Sheriff Appeal Court refuses director’s application to act as lay representative in repayment action

About this case:

• Citation:
  [2025] SAC (Civ) 26
• Judgment:
  External link
• Court:
  Sheriff Appeal Court
• Judge:
  Sheriff Principal Aisha Anwar

Pursuer Colin Hastings, in his capacity as liquidator of Cloudstream Technology, raised an action against Day 41 Ltd (formerly MacLellan Property Ltd) seeking repayment of £625,518.96 paid to it on the basis that it was a gratuitous alienation or unfair preference to Cloudstream’s other creditors. The sole director of the defender, Iain MacLellan, was also the sole director and shareholder of Cloudstream at the point the winding up petition was lodged, and he sought authorisation to act as a lay representative in the defender’s interests.

The application was heard by Sheriff Principal Aisha Anwar KC, with S Chesney, solicitor, appearing for the pursuer and respondent and Mr MacLellan, the prospective lay representative, appearing for the defender and appellant.

Contempt of court

On 12 May 2023, the Advocate General on behalf of HMRC lodged a petition at Dunfermline Sheriff Court for an order to wind up Cloudstream. Following the appointment of the pursuer as interim liquidator, a meeting of Cloudstream’s creditors took place online on 19 September 2023, with a number of disputes arising as to what was decided at that meeting and as to whether Mr Hastings had been properly appointed as Cloudstream’s permanent liquidator.

Day 41’s solicitors withdrew from acting in the appeal on 11 July 2025, 17 days before the peremptory diet. On 23 July 2025, Day 41 lodged an application for permission for Mr MacLellan to conduct the proceedings on its behalf. Mr MacLellan submitted that he would receive no personal gain by acting on behalf of Day 41 and was seeking to comply with the fiduciary duty he owed as its director and look out for the best interests of Cloudstream’s creditors.

The liquidator opposed Mr MacLellan’s application on three grounds. These included that he had previously made an unsuccessful application before Edinburgh Sheriff Court to be appointed as Day 41’s representative in February 2024, with nothing substantial having changed since then, and that he had been found in contempt of court in Pinnacle Cloud Solutions Ltd v MacLellan Property Ltd, an Outer House case from 2014, after failing to obtemper an undertaking he had given to the court. In addition, Day 41 was not in a position to declare to the court that it was unable to pay for the services of a legal representative.

In respect of the previous refusal, Mr MacLellan submitted that the sheriff’s decision might have been different had he had access to the processes in the other actions ongoing before Dunfermline Sheriff Court in relation to the liquidation. As for the contempt of court, that was an injustice, as he was not present in court when the undertaking was said to have been given.

Serious allegation

In her decision, Sheriff Principal Anwar first dealt with Day 41’s ability to fund representation, saying: “Day 41 has formally made the declaration, required of it, that it is unable to pay for legal representation. No financial information has been provided to this court to vouch that position which sits in stark contrast to the information provided two months earlier by Day 41’s accountant to support its opposition to the motion for caution; no satisfactory explanation was provided for this sudden collapse of its financial position. In these circumstances, I was not persuaded that Day 41 was unable to pay for the services of a legal representative to conduct the proceedings.”

Turning to Mr MacLellan’s suitability as a representative, the Sheriff Principal began: “[The sheriff] noted Mr MacLellan’s financial interest in the outcome of the proceedings. Day 41 was accordingly aware that an application by Mr MacLellan to act as its lay representative had previously been refused. Mr MacLellan has a clear interest in the subject matter of these proceedings; he is the defender in separate proceedings at the instance of the liquidator relating to the same payments made by Cloudstream to Day 41. The outcome in the present proceedings will have a material effect upon the outcome in the proceedings at the instance of the liquidator against Mr MacLellan personally.”

She continued: “The suggestion that Day 41’s counsel and solicitors gave an undertaking on Mr MacLellan’s behalf [in Pinnacle] without instruction is a serious allegation. I was not persuaded that there was any basis for the court to attach any weight to that suggestion. Similarly, I was not persuaded that there was any basis for this court to look beyond the clear terms of Lord Tyre’s opinion, which described a breach of undertaking solemnly given to a court in order to avoid the granting of an order for interim interdict as ‘a serious and highly reprehensible act’.”

Considering whether it was nonetheless in the interests of justice to grant permission, Sheriff Principal Anwar concluded: “I take account of the fact that Mr MacLellan is the director of Day 41 and was the director of Cloudsteam and thus can be expected to be well versed in the facts, if not the law. Ordinarily, the appointment of a director as lay representative would be granted by the court, if they can demonstrate they do not have a personal interest in the subject matter of the proceedings; however, having regard to the contradictory information provided to this court regarding Day 41’s financial position and the previous finding of contempt in relation to Mr MacLellan, I do not regard it as being in the interests of justice to grant permission allowing him to act as lay representative for Day 41.”

For these reasons, the application was refused.