Gray v Braid Logistics (UK) Ltd

Factual and Procedural Background

The decision of Mr Watson and the background as set out gave rise to multiple related proceedings, including a Reclaiming Motion concerning interim orders granted in a Judicial Review Petition, which the Inner House dismissed for lack of competent invocation of supervisory jurisdiction. Additionally, a petition under sections 994 and 996 of the Companies Act 2006 was initiated regarding the parent company, followed by a Reclaiming Motion related to those section 994 proceedings. The present proceedings concern an action of reduction challenging the dismissal decision made by Mr Watson.

Legal Issues Presented

1. Whether the action of reduction raised by the pursuer is competent given the existence of an alternative remedy provided by the contract of employment, specifically an appeal process in disciplinary proceedings.
2. The relevancy of the defenders' plea of ratification (both implied and express) of the dismissal decision made by Mr Watson.
3. Whether the delay in express ratification affects its validity, particularly in light of the pursuer's resignation and alleged accrued property rights.

Arguments of the Parties

Defenders' Arguments

• The pursuer's contract of employment contained a disciplinary appeal process which the pursuer failed to exhaust, rendering the reduction action incompetent.
• Viscount Dunedin’s observations in Adair v Colville & Sons establish a general principle that reduction is not competent where other review means exist and have not been exhausted.
• The cases cited (including Philip v Watson, W v Scottish Ministers, and McCue v Glasgow City Council) support the position that reduction is incompetent when alternative remedies are available.
• The dismissal by Mr Watson was ratified by the defenders, initially by implied ratification through their conduct in related litigation and later by express ratification via a Board resolution dated 7 December 2016.
• The Board resolution ratifying the dismissal was valid despite the pursuer’s exclusion from the relevant meeting, as Article 20 of the Articles of Association permits directors to vote despite conflicts of interest, provided disclosure is made.
• The delay in express ratification did not cause unfair prejudice to the pursuer; the ratification relates back to the original dismissal, making the pursuer’s resignation ineffective in negating ratification.
• The pursuer had no vested property rights (such as salary or bonus entitlements) that would be unfairly prejudiced by ratification.

Pursuer's Arguments

• The reduction action is not an appeal to the supervisory jurisdiction but a challenge to the validity of the decision-maker’s authority, so the requirement to exhaust appeal rights does not apply.
• The defenders’ implied ratification lacked valid authorization, as no proper Board resolutions were produced to support the actings relied upon.
• The pursuer was improperly excluded from the Board meeting that passed the ratification resolution, rendering that resolution invalid under the Articles of Association.
• Proper disclosure of financial interests at the Board meeting was lacking, invalidating the express ratification.
• The express ratification was made too late, after the pursuer’s resignation, and thus cannot retrospectively validate the dismissal.
• The pursuer has been unfairly prejudiced by the delay in express ratification, having acted on the basis that the dismissal was invalid and incurred significant costs in related proceedings.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Adair v Colville & Sons 1926 SC (HL) 51	Reduction as an equitable remedy is not available as of right and is generally incompetent where other review means exist and have not been exhausted.	The court adopted this as a general principle governing the remedy of reduction, applying it to find the pursuer’s action incompetent due to failure to exhaust contractual appeal rights.
Philip v Watson 1927 SC 224	Supports the general principle that actions of reduction are limited and must be carefully applied.	Used to support the application of Adair’s principle to the present case.
Arthur v The SMT Sales Services Company 1999 SC 109	Reduction is not a remedy to which a pursuer is entitled as of right on proof of invalidity.	Reinforced the general principle that reduction is an equitable remedy requiring discretion.
W v Scottish Ministers 2010 SLT 65 and McCue v Glasgow City Council 2014 SLT 891	Reduction is incompetent where alternative remedies are available and have not been exhausted.	Referenced to support the defenders' argument on competency and exhaustion of remedies.
Danish Mercantile Co Ltd & Others v Beaumont & Others 1951 Ch 680	Ratification can occur by conduct and defence positions adopted in litigation.	Supported the defenders’ argument on implied ratification.
Alexander Ward & Co Ltd v Samyang Navigation Co Ltd 1975 SC (HL) 26	Ratification by conduct and affirmation of agent’s actions.	Supported the defenders’ implied ratification argument.
Hely-Hutchison v Brayhead Ltd 1968 1 QB 549	Duty of disclosure is owed to the company; breach may render contracts voidable but does not necessarily invalidate resolutions.	The court distinguished this case, rejecting the pursuer’s argument that breach of disclosure barred challenge to the resolution.
Owners of the Ship ‘Borvigilant’ v Owners of the Ship ‘Romina G’ 2003 EWCA Civ 935	Ratification is ineffective if it unfairly prejudices a third party or is done outside a reasonable time.	Applied to assess whether the delay in express ratification prejudiced the pursuer and whether ratification was too late.
Bolton Partners v Lambert 1889 LR 41 Ch D 295	Ratification relates back to the original act, rendering subsequent withdrawal ineffective.	Supported the defenders’ argument that ratification relates back to dismissal, making the pursuer’s resignation ineffective.
Bird v Brown 1850 4 Exch 786	Ratification must occur within a fixed time; ratification after that time is ineffective.	The court rejected the pursuer’s reliance on this case as too broadly stated.
Presentaciones Musicales SA v Secunda & Another 1994 Ch 271	Ratification after expiry of limitation period can be valid; ratification need not be contemporaneous with the act.	Used to support the defenders’ position on the validity of late ratification.
Fischer & Co v Andersen 1896 23 R 395	Authority of counsel can be challenged.	Supported the pursuer’s entitlement to challenge the defenders’ authority to act on implied ratification.

Court's Reasoning and Analysis

The court began by considering Viscount Dunedin’s observations in Adair, recognizing the remedy of reduction as equitable and discretionary, generally unavailable where alternative review mechanisms exist and have not been exhausted. The court found this principle applicable as a general rule, reinforced by subsequent cases including Philip v Watson and Arthur v The SMT Sales Services Company. Applying this, the court held that the pursuer’s failure to exhaust the contractual appeal remedy rendered the reduction action incompetent.

Regarding ratification, the court distinguished between implied and express ratification. It accepted the pursuer’s challenge to the validity of implied ratification due to lack of proper authorization and invalid Board resolutions, particularly noting the pursuer’s alleged improper exclusion from the relevant Board meeting. The court found that without valid Board resolutions, the defenders’ implied ratification argument was not presently sustainable.

Turning to express ratification, the court examined the Board resolution dated 7 December 2016. It found that the directors had made sufficient disclosure of financial interests under Article 20 of the Articles of Association, allowing them to vote validly. The court rejected the pursuer’s argument that the resolution was invalid for lack of disclosure.

On the timing of express ratification, the court analyzed authorities including The Borvigilant, Bolton Partners v Lambert, and Presentaciones Musicales SA v Secunda. It rejected the pursuer’s contention that resignation rendered ratification ineffective, adopting the view that ratification relates back to the original act and is not barred by the pursuer’s resignation. It also found that the pursuer’s accrued claims for salary and bonus do not constitute vested property rights that could be unfairly prejudiced by ratification.

However, the court accepted the pursuer’s argument that the delay in express ratification caused unfair prejudice, as the pursuer had acted on the assumption that no ratification existed and incurred significant costs in litigation. Applying the principle from The Borvigilant, the court held that this delay rendered the express ratification ineffective for the purpose of negating the pursuer’s position.

Holding and Implications

The court's final decision was as follows:

The action of reduction is held to be incompetent on the basis that the pursuer failed to exhaust the alternative remedy provided by the contract of employment.

The defenders’ plea of implied ratification was rejected at this stage due to insufficient evidence of valid authorization.

The defenders’ plea of express ratification was rejected on the grounds of unfair prejudice caused by the delay in ratification, despite finding the resolution valid and not invalidated by the pursuer’s resignation.

The court dismissed the pursuer’s action accordingly, reserving all issues of expenses. No new precedent was created; the decision primarily applies the established principles governing the remedy of reduction, ratification, and contractual appeal mechanisms to the facts of the case.