Petition by Rodney Vincent McAlister (Court of Session)

Factual and Procedural Background

The Petitioner, together with his parents and three brothers (the respondents), were partners in the firm Panda Rosa Metals, a scrap metal business in Aberdeen. The original partnership was dissolved upon the death of the Petitioner’s father in 2019, after which a new partnership at will was formed by the surviving partners, continuing the business under the same name. Disputes arose between the Petitioner and the respondents relating to management and financial affairs of the partnership. The Petitioner sought dissolution of the partnership under the Partnership Act 1890 and the appointment of a judicial factor, including an interim judicial factor, over the partnership estate.

On 2 October 2024, the court appointed an interim judicial factor on an ex parte basis, without notifying the respondents, to preserve the partnership estate amid allegations of mismanagement and unauthorized payments. The appointment was subject to the factor providing caution, which was satisfied, and the interim judicial factor began duties on 7 October 2024. The petition was served on respondents on 8 October 2024. The respondents subsequently moved to recall the interim appointment, challenging the Petitioner’s disclosures and the necessity of the appointment.

Legal Issues Presented

1. Whether the appointment of an interim judicial factor over the partnership estate was justified on the basis of necessity.
2. Whether the Petitioner fulfilled the duty of full and frank disclosure required in ex parte applications.
3. Whether the circumstances surrounding the partnership’s ongoing trading and internal disputes merit the extraordinary remedy of appointing an interim judicial factor.
4. Whether the court should recall the interim judicial factor’s appointment and refuse to consider the matter de novo due to alleged non-disclosure and misrepresentation.

Arguments of the Parties

Petitioner’s Arguments

• The Petitioner alleged denial of access to financial information and management participation, with dubious payments made by the respondents to themselves and others.
• He claimed to hold a 55% interest in the partnership, based on transfers of shares from his mother and deceased father.
• There were significant concerns about inadequate accounting systems, cash flow problems, substantial unauthorized withdrawals, embezzlement by a bookkeeper, suspicious payments to a purported supplier, and competition from a company linked to respondents.
• The Petitioner feared dissipation of partnership assets and asserted urgency justified the appointment of an interim judicial factor to preserve the estate.
• He denied some of the respondents’ characterizations, including the nature of payments and relationships involved.

Respondents’ Arguments

• The respondents contended the Petitioner failed to make full and frank disclosure, particularly regarding access to financial information, which had in fact been provided.
• They disputed the Petitioner’s claimed shareholding and other factual assertions, including the legitimacy of payments and management decisions.
• They argued the partnership was still trading profitably, with disputes typical of partnership disagreements, not warranting the extreme remedy of appointing an interim judicial factor.
• Respondents pointed to alternative remedies available to the Petitioner, such as dissolution or interdict, and submitted the appointment was a remedy of last resort not justified here.
• They highlighted that the Petitioner declined to attend partners’ meetings and that the firm’s financial difficulties were caused by the Petitioner’s own actions.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Carabine v Carabine 1949 SC 521	Appointment of a judicial factor on a dissolved partnership where one partner refuses to settle affairs.	Referenced as an example where appointment was necessary due to deadlock and refusal to settle partnership affairs.
McCulloch v McCulloch 1953 SC 189	Appointment of judicial factor is a remedy of last resort to protect funds in jeopardy.	Supported the principle that appointment of an interim judicial factor requires necessity and is the most extreme remedy.
Gow v Schulze (1877) 4 R 928	Test for appointment of a judicial factor is necessity; disputes between partners are not resolved by a factor.	Applied to reject appointment where disputes existed but did not justify judicial factor intervention.
Elliot v Cassils (1907) 15 SLT 190	Disputes between partners are not a proper basis for appointing a judicial factor.	Used to emphasize that ongoing litigation is the appropriate forum to resolve partnership disputes.
Institute of Chartered Accountants in Scotland v Kay 2001 SLT 1449	Appointment of judicial factor justified where there is deadlock or no effective management.	Referenced to note that appointment is appropriate only when management is deadlocked or estate requires preservation.
Bell v Inkersall Investments Limited 2006 SC 507	Duty of full and frank disclosure in ex parte applications.	Applied to hold that failure of disclosure may require recall of order even if test for order is met.
Scottish Ministers v Stirton 2008 SLT 505	Reinforces duty of full and frank disclosure and consequences of failure.	Supported the court’s decision to recall the interim appointment for failure of disclosure.
Mex Group Worldwide Limited v Ford 2024 SLT 901	Failure to disclose material information may prevent consideration of fresh applications or lead to recall.	Confirmed the court’s approach to non-disclosure in urgent applications.
Elder v Elder and Watson Ltd 1952 SC 49	Appointment of judicial factor to ongoing business may cause harm outweighing benefits.	Supported the court’s caution about appointing a judicial factor where the partnership is still trading.

Court's Reasoning and Analysis

The court began by emphasizing the critical importance of full and frank disclosure in ex parte applications. The Petitioner failed to disclose that he had been given full access to the partnership’s financial records and was invited to partners’ meetings, undermining the basis of his claim that he was being excluded and kept in the dark. This non-disclosure materially affected the court’s initial ex parte decision to appoint an interim judicial factor.

The court acknowledged the complexity and numerous disputes between the partners, noting that many issues could not be resolved by a judicial factor and required separate litigation. The court considered relevant authorities establishing that appointment of a judicial factor is a remedy of last resort, justified only by necessity, such as deadlock or risk of dissipation of assets.

Although the partnership was trading and facing internal disputes, the court found no evidence of deadlock or management paralysis sufficient to justify the appointment. The ongoing trading and profitability of the firm weighed heavily against the appointment, as the intervention risked damaging the business and its value.

The court also noted that the Petitioner’s asserted 55% share was flawed, reducing the weight of his interests and concerns. Furthermore, many of the Petitioner’s allegations were based on suspicion rather than fact, and some were contradicted by evidence from the respondents.

Given the failure of disclosure and absence of necessity, the court concluded that the appointment of the interim judicial factor should be recalled. Even if the court were to consider the matter de novo, the circumstances did not justify the appointment.

The court also observed that alternative remedies were available to the Petitioner, including dissolution of the partnership or interdict, and that the judicial factor could not resolve the substantive disputes between the partners.

Holding and Implications

The court RECALLED THE APPOINTMENT of the interim judicial factor over the partnership estate.

The direct effect is that the interim judicial factor’s appointment ceases, and the partnership continues without court-appointed management intervention. The Petitioner remains liable for the factor’s fees and outlays, with a sum retained from partnership funds to cover these costs. The court awarded expenses of the recall motion against the Petitioner.

No new legal precedent was established. The decision reinforces the principle that full and frank disclosure is paramount in ex parte applications and that appointment of a judicial factor is an exceptional remedy requiring strict necessity, particularly where a partnership is still trading and disputes between partners exist. The parties are encouraged to resolve their disputes expeditiously through appropriate litigation or alternative remedies.