Scotland's Brick and Tile Manufacturing Industry

Millstone Grit and Fireclay Ltd, Wester Jawcraig, Falkirk: (c. 1937 to 1970s, 1987 to 1993, closed 1998)

Millstone Grit & Fireclay Co Ltd – Millstone Grit & Fireclay Co was incorporated in 1966 and took over the common brickworks at Herbertshire, Denny. Worked open cast fireclay pits at Threaprigg and Slamannan Plateau. It was merged with Burn Fireclay Co of Morpeth in 1979 and Herbertshire Brickworks were closed.

The name Millstone possibly derives from  … The first paper on the list, which was contributed by Mr L. W. Hinxman and Mr M. MacGregor, dealt with the distribution and geological position of the fire -clays and ganisters of the South of Scotland. The materials at present used in Scotland in the manufacture of high-class refractory goods are chiefly confined to the Millstone Grit strata between Glasgow and Bonny bridge, on the western side of the central coalfields. This localisation of the fire-clay industry, more marked even than that of the oil shales of the Lothians, though from a different cause, is primarily due to the fact that the industrial centres of the West, with their blast-furnaces, foundries, steel, glass and chemical works, have created a large and increasing market for refractory materials, both raw and manufactured. Ample supplies of suitable fire-clay were fortunately found to exist in the neighbourhood of these centres and thus, while rocks of millstone grit cover considerable parts of the South of Scotland, it is only as yet in certain limited areas that their economic possibilities have been adequately tested. P291

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A Millstone Grit and Fireclay pamphlet Ltd, Herbertshire Works, Denny states

Alpha – 40 – 42% Alumina. Silica 53.2 %. High Duty Fire Brick.

Beta   – 38 – 40% Alumina. Silica 55.5 %. Medium Duty Fire Brick

Beta L – For use in Ladles, Tundishes etc.

Alpha + –  42.1% Alumina. Silica 51.3 %. Super Duty Fire Brick

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Source Falkirk Museum and Archives – Jawcraig Brickworks, Slamannan, Falkirk. Established in 1937. Ceased 1979

The Works were built at Masonfield near Jawcraig by the Alloa Coal Company. Building started in January 1937 and by June 1937 the kiln was almost ready for use. Production was well underway by September 1937.

Raw materials were obtained from the Carbrook Mine at Torwood. The Company stopped the production of common bricks in 1964 and concentrated on refractories, including firebricks, cement, castings, high alumina products, castable products, gun mixes and aluminous jointing cements.

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Jawcraig Brick Works in Falkirk date from the inter-war years and were closed in the 1970s. During World War II the works were owned by Stirlingshire Brick Works Ltd but were under care and maintenance and out of production. At the time of their closure in the 1970s, the works were operated by Craigend Refractories Ltd. The works were rebuilt and re-opened in 1987 but mothballed in 1993.

This view is looking east along the 18-chambered, oil-fired Belgian kiln which was under a steel-framed cover. The Belgian kiln was patented in 1891 and was developed from the Hoffmann kiln. Both types are brick-built and barrel-arched. Belgian kilns fire at between 1,200 and 1,300ºC.

Jawcraig manufactured ‘common’ bricks. In a British Geological Survey report of 1985, it was measured that common bricks accounted for over 80% of Scottish output. Bricks found at Jawcraig in 1980 were marked ‘FALCON A’ and ‘KESTREL’. (These were manufactured by Craigend Refractories Ltd)

Stirlingshire Brick Company made common bricks and it is thought their brand was the ‘STERLING’ brick. A reference in the Bradley & Craven Machine Order Book suggests that Jawcraig Works were owned and/or operated by Robert Thomson in 1937.

06/02/1937 – Airdrie and Coatbridge Advertiser – Good news was forthcoming last weekend with the announcement that a brickwork would be started at Jawcraig by the Alloa Coal Company. Although it may not employ a large number of men, it is nevertheless a good sign and the benefit will be felt in many quarters. Work on the building of the premises is starting immediately.

1939 – 1960‘s – A survey of Scottish brickmarks 1985 suggests that the  Stirlingshire Brick Company Limited were the owners.

1970‘s – A survey of Scottish brickmarks 1985 suggests the by the 1970s, Craigend Refractories were the owners.

1992 – The Herald … Millstone, whose main business is coal and fire-clay mining, has applied for planning permission from Falkirk Council to change the use of its brickworks, 1.5 miles from Slamannan, which has been out of production since 1992 …

31/07/2002 – Scottish Courts  –

Pursuer: Cullen, Q.C.; Johnston; Simpson & Marwick, W.S.

Defenders: Stuart; Dundas & Wilson, C.S.

31 July 2002

[1] The pursuer was appointed interim liquidator of Millstone Grit & Fireclay Limited (hereinafter referred to as “Millstone”) on 25th October 2000. On the same date an order was made by the court for the winding up of Millstone. Before that date another insolvency practitioner acted as provisional liquidator, he having been appointed to that office on 29th October 1998. The petition for winding up was presented to the court on 22nd October 1998, and accordingly, in terms of section 129(2) of the Insolvency Act 1986, that is the date of Millstone’s winding up.

[2] The second, third and fourth defenders, Caledon Holdings Limited, Caledon Coal Company Limited and Hugh McCaig & Company Limited, are all companies that were connected with Millstone. The second and third defenders, Caledon Holdings Limited and Caledon Coal Company Limited, are both in receivership, and they are sued together with the joint receivers appointed over their property and undertaking. The first defender, the Royal Bank of Scotland PLC, acted as bankers to all of those companies. On 17th February 1997 it offered a group overdraft facility to Millstone and the second and third defenders. That offer was accepted on behalf of those companies. That facility was superseded by a further offer of a group overdraft facility made by the first defender on 20th February 1998, which offer was accepted on behalf of Millstone and the second and third defenders. On 19th February 1997 Millstone and the second, third and fourth defenders granted a document referred to as an Unlimited Inter Company Composite Guarantee in favour of the first defender. That Guarantee was re-executed on 25th April and 5th May 1997. The pursuer now challenges the grant of the Guarantee by Millstone, in both its original and re-executed forms.

[3] In the Guarantee Millstone and the second, third and fourth defenders were referred to variously as the Companies or the Guarantors or the Debtors. The Guarantee provided that the Guarantors would, in consideration of the first defender’s giving time or credit or banking facilities to any one or more of the Companies, jointly and severally guarantee to discharge on demand all the obligations of each debtor with interest from the date of demand. It is thus fairly typical of the guarantees that are regularly granted by groups of companies in favour of their bankers.

[4] On 2nd November 1998 the first defender called up the Guarantee. It is averred by the pursuer that shortly thereafter the first defender froze the whole sum standing at the credit of Millstone’s account with them in purported implementation of Millstone’s obligations to the first defender under the Guarantee and in order to discharge the indebtedness to the first defender of one or more of the second, third and fourth defenders. The amount of the sum so frozen is averred to be £554,000.17. On 3rd November 1998 the first defender appointed two insolvency practitioners as the joint receivers of Millstone. They remain in office, but have played no active part in the present proceedings.

[5] The pursuer now challenges the Guarantee on the ground that it was a gratuitous alienation in terms of section 242 of the Insolvency Act 1986, and hence reducible at the instance of the liquidator of Millstone. He seeks reduction of the Guarantee and payment by the first defender of £554,000.17, the sum which he avers was standing at the credit of Millstone’s account when it was frozen by the first defender. So far as it is relevant to the present case, section 242 is in the following terms:

“(1) Where this subsection applies and —

(a) the winding up of a company has commenced, an alienation by the company is challengeable by —

…

(ii) the liquidator;…

(2) Subsection (1) applies where —

(a) by the alienation… any part of the company’s property is transferred or any claim or right of the company is discharged or renounced, and

(b) the alienation takes place on a relevant day.

(3) For the purposes of subsection (2)(a), the day on which an alienation takes place is the date on which it becomes completely effectual; and in that subsection ‘relevant day’ means… —

…

(b)… a day not earlier than 2 years before that date.

(4) On a challenge being brought under subsection (1), the court shall grant decree of reduction or for such restoration of property to the company’s assets or other redress as may be appropriate; but the court shall not grant such a decree if the person seeking to uphold the alienation establishes —

(a) that immediately, or at any other time, after the alienation the company’s assets were greater than its liabilities, or

(b) that the alienation was made for adequate consideration, or

(c) that the alienation —

(i) was a birthday, Christmas or other conventional gift, or

(ii) was a gift made, for a charitable purpose, to person who is not an associate of the company,

which, having regard to all the circumstances, it was reasonable for the company to make….

…

(6) For the purposes of the foregoing provisions of this section, an alienation in implementation of a prior obligation is deemed to be one for which there was no consideration or no adequate consideration to the extent that the prior obligation was undertaken for no consideration or no adequate consideration”.

Thus any alienation made by a company in liquidation at a time not earlier than two years before the commencement of winding up is challengeable by the liquidator, and will be reduced unless the person to whom the alienation was made establishes one of the three defences in subsection (4). In the present case two particular aspects of the section were debated: firstly, whether the definition of “relevant day” in subsection (3) permits a liquidator to challenge an alienation that is only completed after the commencement of winding up, and, secondly, the meaning of the expression “adequate consideration” in subsection (4)(b) in the context of a cautionary obligation.

[6] The pursuer’s factual averments in support of his argument that the granting of the Guarantee by Millstone was a gratuitous alienation are as follows. It is said that the Guarantee was granted by Millstone for no or in any event no adequate consideration. Millstone received no more extensive banking facilities from the first defender after it executed the Guarantee than it had before it did so. Millstone had no need of the Guarantee when it was executed and some of the companies whose debts to the first defender were guaranteed (a reference to the second, third and fourth defenders) were at that time insolvent. By entering into the Guarantee Millstone therefore assumed a potentially substantial contingent liability to the first defender. Millstone did not receive from the first defender money or money’s worth as consideration for entering into the Guarantee. All that Millstone received was the opportunity to draw down funds against the overdraft facility made available by the first defender. Its position did not in any way improve as a result of entering into the Guarantee. The pursuer makes certain further averments to the effect that, even if the making available of an overdraft facility is capable of amounting to consideration for purposes of section 242, that consideration was nil, because the first defender already had adequate security. Those averments are not material to the present debate, however, as they involve proof of matters of fact. The pursuer goes on to over that the calling up of the Guarantee on about 2nd November 1998 and the freezing by the first defender then or shortly thereafter of funds in Millstone’s account in purported implementation of Millstone’s supposed guarantee obligations amounted to a gratuitous alienation in favour of the first defender. That alienation took place in implementation of the prior obligation undertaken by Millstone in terms of the Guarantee and became completely effectual on or shortly after 2nd November 1998 when the funds in Millstone’s account were frozen by the first defender. That date was a date not earlier than two years before the commencement of the winding up of Millstone, which had taken place on 22nd October 1998.

[7] In the answers lodged on behalf of the defenders, it is admitted that the winding up of Millstone commenced on 22nd October 1998, and the Guarantee is referred for its terms. The pursuer’s averments that some of the companies whose indebtedness was guaranteed were insolvent at the time when the Guarantee was granted is met by the response “not known and not admitted”. Otherwise the pursuers’ averments are denied. The averment that some of the companies whose indebtedness was guaranteed were insolvent at the time when the Guarantee was granted is clearly a matter within the knowledge of the second, third and fourth defenders, as they must be in possession of the relevant accounting records and must accordingly be able to determine whether they were in fact insolvent at that time. In these circumstances, the defenders’ response to the pursuers’ averment that certain of those companies were insolvent when the Guarantee was granted must be treated as an admission: Gray v. Boyd, 1996 SLT 61, at 63C-D per Lord Justice Clerk Ross. At the debate on the parties’ pleadings, the defenders did not dispute that the pursuer’s averments were sufficient to entitle him to decree of reduction, except for two matters: whether the alienation, which was completed after the commencement of winding up, took place on a “relevant day”, in terms of section 242(3), and whether the alienation had been made for adequate consideration, in terms of section 242(4).

The liquidator’s power to challenge an alienation completed after winding up

[8] Both parties have tabled pleas to the relevancy of the other’s averments, and when the case called in debate both sought to have those pleas sustained. The defenders’ first argument was that any alienation by Millstone became completely effectual after and not before the commencement of winding up. The winding up of Millstone had commenced on 22nd October 1998, but the alienation was not completed until the Guarantee was called up, which occurred on or about 2nd November 1998. On that basis, it was argued that section 242 was inapplicable; any challenge under that section must relate to an alienation during the period specified in subsection (3), and that period terminated on the commencement of winding up. Thereafter, it was said, any challenge to a disposition by the insolvent company must be made under section 127 of the Insolvency Act 1986, which provides that, in a winding up by the court, any disposition of the company’s property made after the commencement of the winding up is void, unless the court otherwise orders. In response, the pursuers submitted firstly that the literal reading of section 242, and in particular the wording of subsection (3)(b), was not limited to dispositions that became effective before the commencement of winding up; the section imposed a starting date, namely two years before the commencement of winding up, but did not impose a closing date. Secondly, the pursuers submitted that the policy of section 242 was against the pursuers’ construction. It would be an odd and arbitrary result if an alienation could not be challenged merely because it became completely effectual after the commencement of winding up. Thirdly, the legislative history of section 242 was relevant. The predecessor of that section was section 618A of the Companies Act 1948, which was enacted by paragraph 20 of Schedule 7 to the Bankruptcy (Scotland) Act 1985. That provision was based on a draft clause (relating to sequestration) contained in the Scottish Law Commission’s Report on Bankruptcy and Related Aspects of Insolvency and Liquidation, dated 25th February 1982. So far as material, the wording of section 242 is identical to that of the Law Commission’s draft clause. Paragraph 12.19 of the Law Commission’s report expressly states that, although the Commission referred to a period preceding the date of sequestration, they recommended that the proposals should extend to the case where the alienee completes his title (and thereby completes the alienation) after the date of sequestration. There was no indication that Parliament had intended to depart from that policy.

[9] In my opinion section 242 can apply to any alienation that takes place after the date specified in subsection (3), including an alienation that becomes completely effectual after the commencement of winding up. That result is quite clear from the wording of subsection (3). Subsection (2)(c) provides that the right of challenge in subsection (1) applies where the alienation takes place on a relevant day. “Relevant day” is defined in subsection (3) as a day “not earlier than” five years or two years (according to whether or not the alienation favours an associate) before the date on which the winding up of the company commences. The words “not earlier than” set a starting point for the period during which an alienation must take place if it is to fall under section 242, but there is no corresponding reference to any finishing point. The clear inference is that there is no finishing point. Had Parliament intended otherwise, it could readily have defined “relevant day” as a day within the period of five years or two years, as the case may be, immediately prior to the commencement of winding up, in which case the latter date would have been the finishing point.

[10] Moreover, the foregoing interpretation is strongly supported by the purpose of section 242. The fundamental purpose of that section is to prevent insolvent companies from alienating their assets for less than full consideration. In Scots law, apart from the sale or other transfer of goods, the alienation of an asset is typically a two-stage process, with a contract for sale followed by a disposition or assignation. In such a case, it may frequently happen that the disposition or assignation has not been completed by the commencement of winding up. It nevertheless seems clear that section 242 is intended to apply to such transactions. Exactly the same is true, in my opinion, in the case of a cautionary obligation or real security granted before insolvency which is called up or enforced after insolvency. That is a very typical situation, and it would be strange if section 242 did not apply to such cases, where the cautionary obligation or security was granted for inadequate consideration. Counsel for the defenders contended that the proper method of challenge in such a case was under section 127 rather than section 242. Section 127 provides that, in a winding up by the court, any disposition of the company’s property made after the commencement of winding up is, unless the court otherwise orders, void. Thus section 127 renders a disposition totally void, with no defences available to the disponee, subject only to a discretion in the court to order otherwise. If it were correct, as the defenders contended, that that section applied to any case where an alienation did not become completely effective until after winding up, the results would be extraordinary. Where, for example, a company had granted a heritable security for full consideration some years prior to winding up, but the security was not enforced until after the commencement of winding up, the security would be void, subject only to the court’s discretion to make a declaration to the contrary. That is obviously unfair; where a security has been granted for full consideration there is no prejudice to the company or its creditors, and the security ought to be fully valid in the winding up. That result is achieved if section 242 applies, however, because under subsection (4) of that section it is a defence that the alienation has been made for adequate consideration. I am accordingly of opinion that section 127 is wholly inapplicable to cases such as the present. Indeed, if section 127 did apply, it would be open to the present pursuer to challenge the Guarantee under that section, and it would be irrelevant whether any consideration was provided by the first defender for the Guarantee. That is scarcely helpful to the defenders’ position.

[11] Counsel for the pursuer made reference in their argument to the legislative history of section 242, and in particular to the Scottish Law Commission’s Report on Bankruptcy and Related Aspects of Insolvency and Liquidation. If I had thought that there was any ambiguity about the meaning of section 242(3), I would have regarded that Report as strongly supportive of the pursuers’ argument. In the event, however, I do not consider that there is any such ambiguity, and there is accordingly no need to have regard to the Report. I should note that counsel for the defenders made reference in the course of his argument to a number of cases and textbooks, but I did not consider that any of those had any bearing on the issue that arose.

The meaning of “adequate consideration” in section 242(4)(b)

[12] In addition to the foregoing argument on the scope of section 242, counsel for the defenders challenged the relevancy of averments by the pursuer that the Guarantee was granted by Millstone for no consideration, or no adequate consideration. Counsel for the pursuer, by contrast, contended that it was clear from the pleadings that Millstone had entered into the Guarantee without consideration, in that it had assumed substantial contingent liabilities and was exposed to liability for the indebtedness of other companies which were insolvent at the time when the Guarantee was entered into. The pursuer further argued that the granting of an overdraft facility by the first defender to Millstone was not capable of amounting to consideration for the Guarantee, for two reasons; first, such funds as were drawn down by Millstone under the overdraft facility were matched precisely by Millstone’s obligation to repay the first defender and, second, the opportunity to drawn down funds against an overdraft facility did not create in Millstone a new legal right of patrimonial value. It is convenient to deal with all of these arguments together.

[13] The critical question is the meaning of the expression “adequate consideration” as it is used in section 242(4)(b), in the context of a cautionary obligation, that is to say, an obligation granted by one person in security of the debts of another person. The word “adequate” does not give rise to any particular problem; it clearly means that full value, in money or money’s worth, must be given by way of consideration for the obligation undertaken by the insolvent company. The meaning of the word “consideration” has been the subject of judicial comment, but in the context of outright alienations by a debtor, as against alienations in security. In MacFadyen’s Trustee v MacFadyen, 1994 S.C. 416, which was followed in Cay’s Trustee v Cay, 1998 S.C. 780, it was held (at 421D-422B) that the word “consideration” must be given its ordinary meaning as something which is given, or surrendered, in return for something else. It must mean “something of material or patrimonial value which could be vindicated in a legal process, whether by being claimed or possibly by being pled in answer to another’s claim”. The court further held that a consideration acquires its character as a consideration not later than the time when the giving or surrendering takes place. It followed that for something to be “consideration” it must have a patrimonial worth at the time when it is given. Some care is required, however, in applying these principles to cautionary obligations.

[14] It is convenient, however, to begin with the simpler case of an ordinary obligation in security granted by a debtor to his creditor, as by a standard security or assignation in security. Such securities are commonly granted in respect of future indebtedness. That is invariably the case when security is granted for a bank overdraft, as the whole point of the overdraft is to enable the borrower to draw down sums in future. Indeed, because of the application of the rule in Clayton’s case, the identity of the sums borrowed will inevitably circulate, and such sums as are borrowed at the outset of the overdraft facility will often be rapidly repaid. In such a case, the consideration provided by the bank for the security is a series of loans of the sums drawn down from time to time by its customer. Those loans obviously have patrimonial worth at the time when they are given. In MacFadyen’s Trustee the court stated that anything amounting to “consideration” must have patrimonial worth at the time when it, that is to say the consideration, is given. In the case of an overdraft that test is clearly satisfied in respect of the various advances made by the bank. I mention this point because at one point the pursuer appeared to argue that the provision and adequacy of consideration must be determined at the time when the alienation was made, that is to say, when the Guarantee obligation was undertaken; the result of that, it was said, was that the drawing down of loans after the Guarantee was executed could not amount to consideration for the Guarantee. In my opinion that is not correct, for the reason stated in the earlier part of this paragraph. One further matter should be mentioned at this stage. If the customer of a bank has been granted an overdraft facility and is already overdrawn, and then grants a security in favour of the bank, the bank’s continuation of its existing loan to the customer is in my opinion sufficient to constitute consideration, provided that the continuation of the loan is properly regarded as dependent upon the granting of the security. That last requirement is an inference that I would draw readily, but some evidence to support it will always be necessary.

[15] When the obligation undertaken by the debtor is cautionary in nature, the position is more complex in that three parties are involved. As a matter of general law, if a company X borrows from a bank and another company Y guarantees X’s debt to the bank, the bank’s loan to X is regarded as consideration for Y’s guarantee. The crucial point is that consideration must move from the party providing it rather than to the person who provides the counterpart obligation. In the context of section 242, however, I do not think that the analysis can be so simple. The purpose of section 242 is to prevent companies in financial difficulty from alienating property without obtaining a full return. That suggests that the consideration must not only move from the person who provides it but must move, at least to some degree, to the company making the alienation. In the above example, that means that the consideration must move not only from the bank but also to some degree to Y. It does not follow, however, that the consideration must be provided exclusively to Y. In the commercial world guarantees and other cautionary obligations are regularly granted, for a multitude of reasons. This is not done out of charity, but because the person granting the guarantee requires to give it to achieve some commercial result which will enure to its benefit. In the case of the bank overdraft discussed above, Y may grant the guarantee because it is important to its business that X should receive an overdraft facility, perhaps because X and Y are members of the same group and their businesses are closely interconnected. In such a case I would readily hold that the bank’s advancing funds to X was consideration for Y’s granting the guarantee, in that Y has received a substantial benefit as a result of the guarantee. That is especially so where X and Y have granted cross-guarantees in respect of each other’s obligations to the bank. So far as the adequacy of the consideration moving to the guarantor is concerned, in such a situation I am of the opinion that it should not be assessed too precisely. The benefit obtained by a company which gives a guarantee on behalf of an associated company will rarely be capable of precise quantification, and if the transaction as a whole appears commercial it should generally be assumed that the consideration is adequate. In all cases, however, it is essential that full consideration, in money or money’s worth, should move from the creditor, and the adequacy of that consideration should be assessed strictly. Thus, in the above example, the bank must provide full consideration to X. The type of transaction under consideration is exemplified by John E Rae (Electrical Services) Linlithgow Ltd v. Lord Advocate, 1994 SLT 788, where two companies and the individual who controlled both of them granted a bond jointly and severally in favour of the Commissioners of Inland Revenue in relation to underpayments of tax and national insurance contributions by one of the companies. The Revenue required such a bond as a condition of granting an exemption certificate in favour of the latter company. The liquidator of the other company sought to challenge the bond as a gratuitous alienation. It was held that the granting of the bond by the company in liquidation was necessary to secure the issue of the exemption certificate, and that without the exemption certificate the company in liquidation would have been unable in practice to trade. Thus there was a benefit to the company in liquidation. Consequently the issue of the exemption certificate was both consideration and adequate consideration for the granting of the bond.

[16] In all such cases, however, it is important to bear in mind that the onus of proving that consideration was provided, and that such consideration was adequate, rests on the creditor in the guarantee. It is accordingly essential for the creditor to aver the consideration provided for the guarantee, and to do so in such terms that it can be inferred that the consideration was adequate. In the present case, I am of opinion that the defenders have failed to make such averments.

[17] The defenders’ averments of consideration are as follows. They state that the Guarantee was granted in implement of a condition in the offer of a group overdraft facility made by the first defender, which offer was accepted by the Millstone and by the second and third defenders. It is said that the offer was of an overdraft facility amounting initially to £1,060,000, and that the facility was to be calculated by netting the total of the cleared creditor balances on current accounts in the names of Millstone, the second and third defenders and another non-borrowing company. What was involved was therefore a typical group overdraft facility. It is further averred that the rate of interest charged on the net debit balance was lower than had previously been charged, and in fact amounted to 4% above base rate subject to a minimum charge of 8% per annum. The facility was used by both Millstone and the third defenders. Millstone’s account is said to have been continuously overdrawn, frequently by substantial amounts, between November 1996 and 10th October 1997. The amount of Millstone’s overdraft on certain dates is averred; the highest of these amounts, on 17th February 1997, was £1,097,446.69. It is averred that between 10th and 22nd October 1997 Millstone’s account switched between debit and credit, and that after 22nd October 1997 it was continuously in credit. The effect of these averments is summarised by the defenders as follows:

“In the circumstances, where said guarantee was required as a condition of the agreement that said facility would be made available to [the second defender and the associated companies], including Millstone, and where Millstone made use of said facility as aforesaid and enjoyed the benefit of a reduced rate of interest on netted balances, then esto it was an alienation, it was made by Millstone for adequate consideration”.

In addition to those averments, it is necessary to take into account the defenders’ implied admission, referred to in paragraph [7] above, that at the time when the Guarantee was granted certain of the companies whose indebtedness was guaranteed were insolvent.

[18] In my opinion those averments do not disclose that adequate consideration was provided for the Guarantee. The critical point is that, when the Guarantee was granted by Millstone, some of the companies whose obligations were guaranteed were insolvent. Undertaking a guarantee for the obligations of an insolvent company is inevitably detrimental, because such a company is incapable of paying its debts in full. Thus the granting of such a guarantee provides an immediate benefit to the creditor, and a corresponding immediate detriment to the cautioner. That benefit to the creditor is distinct from the usual benefit that a guarantee confers. In ordinary circumstances, a guarantee deals with the possibility that the principal debtor may become insolvent in future. Where the principal debtor is already insolvent, however, the function of the guarantee is to provide security for debts that, ex hypothesi, cannot be paid in full. In my opinion the making of future advances by the creditor in such a guarantee can never be adequate consideration for a security of that nature. Every such advance carries with it an obligation on the borrower to repay the loan. To the extent that such an advance is made to the solvent guarantor, the guarantor is obliged to repay. To the extent that such an advance is made to the insolvent company whose obligations are guaranteed, the guarantor is inevitably obliged to repay part of the sum advanced, because the principal debtor cannot pay in full. Thus the guarantor is bound to pay more than it receives, and the consideration provided by the creditor cannot be adequate..

[19] In the present case it seems likely that that is what happened, as the first defender has called up the guarantee granted by Millstone. The defenders do not aver that the companies that were insolvent when the Guarantee was granted have subsequently become solvent, or that Millstone’s obligations under the Guarantee have nothing to do with the initial insolvency of those companies. In the circumstances it can be inferred that the consideration provided by the first defender for Millstone’s obligations under the Guarantee was inadequate. For that reason, I am of opinion that the defence in section 242(4)(b) is not available to the defenders.

[20] In addition, any consideration provided by the first defender for the Guarantee must have consisted of the lending of sums to the second and third defenders and to Millstone. Nothing is said by the defenders about such lending, however, beyond the bare averment that the facility was “available to and utilised by” Millstone and the third defender together with rather general averments about Millstone’s overdraft between November 1996 and October 1997. I do not think that that is enough to draw the inference that the consideration provided by the first defender was adequate, especially against the background that certain of the other defenders were insolvent when the Guarantee was granted. Finally, the defenders aver that the lower interest rate that is made available by the first defender was consideration for Millstone’s obligations under the guarantee. It is clear that the effect of any such reduction in interest rates would be minimal by comparison with the potential liability under the Guarantee, and in my opinion such reduction would not be capable of amounting to adequate consideration.

[21] I accordingly conclude that the defenders have not stated a valid defence to the pursuer’s claim that the Guarantee should be reduced as a gratuitous alienation in terms of section 242 of the Insolvency Act 1986. I will accordingly sustain the first and second pleas in law for the pursuer and pronounce decree of reduction in terms of the first conclusion of the summons. At the same time I will repel the defenders first three pleas in law; these deal respectively with the liquidator’s power to challenge a gratuitous alienation that becomes completely effective after the commencement of winding up, the general relevancy of the pursuer’s averments, and the question of whether the Guarantee amounted to a gratuitous alienation.

[22] The pursuer has a further conclusion for payment by the first defender of the sum of £554,000.17, which is said to be the sum at credit of Millstone’s account which was frozen by the first defender shortly after the Guarantee was called up. The defenders deny that that sum was frozen. In the circumstances it will be necessary to have a proof of the pursuer’s averments that that sum was frozen in purported implement of Millstone’s obligations to the first defender under the Guarantee and in order to discharge the indebtedness to the first defender of one or more of the second to fourth defenders. In addition, the defenders aver that the first defender has granted contractual guarantees to the Coal Authority and Falkirk District Council in respect of certain contractual obligations incurred by Millstone. It is said that those guarantees, which total £375,000, are likely to be called up. It is averred that Millstone granted indemnities in respect of the guarantees, and that the first defender is accordingly entitled to retain sums in Millstone’s account to discharge those indemnities. The relevancy of these averments was not challenged by the pursuer, and it will accordingly be necessary to deal with them at proof. I will therefore allow a proof restricted to the pursuer’s averments in Condescendence 3 relating to the freezing of the sum at credit of Millstone’s account and a proof before answer in relation to the defenders’ averments in Answer 5 relating to the guarantees granted by the first defender and the corresponding indemnities by Millstone.

14/03/2014 – Falkirk Herald  – Controversial plans for a waste treatment site near homes in the Braes have been approved by the Scottish Government. The approval will allow storage, treatment – including lime treatment – and distribution of organic waste at the old Jawcraigs brickworks site near Slamannan. It was originally refused by Falkirk Council. James McCaig Farms, which owns the site, appealed the decision and this was upheld by Scottish Government Reporter Lance R Guilford who concluded that the “…proposed development is consistent with the relevant provisions of the development plan and that there are no material considerations which would justify refusing to grant planning permission”. Residents – the closest being 100 metres from the site – are concerned about noise, smells and traffic the plant will create. Mr Guilford included six conditions for the planning approval to go ahead. Upper Braes Councillor John McLuckie, who was part of the planning committee which refused the plans, said: “I’m disappointed in the decision but happy that there are conditions attached.” Andrew McCaig said: “The site will create new jobs and bring new investment to the area.” Central Scotland MSP, Margaret Mitchell was also “disappointed” at the decision. She said: “It is yet another example of the centralisation of decision making under this SNP majority government. “Here the wishes of a local community and the detailed considerations and concerns laid out by Falkirk Council, in refusing this application, have now been ignored and overturned by the Reporter. “Furthermore the conditions attached to the planning consent approved by the Reporter when he overturned Falkirk Council’s decision to refuse, will give little or no comfort to the local community. “The fact of the matter is that in this economic climate when councils are facing cuts to their budgets local Authority rarely have the resources to police or enforce these planning conditions.” Falkirk East MSP Angus MacDonald welcomed the Reporter’s decision. He said: “I have been working with local residents, SEPA and Falkirk Council since last summer to try to resolve the effects that the business at Wester Jawcraig Farm is having on the local community. “I welcome the Reporter’s decision to allow planning permission – bringing the process indoors will allow the business to continue to operate with less of an impact on nearby neighbours, provided the conditions set out by the reporter are adhered to. “I will continue to work with SEPA and Falkirk Council to make sure that the site is monitored and any concerns that my constituents have are addressed.”

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Below – The Scottish Industrial Archaeology Survey published a report in 1985 entitled ” A survey of Scottish brickmarks. During the compilation of this report in which the survey officers visited working and derelict brickworks sites, many items of interest were donated or found. Many of these items were thereafter donated to the National Museum Scotland. The item below is one of these items. An iron stamping plate marked ‘Sterling’.