Former Livingston FC director has claim against him for misappropriation of club money dismissed

About this case:

• Citation:
  [2023] CSOH 71
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Braid

Livingston FC Ltd claimed that Neil Hogarth had misappropriated sums of £74,000 and £50,000 from it. The defender sought dismissal of the case on the basis that the pursuer’s pleadings were lacking in specification and failed to give fair notice of the case against him.

The case was heard by Lord Braid in the Outer House of the Court of Session. Forsyth, advocate, appeared for the pursuer and D Thomson KC for the defender.

Not adequately explained

The pursuer had twice previously entered administration as a result of financial difficulties. Various individuals, including the defender, from time to time advanced money to the club to assist it through these periods of financial difficulty. In late May and early June 2016, another former director of the club, Gordon McDougall, assigned his claims against the pursuer to the defender in return for the sum of £125,000.

It was agreed that payment of that sum was partly made by a transfer of £74,000 from a client account held by the club’s solicitors, Harper Macleod, which it received as an expenses payment from litigation involving another individual, Gerard Nixon. This was explained in a letter of 23 May 2016 as the Nixon expenses not being used to fund the acquisition of the debt but on the instructions of LFC, to repay a loan owed by LCF to Mr Neil Rankine, who was involved in his own litigation against the club.

The position of the pursuer was that the defender paid himself £74,000 which he justified as being in settlement of his loan account, but that he had no repayable loan account ‘in that sum’, without stating what the true balance was. The additional £50,000 was said to result from the creation of a false loan account which was paid by December 2019.

Senior counsel for the defender submitted that the pursuer’s case was not adequately explained or set up. To the extent that LFC pled that the £74,000 admittedly paid to it by Mr Hogarth was not a loan, but had a different purpose, that case was not adequately explained or set up: in particular, there were no averments explaining the contradiction between that alleged position, and the instruction given by LFC to its solicitors as to how to disburse the Nixon expenses and for what purpose. Only a single averment related to the second sum of £50,000 which was also wholly lacking in specification.

Obfuscate, not clarify

In his decision, Lord Braid said of the pursuer’s pleadings: “I consider them to be deficient in a number of respects. In summary, they are diffuse, lengthy, disjointed, contradictory, lacking in specification and, to an extent (in relation to the equivalence of the Nixon expenses, and the sums paid to LFC by Mr Hogarth) rely on innuendo. Overall, the averments tend to obfuscate rather than clarify what the issues in the case are.”

He continued: “Although the case did not originate in the commercial court, LFC was given the opportunity, in effect, to start again, when the case was remitted here; and short focussed paragraphs, set out in a logical order without repetition would have done much to improve the clarity of its case.”

Addressing whether there was nonetheless a relevant case, Lord Braid said: “Dealing first with the second conclusion for payment of £50,000, neither LFC’s pleadings, nor the documents referred to by counsel for the pursuer, nor the explanation tendered by him in the course of submissions give fair or intelligible notice to Mr Hogarth, or for that matter the court, as to how that liability is said to arise. The averment that Mr Hogarth misappropriated £50,000 of the pursuer’s funds by creating a false loan account which was paid by December 2019 is hopelessly lacking in specification.”

He continued: “Having accepted that it received sums amounting to £74,000 from Mr Hogarth, it is incumbent upon LFC to aver why those sums were not loans, and this it does not do. There is no purpose in allowing a proof on this issue, since there is no prospect of LFC proving, on its present averments, either that the benefit of the agreement with Mr McDougall was unlawfully diverted for Mr Hogarth’s benefit, or that the sums totalling £74,000 paid by him to LFC were not loans. It follows that none of the averments directed towards showing that the £74,000 paid by Mr Hogarth to LFC was not a loan can be admitted to probation.”

Lord Braid concluded: “I have come to the view that it is not appropriate to exercise my case management powers at this stage by affording LFC a further opportunity to rectify the defects in its pleadings. It follows that the entire action falls to be dismissed as irrelevant and lacking in specification. I reach this view in some respects reluctantly, inasmuch as there does appear to be a genuine dispute between the parties as to whether Mr Hogarth might have been overpaid and LFC, if it can plead a relevant and specific case, will now require to raise a fresh action.”

The action was therefore dismissed.