Sir Tom Hunter failed yesterday in his court battle with Tesco to stop a £150m rights issue being voted on next week at Dobbies Garden Centres, where he owns 29.9% and the supermarket giant 65%.

Lord Glennie, giving judgment in the Court of Session, said the court "should not be used to further the interest of one or other party in a commercial tussle." He suggested that the two sides should negotiate a buy-out of shares, or risk a continuing war of litigation, and added that the court could if necessary adjudicate on a fair price if one side alleged prejudice.

Tesco is understood to have offered minority holders 1200p for their shares, which currently stand at 1225p, while Hunter is believed to have countered with a similar offer to Tesco - which was also rejected.

The rights issue cash is being raised to repay a £100m soft loan from Tesco and provide £50m funding for acquisitions - in a sector where Hunter's West Coast Capital controls Dobbies' major rival Wyevale.

West Coast Capital had claimed in court that the move was a breach of duty by Dobbies directors, aimed in reality at forcing minority shareholders to dilute their interests and cede much stronger control to Tesco, which outmanoeuvred Hunter with a successful £156m bid for the Midlothian-based garden retailer last year.

Tesco had countered that Hunter's legal action was more about achieving "a more attractive exit strategy" for West Coast Capital.

Lord Glennie, refusing interim interdict, said he was not persuaded that West Coast Capital had made a prima facie case, and even if it had, the balance of convenience was strongly in favour of the issue proceeding. He agreed that "current negotiations for acquisitions would inevitably collapse, since sellers would not simply wait to see what was the outcome of protracted litigation, and the expansion of the company's business would be halted or significantly delayed" if the rights issue did not go ahead timeously.

The judge said stopping the fund-raising would amount to "interfering with the company's ability to compete with its competitors, including a competitor in which WCC has a significant interest".

In court earlier this week Richard Keen QC, Dean of the Faculty, had claimed there was "confusion" in the minds of at least some of Dobbies' directors over whether they should be acting in Tesco's best interests or those of Dobbies and all of its shareholders. He queried why Dobbies wanted to pay back a loan granted only six months earlier on favourable terms, and why £50m was needed for a war chest when the only two acquisitions needing funding had cost £8m.

Dobbies, however, said it had two other unnamed targets worth £65m, and claimed it would lose Tesco's valuable offer to underwrite the issue if it were blocked. David Sellar QC, for Dobbies, had told the judge that Hunter was acting as a "disappointed suitor" and in his role as a competitor, not a shareholder.

But yesterday Lord Glennie said he did "not accept the criticism of the conduct of the (Dobbies) directors" during the takeover offer, and that the presence of Tesco representatives on the Dobbies board was to be expected. He said: "WCC are in effect asking the court to second-guess the directors of the company in their decisions as to whether to raise funds for expansion and, if so, how to do it. Through no fault of its own, WCC is able to put before the court only a partial picture."

Dobbies' acquisition targets were necessarily unknown to Hunter because "through its interest in Wyevale, WCC was a competitor of the company".

The judge added: "It is unrealistic to expect the board to propose a new share issue each time it wishes to make an acquisition."

Lord Glennie said he noted that both sides had suggested that a buy-out was the only way forward, and this was "likely, at the end of the day, to reflect the reality of the position".

For West Coast Capital, spokesman Ewan Hunter (no relation) said afterwards: "We respect Lord Glennie's interim judgment. It is our intention to speak to Tesco in order to seek a fair solution for all 300 shareholders, many of whom have written to us unsolicited in support of our actions. Should a fair resolution not be forthcoming we reserve our right to continue down the legal process."

He added that WCC had "not at all" dropped the option of taking up the rights, at a cost of £44m, to maintain the blocking stake.

James Barnes, chief executive of Dobbies, said he was glad to get back to running the business. "We have made plans, we have got some of the sites, and it is important we have the resources to develop them."

On the suggestions in court that a buy-out was inevitable, he said: "I don't necessarily share that view. I take a pragmatic view of these things, West Coast Capital has a 29.9% shareholding, and we would be happy to engage accordingly."

It is unrealistic to expect the board to propose a new share issue each time it wishes to make an acquisition'