarantee 48. Mr. Scott has particularly criticised the continuance of the guarantee by St. Martin of the advances owing by Atholl to the Bank of Scotland, albeit at a reduced figure. 49. It should be remembered, however, that at the time of the sale in July 1963 the financial position of Atholl was disastrous. By then the Bank of Scotland had advanced to Atholl a total of about £1 ,475,000 including £93,000 for the provisional liquidator. Of this amount the bank could not recover in a liquidation more than £413,000 taking into account preferential claims at £339,000 and moratorium priorities worth £32,000. It would be natural to expect the bank to seek to reduce its potential loss by preserving its rights under the guarantee for the full amount of £900,000. 50. Although it was in the interests of St. Martin to reduce as far as possible a potential liability, particularly if it were to depend on the management of a company which was no longer a subsidiary, Mr. Hogg, as receiver and manager of St. Martin, could do nothing to achieve such a reduction without the concurrence of the bank. In the event of liquidation of Atholl, St. Martin would have been called upon to pay up the whole amount of £900,000 under its guarantee and would not have recovered on its unsecured claim of about £745,000 against Atholl more than £28,000 as compared with the £81,000 which it received from Atholl under the sale agreement. It appears to me that Mr. Hogg had no alternative to accepting contin- uation of the bank guarantee at the reduced figure of £500,000. Offer by shareholders 51 . In Mr. Scott’s circular of 2nd November 1963 (reproduced in appendix B) he refers to an offer to Mr. Hogg by a committee of St. Martin shareholders to purchase all that company’s interests in Atholl and complains that this offer was not given proper consideration. 52. The shareholders concerned were Sir Alfred Beit, Mr. Scott, Overseas American Finance Co. Limited, controlled by Mr. Scott, and MacNeill & Son Limited, controlled by Sir Alfred Beit. Together these shareholders held approximately 35 per cent of the shares of St. Martin at that time. 53. These shareholders offered to purchase the Atholl shares for £500 and the beneficial ownership of Atholl’s debt of £745,000 to St. Martin for £82,000, it being a condition that Tickler should pay to Atholl the amount of £81,1 10 owing to that company. It was provided that ‘any benefit or equity’ arising from this offer was to be held in trust for all the registered shareholders of St. Martin subject to a first charge in favour of the shareholders making the offer in respect of any cash advances made by them in connection with the offer. 7 63834—0 Printed image digitised by the University of Southampton Library Digitisation Unit 54. In comparison with the offer made by Stuart this shareholders’ offer would have benefited the remaining St. Martin group by an amount of £499 in the consideration for the Atholl shares, and by £890 in the settlement of amounts owing from Tickler to Atholl and from Atholl to St. Martin. On the other hand the shareholders’ offer made no provision for the trade creditors of Atholl or for the Bank of Scotland, and it did not provide for any reduction in the bank guarantee given by St. Martin for £900,000. No reference was made to the additional funds required to complete the contracts. I am satisfied that Mr. Hogg acted properly in rejecting this offer in favour of the offer made by Stuart. Arrangement for further finance 55. Before Stuart purchased Atholl an arrangement was made for the further finance which was required to complete the work on hand at the time of the transaction. In addition to the advances totalling £1,169,000 at 28th February 1963 the Bank of Scotland had provided £183,000 of moratorium finance, £30,000 of post-moratorium finance and £93,000 for the provisional liquidator, namely a total of £1,475,000. It was agreed that the further funds required should be put up by the bank and Sagit (the industrial holding company which has a large shareholding in Stuart) on the following terms: (i) Sagit to make available to Atholl up to £300,000 until completion of the current contracts, i.e. those open at 8th August 1963. The bank to provide facilities up to £100,000 as finance additional to the above £300,000. (ii) Immediately after 8th August 1963 Sagit to procure Atholl to pay: (a) The fees and outlays of the provisional liquidator. (b) The debts of the preferential creditors, excluding the bank, in full amounting to approximately £33,000. (c) The debts of the trade creditors at 5s. in the £. (iii) Sagit to procure Atholl to complete current contracts expeditiously and economically. (iv) On completion of the current contracts, the then net current assets of Atholl to be distributed in the following order: (a) In repaying the finance provided by the bank under (i) above, with interest. (b) In repaying the finance provided by Sagit under (i) above, with interest. In paying Sagit a fee as financial advisers of £10,000 for each year or part year they act as such, subject to a maximum of £20,000. (c) In paying to Stuart as managers a fee of £50,000 for each year or part year they act as such, subject to a maximum of £100,000. (d) In paying the whole balance up to a total of £600,000 to the bank in repayment of Atholl’s outstanding overdraft. Provided that Sagit in its sole discretion can agree to this maximum being raised to £650,000. Any balance remaining thereafter to be shared equally between the bank and Sagit. The bank to accept the payments made to it hereunder and under paragraph (vi) below in full discharge of Atholl’s outstanding overdraft and interest. (v) Any new contracts to require prior approval of the bank and be separately recorded. (vi) On completion of the current contracts, Sagit to pay the bank one half of the value of the fixed assets of Atholl as taken over at 8th August 1963. The above arrangement was set out in a letter dated 8th August 1963 addressed by the solicitors acting for the Bank of Scotland to the solicitors acting for Sagit and a copy of this letter is annexed at appendix F. 56. As will be seen, this arrangement for further finance, and its repayment, authorised fees and laid down terms for repayment of sums previously advanced by the bank. This is the only agreement which might be described as a ‘sharing arrangement’, such as that questioned by Mr. Scott in his circular of 2nd November 1963 (reproduced in appendix B), and I am satisfied that there was nothing improper in it. Indeed, by entering into this arrangement the bank sacrificed its preferential claims estimated at £339,000 and priority for repayment of other moratorium and post-moratorium finance totalling £32,000. Other matters raised by Mr. Scott 57. Mr. Scott has suggested that the investigation should include an enquiry into any arrange- ment which might have been made with insurers of the creditors of Atholl. I am informed 8 Printed image digitised by the University of Southampton Library Digitisation Unit that no such arrangement, other than for continuation of credit insurance, was made by any of the parties to the Atholl sale agreement. 58. Mr. Scott has also suggested that what he regards as unsatisfactory features in the Atholl transaction might be attributable to other business relationships between the parties or their representatives. I am satisfied that the interests of St. Martin have not been adversely affected by any such relationship. Financial position of Atholl at 30th September 1965 59. I have received from Mr. Waldie of Thomson McLintock & Co. a report on the operating results of Atholl for the period from 1st March 1963 to 30th September 1965. From this report I have extracted and attach hereto, marked appendix G, a summarised approximate operating statement for the period, and, marked appendix H, a summarised draft balance sheet at 30th September 1965. These statements show that Atholl’s total deficiency has increased from £1,517,519 to £2,055,692 even after cancellation of amounts totalling £645,924 owing to St. Martin and others. 60. The bank provided in full the facilities of £100,000 required by paragraph (i) of the arrange- ment for further finance and as will be seen from appendix H this finance has been reduced to about £53,000. With this exception no payments under paragraph (iv) of the above arrangement for further finance have yet been made to either the bank, Sagit or Stuart. On the evidence at present available it appears that the bank is unlikely to receive more than repayment of this balance of £53,000 and its half share, approximately £52,000, of the fixed assets to be valued on completion of current contracts. On present estimates Sagit will recover the major part of its advance of £300,000 but it appears unlikely that any funds will be available for payment of the fees owing to Sagit and Stuart. It will be noted that no payment can be expected under heading (iv)(d) of the arrangement. 61. By comparison with the preferential and unsecured claims which might have been worth about £413,000 in a liquidation the bank now appears likely to recover only about £52,000 of its aggregate advances of £1,475,000. 62. In contrast to the ‘profit to purchaser’ shown in estimate A at £622,920, and estimate B at £1,337,920, in Mr. Scott’s circular to shareholders dated 2nd November 1963 it appears that Stuart will make no profit at all. It is unlikely that either Sagit or Stuart will receive any of their fees agreed at a maximum of £120,000. 63. The share capital of A tholl appears to be worthless even after taking into account the com- position with the unsecured trade creditors and the releases granted by the bank. Atholl’s trading losses, totalling about £2,000,000 might have some value for tax purposes if admitted by the Inland Revenue for set-off against future profits earned in the same type of business. The circumstances lead me to think that the value of the tax loss is problematical and in my opinion it should be left out of account when considering the financial result of Sagit’ s rescue operation. Conclusions on the Atholl transaction 64. I have come to the conclusion that Mr. Scott’s criticisms of the Atholl transaction were unfounded, and in particular I have satisfied myself on the following matters : (a) Without substantial sources of additional finance to complete the contracts the only alternative to a sale of the shares was liquidation of Atholl in which unsecured trade creditors could not have received a dividend of more than Is. 5d. in the £. (b) The offer which was accepted was the best offer available; it made provision for a pay- ment of 5s. in the £ to unsecured trade creditors of Atholl and for a reduction in the liability of St. Martin under guarantee. (c) There was nothing improper in the arrangement for obtaining additional finance after the sale; this was a ‘sharing arrangement’ only to the extent of laying down terms for repayment of sums previously advanced. (d) No improper arrangement was made with insurers of Atholl creditors by any of the parties to the Atholl sale agreement and the interests of St. Martin have not been adversely affected by any business relationship between the parties or their repre- sentatives. (e) On the evidence available it appears that the purchasers of Atholl, far from making too great a profit out of the transaction, will make no profit at all. 9 Printed image digitised by the University of Southampton Library Digitisation Unit The St. Martin Merger 65. Appendix A, to which reference has already been made, shows the relationship between the various companies in the St. Martin group at the time when receivers were appointed to St. Martin and Foster Clark early in 1963. 66. The formation of the group covered a period of a little over four years, from 1956 to early in 1960, and the somewhat involved steps by which the principal companies in the group, namely St. Martin, Tickler, Atholl and Foster Clark, were brought together are illustrated in appendix I annexed. Situation at the beginning of 1956 67. At the beginning of 1956 St. Martin, established as preserve manufacturers at Maidenhead in 1937, was a public company with a capital of £325,000 all in ordinary shares quoted on the Stock Exchange, London. The company had seven small subsidiaries. Following declining profits in the previous five years St. Martin made a loss in the year ended 31st March 1956. Dividends which had been paid at 12£ per cent per annum were reduced to 10 per cent in 1955, and no dividend was paid for the year ended 31st March 1956. 68. Tickler, preserve manufacturers of Grimsby, Law, Whitchurch and Southall, was a private company incorporated in 191 1 and had a capital of £409,203 (of which £89,203 was in preference shares, and £320,000 in ordinary shares) closely held by the Tickler family and their associates. The company had six small subsidiaries. This company was also suffering from adverse con- ditions and had incurred a loss in each of the three years ended 30th April 1956. Early in 1956 Tickler sold its factory in Southall, London, for £390,000 and thereby realised a capital profit in excess of £290,000. 69. Atholl, the Scottish building contracting company, formed in 1944 and described earlier in this report, was a private company with a capital of £60,700 all in ordinary shares held pri- vately. The company had been making profits at the rate of about £50,000 per annum before 1956. 70. At that time, Foster Clark, canners of fruit and vegetables at Maidstone, was a public company with a capital of £625,000 quoted on the Stock Exchange, London. The company was making profits and paying dividends. It was not brought into the St. Martin group until 1960. Events in 1956 71. On 24th January 1956 Mr. Scott purchased the whole share capital of Atholl for a total cash consideration of £192,000. Following this transaction the directors of Atholl were replaced by Mr. Scott, Lord Sempill, Sir Alfred Beit and Mr. H. J. Guntrip. 72. On 30th October 1956 Overseas American Finance Co. Limited, acting as nominees for Mr. Scott and Sir Alfred Beit, made a general offer to purchase all the preference and ordinary shares of Tickler for cash. This offer was contained in a circular which is reproduced in appen- dix J and, after the prices had been increased marginally, the offer was accepted by holders of about 99 per cent of both the ordinary and preference shares in Tickler. The total consideration amounted to £438,925. On 23rd November 1956 the existing directors of Tickler were replaced by Mr. Scott, Sir Alfred Beit and Mr. S. E. Bushell. 73. In the short time between the purchase of Tickler in November 1956 and the end of that year, Tickler entered into two major transactions which changed its basis of operations. 74. On 27th December 1956 Tickler entered into an agreement with St. Martin to sell to that company for seven years from that date all its future production at prices based on an agreed formula. The consideration included the allotment to Tickler of 675,000 new 4s. Ordinary shares representing 29 per cent of St. Martin’s increased equity. The agreement was authorised by minutes of the Tickler Directors dated 27th December 1956 and of the St. Martin Directors dated 2nd January 1957. 75. At the same time Tickler bought from Mr. Scott the whole share capital of Atholl for £220,037. lOs.Od. payable in cash. This transaction was authorised by minute of the Tickler Directors dated 28th December 1956, Mr. Scott not voting. I have seen no evidence that the Tickler directors obtained an independent opinion on the price to be paid. 76. The above transactions, which were all effected in 1956, may be summarised in chrono- logical order as follows : (i) The purchase by Mr. Scott of Atholl, building contractors; (ii) The sale by Tickler, preserve manufacturers, of one of its factories at a substantial capital profit ; 10 Printed image digitised by the University of Southampton Library Digitisation Unit (iii) The purchase of Tickler by Mr. Scott and Sir Alfred Beit; (iv) The signing of a trading agreement between Tickler and St. Martin, affecting Tickler’s production for seven years, Tickler acquiring 29 per cent of St. Martin’s increased equity; (v) The purchase by Tickler of Atholl from Mr. Scott. 77. At the end of 1956, as a result of these transactions Mr. Scott and Sir Alfred Beit between them owned 99 per cent of Tickler, which in turn owned 100 per cent of Atholl and 29 per cent of the equity of St. Martin. 1957—1958 78. In January 1957, following the trading agreement with Tickler, Mr. Scott, Lord Sempill, Sir Alfred Beit, Mr. S. E. Bushell and Mr. H. J. Guntrip were appointed directors of St. Martin. In the course of 1957 all the previous directors of St. Martin, with the exception of Colonel W. M. Tickler, resigned. 79. In December 1957 Mr. Scott purchased from Tickler for cash at 4s. a share, equivalent to a total consideration of £135,000, the 675,000 ordinary shares in St. Martin which it had acquired under the trading agreement. This transaction was authorised by minute of the Tickler directors dated 23rd December 1957, Mr. Scott not voting. I have seen no evidence of an independent opinion concerning the purchase price but the Stock Exchange official list for that date records the market price of St. Martin’s Ordinary shares at 2s. 6d. — 3s. 6d. each, substantially less than the price paid by Mr. Scott. 80. Early in 1958 Mr. Scott and Sir Alfred Beit sold their 99 per cent shareholding in Tickler to St. Martin for a combined consideration of £600,000 in cash and 1,500,000 new 4s. Ordinary shares of St. Martin. This transaction was authorised by minute of the St. Martin directors dated 6th February 1958, Mr. Scott not voting and Sir Alfred Beit not being present. A circular to shareholders of St. Martin dated 7th February 1958 giving information concerning this transaction is reproduced at appendix K. The new shares were issued on 6th February 1958 and represented about 39 per cent of St. Martin’s increased equity. Taking the new St. Martin shares at their market price of 3s. 6d. at the end of February 1958 the total con- sideration received by Mr. Scott and Sir Alfred Beit for about 99 per cent of Tickler’s capital may be valued at £862,500 as compared with £438,925 at which the same shares changed hands in 1956. 81. It will be seen from the consolidated balance sheet of Tickler and Atholl as at 31st December 1957 (appendix K) that their cash resources were £636,899. Between then and 31st March 1958 there were substantial movements on the current account between Tickler and St. Martin and on balance nearly £600,000 was transferred to St. Martin. The records of St. Martin and other information available to me indicate that one transfer of £600,000 in February 1958, from Tickler to St. Martin was used by the latter to provide the cash part of the consideration for the purchase of the Tickler shares from Mr. Scott and Sir Alfred Beit, referred to in the preceding paragraph. 82. Bearing in mind the trading agreement between Tickler and St. Martin, and the common membership of three directors on their respective boards, I should have expected them to obtain an independent opinion concerning the fairness of the terms on which St. Martin acquired this substantial investment. I have seen no evidence of any such opinion and there is no reference to one in the circular sent to St. Martin shareholders. 83. In February 1958 after Mr. Scott and Sir Alfred Beit had acquired a further 170,000 ordinary shares in St. Martin, they held 62 per cent of the equity of St. Martin, which owned 99 per cent of Tickler, which in turn owned 100 per cent of Atholl. 1959—1960 84. During 1959 the Directors of St. Martin looked for further acquisitions and in December of that year they made a formal offer to purchase the equity of Foster Clark by an exchange of shares. 85. As mentioned above, Foster Clark, canners of fruit and vegetables at Maidstone, was a public company with a capital of £625,000 (of which £100,000 was in preference shares and £525,000 in ordinary stock units) quoted on the Stock Exchange, London. 86. Foster Clark had continued to make profits up to September 1958, but in order to conserve cash resources it had not paid an ordinary dividend since that for the year ended 30th September 1956. It was the parent company of a small group, of which the more important subsidiaries were Corbatch Canners Ltd. and Tay Valley Canning Co. Ltd. Immediately prior to the bid Foster Clark ordinary stock units of 10s. were standing in the market at 13s. 6d. per unit. 11 Printed image digitised by the University of Southampton Library Digitisation Unit 87. The terms of the offer were set out in a circular to Foster Clark shareholders dated 23rd December 1959 which is reproduced at Appendix L. Foster Clark had no previous connection with Mr. Scott and the directors resisted the bid. In January 1960, however, St. Martin succeeded in obtaining control and by the time the offer closed in February 1960 St. Martin had acquired 77 per cent of the equity of Foster Clark. 88. Taking into account the new St. Martin shares at their mid-market price of 6s. 6d. per share at the end of March 1960 the total consideration received by the vendors of 77 per cent of the Foster Clark equity is calculated to have been £799,675 equivalent to 19s. 6d. per stock unit compared with the price before the bid of 13s. 6d. 89. In March 1960 after the successful bid by St. Martin for Foster Clark involving the issue of further St. Martin shares, that company owned 77 per cent of the equity of Foster Clark, and 99 per cent of Tickler, which owned 100 per cent of Atholl. The details are given in appendix A. This relationship continued until receivers were appointed to St. Martin and Foster Clark in February 1963. Scope of Investigation 90. My investigation and report have been limited to consideration of the Atholl transaction and to the steps by which the principal companies in the St. Martin group were brought together. I have not investigated in detail the difficulties which led to the appointment of receivers and managers or the present financial position of the group. Evidence 91. In the course of my enquiries I have received and examined audited accounts, financial statements, minutes, circular letters, correspondence and memoranda concerning the various matters which were the subject of my investigation. 92. I have also received oral evidence from directors and others who seemed able to throw some light upon the matters under enquiry. Attached hereto marked appendix M is a list of the individuals who gave such evidence. I have not found it necessary to examine any person upon oath. John D. Russell Inspector 31st January, 1966 Printed image digitised by the University of Southampton Library Digitisation Unit St. Martin Preserving Company Limited Manufacturers of preserves, jams, marmalade {‘Chunky’ Brand), mincemeat and Christmas puddings s — Eli's — fels’l- •Sill 1 1<S 1 _ uc -a s soi- g . 8 "3 JH •S 3 -P-s H |ij 31 I i -If 2 <5 £> g _Ufl ■aS 8 I "a! Printed image digitised by the University of Southampton Library Digitisation Unit South Essex St. Martin St. Martin St. Martin St. Martin St. Martin Lauries Foster Clark Preserving (Eastern) (Northern) (Southern) (Eire) (Overseas) Preserves (South Australia) Co. Ltd. Ltd. Ltd. Ltd. Ltd. Ltd. Ltd. Ltd. APPENDIX B S. R. HOGG. d.$.o„ m.c .. f.c.a., Receiver and Manager. St. Martin Preserving Company Limited r."n CT scott. cha.mman 2, BALFOUR PLACE, W. M. Y. Oswald H. J. GUNTRIK, A.C.I.S. (9*cr*ta*Y a 0,.,cto.) LONDON, W.l. 2nd November, 1963. Dear Sir or Madam, Following the appointment of Mr. S. R. Hogg as Receiver and Manager to the St. Martin Preserving Co. Ltd., your Board was of the opinion that the fate of the unsecured creditors and shareholders was substantially dependent on the future of Atholl Houses Limited, a major subsidiary of St. Martins. Atholl Houses Limited is a principal building contractor located in Scotland, with a long and successful building history and reputation with many local authorities. At the date of the Receiver’s appointment the approximate value of Atholl’s contracts in hand was some £15m. The major proportion of these contracts in hand had been completed building wise, but final payments due to Atholl had not been received, very substantial sums of money being tied up in retentions and unmeasured work. The Receiver and the Bank of Scotland (Bankers and largest unsecured creditors of Atholl) arranged for a valuation to be made of Atholl. The Boards of Atholl and St. Martins considered this valuation, when produced, was grossly inadequate, resulting as it did in the assets of Atholl being undervalued in the opinion of the Boards by at least £715,000. Representations and protests by the Boards of Atholl and St. Martins concerning the inadequacy of the valuation were ignored or disregarded. The basis of the Boards’ objections however, has never been disputed by the Bank or the Receiver. Following their valuation the Bank and the Receiver maintained that a sale of Atholl was the only alternative to a disastrous liquidation of that Company. The Board of St. Martins has never agreed with this view and policy, of “no other alternative” most particularly if: (i) any sale of Atholl was to be based on the unrealistic valuation, (ii) the only alternative to a disastrous liquidation was to be a disastrous loss to St. Martins with a handsome profit to a purchaser (evident on even the valuation arranged by the Bank and the Receiver, let alone the Board’s estimate — see page 3, estimates A and B), (iii) the sale was to be effected with a customer of the Bank of Scotland in an atmosphere that precluded any discussion of the terms with the Boards of Atholl and St. Martins or pre-empted any proper examination of other alternatives. The Board of St. Martins, in its efforts to secure and inform creditors, and share- holders, has repeatedly but unsuccessfully tried to obtain full information concerning negotiations or agreements relative to a sale of Atholl Houses Limited. A committee of shareholders comprising the largest individual holdings in St. Martins supported the Board’s views that every effort should be made to retain the benefit of Atholl within the St. Martins Group. This committee of shareholders made an offer to the Receiver to purchase his interests in Atholl. The Receiver rejected the shareholders’ offer as being unacceptable to him, but gave no reasons why the offer was unacceptable. From the information available, it appears that the Receiver has accepted a lesser offer for St. Martins’ interests in Atholl Houses Limited. Such information as is available indicates to your Board the following: 1. The Receiver has now concluded an agreement, the terms of which provided for virtually the whole of the issued capital of Atholl to be sold for the sum of £1. 2. Net current account advances of some £660,000 loaned to Atholl by the St. Martins Group (prior to the appointment of the Receiver) will not now be repaid to St. Martins, nor be recovered by St. Martins at any future date. 14 Printed image digitised by the University of Southampton Library Digitisation Unit 3. A further term of the agreement concluded by the Receiver provides for St. Martins to continue to shoulder the burden of a £500,000 guarantee (formerly £900,000) to the Bank of Scotland. This £500,000 guarantee being on account of continuing advances from the Bank of Scotland to Atholl amounting to £600,000. It appears that St. Martins must continue to guarantee £500,000 of Atholl’s debt of £600,000 to the Bank of Scotland, even though St. Martins no longer has any control or vested interest in the affairs or assets of Atholl. This continuing guarantee of £500,000 to the Bank of Scotland despite the fact that: (a) The Receiver has sold virtually the whole of the issued capital of Atholl for £1. (b) The transaction concluded negates any possibility of the St. Martins Group ever recovering its net loans to Atholl of £660,000. On the basis of the valuation arranged by the Bank and the Receiver ( page 3, estimate A), it would seem that the purchasers of Atholl ( having acquired the shares from the Receiver for the sum of £1) will be in a position to make a profit of at least £622,920, although , in the opinion of your directors, the profit to the purchaser is more likely to be in the region o/£l,337,920. I must advise shareholders that, in my opinion,, there are many events and occurrences concerned with the sale of Atholl tfyat remain inexplicable, and further, I do not believe the Receiver or the Bank of Scotland have been as frank and, open with the Board of St. Martins as they might have been. Such information as has been provided of the terms between the Bank of Scotland and the purchaser of Atholl shares has been consistently blurred or expressed in ambiguous language. Without full disclosure of all documents and agreements, the Board of St. Martins cannot be satisfied that the terms of sale for Atholl (so far disclosed) was, or is, in the best interests of the unsecured creditors and shareholders of the St. Martins Group of Companies. As Chairman of St. Martins therefore I have asked the Receiver to supply copies of all documents and agreements relating directly or indirectly to the sale of the shares of Atholl Houses Limited and to the arrangements with the Bank of Scotland. Solicitors acting for the Receiver replied in the following terms: “It is not the Receiver’s intention or indeed his duty to disclose the documents relating to this or any other transaction into which he may enter in the name of the Company until such time as he reports on his dealings to the creditors and other interested parties.” Presumably, the Receiver can justify his actions and I therefore, do not understand why he will not assist the Board of St. Martins to fulfil its duties to the unsecured creditors and shareholders of the St. Martins Group of Companies. To assist the Board, all that the Receiver has to do is to supply copies of documents and agreements concerned with the sale of Atholl Houses Limited. Atholl Houses was a major subsidiary of St. Martins and the sale of this major asset for the consideration which I understand was received may well result in very substantial losses to the shareholders and creditors of St. Martins. Questions I consider vital to the interests of unsecured creditors and shareholders have been subjected to considerable evasion or prevarication, and have not been properly answered. In the circumstances, therefore, the Board of St. Martins is convening a meeting of shareholders (Notice attached herewith). At this meeting the Board will propose a Special Resolution for shareholders consideration declaring that there ought to be an Inspector appointed by the Board of Trade to investigate the sale of Atholl Houses Limited. Shareholders unable to attend the meeting are invited to indicate their support, or otherwise, for the Board’s resolution by returning the proxy form enclosed. R. N. SCOTT, Chairman. 930H4—D 15 Printed image digitised by the University of Southampton Library Digitisation Unit ESTIMATED ASSETS AND LIABILITIES OF ATHOLL HOUSES LIMITED AS TAKEN OVER BY THE PURCHASER OF ATHOLL SHARES FOR THE SUM OF £1 ESTIMATE A Assets ESTIMATE B Assets as estimated by (as estimated in valuation arranged by Bank and Receiver) Fixed Assets & St. Martin 137,785 137,785 Plant and Tools 40,906 40,906 Interest in Subsidiaries 27,513 27,513 Current Assets Stock in Trade 25,774 25,774 Retentions and Interim Payments . . 699,365 699,365 Estimated Work in Progress 442,500 1,157,500 Debtors and Loans 114,206 114,206 Cash in Hand 3,651 3,651 TOTAL ASSETS . . . . 1,491,700 1,491,700 2,206,700 2,206,700 LESS: Liabilities Trade and Other Creditors 236,003 236,003 Inland Revenue and Pensions 32,776 32,776 Deferred liability to Bank of Scotland (See note i) . * 600,000 600,000 868,779 868,779 868,779 868,779 NET ASSETS 622,921 1,337,921 COST OF SHARES TO PURCHASER 1 1 PROFIT TO PURCHASER . . 622,920 1,337,920 Less undisclosed sharing arrange- ment between purchaser and Bank of Scotland (See note ii) . . ? ? (i) £500,000 of this deferred amount due to the Bank of Scotland continues to be guaranteed by St. Martins. (ii) There is some sharing arrangement between the Bank of Scotland and the purchaser of Atholl. This sharing arrangement is concerned with any surplus assets. The precise details of this sharing arrangement have not been disclosed despite repeated requests for information. 3 16 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX C Correspondents in U-S'A • Canada • Bermuda • Australia • New Zealand • South & hast Africa HOGG, BULLIMORE & C<? CHARTERED ACCOUNTANTS. Telegrams : veristock .London . Cables: veristock. London. e c a Telephone: METROPOLITAN 8395 H.D. Barnard. O. G.W.Ballarc W. D. Wilson. P. M. Robeson . D. C. Clark. PRIVATE & CONFIDENTIAL . To : The Creditors of Atholl Houses Ltd. Dear Sirs , JS.C.2. 29th April 1963. T. tv SL. A mt, j Reo*ivwJ 1 -MAY 1963 Aniwirwi 1 Atholl Houses Ltd. \\\*M Further to my circular letters of the 26th February and the,j28th March 1963, and to the circular letter dated the 8th March from the Committee of Creditors, I am now writing to advise you that the Reports of Messrs. John Dansken & Purdie, Chartered Quantity Surveyors, dated 10th April 1963, on the Company's Work in Progress, and of Messrs. Thomson McLintock & Co., Chartered Accountants, dated 16th April 1963, on the state of the Company's Affairs, have both been delivered to the Bank of Scotland and copies have been made available by the Bank to me and to all the other Directors. It is obviously not possible to supply creditors with full copies of these two Reports but I am quite certain that any interested creditor who applies to the Bank of Scotland will be allowed to peruse the full documents. I think, however, the contents of the Reports can be summarised as follows :- (1) WORK IN PROGRESS . Messrs. 'John Dansken & Purdie report that the gross value of work in progress of Atholl at the 28th February 1963, arrived at by taking the valuations for interim payments before and after this date and adjusting same, the retention monies taken from the interim valuation immediately prior to the 28th February 1963, and the amounts outstanding to sub-contractors arrived at by taking the total value of work done by sub-contractors, can be summarised as follows :- Gross Cash Due Retention Money Held Cash Immediately Available Sub-Contractors £ 207 ,744- Atholl Houses Ltd. 491 ,621 Total £ 699,365 £ 134,953 £ 72,791 371,576 120,045 £ 506,529 £ 192,836 They point out, however, that these values are likely to be conservative assessments in respect of there being no valuation placed on unmeasured work and they give as their opinion that these values may be understated to the extent of an average maximum of about 4%, i.e. by a sum of £4^2,500, which of course includes unmeasured work due to sub-contractors. 17 Printed image digitised by the University of Southampton Library Digitisation Unit 2 (2). STATEMENT OP AFFAIRS . We append to this report a summarised Statement of the Company's affairs, both on a going concern basis and on a break up value based on the figures submitted by Messrs. Thomson, McLintock & Co. You will observe that the Work in Progress has been included at the value suggested by Messrs. John Dansken & Purdie which exclude o any value of unmeasured work, but even were the unmeasured work to be included on the basis suggested by them the Statement of Affairs would still result in a deficiency on a going concern basis of well over £1,000,000. Immediately on receipt of these Reports the Bank of Scotland got into touch with Mr. Hugh C. Stenhouse, O.B.E. , who had some time earlier expressed his concern that yet another well known Scottish Company might be put into liquidation with all its unfortunate consequences for creditors and others dependent on Atholl . Ac a result of these discussions Mr. Stenhouse made certain proposals, which were accepted by the Bank of Scotland and by myself ac Receiver of St. Martin Preserving Co. Ltd., but as stated below this offer has now been withdrawn. The offer can be summarised as follows: - 1. The whole issued share capital of Atholl to be acquired for the nominal consideration of £1. 2. The loan of approximately £750,000 from St. Martin Preserving Co. Ltd. to Atholl to be cancelled in return for a consideration of £69 , 000 - which payment to be made by the Bank of Scotland. The loan from Atholl to T.G. Tickler Ltd. amounting to £81,110 to be settled in full by the payment by 31st May 1963 .by Ticklers of £69,000. 4- The Bank of Scotland to cancel -one-half of its total advance to Atholl amounting, after the application of accrued interest and having, met the obligations undertaken by the Bank during the moratorium period, to approximately £1,300,000. The Bank to be given a first Floating Charge over the whole assets of. the Company and fixed security over its heritable property in respect of the' continuing advance of approximately £.650,000. Interest on that advance to be waived for a period of ' one ye ar . 5. The purchaser to make arrangements immediately to purchase from all other creditors of Atholl their whole admitted claims against Atholl as at 28th February 1963 for a payment 5/- per £. It was also a term that the purchaser after a reasonable period and at his own discretion would make a further payment to trade creditors not exceeding 5/- pen £ if it transpired' that’ the position of the Company was more favourable than now appears. 6. Mr.. Oswald and Mr.' Lambie to remain in the employment of the Company for not less than one year although the purchaser would be entitled to terminate their employment at any time on three months' notice. 7. That of the present Directors of the Company who are MessrB. Hogg, Durlac , Wilson, Scott, Seaman, Oswald and Lambie,. Messrs. Scott and Seaman should immediately • resign from the Board. Mr. Seaman should also immediately resign as Secretary. 18 Printed image digitised by the University of Southampton Library Digitisation Unit - 3 - 8* Future Bank overdraft facilities, if required, to be made' available by the Bank of Scotland on a new account and on the basis of security being provided satisfactory to the Bank. 9. The existing guarantee given by St. Martin to the Bank of Scotland for sums up to £900,000 to remain undisturbed, except that the Bank of Scotland could only, rank in respect of the continuing guarantee for the uncancelled balance of its advance amounting, to- approximately £650., 000. Mr. Stenhouse made it clear at the outset that in order to restore full confidence in the Company, an imperative first step before he could proceed further was the immediate reorganisation of the Board. The proposals which Mr. Stenhouse had made to the Bank were at once communicated to all Directors of Atholl. Immediate action was necessary to accomplish reorganisation of the Board and accordingly I and my Partners, Durlac and Wilson, delivered to Mr. Stenhouse our undated letters of resignation as Directors of the Company so that Mr. Stenhouse would be in a position to lodge our resignations with the Company at any time he desired, Neither Mr. Seaman's nor Mr. Scott's resignation has yet been received and accordingly Mr. Stenhouse cannot proceed further. Therefore, the proposals have been withdrawn. It is with the greatest regret that I have to advise creditors that in the absence of .any immediate alternative proposal I can see no other course but for the creditors to take steps to put the Company into liquidation as quickly as possible so as to prevent any creditor acquiring a preference. My Partners Durlac and Wilson and I are today tendering, to the Company our resignation as Directors, but we will nevertheless continue to fulfil our undertaking given to the Bank of Scotland to counter- sign cheques drawn by Atholl on the special account of the Bank of Scotland opened by the Bank to meet moratorium payments due to creditors in respect of orders authorised during the moratorium period which ends tomorrow, Tuesday, 30th April. We -will moreover be pleased tp help the creditors in any way we can and, if required, to attend a meeting of creditors if ohe be convened. Yours faithfully, S. R. HOGG. 'SRH/WHD/GJ . 19 Printed image digitised by the University of Southampton Library Digitisation Unit ATHOLL HOUSES LTD. SUMMARISED STATEMENT OF AFFAIRS as At £8 tH February 1963 As Estimated going Break up concern Values Aggregate FIXED ASSETS Cost Depreciation Net heritable Property £ $7 ,391 6,021 51,370 Plant and Machinery 102,261 35,837 66,424 Motor Vehicles 45,280 17,321 27,959 Office Furniture and Equipment 10 , 082 5.189 9-, 893 215,014 64,368 150,646 Less: Instalments outstanding under Hire Purchase Agreements 12,861 137,785 80,000 Loose Plant & Tools 40,906 5,000 INTEREST IN SUBSIDIARY Shares at cost 27,513 CURRENT ASSETS Stock in Trade - as valued by Company's officials 25,779 10,000 Work in Progress - as valued by John Dansken & Purdie 699,365 100,000 Sundry Debtors and Unexpired Charges 14,877 14,000 Loan to Director 18,219 18,000 Loan to T.G. Tickler Ltd. 81,110 69,000 Cash on Hand 3:651 3.j65i TOTAL ASSETS 1 , ,049,200 299,651 LESS: PREFERABLE CLAIMS * Bank of Scotland for wages, etc. 317,997 Inland Revenue 25,468 Graduated Pension Contributions & Pension Fund 7,308 £3507773 350,773 DEFICIENCY ON PREFERABLE CLAIMS 51,122 UNSECURED CREDITORS * Bank of Scotland 851,128 Inland Revenue 8,396 Amount due to Sub-contractors as assessed by John Dansken & Purdie 207,744 Trade and Sundry Creditors 387,103 St. Martin Preserving Co. Ltd. 744,807 Foster Clark Ltd. 2,025 Robroyston Brickworks Ltd. 14,743 £2,215,946 2,215,946 2, 566,719 Estimated Additional Claims arising in event of liquidation for cost of completion. of contracts by local authorities, etc. less sums due on contracts but withheld by them 436,474 DEFICIENCY OF ASSETS £1, 517.519 TOTAL ESTIMATED DEFICIENCY AS REGARDS CREDITORS £2,703,542 Subject to expenses of realisation and distribution. * Note : Bank of Scotland hold the guarantee of St. Martin Preserving Co. Ltd. for £900,000. 20 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX D McGRIGOR DONALD & CO. Solicitors 172 St. Vincent Street, GLASGOW , C.2. 7th June, 1963* Creditors of Atholl Houses Ltd. Dear Sirs, You will have received from the Board of Atholl Houses Ltd., a circular dated 21st May 1963 which cancelled the meeting of creditors called by the Board for 23rd May 1963* On 24th May 1963, as the result of a Petition for Compulsory Winding Up presented by the Inland Revenue with the approval of the Committee of Creditors and the Bank of Scotland, Mr. John Waldie, C.A., of Messrs. Thomson McLintock fit- Co., Chartered Accountants, 21b West George Street, Glasgow, was appointed provisional liquidator and i6 now in de facto control o'f the Company's affairs. In accordance with the usual procedure an order was made for service of the Petition for Liquidation upon the Company and in course of time the Court will fall to determine whether or not the Company should be liquidated and an official liquidator appointed.. If an official liquidator is appointed the. date of liquidation will for all purposes, including equalisation of diligences, date back to 24th May 1963. In order to preserve the position, Mr. Waldie is in touch with the various employers and it is hoped to arrange a general resumption of work on the contracts on an interim basis until final arrangements can be effected. This matter is, of course, one for Mr. Waldie and not for the Committee of Creditors whom we represent and you should be hearing directly from bim if you are concerned either as suppliers or as sub -contractors in contracts not yet completed. In the meantime, however, the Committee of Creditors have been consulted by interested parties in connection with certain proposals made by Messrs. A. A. Stuart & Sons (Contractors) Ltd. with the approval and support of their major shareholder, Messrs. Sagit Trust Co. Ltd. (formerly The South African and General Investment and Trust Co. Ltd.) who are a substantial industrial holding company. These proposals which have been examined in detail by ourselves as Solicitors to the Committee of Creditors bear' some similarity to the proposals originally made by Mr. Stenhouse which were set out in full in Mr. Hogg's circular of 29th April 1963. They involve arrangements for acquiring through the Receiver of that Company the debt of Messrs. St. Martins Preserving Company Ltd. and an agreement with the Bank of Scotland by which the Bank will substantially reduce its claim and receive payment in whole or in part of the remainder only after the existing contracts of the Company have been completed. It would be part of the barga in tha^ the debts of trade creditors (includi ng sub -contract o rs ) as at 28t h February 1963 be settled by payment at the rate of 5/- in ~the £ on these_ debts as ascertained. If / 21 Printed image digitised by the University of Southampton Library Digitisation Unit 2 . If you have examined the f inures set out in the various circular letters you will he satisfied, as are the Committee of Creditors, that in the event of the liquidation taking its normal course, the possibility of a dividend' to ordinary' creditors is exbremely remote. In addition the liquidator would he faced with very great problems in the matter of attempting to finance the completion of contracts and this might well mean that many contracts would require to he abandoned and put out by the local authorities for fresh tender to new main contractors. Having these points in mind the Committee of Creditors have no hesitation in indicating that they themselves, in respect of their own debts, propose to accept the figure of 5/- in the £ mentioned above and strongly recommend all trade creditors to do likewise. In making this recommendation the Committee of Creditors would like to acknowledge that in their opinion the terms of the proposed arrangement are eminently fair as between the bank and the other creditors. Indeed the bank has throughout the discussions shown itself willing to accept the possibility that It will receive less than it would receive, by virtue of its preference, on a liquidation, if by doing so it would assist proposals for carrying on the contracts and enabling something to be paid to the trade creditors. In this respect the Committee regard the bank's attitude to the proposed negotiations as a generous one. The Committee of Creditors would like to make it clear that the proposal does not deal with indebtedness after 28th February 1963 because as a result of the moratorium arrangements, sums due to suppliers and sub- contractors, for the period from 1st March to 30th April 1963, will be paid Arrangements with suppliers and sub -contractors made by Mr. Waldie subsequent to his appointment will also be settled in full and will be unaffected by the present .proposals. It will be clear therefore that the offer of 3/- in the £ is in relatio n to the claims of creditors both sub-contractors and suppliers which were irozen 1 at the commencement of the moratorium . The proposed arrangements with Messrs. A .A. Stuart & Sons .(Contractors) Ltd. and their Associated Company, Messrs. Sagit Trust Co. Ltd. are exceedingly complicated involving as they do separate agreements with certain otlier interested parties but the willingness of creditors to accept settlement of their claims to 28th February 1963 at a rate of 5 /- in the £, is an essential element of the bargain and we have agreed, as a Committee/ to seek the consent of creditors to this part of the arrangement on the basis that if it cannot be obtained there is little point in incurring the expense, of bringing to a conclusion other negotiations, including negotiations wioh employers on the various contracts. Time is naturally very short for it xs imperative that work be resumed on all the contracts at the earliest possible moment and to make up for time lost for one reason or another in recent months. . in the circumstances the Committee have agreed to notify lSwune 1 196^ iSS ° f the ViewS of creditors as a whole at 2 p.m. on Friday, £re agreeab le to the proposal then however larg e or small XQur_clain may be we ask you to sign the attached form "and send it t.n" +.V-* s address by return of post if possible . — does the / We should make it clear that the signing and returning of the not conclude a contract for purchase of your debt as ascertained form 22 Printed image digitised by the University of Southampton Library Digitisation Unit 3. the lines mentioned above for such a bargain will ultimately require to be effected directly between the proposed purchasers and yourselves. Signing and returning the form will, however, amount to an intimation that you are prepared to complete such a contract at the appropriate time. Yours faithfully, McGRIGOR DONALD & CO. Solicitors to the Committee of Creditors. June, 1963. Messrs. McGrigor Donald & Co., Solicitors, 172. St. Vincent Street, GLASGOW, C.2. Agents for the Committee of Creditors . Dear Sirs, Atholl Houses Ltd . I/Ws 0 f intimate that as part of such an arrangement as is set out in your circular letter of 7th June 1963, i/We am/are prepared to sell, assign or discharge for a payment at the rate of 5/- in the £ the indebtedness of Messrs. Atholl Houses Ltd, to me/us as at 28th February 1963-. Yours faithfully. N.B. No figure for the indebtedness should be inserted in this i ntimation as this would involve checking all figures through the books of the Company i 23 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX E THIS AGREEMENT is made the Bo ' T" O- day of July 1963 BETWEEN ^ TICKLER jf LIMITED the registered office of which is at Paster" Street, Grimsby in the County of Lincoln (hereinafter called "Ticklers") of the first part ST . MARTIN PRESERVING COMPANY LIMITED the registered office of which is at Eiffel Tower Works, Hart Street, Ikidstone, Kent acting by its agent SAMUEL ROLLESTON HOGG Chartered Accountant of City-Gate House, London, E.C.2. in his capacity of Receiver for the Debenture Holders of the said St, Martin Preserving Company Limited (hereinafter called "St. Martin Preserving") of the second part the said SAMDEL ROLLESTON HOGG (hereinafter called "the Receiver") of the third part and A .A. STHART Sc SONS (CONTRACTORS) LIMITED the registered office of which is at 2,275 London Road, Glasgow, E.2. (hereinafter called "Stuarts") of the fourth part WHEREAS s- (a) At ho 11 Houses Limited (hereinafter called "Atholl Houses") was incorporated in Scotland in 1944 and has an issued share capital of £60,700 divided into 60,700 fully paid shares of £1 each (b) Ticklers are the beneficial owners of the whole of the said fully paid 60,700 shares of £1 each in Atholl Houses, of which 60,698 are registered in the name of Tioklers, one share is registered in the name of Wreyford Henri Durlao as a mere nominee of Ticklers and one share is registered in the name of Richard Nelson Scott as a mere nominee of Ticklers (c) Ticklers is a subsidiary of St, Martin Preserving 1 . 24 Printed image digitised by the University of Southampton Library Digitisation Unit which company is the beneficial owner of 318,557 of the issued 320,000 Ordinary Shares of £1 each in the capital of Ticklers, all the 40,000 issued 5&- per cent. Cumulative Preference Shares of £1 each and 49,103 of the issued 49,203 n per cent. Cumulative Preference Shares of £1 each (d) By a First Mortgage Debenture (hereinafter called "the Debenture") dated the 30th January, 1939, St. Martins Preserving charged its property and assets therein specified to secure the payments to Martins Bank limited of the monies therein mentioned (e) By, a Transfer of Debenture dated the 21st July, 1961, Martino Bank limited transferred the Debenture and all monies and Interest thereby secured and the full benefit thereof to National Commercial Bank of Scotland limited (f) By a Deed of Appointment dated the 6th February, 1963, National Commercial Bank of Scotland limited, pursuant to the power in that behalf contained in the Debenture, appointed the Keoeiver to be receiver and manager of the property oharged by the Debenture and to exercise the powers therein contained (g) By Interlocutor of the Court of Session, Edinburgh dated the 24th May, 1963, John Waldle, Chartered Accountant of Glasgow (hereinafter oalled "the Provisional liquidator") was appointed provisional liquidator of Atholl Houses (h) Ticklers is indebted to Atholl Houses in the sum of £81,000 or thereabouts (i) Atholl Houses is indebted to St. Martin Preserving in the sum of £750,000 or thereabouts NOW IT IS HEREBI AGREED as follows »- (A) THIS Agreement is conditional upon i- (a) Stuarts acquiring on or before ' £ x July, 1963 ("the Settlement Date") the agreement of all, or of as many as Stuarts in its sole discretion 2 . 25 Printed image digitised by the University of Southampton Library Digitisation Unit deems sufficient, trade creditors (including the Inland Revenue (so far as unsecured) Poster Clark limited and Robroyston Brickworks limited) to accept 5/- in the £ in full settlement of their claims against Atholl Houses as at 28th February, 1963 (b) Ticklers paying to Atholl Houses the sum of £81,000 and obtaining from Atholl Houses :- I. a release from all liability whatsoever to Atholl Houses in respect of - (i) all sums now owing by Ticklers to Atholl Houses and whether presently payable or notj (ii) all claims, actions, proceedings, accounts • and demands whatsoever which Atholl Houses has at any time hereto- fore had or now has or may have here- after against Ticklers for or on account of or in relation to any act, cause, matter or thing prior to the Settlement Date; and II. an acknowledgment that the payment by Ticklers of the said sum of £81,000 shall not operate in any way by way of limitation of the complete and absolute release intended to be effected by sub— heads (i) and (ii) of this sub-clause (c) Atholl Houses paying to the Receiver the sum of £81,000 and obtaining from the Receiver and St. Martin Preserving :— I. a release from all liability whatsoever to St . Martin Preserving in respect of - (i) all sums whatsoever owing by Atholl 3. 26 Printed image digitised by the University of Southampton Library Digitisation Unit Houses to St. Martin Preserving whether presently payable or not; (ii) all claims, actions, proceedings, accounts and demands whatsoever which St. Martin Preserving has at any time heretofore had or now has or may have hereafter against Atholl Houses for or on account of or in relation to any act, cause, matter or thing prior to the Settlement Date; and II. an acknowledgment that the payment of the said sum of £81,000 shall not operate in any way by way of limitation of the complete and absolute release intended to be effected by sub-heads (i) and (ii) of this sub-clause (d) The Commissioners of Inland Revenue withdrawing their petition for the winding up of Atholl Houses and the discharge of the Provisional liquidator from his present appointment by the Court of Session, Edinburgh, as provisional liquidator of Atholl Houses (e) The Receiver and St. Martin Preserving obtaining from Bank of Scotland a reduction from the sum of £900,000 to the sum of £500,000 of the amount of the liability of St . Martin Preserving to such Bank in respect of St . Martin Preserving’s guarantee of such Bank's advance to Atholl Houses (B) (i) Ticklers undertakes and covenants with Stuarts that (subject to the conditions contained in sub-paragraphs 1 (A)(a) and 1 (A)(d) above being duly implemented) it will duly pay to Atholl Houses on demand the said sum of £81,000 in exchange for delivery of a duly executed Deed of Release in the terms set forth in the Pirst Schedule hereto; 4 . 27 Printed image digitised by the University of Southampton Library Digitisation Unit (ii) The Receiver and St. Martin Preserving undertake and covenant with Stuarts that (subject to the conditions contained in sub-paragraphs 1 (A)(a) and 1 (A)(d) above being duly implemented) i (a) they will use their respective best endeavours to procure that Atholl Houses will forthwith upon receipt of the said sum of £81,000 (1) duly execute and deliver to Ticklers a Deed of Release in the terms aforesaid; and (2) pay the said sum of £81,000 to the Receiver and (b) upon receipt of the said sum by the Receiver they will duly execute and deliver to Atholl Houses a Deed of Release in the terms set forth in the Second Schedule hereto 2. SUBJECT to and upon the due fulfilment of all the conditions referred to in Clause 1 hereof s— (a) Ticklers shall sell and Stuarts shall purchase all the said 60,700 issued and fully paid shares of £1 each in Atholl Houses at the total price of £1 (b) The said shares hereby agreed to be sold shall be sold free from any lien, charge or encumbrance and with all rights attached thereto 3 . THE sale and purchase hereby agreed to be made shall be completed forthwith upon the due fulfilment of all the conditions referred to in Clause 1 hereof. On completion (i) Ticklers shall deliver a duly executed transfer in favour of Stuarts or its nominees of the said 60,698 shares of £L each in Atholl Houses registered in its name together with the relevant share certificate(s) ; (ii) Ticklers shall procure the said Wreyford Henri XUrlac to deliver to Stuarts a duly executed transfer in favour of Stuarts or its nominees of the said one 5. 28 Printed image digitised by the University of Southampton Library Digitisation Unit share registered in nis name and held by him as a mere nominee of Ticklers; (iii) Ticklers shall use their best endeavours to procure the said Richard Nelson Scott to deliver to Stuarts a duly executed transfer in favour of Stuarts or its nominees of the said one share registered in his name and held by him as a mere nominee of Ticklers together with the relevant share certificates 4* TICKLERS hereby agree that until the said transfers referred to in Clause 3 hereof have been duly registered by At ho 11 Houses Ticklers will (at the expense of Stuarts) exercise such rights and powers in respect of and attaching to the said shares as Stuarts shall from time to time direct. In particular, but without prejudice to the generality of the foregoing, it is contemplated that such rights and powers be exercised for the purpose of requisitioning a General. Meeting of Atholl Houses pursuant to Section 132 of the Companies Act, 1948 to reconstitute its Board of Directors and for the purpose of voting at General Meetings of Atholl Houses in such manner as Stuarts may direct 5. TICKLERS hereby warrants to and covenants with Stuarts that to the best of its knowledge and belief the recitals to this Agreement are in all respects accurate having regard to the register of members of Atholl Houses not being available for inspection 6. ST. MARTIN PRESERVING and the Receiver hereby guarantee to Stuarts the due performance by Ticklers of all its obligations hereunder 7. NOTWITHSTANDING the completion of this Agreement the provisions thereof shall remain in full force and effect and binding upon the parties hereto to the extent that they are not fully implemented on or before completion AS WITNESS the hands of the parties hereto the day 6 . 29 Printed image digitised by the University of Southampton Library Digitisation Unit and year first above written THE FIRST SCHEDULE THIS DEED is made the — day of July, 1963 BETWEEN ATHOIil HOUSES LIMITED whoae registered office is at 29, Dark Circus, Glasgow, C.3. (hereinafter called *T" C«r "Atholl Houses") of the one part and^TICKLER^ LIMITED whose registered office is at Past ear Street, Grimsby, Lincoln (hereinafter called "Ticklers") of the other part NOW THIS DEED WITNESSETH as follows i- 1« IN consideration of the sum of £81,000 paid by Ticklers to Atholl Houses (the receipt whereof is hereby acknowledged) Atholl Houses hereby releases Ticklers from all liability whatsoever in respect of (i) all sums now owing by Ticklers to Atholl Houses and whether presently payable or not; (ii) all claims, actions, proceedings, accounts and demands whatsoever which Atholl Houses have at any time heretofore had or now have or may have hereafter against Ticklers for or on account of or in relation to any act, cause, matter or thing prior to the date of this Deed 2. THE figure of £81,000 stated in Clause 1 hereof shall not operate in any way by way of limitation of the complete and absolute release intended to be effected by such Clause IN WITNESS whereof the parties hereto have caused their Common Seals to be hereunto affixed the day and year first above written THE SECOND SCHEDULE THIS DEED is made the ; ■■■■ — day of July, 1963 BETWEEN ST. MARTIN PRESERVING COMPANY LIMITED whose 7. 30 Printed image digitised by the University of Southampton Library Digitisation Unit registered office is at Eiffel Tower Works, Hart Street, Maidstone, Kent, acting by its Agent SAMUEL ROLLESTON HOGS, Chartered Accountant, of City— Gate House, London, E.C.2. in his capacity as Receiver for the Debenture Holders of St. Martin Preserving Company Limited (hereinafter called "3t. Martin Preserving 11 ) of the first part the said SAMUEL ROLLESTON HOGG (hereinafter called "the Receiver") of the second part and ATHOLL HOUSES LIMITED whose registered office is at 29, Park Circus, Glasgow, C.3. (hereinafter called "Atholl Houses") of the third part HOW THIS DEED WITHESSETH as follows 1. IH consideration of the sum of £81,000 paid by Atholl Houses to the Receiver (the receipt whereof the Receiver hereby acknowledges) St. Martin Preserving and the Receiver hereby release Atholl Houses from all liability whatsoever to St. Martin Preserving in respeot of i- (i) all sums whatsoever owing by Atholl Houses to St. Jfertin Preserving and whether presently payable or notj (li) all claims, aotions, proceedings, accounts and demands whatsoever which St. Martin Preserving has at any time heretofore had or now has or may have hereafter for or on account of or in relation to any act, cause, matter or thing prior to the date of this Deed 2. THE figure of £81,000 stated in Clause 1 hereof shall not operate in any way by way of limitation of the complete and absolute release intended to be effected by such Clause IH WIIHESS whereof the parties of the first and 8 . 31 Printed image digitised by the University of Southampton Library Digitisation Unit third parts hereto have caused their Common Seals to he hereunto affixed and the party of the second part has set his hand and seal the day and year first above written SIGHED hyvauiSM dexek vaisd . T- <v. on behalf of^IICKLER|l ) LIMITED in the presence ) of:- ) N.A. Copping City Gate House, Finsbury Square, London, E.C.2. W.L. Wilson 6d. Stamp. Managing Clerk. SIGNED by SAMUEL ROLLESTON ) ,HOGG. ) on behalf of ST, MARTIN ) s.H. Hogg. PRESERVING COMPANY ) LIMITED in the presence ) of:- ) N.A. Copping City-Gate House, Finsbury Square, London, E.C.2* Managing Clerk. SIGNED by SAMUEL ) HOLIEST ON HOGG in the ) S.R. Hogg, presence of:- ) N.A. Copping City-Gate House, Finsbury Square, London, E.C.2. Managing Clerk. SIGNED by Peter Winder # Allsebrook on behalf of A. A. STUART & SONS (CONTRACTORS) LIMITED in the presence of :- (Sgd. ) P.W. ALLSEBROOK (6d stamp) C.B. Pope, 10, Upper Grosvenor Street, London, W.l. 9 . 32 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX F Copy of letter from Messrs Mac lay Murray & Spens, Solicitors, Glasgow to Messrs McClure Waismith Brodie & Co, Solicitors, Glasgow dated 3th Aufust 1963. Messrs McClure Mai smith. Brodie & Co,, Solicitors, 77 St. Vincent Street, GLASGOW C.2. I69 West George Street, GLASGOW C.2. 3th August 1963. Dear Sirs, Atholl Mouses Ltd . We are writing on "behalf of our clients, the Bank of Scotland, to set out the terras- of the agreement -reached between the Bank and your clients, Sagit Trust Co. Limited ("Sagit") in regard to the proposed purchase by Sagit 1 s associated Company, A. A. Stuart & Sons (Contractors) Limited. ("Stuart’ 1 ), of the Share Capital of Atholl Houses Ltd. ("Atholl"). This agreement is conditional on:- (1) Stuart acquiring on or before 8th August 1963, ("The Settlement Date") the whole Share Capital of Atholl from T..G. Tickler Ltd. ("Tickler") for One pound (£l) Sterling, (2) Stuart .obtaining before 31st July 1963 the agreement of all, or of as many as Stuart deem sufficient, trade creditors (including sub- contractors, Inland Revenue (so far as unsecured), Foster Clark Ltd., and Robroyston Brickworks Ltd.) to accept 5/-d. in the £ in full settlement of their claims against Atholl as at 23th February 1963 . (3) St. Martin Preserving Co. Ltd. ("St. Martin") agreeing to accept the sum of £81,000 from Atholl in full settlement of its claim of approximately £750,000 against Atholl. (4) Tickler agreeing to pay £31,000 to Atholl immediately in settlement of Atholl' s claim against Tickler of approximately £31,000. (5) The Commissioners of Inland Revenue withdrawing their petition for the winding up of Atholl and the -Provisional Liquidator of Atholl being discharged from his appointment as .such. If these conditions are fulfilled, the Bank and Sagit have agreed as follows I. Sagit will, immediately after the Settlement Date, provide from its own/ 33 Printed image digitised by the University of Southampton Library Digitisation Unit - 2 - own resources or from sources independent of the Bank' and make continuously available to Atholl so far as reasonably required until completion of contracts current at the Settlement Date, including contracts completed but not yet- measured and contracts measured but not yet paid for (all hereinafter referred to as ' "current contracts"), or longer as required, the sum of £300,000. The Bank will provide Atholl with such additional finance not exceeding £100,000 in total as may reasonably be required from time to time by Atholl over and above the said sum of £ 300,000 to complete the said contracts. II. Immediately after the Settlement Date Sagit will procure Atholl to pay from the £ 300,000 provided by Sagit (a) The fee and outlays of the Provisional Liquidator and those of his professional advisers in respect of the period between the date of his appointment, viz, 24 th May I963, and the date of his discharge and all other expenditure incurred by him from and including .Monday 1 st July until the date of his discharge. Atholl will also take over all contracts and accept all commitments entered into by the Provisional Liquidator during his period of office and take all necessary steps to procure his discharge. (b) The Debts of the preferential creditors of Atholl (excluding that of the Bank) as at 28 th February 1963, amounting to approximately £33,000 in full. (c) A sum equivalent to 5 /- in the £ on the debts of all trade creditors (including sub-contractors, Inland Revenue (unsecured) Foster Clark Ltd. and Robroyston Brickworks Ltd.) as at 23 th February 1963; provided that if Sagit consider it expedient Stuart shall pay the said sum to and shall procure discharges from the said oredi-tors in which case Sagit will procure^ 34 Printed image digitised by the University of Southampton Library Digitisation Unit - 3 - procure Atholl to reimburse Stuart forthwith out of the said sum of £300,000 for the whole cost of so doing. Provided that, notwithstanding the requirement of immediate payment to the said creditors, Atholl or Stuart as the case foay be shall have a reasonable opportunity before making payment to verify that the amounts claimed by such creditors are due by Atholl, III. Sagit will procure that Atholl will complete as expeditiously and' economically as possible all current contracts or such of those contracts as it may be agreed with the Bank should be completed at the rates and on the term3 originally agreed by the employers with Atholl or, if Atholl are able to negotiate rates more favourable to Atholl, at such other rate3. IV. Sagit will procure that on the completion of the current contracts (i.e. on final measurement of the last of such contracts) the then net current assets of Atholl i.e. as presently -existing and as generated in completing such contracts, including retentions but excluding fixed assets i.e. heritable property, plant and machinery, motor vehicles, office furniture and equipment (less instalment's under B.P. Agreements) loose plant and tools and interest in subsidiary, shall, after making reasonable provision for any unexpired maintenance obligations, be distributed as follows and in accordance with the following order of priority: - (a) In repaying any additional finance provided by the Bank in - accordance Vith paragraph I above, together with interest. (b) In repaying the loan by Sagit of £300,000 together with interest, and in paying to Sagit for each year or part year that they so act a. fee for their services as financial advisei’s to Atholl of £10,000 but the total fees so paid shall not in any event exceed £20,000. '* (.e) In paying to Stuart for each year or part year that they so act/ 35 Printed image digitised by the University of Southampton Library Digitisation Unit _ 4 - act a fee for their services as managers of Atholl of £50,000 but the total . fee so paid shall not in any event exceed £100,000. (d) In paying the whole balance up to a total sum of £600,000 to the Bank in repayment to the Bank of Atholl' s outstanding •overdraft; provided that Sagit proposes if in its sole discretion, it considers^ the result of completing the Current contracts has been sufficiently favourable to agree to the foregoing figure of £600,000 being increased to £650,000. Any balance thereafter of the then net current assets to be shared equally between Stuart and the Bank. The sums paid to the Bank under this sub-paragraph and under paragraph V. below shall be accepted by the Bank in full discharge of Atholl 's outstanding overdraft and interest. V. If during the period of completion of current contracts Atholl wish to take on new contracts, the approval of the Bank, which shall not be unreasonably withheld, is to be obtained. In calculating the amounts available for distribution to the Bank, Stuart and Sagit under the previous paragraph all transactions relating to and all assets and liabilities arising from such new contracts shall be kept separate and excluded in arriving at the figure of net current assets referred to in paragraph IV above. Sagit will procure that Atholl keep such separate books of account as will enable the necessary separation to be effected. A reasonable proportion (as certified, failing agreement, by an independent Chartered Accountant mutually chosen) of the overheads and of all fixed charges shall be borne by all such new contracts* VI. In addition to the payments by Atholl to the Bank under paragraph IV, Sagit agree to pay the Bank on completion of the current contracts one-half of- the value a.t that date (as fixed, failing agreement, by an/ 36 Printed image digitised by the University of Southampton Library Digitisation Unit an independent valuer mutually chosen) of the fixed assets of Atholl taken over at the Settlement Date as referred to in , paragraph IV above and of any further fixed assets necessarily acquired to complete the .current contracts. VII. The Bank wild, be entitled at any time to examine the books of account of Atholl including the books relating to any new contracts taken on by Atholl under paragraph V. Sagit agree that, until this agreement has been fully implemented, the Bank shall be entitled to nominate one Director of Atholl and Sagit undertake to ensure his appointment. VIII. In the event of any dispute or difference arising between the Bank and Sagit as to the meaning or effect of their agreement or as to any matter whatsoever arising in relation thereto, such dispute or difference shall be referred to an Arbiter 1 chosen mutually and, failing agreement, to be appointed by the President for the time being of the Law Society of Scotland. Please confirm that these terms are agreed by you on behalf of your clients. Yours truly, (Sgd.) Maclay Murray & Spans 37 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX G ATHOLL HOUSES LTD. SUMMARISED APPROXIMATE OP ERA TING STATEMENT FOR P ERIOD FRCM 1ST MARCH, 19S'3 TO 3QTH .SEPTEMBER, INCOME Work done and sundry sales Add: Closing Work in Progress Less: Opening Work in Progress 3 . 526,208 500 , 588 . 3 , 826,796 699.365 3 , 127,431 EXPENDITURE 4 , 176,909 mADmofioss) ( 1 , 049,478 ) Add: Management Fees (oharged) SAGIT Trust Co. Ltd. A. A. Stuart & Sons (Contractors) Ltd. ( 20,000 ) ( 100,000 ) OPERATING CL0S3) ( 1 , 169,478 ) Add: Investment in and Loan to subsidiary company written off Provision made for its deficiency ( 25.000) ( 25.047) ( 50,047 ) (1,219,525 ) Less: Inoome Tax recoverable Sundry Loans received, not repayable 12,578 645.924 658,502 (561,023 ; Less: Increase in Capital Reserve Gain on Sale of Property ( Loss )on Sale of Plant and Vehicles 24,149 ( „:.gga) 22^850 (INCREASE) D) foEFIMEUrt ) (538.173 ) (DEFICIENCY )AT 28TH FEBRUARY. 1967 (uanaa) 38 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX H ATHOLL HOUSES LTD. SUMMARISED DRAFT BALA! iOE FFJIJ'T’ AS AT 30TH SEFTEf©ER , • 1965. As revalued Aggregate lBt July, 1963 Depreciation With Additions since ?IXED ASSETS at Cost 1st July, 1963 Net Heritable Property £63,481 5,669 57,812 Plant & Machinery 49,338 29,627 19,711 Motor Vehicles 14,098 9,075 5*023 Office Furniture & Equipment 13,405 6,695 ..6,73 0 gyo66 89,256 Loose Plant & Tools TOTAL FIXED ASSETS 22h23. INTERES T IN SUBSIDIARY Shares at coot and advances (wholly written off) (Doficienoy )of Assets at dato (wholly provided for) FIXED ASSETS CURRENT ASSETS Stoolc in Trade - as valued by Company’s officials 24,376 Work in Progress 300,588 Sundry Debtors 61,382 Income Tax recoverable 12,415 398,761 128,691 ( 85.0*171 103,644 LESS : CURRENT LIABILITIES Hire Furohase Accounts 453 Amounts due to Subcontractors 63,454 Sundry Creditors and Accrued Charges 28,806 Balanoos payable under agreements with Creditors 19,107 Income Tax 'deducted from Loan Interest 7,547 Bank Overdraft - Current 52, 584 NET CURRENT ASSETS ESTIMATED INITIAL SURPLU3 iZliSSl aa6,8io 330,454 Less : Ranking Liabilities SAGIT Trust Co. Ltd. - Loan - .Fee to date A. A. Stuart & Sans (Contractors) Ltd. - Fee to date , Bank of Scotland - Share of Fixed Assets ( DEFICIENCY) AF TER RANKING LIABILITIES Less ; Contingent Liability - Priraaz-y - Bank of Sootland ( DEFICIENCY )AFIBR CONTINGENT LIABILITY ~ PRIMARY Less ; Contingent Liabilities - Secondary - Bank of Sootland A * A. Stuart & Sons (Contractors) Ltd. - Balance of Old Trade - Ac 0 aunts ( DEFICIENCY )AFTER CONTINGENT LIABILITIES - SECONDARY REPRESENTING ;- 300,000 20,000 100,000 51,822 471,822 (141.368) 600,000 (741.368) 820,995 S82t%8 .1,314,354 ( £2,055,692) ISSUED SHARE CAPITA!, CAPITAL RESERVE (DEBIT )BAIAHCE ON PROSIT AND LOSS ACCOUNT (• 60,700 22,850 2,3,39,24 2 )(?.2,055,6pg? 39 Printed image digitised by the University of Southampton Library Digitisation Unit Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX J Overseas American Finance Company LIMITED LT. COL. THE HON. RANDAL PLUNK! 2, BALFOUR PLACE LONDON, W.t. HYDE PARK 4353-7 BENTLEYS PRIVATE AND CONFIDENTIAL To Shareholders of: — 30th October, 1956. T. G. TICKLER, LTD. Dear Sir (or Madam), Beit Scott & Company .Limited have authorised us to make on their behalf an offer to purchase for cash your holding of the shares of T. G. Tickler Ltd. on the following terms : — 1. For the 5£% Cumulative Preference Shares 20/- in cash for each such Preference Share. 2. For the 71% Cumulative Preference Shares 22/- in cash for each such Preference Share. 3. For the Ordinary Shares 18/9d. in cash for each such Ordinary Share. 4. The purchase will be conditional upon : — (a) acceptances being received in respect of not less than 90 per cent of all the issued Shares in T. G. Tickler Ltd. (or such lesser percentage as the Directors of Beit Scott & Co., Ltd. may decide) not later than noon on 1 6th November, 1956 (unless a later date for acceptances shall be announced by the Directors of Beit Scott & Co., Ltd.) and (b) the purchasers being satisfied that the asset position of T. G. Tickler Ltd. as at the 1st October, 1956 has been substantially maintained and preserved down to the date of the sale becoming effective. 5. The purchasers will be entitled to any dividends declared or paid on the said shares on or after the date of this letter. If you wish to sell your holding, acceptance of this offer should be made on the accompanying form of acceptance completed in accordance with the instruc- tions thereon and sent to us as soon as possible but in any event not later than in time to reach this office by noon on the 16th November, 1956. Within seven days of the closing date for acceptances whether as originally fixed or as subsequently extended you will be notified whether or not the offer has become unconditional. Please do not forward your Share Certificates or a transfer at this stage. If acceptances are received in respect of a sufficient percentage of Shares we will send you instructions as to delivery of your Shares to a Bank against payment in cash for such Shares. Yours faithfully. For and on behalf of OVERSEAS AMERICAN FINANCE COMPANY LIMITED S. EDEN BUSHELL Managing Director Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX K i£>t jllartnt Jfrejfertung Co. Httr. MAIDENHEAD BERKS TELE { "CHUNK?” MA?DENH^D eiMCTORS SE CRETAR Y U. E. SEAMAN, A.C.A. 1th February, 1958 To the Members Dear Sir or Madam T. G. TICKLER LIMITED 1. You will recall that in January, 1957, your company entered into a trading agreement with T; G. Tickler Limited designed to benefit your company. This resulted in a substantial improvement m your company’s trading position and following thereon your directors were of the opinion that the position could be still further improved and consolidated if control of T. G. Tickler Limited could be secured. Accordingly, your company has acquired from Mr. R. N. Scott and Sir Alfred Beit both directors of your company their controlling shareholding in T. G. Tickler Limited as follows-— Shares of £1 each fully paid Ordinary Shares '5 1 % Cumulative Preference Shares . . 1\% “B” Cumulative Preference Shares the consideration receivable by Mr. R. N. Scott and Sir Alfred Beit is £600,000 cash and 1,500 000 shares of 4/- each m the capital of your company credited as fully paid and ranking pari passu with the existing shares of the company except that they will not rank for any dividend which may be declared m respect of the year ending 31st March, 1958. Application has been made to The Council of the Stock Exchange London for permission to deal in and quotation for these shares. Mr. R. N Scott and Sir Alfred Beit previously controlled 845,000 shares in your company and as a result of this trans- action now control 2,345,000 shares. 2 . T.G. Tickler Limited was incorporated on the 14th July, 19il. It carries on a substantial business as preserve manufacturers. It has a number of subsidiary companies, including Crosbie’s Pure Food Co. Limited and Barnes & Co. Limited, none of whom trade for their own account their trading results being incorporated with those of T. G. Tickler Limited. Under the agreement of January, 1957, your company receives the whole of T. G. Tickler’s production. This agreement and the resulting co-operation between the companies has proved to be beneficial to both. 3. • T. G. Tickler Limited also has a wholly owned subsidiary Atholl Houses Limited, a company incorporated on the 1st February, 1944. This company is engaged in building and construction and has an excellent profit record. 4. The following is a copy of a report which has been received from Messrs. James Meston & Co. Chartered Accountants, the auditors to your company: — Total acquired Total Issued by your Company 320,000 319,157 40,000 40,000 49,203 49,103 409,203 408,260 42 Printed image digitised by the University of Southampton Library Digitisation Unit To the Directors, St. Martin Preserving Co. Limited 1 Lbadenhall Street, London, E.C.3 Gentlemen 5t/; February, 1958 Wo have examined the audited accounts of T. G. Tickler Limited and its subsidiary company, Atholl Houses Limited, for the 10 years ended 31st December, 1957, and we report that: — 1. Profits The profits and losses of T. G. Tickler Limited and Atholl Houses Limited,' as shown by the Profit and Loss Accounts, were as follows: — (a) T. G. Tickler Limited Profits as defined below before charging depreciation £ Depreciation £ Profits as defined below after charging depreciation £ Year ended 30th April 1948 147,902 12,739 135,163 1949 233,248 53,299 21,676 211,572 1950 18,968 34,331 1951 148,336 22,807 125,529 1952 70,803 33,925 36,878 1953 5,738 (Loss) 58,908 „ 32,821 38,559 (Loss) 1954 27,684 86,592 „ 1955 73,119 „ 20,785 93,904 „ 1956 86,061 „ 16,095 102,156 „ 1957 17,096 „ .19,755 36,851 „ Period to 31st December 1957 31,974 (Profit) 5,887 26,087 (Profit) ( b ) Atholl Houses Limited Year ended 31st December 1948 52,300 6,000 46,300 1949 44,773 4,000 40,773 1950 54,407 2,500 51,907 1951 61,720 2,500 59,220 1952 63,811 2,500 61,311 1953 45,437 1,500 43,937 1954 210,318 3,000 207,318 1955 57,759 87,568 3,000 54,759 1956 6,000 81,568 1957 46,393 6,000 40,393 The profits and losses set out above are arrived at: (a) Before providing for United Kingdom taxation. ( b ) Before charging the emoluments of the directors of T. G. Tickler Limited and Atholl Houses Limited. (c) After charging all other expenses. (d) After making such other adjustments as we consider appropriate. 43 Printed image digitised by the University of Southampton Library Digitisation Unit The book value of the net assets of T. G. Tickler Limited and Atholl Houses Limited as shown by the consolidated balance sheet as at 31st December, 1957, was as follows: — Fixed Assets Freehold Property at professional valuation, Decem- ber, 1956 £207,350 Other Freehold and Heritable Properties at cost . . 19,999 £227,349 Plant, Machinery and Fittings at cost less proceeds of sales 155,351 Motor Vehicles at cost .. .. .. .. .. 44,581 Loose Plant and Tools as valued by company’s officials 6,047 Trade Investments at cost 67 Goodwill and Trade Marks at cost 37,364 470,759 Current Assets Stock in Trade as valued by company’s officials Work in Progress as valued by company’s officials . . Sundry Debtors and Prepayments Temporary Loans to associated companies and others Estimated Income Tax repayable Balance at Bankers and Cash in Hand .1,013,923 470,759 £4,746 208,629 72,255 18,394 73,000 636,899 1,013,923 Liabilities Sundry Creditors, accrued charges and provisions . . 342,335 Provisions for superannuation .. .. .. .. 18,843 Current Taxation . . . . . . . . . . 57,660 418,838 595,085 1,065,844 Less: Loan Capital 4|- % Twelve year Unsecured Loan Stock 1959-63 200,000 865,844 Less: Reserve for depreciation 154,308 Provision for future Income Tax .. .. 16,000 170,308 Book value of Consolidated Net Assets . . . . £695,536 The book value of the consolidated net assets set out above is subject to profits tax non-distribution relief which has been granted. In the event of subsequent distributions exceeding profits earned after 31st December, 1957, it may be withdrawn in whole or in part. Yours faithfully, JAMES MESTON & CO. 44 Printed image digitised by the University of Southampton Library Digitisation Unit Your directors are satisfied that the acquisition of shares in T. G. Tickler Limited will prove to be a valuable investment by your company. It will be noted from the Accountants’ report that the present annual profits are at the rate of approximately £90,000 before depreciation. The directorsconsider the provision for depreciation to be excessive and estimate the future annual charge at £11,000. On the information available to them your directors are of the opinion that the profits of the new subsidiaries should continue at the rate of not less than £50,000 per annum before tax. 6. Copies of the minutes of the meeting of directors at which this transaction was completed, the report of your company’s auditors, as set out above, together with statements of their adjustments and the accounts of the two new subsidiary companies for their last two financial periods may be inspected by any member at the company’s registered office at Maidenhead and at the offices of Messrs. James Meston & Co., Chartered Accountants, 1 Leadenhall Street, London, E.C.3, during usual business hours on any week day (except Saturday) up to and including 21st February, 1958. Yours faithfully. R. N. SCOTT, Chairman. 45 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX L The permission given by the Board of Trade under the Prevention of Fraud (Investments) Act 1958, for the distribution of these documents does not imply approval by them of the terms of the offer or responsibility for any of the statements made or for the soundness of any of the opinions expressed. MAIDENHEAD • BERKS. Tiki MAIDENHEAD 3170/3 ELY • CAMqs. T«L! ELY aees/s ORIMSBY ■ LINCS. TBL I ORIMSBY 8B471 t. Harttn iPtetfer&utg Co. 3ltb. 2. BALFOUR PLACE LONDON W. 1. Tilkfhoni I OROSVENOR 74Ss/s INLAND! 'CHUNKY' LONDON TELEX OviHUII ‘CHUNKY* LONDON H. J. OUNTRI Pi A.C.I.S. L. E. SEAMAN. A.C.A. io the Ordinary Stockholders of Dear Sir or Madam, FOSTER CLARK LIMITED 23rd December, 1959 In accordance with our letter to the Board of Foster Clark Limited dated 16th December, 1959, St. Martin Preserving Company Limited hereby offer to acquire the whole of the issued Ordinary Stock Units of 10/- each of Foster Clark Limited on the following terms: 1 . In exchange for every one (1) Ordinary Stock Unit of 10/- each of Foster Clark Limited, St. Maxtin Preserving Company Limited will issue three (3) of its own Ordinary shares of 4/- each fully paid. 2. The offer is conditional upon acceptances being received in respect of not less than 90 % of all the issued Ordinary Stock Units of 10/- each in Foster Clark Limited not later than 14th January, 1960 (or such lesser percentage and at such later date, not being later than 29th February, 1960, as the Directors of St. Martin Preserving Company Limited may decide to accept). 3. The St. Martin Preserving Company Limited shares to be issued in respect of this offer will rank as from the date of issue pari passu with the existing Ordinary shares of the Company. In the event of acceptances being received in respect of more than 90% of the Ordinary Stock (or such lesser percentage as the Directors of St. Martin Preserving Company Limited may decide to accept), this offer will become unconditional and an announcement will then be made in the Press. If you wish to exchange your holding, acceptance of this offer should be made on the accompanying form of acceptance completed in accordance with the instructions thereon and sent to us, together with your stock certificate^) if available, as soon as possible, but in any event not later than in time to reach this office by noon on 14th January, 1960. If the offer becomes unconditional, share certificate(s) in respect of the shares to be allocated will be despatched within 21 days of the closing of this offer. If the offer should not become unconditional the form of acceptance and transfer and the Foster Clark Limited stock certificate^) will be returned by post. Application will be made to the Council of the Stock Exchange, London, for permission to deal in and quotation for the new shares in St. Martin Preserving Company Limited to be issued in tire event of this offer becoming unconditional. A copy of the Memorandum and Articles of Association of St. Martin Preserving Company Limited and a copy of the last published Accounts will be available for inspection at Martins Bank Limited, 68 Lombard Street, London, E.C.3., during normal working hours, excluding Saturdays, up to and including the day this offer closes. Latest available middle market quotations are as follows: ST. MARTIN FOSTER CLARK On 16th December, 1959 . . . . . . . . 7/7-Jd. 13/6d. (immediately before this offer was made public). Latest quotations (21st December, 1959) .. .. 7/10*d. 21/6d. The present issued Share Capital of St. Martin Preserving Company Limited is £760,000. If there is a 100 % acceptance of this offer, the issued Share Capital will be £1,390,000. The net trading profits (after taxation) of St. Martin Preserving Company Limited for the three years ended 31st March, 1959 were: £ Year ended 31st March, 1957 21,675 Year ended 31st March, 1958 46,956 Year ended 31st March, 1959 97,994 Other than in the normal course of trading, there has been no material change in the financial position of St. Martin Preserving Company Limited since the last published accounts. St. Martin Preserving Company Limited have the intention on acquiring the business of Foster Clark Limited to continue the undertaking of that Company with the assistance of its present executives and employees with the object of the further development and expansion of its products. Yours faithfully, for and on behalf of ST. MARTIN PRESERVING COMPANY LIMITED L. E. SEAMAN, Secretary. Ordinary Dividend for year Less Income Tax % £ 5 9,344 10 26,450 12* 58,188 Printed image digitised by the University of Southampton Library Digitisation Unit APPENDIX M List of individuals who gave oral evidence to the inspector appointed by the Board of Trade Mr. P. W. Allsebrook Managing Director, Sagit Trust Company Limited Sir Alfred Beit, Bt. Director, St. Martin Preserving Company Limited Mr. G. H. Cann Partner, Thorne, Lancaster & Co., Auditors of Foster Clark Limited Mr. W. J. L. Clarke Partner, Hodgson, Harris & Co., Auditors of T. G. Tickler Limited Mr. W. H. Durlac Partner, Hogg, Bullimore & Co. Mr. J. P. Fyfe Partner, John Dansken & Purdie, Surveyors appointed by the Bank of Scotland Mr. W. H. Haddow Assistant Treasurer, Bank of Scotland Mr. J. E. Hiscock Managing Director, A. A. Stuart & Sons ( Contractors ) Limited Mr. S. R. Hogg Receiver and Manager, St. Martin Preserving Company Limited Mr. M. Lambie Director, Atholl Houses Limited Mr. W. M. Y. Oswald Director, Atholl Houses Limited Mr. D. J. Pyne-Gilbert Partner, Thorne, Lancaster & Co., Auditors of Foster Clark Limited Mr. T. N. Risk Partner, Maclay, Murray and Spens, Solicitors acting for the Bank of Scotland Mr. R. N. Scott Chairman, St. Martin Preserving Company Limited Mr. D. Thompson Partner, Surman, Leat & Co., Successor firm to Eric Phillips & Co., Auditors of Atholl Houses Limited and T. G. Tickler Limited Mr. J. Waldie Partner, Thomson McLintock & Co., Glasgow, Provisional Liquidator of Atholl Houses Limited Sir William Watson Treasurer, Bank of Scotland Mr. W. D. Wilson Partner, Hogg, Bullimore & Co. Mr. G. Wright Director, Sagit Trust Company Limited Printed In England for Her Majesty’s Stationery Office by A. Wheaton & Co. Ltd., Exeter. Dd. 115929 K6 9/66 47 Printed image digitised by the University of Southampton Library Digitisation Unit op. 1100.3. *3 1 BOARD OF TRADE Investigation into the affairs of St. Martin Preserving Company Limited REPORT BY MR. J. D. RUSSELL. M.A., f.c.a. ( Inspector appointed by the Board of Trade in accordance with the provisions of Section 165(b) of the Companies Act 1948) LONDON: HER MAJESTY’S STATIONERY OFFICE PRICE 6s. 6 d. NET Printed image digitised by the University of Southampton Library Digitisation Unit CONTENTS Page Terms of appointment 1 Background to appointment 1 The sale of Atholl Houses Limited 2 Result of investigation 2 Background to the transaction 2 Financial position of Atholl at 28th February 1963 3 Impending liquidation of Atholl 3 The sale agreement 4 Criticisms by Mr. Scott 5 Valuation of work in progress 5 Continuance of bank guarantee 7 Offer by shareholders 7 Arrangement for further finance 8 Other matters raised by Mr. Scott 8 Financial position of Atholl at 30th September 1965 9 Conclusions on the Atholl transaction 9 The St. Martin merger 10 Situation at the beginning of 1956 10 Events in 1956 10 1957-1958 11 1959-1960 11 Scope of investigation 12 Evidence 12 Appendices A The St. Martin group at 1st January 1963 13 B St. Martin circular to shareholders, 2nd November 1963 14 C Mr. S. R. Hogg’s circular to creditors, 29th April 1963 17 D Letter to creditors from McGrigor, Donald & Co., 7th June 1963 21 E Sale agreement dated 30th July 1963 24 F Letter from Maclay, Murray & Spens to McClure, Naismith, Brodie & Co. dated 8th August 1963 33 G Summarised approximate operating statement of Atholl Houses Limited ... 38 H Summarised draft Balance Sheet of Atholl Houses Limited at 30th September 1965 39 I Steps by which the St. Martin group of companies were brought together 40 J Circular letter to shareholders of T. G. Tickler Limited dated 30th October 1956 41 K Circular letter to shareholders of T. G. Tickler Limited dated 7th February 1958 42 L Circular letter to shareholders of Foster Clark Limited dated 23rd December 1959 46 M List of individuals who gave oral evidence 47 63034 — B Printed image digitised by the University of Southampton Library Digitisation Unit