Legal Action - West Calder Oil Co. v. Fell, 1872

West Calder Oil Co. v. Fell

conjoined with Fell v. West Calder Oil Company

In the first of these conjoined actions, which is at the instance of the West Calder Oil Company, and Mr. Lewis Thorpe Merrow and John Findlay as its only partners, against Alex. Morrison Fell, who was formerly a partner of the company, the pursuers seek to have the defender ordained to execute an assignation inn their favour of his interest in the leases of the mineral fields worked by the company. In the other action, which is a reduction at Mr Fell's instance against the company, and Lewis Thorpe Merrow, John Findlay, John Wilson Fell, and Thos. Dunlop Findlay, as the partners, he seeks to set aside an agreement dated 1st and 4th July,1870, whereby in consideration of a sum of £400, he agreed to retire from the West Calder Oil Company as at 15th June, 1870, and to relinquish his managership of the company's works.

It is stated for Mr Fell that the company was originally formed in July, 1862, for the purpose of taking over a lease of the oil shale field at West Calder, which had been acquired by him, and that there was a regular contract of copartnery between him and Mr Merrow, Mr. T.D. Findlay, and Mr J.W, Fell for 31 years, which provided that in respect of the lease contributed by Mr A.M. Fell, he should be interested in the partnership to the extent of a one-fourth share,each of the other partuers having also one-fourth, and that he should take the management of the company's works during the term of the copartnery, and should receive therefor a salary of £800 per annum; and that the cash books, ledgers, and other principal books of the company were to be kept an Glasgow, under the charge of Messrs Merrow & Fell, and that the books were to be brought to balance half-yearly.

That in 1863 an agreement was entered into whereby Mr Morrow and Mr J. W, Fell transferred to Mr John Findlay one-third of the interest held by them respectively, and that by another agreement executed in May, 1866, Mr T. D. Findlay, in consideration of a sum of £6000, said to have been paid to him by Mr John Findlay, agreed to retire from the company as at 22nd May, 1866, and transfer his interest to John Findlay, but that this agreement was never carried out, and that T. D. Findlay continued to be a partner as formerly. That this agreement had been entered into by T. D. Findlay in the apprehension of serious losses by his East India house.The pursuer's statement regarding that agreement are denied by the defenders.

The pursuer, Mr Fell, further states that a very extensive business was carried on by the West Calder Oil Company, and that large works were erected a at West Calder. That he had the management of the operative department of the works from the commencement of the company till the 15th June, 1870, and that for some time prior to the latter date the amount of the company's sales of their manufactures was about £50,000 per annum. That the principal books of the company, as provided by the contract of copartnery were kept in Glasgow under the charge of Mr Merrow, who took the entire charge of the financial affairs of the company. That Mr Fell never at any time saw the books in Glasgow, and that they were not brought to any balance during the whole period he was a partner June, 1870, and that he received no part of the profits earned during those years, or any accounting therefor, That Mr Merrow received all sums of money paid to the company, and that he kept no separate bank account for the company, but paid all the moneys either into the bank account of his firm of Merrow and Fell, or into his own private bank account.

That in May and June, 1870, Mr Merrow and Mr T. D. Findlay represented to Mr Fell that the company were in difficulties, that during the year then just ended, the company, instead of realising any profit, had made a loss of £6000 or thereby, and that during the previous year there had been a loss of £3000 or thereby. That the result of the company's operations, from its commencement had been to produce,a large amount of loss without leaving any profit, and that in these circumstances, Messrs Smith Fleming & Co., who were large creditors of the West Calder Oil Company, to the extent of £10,000 or thereby had intimated that Mr Fell must retire from the concern, and give up his managership, otherwise they would proceed to enforce their claims against the company, and would wind it up. That Mr. Merrow and Mr T. D Findlay represented to Mr Fell that, if he would agree to do that, the change would be satisfactory to Smith, Fleming & Co. and they would then allow the concern to go on; that he had to choose between the alternative of agreeing to that proposal, or of having the company wound up, with the certainty of its being found to be bankrupt.

That these representations were false, to the knowledge of the defenders, Mr Merrow and Mr T. D. Findlay and were fraudulent on their part, and that. they concealed and misrepresented the state of the company's affairs to Mr Fell, and the value of his interest therein, in order to induce him to retire from the concern, and throw up his managership for a very inadequate consideration. That the compensation offered to him at first was a year's salary, being a sum of £300, which he refused to accept, and that thereupon Mr T. D. Findlay undertook to consult Smith, Fleming & Co. as to the compensation being increased, and thereafter on 10th June, 1870 wrote to Mr Fell that he had indicated what had passed to the proper quarter, but had not been successful in obtaining more favourable terms than a year's salary.

That Mr Fell had asked that the books should be audited and balanced, but that this was refused by Mr Merrow and Mr T. D . Findlay, on the ground that it would never do to disclose the wretched state of the company's affairs, and that the expenses of an audit would be thrown away. That the offer to allow Mr Fell a year's salary was afterwards increased to £400, which sum Mr Fell accepted in the circumstances, and entered into the agreement now sought to be set aside. That after Mr Fell had executed this agreement, his brother, John Wilson Fell, was also induced by Mr Merrow and Mr T. D. Findlay to retire from the company, and also from his firm of Merrow & Fell, for a sum of £900 for his interest in both concerns.

That in February, 1872, the remaining partners of the company issued a prospectus for the formation of a limited liability company to take over the works, leases, plant, and goodwill of the West Calder Oil Company, and that with, that prospectus were published reports by Mr Williamson, mining engineer, as to the mineral fields held by the company - Mr Binnie upon the-works, and by Mr Mackinnon, C.A. to the profits, calculated on an examination of the books of the company for thirty-eight months, from August, 1868 to October, 1871. That this report by Mr Mackinnon on the books gave rise to suspicions in Mr Fell's mind that the statements made to him of heavy losses, and no profits could not have been true, and that Mr Merrow had withheld from him the information which the books contained for the purpose of mis-representing the true state of the company's affairs, and of defrauding him of the true value of his interest in the concern. That the business, works, plant, leases, and goodwill of the company had been sold by the defenders to the limited liability company fox a sum of £80,000. The defenders deny the pursuer's statements as to fraud, misrepresentation, and concealment, and state that, in addition to the sum of £400, the pursuer was discharged of a debt of £500 due by him to the company, and they plead that the pursuer's statements was not relevant.

The Lord Ordinary (Ormidale) heard a debate on the relevancy, and has now issued interlocutors allowing a proof to the parties. (There are similar actions in dependence between the West Calder Oil Company and Mr John W. Fell, in which similar interlocutors were pronounced.).

Counsel for Messrs Fell - Mr A. B. Shand and Mr James.Keir.; Agent- T. F. Weir, S.S.C. Counsel for the West Calder Oil Company - Mr McLean. Agents--J. & R. D. Ross.

The Glasgow Herald, 16th December 1872