Former Scotland national rugby captain Jim Aitken is in the midst of a legal row over 'missing grain' as major companies lay claim to an estimated £30m of stock after the collapse of his key Scottish agriculture company.

Global drinks maker Diageo alone has a claim for £13.3m worth of malting barley, which is used in brewing, amounting to 65,000 tonnes.

It comes six months after Chad Griffin and Thomas MacLennan of FRP Advisory Trading Limited were appointed administrators of the 71-year-old East-Lothian based grain merchants, Alexander Inglis and Son Limited (AIS), one of the UK’s leading suppliers of grain and cereals to the whisky and distilling industries.

The firm had been under the management of former Scottish rugby captain Jim Aitken since 1985 when he became the majority shareholder after taking over from the Inglis family.

It operated five grain stores across East Scotland and the Borders area, had turnover of around £100m and employed 40 staff.

Before taking ownership of one of Scotland's largest grain merchants he had notched up 24 international caps and scored one try, playing at loose head prop, between 1977 and 1984. He captained the Scottish Grand Slam side in the 1984 Five Nations Championship.

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The Herald:

Mr Aitken made original contact with FRP about the financial state of the company in May 4, 2021 and after after consultation with Macquarie Bank, notices of intention to appoint administrators were lodged. The collapse was seen by some as one of the worst financial disasters to hit Scottish agriculture in the modern era and administrators anticipate a total deficit of over £70m.

Around 200 have been known to have lost money, including many local haulage contactors and tradespeople.

NFU Scotland cereals committee chairman Willie Thomson said it was a "distressing situation". Solicitors providing advice to NFUS, said it was the administrator’s task to act in the best interest of the creditors.

Adminstrators said that the business had been suffering from weaker trading in recent months following a poor harvest in 2020 and a fall in demand stemming from the Covid pandemic.

It had also continued to be hit by "legacy" losses on dealings with its dealing with the failed Philip Wilson Group.

Now multiple companies including Diageo and Bairds Malt Limited have laid claim to 88,000 tonnes of grain - including wheat, malting barley, feed barley, oil seed rape and oats.

But according to an administrators' analysis there are were "significant stock shortfalls - with claims far outweight the amount grain being kept.

Their data shows that the collapsed company held 50,000 tonnes of malting barley worth around £10.3m, which is 60% lower than the 80,000 tonnes of claims received, valued at around £16.5m.

It also held around 30,000 tonnes of wheat, worth around £6m - but that was 90% lower than the 57,000 tonnes of claims put in, valued at around £11.4m.

The latest stock calculation showed 3000 tonnes of feed barley, worth over £500,000, but that was 40% lower than the 4200 tonnes of claims submitted worth around £700,000.

And there was 3000 tonnes of oil seed rape, worth £1.5m - some 30% down on the 3900 tonnes of claims received valued at around £1.95m.

The Herald:

Jim Aitken Source:YouTube

Administrators who are currently taking the claims through the Court of Session - say they should retain half of the malting barley, worth over £5m.

Among the claims are those from suppliers alleging they retained ownership of grain stock.

AIS held large quantities of grain at the time of administration, including that of customers who had bought in advance but left it in storage, third parties storing at the premises and suppliers claiming retained title for unpaid stock.

According to an administrators analysis from July, there had been a major discrepancy between grain stocks in company books and the reality of what was in store.

Several parties had raised concerns that original stock count estimates were too high.

Administrators said that after a further stock count estimated levels were 30% lower than originally calculated.

It is feared a major financial loss will fall on cereal growers in the south of Scotland and the north of England.

Macquarie Bank, the main lender, which holds a £68m are secured creditors and have a hold over the assets and will rank first in the queue when payments are made to those owed money.

Preferential creditors, such as employees would be next in line followed by unsecured creditors such as farmers and final shareholders.

Farmers make up more than one-third of the 166 unsecured creditors owed more than £6m.

Among the farmer creditors, there are 23 businesses owed more than £50,000, and their claims alone total £2.924m. Others are owed more than £100,000 and some more than £200,000.

But concerns remain that a large number of producers who hold malting barley contracts with the merchant for delivery this coming harvest remain uncertain over where the obligations will lie for crops already sown.

A court action which will decide who owns what, raised concerns that the malted barley would start to degrade in March.

Timothy Young QC for Bairds Malt said companies were not "in competition" over the ownership of the grain, including the administrators.

"There is not situation in which all of the current claimants can be successful in respect of their claims. Success for one will be loss for another," he said.

"With the malting barley, there are something of the order of 50,000 metric tonnes, of which on the administrators' assessment they claim over half. So they end up with 26,430 metric tonnes having only accepted claims from Diageo and Baird's only 23,000 metric tonnes."

The complexity and size of claims in relation to the amount of grain in store prompted the administrators to apply to the courts in June for permission to sell the grain.

The Herald:

Alexander Inglis properties had been put up for sale.  It's grain drying, storage and  warehousing facilities in East Lothian, the Scottish Borders, Northumberland and Perthshire were available in June for over £16m. Source: Savills.

While the court set out a process for assessing claims for title to the stocks, it did not make an order regarding any sale, except for 2,000 tonnes of oilseed rape.

Paul O'Brien QC for Scots agricultural support firm DM Carnegie who were suppliers indicated there was a complication as the Bairds Malt malted barley claim came under Section 25 of the Sale of Goods Act - but said that no contract was ever concluded.

He said the company's books and records show the barley being treated as purchased on delivery and Mr Aiken said in an affidavit, that that was just a matter for processing purposes only."

Andrew McWhirter for Diageo said that its investigations showed that malting barley that they were entitled to had been in relevant company sheds.

"Diageo's position is that it can vouch title to the the malting barley and it does so by warrants of entitlement and contractual documentation in place," he said.

"Diageo have also lodged affidavits from employees of the company, which say the malting barley was in the relevant sheds specified in the warrant entitlements... and it now seems that Mr Aitken concedes that point.

The Herald:

"He seems to say that the company did have sufficient quantities of malting barley to satisfy the Diageo warrants and that was in sheds at the specified dates.

"The minuter's position is the stock only belongs to Diageo if it's in the shed identified in the warrants at the date of administration, or there's evidence to suggest that it was moved from one of those sheds and is now located in a different shed.

"But the evidence of Mr Aitken would seem to suggest that the malted barley was in the appropriate shed at the date of the warrant entitlement. So on the administrators' own assessment it seems that that stock is ascertained."

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Mark Boni for the administrators said Mr Aitken was "not under the control of the administrators" and that they may need to speak to him. When the company went into insolvency, the administrators said they would focus on marketing the assets for sale.

In June, the firm’s complex at Ormiston, East Lothian including ten grain storage sheds was put up for sale at offers over £7m.  Other sites in the Scottish Borders, Perthshire and Northumberland were on the market for  nearly £9m.

But in August the National Farmers Union in Scotland warned about delays to the sale of grain storage sites owned by AIS with some deals stalling at a time when a spring barley harvest was underway.

In September, a Northumberland farming co-operative North East Grains bought the Swarland Grain Store from the administrators.

The full case is not expected to be heard till April.