'

UNTO THE RIGHT HONORABLE THE LORDS OF COUNCIL AND SESSION

PETITION

of Colin Cornes, Andrew Howard Foster, Andrew John Hodgson, Roderick William Nfathers and Willlam Brown Wishart, the directors of THE SCOTTISH COAL COMPANY LIMtrED, a company incorporated under the Companies Acts (with company number SC154655) ~nd with its registered office at Castlebridge Business Park, Gartlove, Alloa '

PETITIONERS for

an order to wind up that company, under the Insolvency Act 1986 and to appoint a provisional liquidator to that company.

HUMBLY SHEWETH:

Introduction

1.1 The Petitioners ("the Directors") are the directors of The Scottish Coal Company Limited ("the Company"). The Company is incorporated under the Companies Acts with the company number SC154655 and has its registered office at Castlebridge Business Park, Gartlove, Alloa.

1.2.1 In this application, the Petitioners seek an order for the winding up of the Company, under the Insolvency Act 1986 c-the Insolvency Act") and the Insolvency (Scotland) Rules ("the Insolvency Rules").

1.2.2 The Directors have a title to make this application under section 124(1} of the Insolvency Act. They instructed this application by a resolution dated 18 April2013.

1.2.3 · The· Directors m·ake this''applicafion 'with' fhe express tonsenf of the 6nl{sharen61der of . the Company. That shareholder is SRGH Limited ("SRGH"). SRGH is incorporated under the Companies Acts and also has its registered office at Castlebridge Business Park, Gartlove, Alloa.

1.2.4 The only shareholder of SRGH is, in turn, Scottish Resources Group Limited ("SRG"). SRG is incorporated under the Companies Acts and also has its registered office at Castlebridge Business Park. Gartlove, Alloa. The Directors make this application with the express consent of SRG.

1.3.1 The Company has had no other registered office within the period of six months immediately before the making of this application.

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1.3.2 As set out in Statement 2.6.1 below, the Company's "centre of main interests", within the meaning of the EU Insolvency Regulation ("the Regulation"), is situated in Scotland.

1.4 No administrator had been appointed to the Company, no receiver had been appointed in respect of any part of its property and no liquidator had been appointed for its voluntary winding-up.

1.5 In these circumstances this Court has jurisdiction over this application in terms of 120( 1) of the Insolvency Act.

1.6.1 Winding up proceedings in respect of the Company will constitute "main proceedings" within the meaning of the Regulation.

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1.6.2 The Company does not have any other "establishment", within the meaning of the Regulations, in any other Member State.

The Company

2.1.1 The Company was incorporated on 25 November 1994 under the Companies Acts as a company limited by shares.

2.2.1 The share capital of the Company is £24,400,000, divided into 24,400,000 ordinary shares of £1 each, all of which have been issued and are fully paid up.

2.2.2 All of those ordinary shares in issue are held by SRGH.

2.2.3 SRGH acts only as an intermediate holding company. lt carries on no independent activity.

2.2.4 The Company is the main operating subsidiary of the group of companies ("the SRG Group"), the parent of which is SRG.

2.2.5 SRG is only a holding company and does not carry on any independent business. SRG is a party to the contractual arrangements with Bank of Scotland PLC ("the Bank"), under which banking facilities ("the Bank Facilities") are provided primarily to the Company.

2.2.6 For completeness, the only other operating member of the SRG Group is Castlebridge Plant Limited ("CPL"). The Banking Facilities also provide that the Company guarantees CPL's indebtedness under them.

2.3.1 The objects for which the Company was incorporated included acquiring the property, rights and liabilities of British Coal Corporation under any restructuring scheme made pursuant to the Coal Industry Act 1994 and the carrying on, expansion and extension of the businesses and operations transferred to it thereanent.

2.3.2 The objects of the Company are set out in full in its Memorandum of Association. A print of the Memorandum and of the Company's Articles of Association is produced.

2.4.1 In outline, the Company's business ("the Business") comprises three divisions.

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2.4.2 The first, and largest division in terms of turnover, comprises opencast mining operations ("the Mining Operations") at seven sites ("the Sites") in Scotland.

2.4.3 The second division of the Business rthe Estates Division") comprises the management and development of the Company's land portfolio ("the Land Portfolio").

2.4.4 The third division of the Business ("the Renewables Division") comprises the development of renewable energy. In particular, the Renewables Division includes wind farm developments ("The Wind Farm Developments") on land which the Company owns.

2.4.5 For completeness, CPL provides the plant which the Company uses in the Mining Operations.

2.5.1 The Business is described more fully at Statement 3 below. The legislative provisions, ("the Statutory Obligations"}, to which the Mining Operations are subject, are described more fully at Statement 4 below. The Statutory Obligations include those arising under planning legislation and agreements which are authorised by that legislation ("the Planning Obligations"). That legislation includes in particular the Town and Country Planning (Scotland) Act 1997 ("the Planning Act").

2.5.2 The Statutory Obligations are significant and now very onerous for the Company. The costs of complying with the Statutory Obligations, including provisions which the Company has made for costs that it is likely to incur in complying with them, are referred to in this application as "the Statutory Costs". The Statutory Costs include the costs of complying with the Planning Obligations, which are referred to in this application as "the Planning Costs".

2.6.1 The centre of the main interests of the Company, within the meaning of the Regulation, is at the Company's registered office.

2.6.2 That address is where the Company conducts the administration of its interests and is, therefore, ascertainable by third parties.

2. 7 The Company has 627 employees in the Business. The Company is a participating employer in two defined benefits pension schemes, each of which has been established by SRG and the assets and liabilities of which are vested in a trustee of that scheme (together "the Pension Trustees").

The Business -,_ ~

3.1.1 As set out above, the Mining Operations are the largest division of the Business. The great majority of the Company's 627 employees are employed in the Mining Operations.

3.1 .2 Mining Operations are continuing at House of Water, Broken Cross, Dalfad, Dunstonhifl, Mainshill and St. Ninians. House of Water and Broken Cross are the largest of the Sites. The site at Blair House has been "moth balled".

3.1.3 Those of the Sites which are specified in Part 1 of Schedule 2 ("the Owned Sites") are owned by the Company. Those specified at Part 2 of Schedule 2 ("the Partly Owned Sites"), are partly owned and partly leased under long mineral leases.

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3.1.4 The local authority areas in which the Sites are situated are Fife, South Lanarkshire and East Ayrshire. They are referred to together in this application as "the Local Authorities".

3.1.4 In addition to the seven Sites in the Mining Operations division, there are a further eleven former mining sites ("the Former Sites"), which are presently at various stages of restoration.

3.1.5 The Mining Operations are loss making because of the present price of coal, its projected price and operating costs, specifically the cost of fuel. For the same reasons, the Mining Operations are reasonably projected to remain loss making.

3.2.1 The second division of the Business comprises the Land Portfolio. In turn, the Land · . . · --• · · , ·•· -.-, · .• ,_..portfolio comprises;-first -of all, "development assets", · on which -the,.,Company promotes

residential, commercial or leisure developments. In addition, the Land Portfolio comprises "investment assets", which the Company holds on a long term basis.

3.2.2 The Land Portfolio has value.

3.3.1 The third division of the Business comprises the Renewables Division. The most significant of the Wind Farm Developments are at Broken Cross, Dalquhandy, Poniel , House of Water, Piperhill, Westfield and St. Ninians.

3.3.2 The Renewables Division has potential future value. This future value is based on planning permission being received for the Windfarm Developments.

3.4.1 The Company finances the Business primarily from the Bank Facilities. The Bank Facilities comprise (i) a "revolving credit" facility of a maximum of £40,000,000, under which sums borrowed are to be repaid within three or six months of its draw down, and (ii) an overdraft facility of a maximum of £5,000,000, which is repayable on demand.

3.4.2 Since 31 December 2012 the Bank has renewed the revolving credit facility only on a monthly basis, subject to certain conditions. The revolving credit facility at present extends until 5 May 2013.

3.4.3 The Bank Facilities are secured by a floating charge over the whole property of the Company ("the Floating Charge")-

3.5.1 The Company also participates in five arrangements ("the Bond Facilities·), for the provision of bonds to cover the Planning Costs, which arise out of the liability to restore the Sites and the Former Sites after the Mining Operations have ceased.

3.5.2 These Bond Facilities are (i) between SRG, the Company and Zurich Insurance Public Limited Company ("Zurich·); (ii) SRG, the Company and Euler Hermes Europe S.A. (N.V.) {"Euler"); (iii) SRG, the Company and Royal and Sun Alliance plc; (iv) SRG, the Company and Aviva Insurance Ltd; and (v) SRG, the Company and Coface S.A

3.5.3 The liabilities under the Bond Facilities between SRG, the Company and Zurich and between SRG, the Company and Euler are secured pari passu by the Floating Charge which the Bank holds as security trustee. The other Bond Facilities are unsecured.

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3.6 The Company has also granted to the Secretary of State for Energy and Climate Change a floating charge which is over the whole property of the Company, but is postponed to the Floating Charge.

3. 7.1 In undertaking the Mining Operations the Company also relies on the suppliers of its fuel having credit insurance available. Without such insurance suppliers would require to be paid on delivery and would not allow the Company any credit.

3.7.2 In the course of March 2013, the Company's fuel suppliers informed the Company that credit insurance was no longer available to them.

Regulation of the Company's Mining Operations

4.1 As set out in Statement 2.5.1 above, the Mining Operations are subject to the Statutory Obligations. The most significant of the Statutory Obligations, particularly as regards the Statutory Costs to which they give rise, are set out in outline in this Statement.

4.2.1 The first set of Statutory Obligations arise under the Environmental Protection Act 1990 ("the Environment Acr) and other environmental legislation.

4.2.2 The Statutory Obligations imposed on the Company include, first of all, the obtaining of, and compliance with, licences issued under the Controlled Activities Regulations (Regulations) 2005 ("the CAR Licences•) relative to the water environment. The CAR Licences are issued by the Scottish Environment Protection Agency ("SEPA").

4.2.3 Those Statutory Obligations also include compliance with permits c-the PPC Permits") which are also issued by SEPA under the Pollution Prevention and Control (Scotland) Regulations 2000 and 2012, and which regulate, among other processes, the emission from the Mining Operations of dust into the atmosphere and of water into watercourses.

4.2.4 Finally, the Statutory Obllgations include obligations to comply with notices under Part IIA of the Environment Act to "remediate" contaminated land, and to obtain, and subsequently comply with, all other statutory licences, permits and the like.

4.2.5 In the context of those Statutory Obligations, the Environment Act provides that an insolvency practitioner which includes a liquidator is not personally liable to comply with a notice to remediate contaminated land, unless the works required are to any extent referable to substances in the land as a result of acts or omissions by him, which it was unreasonable for a person acting in that capacity to do or make.

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4.3.1 The next set of Statutory Obligations arise under the Mines and Quarries Act 1954 ("the Mines Act"). The Mines Act imposes duties on mine owners and occupiers in relation to fencing disused mines and quarries. The Mines Act expressly imposes these duties on a liquidator, who is treated as the occupier of a mine.

4.3.2 In addition, the Control of Pollution Act 1974 imposes obligations are imposed on operators of a mine to give notice to SEPA of the discontinuance of various activities at mines.

4.4.1 The next set of Statutory Obligations are imposed on the Company by the Health and Safety at Work etc. Act 1974. Those include obligations (a) to conduct undertakings in a

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way that ensures, so far as is reasonably practicable, that those not in its employment who may be affected by his undertaking are not exposed to health and safety risks, and (b) to ensure that, when it is in control of work premises, it takes reasonable measures to ensure the health and safety of those who are not its officers.

4.4.2 In addition, the Quarries Regulations 1999 impose on the Company obligations in relation to health and safety management, and operational and risk control, of the quarries that they operate.

4.5.1 Finally, the Statutory Obligations include the Planning Obligations, namely those which are imposed on the Company as owner, or lessee, of the Sites, and the Former Sites, by

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4.5.2 In particular, the Planning Obligations include those which arise under the conditions of the planning consents and under agreements which the Company has reached with the Local Authorities under section 75 of the Planning Act. Those conditions and agreements include provisions for the restoration and remediation of the Sites, after the Mining Operations have ceased, and of the Former Sites.

4.5.3 Those Planning Obligations are the subject of the Bond Facilities. However, the Planning Costs exceed the sums available under the Bond Facilities.

Financial Position of the Company

5.1.1 The most recent audited accounts which the Company produced are those for the year to 26 March 2011 ("the 2011 Accounts"). The 2011 Accounts were prepared on a Mgoing concern basis".

5.1 .2 The 2011 Accounts show that at that date the Company had (i) assets of £217,336,000, and (ii) liabilities, including provisions, of £136,968,000 in total.

5.1.3 The 2011 Accounts also showed that in the year to 26 March 2011 the Company made a profit after tax of £4,155,000.

5.2 Since the date at which the 2011 Accounts were prepared, there has been a materially adverse change in the financial position of the Company.

5.3.1 The Directors have prepared an Estimated Statement of Affairs ("the ESN) as at 9 April 2013. The ESA was prepared on the basis that the Company could not continue as a going concern. The ESA shows that at that date the Company had (i} assets with an estimated realisable value of £55,038,000, and (ii) liabilities of £250,277,000 in total, including contingent liabilities.

5.3.2 In particular, the ESA shows that, of those liabilities, £45,000,000 was owed under the Bank Facilities. The ESA also shows that £43,135,000 was contingently owed under the Bond Facilities.

5.4 The Directors have also prepared a cash-flow statement ("the Cash Flow Statemenr) on a weekly basis for the period from week ending 13 April until week ending 29 June, both 2013. The Statement included the Company's principal liabilities which are due for payment during that period. The Cash Flow Statement shows that with effect from week

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ending 20 April 2013, the Company will have, and will continue increasingly to have, insufficient cash with which to pay its liabilities as they fall due for payment.

5.5 For completeness, the Company and SRG have been unable to refinance the Company's liabilities or otherwise reach an agreement with its creditors to avoid its winding up.

Inability to Pay Debts

6.1 Section 122(1 )(f) of the Insolvency Act 1986 provides that a company may be wound up by the court if the company is unable to pay its debts.

6.2.1 Section 123(1)(e) provides that a company is deemed to be unable to pay its debts:-

"if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due".

6.2.2 In the circumstances, and particularly under reference to the Cash Flow Statement, the Company is unable to pay its debts within the meaning of section 122(1 )(f).

6.3.1 In addition, section 123 {2) of the Insolvency Act provides that a company is also deemed unable to pay its debts:

"if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its Uabilities, taking into account its contingent and prospective liabilities".

6.3.2 In these circumstances, and particularly under reference to the ESA, the Company is unable to pay its debts also within the meaning of section 123(2).

Orders Sought

7 .1.1 In these circumstances the Directors seek, first of all, an order that the Company be wound up by this court under the Insolvency Act, and in particular section 125(1 ), and that interim liquidators {"the Interim Liquidators") be appointed for that purpose.

7 .1 .2 Secondly, and for the reasons set out in Statement 9 below, the Petitioners also seek the appointment of p~ovisional liquidators to the Company. .. . .. .... "

Interim Liquidators

8.1.1 The Directors suggest that B. C. Nimmo, C.A., and G. A Friar, C.A., are fit and proper persons to be appointed as the Interim Liquidators. They are both qualified insolvency practitioners, under section 390 of the Insolvency Act, and are a partner and an associate partner respectively in KPMG LLP ("KPMG"). Mr. Nimmo is based at KPMG's office at Saltire Court, 20 Castle Terrace, Edinburgh. Mr. Friar is based at KPMG's office at 191 West George Street, Glasgow. They have consented to act.

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8.1.2 The liquidation of the Company ("the Liquidation") will be complicated, especially because of the Mining Operations and the implications for the Liquidation of the Statutory Obligations. The complexity of the Liquidation makes it necessary that the Interim Liquidators are from a firm, such as KPMG, with the experience and resources to enable the Interim Liquidators to conduct the Liquidation.

8.1.3 lt is also sought that the order appointing the Interim Liquidators should specify, under section 231 of the Insolvency Act, that either of the Interim Liquidators may exercise their powers.

8.1 .4 For completeness, KPMG have since September 2012 given advice to the Company, through the Directors, on the implications o( Jts fiQancjal position. lfl P~.rt!cular:, K!:?MG ~ ' ..... . . ..... ~ ... .. - ....... ...... 4- ... . ... .. * .. ~ .. .... ~"" - '.. - ~

have advised on the prospect of further investment and, as a contingency, on how the liquidation of the Company might operate in practice. The advice has necessarily been detailed, again because of the Mining Operations and the implications for the Liquidation of the Statutory Obligations. That prior involvement of KPMG with the Company is insufficient to preclude the appointment does not preclude the appointment of the two members of that firm as the Interim Liquidators.

Provisional Uquidators

9.1 In the circumstances, it is appropriate that provisional liquidators ("the Provisional Liquidators") be appointed to the Company under section 135 of the Insolvency Act and Rule 4.1 of the Insolvency Rules.

9.2.1 The Company's inability to pay its debts, and the Statutory Obligations in respect of the Sites and the Former Sites, mean that the Directors can no longer carry on the management of the Company without being in breach of their duties. That is so even to the extent of the orderly cessation of the Mining Operations.

9.2.2 More particularly, the Directors could not properly continue after the making of this application to permit the Company to operate because of the effect of section 127 of the Insolvency Act.

9.3.1 Instead, it is sought that the Provisional Liquidators will have the power to begin the orderly cessation of the Mining Operations and also to begin the orderly realisation of the Estates and Renewables Divisions.

9.3.2 Jt is therefore sought that the Provisional Liquidators be given the usual powers set out in section 169(1) of the Insolvency Act, namely (a) to bring or defend any legal proceedings on behalf of the Company, and (b) to cany on the business of the Company so far as it may be necessary for its beneficial winding up.

9.3.3 In addition, it is sought that the Provisional Liquidators be given two further powers. The first further power, which is sought out of caution, is to cause the Company to cease the Mining Operations, as the Provisional Liquidators reasonably consider to be expedient.

9.3.4 lt is in addition sought that the Provisional Liquidators be given the power to enter into, on the Company's behalf, an agreement with the Bank under which the fatter will provide the Company in liquidation with a borrowing facility of approximately £3,000,000. That

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facility will be necessary to fund the conduct of the provisional liquidation and of the Liquidation. The necessity arises because the Company's income would be insufficient otherwise to provide such funding. That is shown by the Cash Flow Statement. lt is understood that it will be a condition of the Bank providing that facility that, after the appointment of the Interim Liquidators, the facility will be secured on the assets of the Company. Paragraph 10 of Schedule 4 to the Insolvency Act gives a liquidator gpower to raise on the security of the assets of the company any money requisiten.

9.4.1 If appointed, the Provisional Liquidators intend to instruct an application to this Court ("the Directions Application•) for four directions ("the Directions") and, depending on the terms of the Directions, for a further order ("the Further Order") under section 156 of the Insolvency Act ("Section 156.), altering the priorities of the expenses of the Liquidation which would otherwise arise under Rule 4.67 of the Insolvency Rules (MRule 4.67").

9.4.2 The Directions Application is more fully described at Statement 10 below. In outline, the Directions concern the implications of the Statutory Obligations and the Statutory Costs for the orderly cessation of the Mining Operations and so for the winding up of the Company.

9.5 On the winding up order being made, it is anticipated that the Interim Liquidators will continue the Directions Application. Only the Interim Liquidators could have the powers which are the subject of the Directions.

9.6.1 The Directors suggest that Mr Nimmo and Mr Friar are fit and proper persons to be appointed as Provisional Liquidators.

9.6.2 lt is also sought that the order appointing them should specify, under section 231 of the Insolvency Act, that either of the Provisional Liquidators may exercise their powers.

9.6.3 As set out in Statement 8.1.4 above, KPMG have since September 2012 given advice to the Company, through the Directors, on the implications of its financial position. That prior involvement does not preclude the appointment of two of the members of that firm as the Provisional Liquidators.

Proposed Directions Application

10.1 lt is anticipated that the Directions Application and the Directions, and, if necessary, the Further Order which are made will be crucial to the conduct of the Liquidation.

1 0.2.1· The first of the Directions ("the First Direction") concerns the question of whether a liquidator of the Company (including the Interim Liquidators and for convenience "the Liquidator") would have the same power to abandon the Owned Sites, or the parts of the Partly Owned Sites which are owned, and such of the Former Sites as the Company owns in whole or in part as they would have to abandon the leases in respect of the Partly Owned Sites.

10.2.2 The First Direction is necessary because of the uncertainty over the question, which arises first of all from the absence of any statutory provision equivalent to section 178 of the Insolvency Act ("Section 178"), which gives the liquidator of an English registered company a statutory power to "disclaim" "onerous property", including land.

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10.2.3 The uncertainty is increased by the absence of any authority on the question since the abolition of feudal tenure by The Abolition of Feudal Tenure Etc. (Scotland) Act 2000.

10.2.4 The practical significance of the First Direction arises from the Statutory Costs of complying with the Statutory Obligations which arise from ownership and occupation of the Sites. The Statutory Costs include the Planning Costs.

1 0.2.5 The Statutory Costs exceed the value of the Sites. In the absence of a power to abandon, the Liquidator might be personally liable to pay those Statutory Costs. Alternatively, those Statutory Costs might be expenses of the Liquidation, and exhaust the proceeds of the realisation of the Estates Division and the Renewables Division.

1 0~2 .6' The · First Direction · also includes two more ·detailed, subsidiary questions. The first is whether a power to abandon land includes a power to abandon part of a registered title.

10.2.7 The second subsidiary question is whether, if ownership of the Sites and the Former Sites is abandoned, the failure to comply with each of the Statutory Obligations which results gives rise to any person, and in practice the Local Authorities and SEPA, having a right in damages for loss which that failure had caused.

10.3.1 The second of the Directions ("the Second Direction•) assumes that the Liquidator would have power to abandon the Owned Sites, or the parts of the Partly Owned Sites which are owned, and such of the Former Sites as the Company owns in whole or in part. The Second Direction concerns the question of what would be the necessary procedure for effectively abandoning that land.

1 0.3.2 lt is intended that the Interim Liquidators will implement a procedure for abandoning certain of the Sites and of the Former Sites immediately on their appointment. That procedure will be set out in the Directions Application and will be based on the statutory procedure for disclaimer under section 176.

1 0.4.1 The third of the Directions ("the Third Direction") concerns the question of whether the Liquidator would have power to abandon the CAR Licenses, the PPC Permits, and all other statutory licences, permits and the like.

1 0.4.2 Section 178 gives the liquidator of an English registered company a statutory power to disclaim a licence under the provisions of the Environment Act which apply in England and Wales.

1 0.4.3 The Third Direction is likely to be of practical importance only if the First Direction is to the effect that the Liquidators have a power to abandon the Sites and the Former Sites, and, albeit to a lesser extent, the Second Direction is to the effect that the procedure has been effective.

1 0.4.4 The reasons why the Third Direction is of practical significance to the Liquidation are the same as those set out at Statement 1 0.2.5 above in relation to the ownership of the Sites.

1 0.5.1 The fourth of the Directions (*the Fourth Direction•) is sought for completeness. The Fourth Direction concerns the correct treatment in the Liquidation of the Planning Costs.

1 0.5.2 The Fourth Direction concerns the question of whether all of the Planning Costs would be debts, which have the right to prove (otherwise rank) in the Liquidation, and would not be

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expenses of that process within Rule 4.67. That question concerns primarily those Planning Costs which arise from the obligations which have been imposed on the Company in the conditions of the planning permissions for the Sites and the Former Sites, and require their remediation. These conditions could be enforced by procedures which are taken by the Local Authorities under the Planning Act.

10.5.3 In addition, the Forth Direction includes the question of whether the Liquidator would be personally liable for a failure of the Company to comply with any enforcement procedure under the Planning Act, and in particular, a failure to comply with the service of a breach of condition notice.

10.5.4 The Fourth Dir~ction is likely to be of practical importance in relation to the Sites and the Former Sites only if the First Direction is to the effect that the Liquidator does not have a power to abandon the Sites and the Former Sites.

10.5.5 The reason why the Fourth Direction is of practical significance is the same as that set out at Statement 1 0.2.5.

10.6.1 The Further Order assumes that the First Direction and the Third Direction are in the negative and that the Liquidator has no power to abandon either ownership of any of the Sites and the Former Sites, or the CAR Licences, the PPC Permits, and other statutory licences, permits and the like. In addition, the Further Order assumes that the Fourth Direction is to the effect that the Planning Costs are expenses of the Liquidation.

1 0.6.2 On that assumption, the Further Order concerns the order of the expenses of the liquidation which are set out in Rule 4.67(1). More specifically, the Further Order concerns the priority which the Statutory Costs would have, under Rule 4.67(1)(a), being outlays properly chargeable or incurred by the Provisional Liquidators or the Liquidator in carrying out their functions. In particular, the Statutory Costs will have priority over the remuneration of the Provisional Liquidators which has a lower priority under Rule 4.67(1)(e), and the remuneration of the Liquidators which has an even lower priority under Rule 4.67(1)(h).

1 0.6.3 As set out in Statement 1 0.2.5 above, it is likely that the Statutory Costs (including the Planning Costs) will exhaust the realisable proceeds in the Liquidation.

10.6.4 In these circumstances, the Further Order is sought under Section 156 that the remuneration of the Provisional Liquidators and that of the Liquidator are to be paid out of the Company's assets in priority to the Statutory Costs.

10.6.5 Such an order i_s just in the circumstances. The work of the Provisional l.:iquidatorS'and'· l+

that of the Liquidator would benefit the creditors including those to whom the Statutory Costs are owed. There is no official receiver in the liquidation of a Scottish company who would act as its liquidator, and whose remuneration would be paid from public funds, if the assets of the liquidation were insufficient to pay that remuneration.

Period of Notice

11.1.1 In the circumstances the appropriate period of notice is 3 rather than the 8 days which are set out in Rule of Court 74.22(2).

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11.1.2 The shortening of that period would enable the orderly cessation of the Mining Operations and the orderly realisation of the Estates Division and of the Renewables Division to proceed more expeditiously. lt would also permit the Interim Liquidators to implement what is intended to be the process of abandoning the assets which is the subject of the Third Direction.

11.1.3 lt is not reasonably foreseeable that any person would have any interest in objecting to this application.

11.1.4 More specifically, the Bank is fully aware that this application is to be made. lt is reasonably believed that the Bank, in its capacity as the trustee of the Floating Charge, has kept Zurich and Euler fully infonned.

.·. 11.1 .5 In addition, the providers of the Bond Facilities which are unsecured, the Pension

Trustee, SEPA and the Local Authorities have been advised of the possibility of this application being made.

11.2 Accordingly, the Directors seek that reduction of the period of notice, under Rule of Court 14.4(6)(b).

General

12 This application is made under the Insolvency Act and, in particular, (i) its sections 122(1)(f),123(1)(e),124, 125 and 138; (ii) Rule 4.1 of the Insolvency Rules, and (iii) Rule of Court 14.4(6)(b) and Part V of Chapter 7 4 of the Rules of Court, including in particular Rules 74.21, 74.22 and 74.25.

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MAY IT THEREFORE please your Lordships

(i) to authorise this petition for the winding up of The Scottish Coal Company Limited ("the Company") under the Insolvency Act 1986 ("the Insolvency Act") to be intimated on the Walls of Court in common form;

(ii) to authorise this petition to be served upon the persons named in Schedule 1;

(iii) to authorise this petition to be advertised once in each of The Edinburgh Gazette and The Herald newspaper;

(iv) to allow any person claiming an interest in this petition to lodge answers to it, if so advised, within 3 days of that intimation, service and advertisement;

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(v) to appoint, under section 135 of the Insolvency Act. Blair Carnegie Nimmo, C.A., KPMG LLP, Saltire Court, 20 Castle Terrace, Edinburgh, and Gerard Anthony Friar, C.A. KPMG LLP, 191 West George Street, Glasgow, (or such other person or persons as your Lordships shall think appropriate) to be provisional liquidators of the Company;

(vi) to authorise the Provisional Liquidators to exercise the powers set out in section 169(1) of the Insolvency Act without the sanction or intervention of the Court;

(vii) to authorise the Provisional Liquidators to cause the Company to cease the mining operations which the Company undertakes, as they reasonably consider to be expedient;

(viii) to authorise the Provisional Liquidators to enter into, on the Company's behalf, an agreement with the Bank of Scotland PLC under which the latter will provide a borrowing facility of approximately £3,000,000 which is necessary to fund the conduct of the provisional liquidation and of the Liquidation;

(ix) to direct, under section 231 of the Insolvency Act, that any act required or authorised under any enactment to be done by the Provisional Liquidators may be done by either of them;

and thereafter upon resuming consideration of this petition, with or without answers,

(x)· to order that the Company be Yiound up by the Court under the provisions of the Insolvency Act;

(xi) to appoint Mr. Nimmo and Mr. Friar, or such other person or persons as your Lordships shall think appropriate, to be interim liquidators of the Company;

(xii) to authorise the Interim Liquidators to exercise the powers set out in section 169(1) of the Insolvency Act without

the sanction or intervention of the Court;

(xiii) to direct, under section 231 of the Insolvency Act, that any act required or authorised under any enactment to be done by the Interim Liquidators may be done by either of them;

(xiv) to direct that the expenses of, and incidental to, this petition be expenses of the liquidation; and

- ·(xvr· . to decern; or to' do fUrther or· otherwise in the premises as your Lordships shall seem proper.

According to Justice, etc.

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SCHEDULE 1

Service of common form is sought upon:

1. The Scottish Coal Company Limited, Castlebridge Business Park, Gartlove, Alloa

" # .- ... - . -- ... - _,.. .. ...,_ ._,. -- _ __ .......,;.

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,.. ..

SCHEDULE 2

Part 1 - The Owned Sites

Dalfad I Powharnal, Muirkirk, East Ayrshire (Operational)

Mainshill, Douglas, South Lanarkshire {Operational)

Part 2 -The Partly Owned Sites

House of Water I Burnston Remainder, New Cumnock,' East Ayrshire (Operational)

Broken Cross, Near Douglas Water, South Lanarkshire (Operational)

DunstonhiU, Near Patna, East Ayrshire (Operational)

Blair House, Oakley, Fife (Mothballed)

St. Ninians, Kelty, Fife (Operational)

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IN THE COURT OF SESSION

PETITION

of

Colin Cornes & others, as the directors of The Scottish Coal Company Limited

PETITIONERS

for

an order to wind up that company, under the Insolvency Act 1986 and to appoint a provisional liquidator to that company

Solicitor for the Petitioners

SC0.346.7

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