Company ordered to pay £87,000 to former owner of commercial premises to fulfil obligation under buy-back agreement

About this case:

• Citation:
  [2025] SC GLA 7
• Judgment:
  External link
• Court:
  Sheriff Court
• Judge:
  Sheriff S Reid

Sagir Sarwar contracted with Clearwater Investments Scotland Ltd and its sole director Liaquat Ali for a “buy-back” option on the commercial premises, which he sold to them in order to clear a secured debt of his own, which included a clause for payment of surplus sale proceeds if the premises were sold to another party. It was established that the defenders had an obligation to account, but the second defender disputed what sum was payable to the pursuer.

The case was heard by Sheriff Stuart Reid at Glasgow Sheriff Court. Mr K Lang, solicitor, appeared for the pursuer, and Mr I Burke, solicitor, for the second defender.

Net free proceeds

In 2017, the pursuer experienced financial difficulties which resulted in a secured creditor threatening to repossess commercial premises in Hamilton that he owned. To avoid this, he entered an arrangement with the defenders to sell the premises to them for £300,000 and separately agreed a buy-back agreement exercisable within four years of the sale.

To make the arrangement work, the defenders required to take out a five-year secured loan for £221,000, and if the buy-back agreement was not exercised the premises would be sold to clear this outstanding debt. It was agreed that, in the event of such a sale, the pursuer was entitled to receive from the defenders any “surplus monies” from the sale, less expenses and other borrowing following the clearing of the secured debt.

The pursuer failed to purchase the property back from the defenders within the four-year period as he was unable to secure the funding to do so. Consequently, the second defender arranged for the first defender to sell the property to third parties via private bargain for the sum of £300,000. The net free proceeds of the sale totalled £87,347 and it was for this sum that the pursuer raised the action for payment.

The pursuer invited the court to sustain his objections to the second defender’s account. He further contended that the property had been sold at under-value and that this was a breach of the buy-back agreement. For the second defender, the court was invited to conclude that no profit was made from the defenders’ sale of the premises.

Could not be simpler

In his decision, Sheriff Reid noted that emphasis was placed on the pursuer not exercising the option to purchase, saying: “The evidence of alleged repeated attempts to purchase the premises are irrelevant. The incontrovertible truth is that the pursuer failed timeously to buy them back. The various disputed reasons for that failure – none of which are proved in the miasma of competing counter-allegation – are nothing to the point.”

He then considered the relevance of whether the property had been sold at an under-value: “The defenders’ express permitted purpose in selling the premises is to clear their own liabilities and recoup their indebtedness. To imply a more onerous obligation on the defenders (such as to achieve “best open market price” or the like) sits uneasily with that express limited purpose. Besides, if clause 3 were to be interpreted as imposing some such more onerous obligation, there would be little incentive for the pursuer to exercise the buy-back option at all.”

Considering what proceeds of sale could be considered surplus, Sheriff Reid said: “The surplus monies are easily ascertained. According to the account lodged by the second defender, the sale price in July 2022 was £299,006.45, from which the secured loan of £208,857.34 was deducted, together with twenty undisputed expenses of sale. This produced a net ‘balance’ due to the first defender of £87,347.31. This sum represents the surplus monies from the sale. The position could not be simpler.”

He concluded: “The only remaining question, therefore, is whether, on the evidence, any “expenses and other borrowing personal or business” fall to be deducted from those surplus monies. Logically, the onus must fall on the second defender to aver and prove such a deduction. The pleadings are silent on the issue. In any event, no credible or reliable evidence was adduced by the second defender to establish any such deduction from the surplus monies.”

Decree was therefore granted against the defenders for payment of the sum of £87,347.31.