Case No. CR-2019-LDS-000669

and, as a convention adopted by Counsel, I have used “Charles” when referring to Charles Hughes and “Charlie” when referring to Charlie Pickering.40.Certain portions of the narrative below are taken from a judgment of DJ Bond dated 23 March 2022 in the s994 Petition brought by Lisa in respect of Caprina Trading Limited (and also involving allegations concerning its subsidiary, Caprina Limited). I indicate such passages thus: “(DJB Judgment)”.41.I have set out in outline below details of certain other Hughes’ family companies because they occasionally feature in connection with either the narrative of events or specific allegations.42.The petitioner, Lisa Pickering (“Lisa”) is the daughter of Nora Hughes (“Nora”) and Charles Hughes (“Charles”), the third respondent. Nora was born in 1930. Charles in 1929. They married in 1982 and separated in the 1990s. Nora sadly died on 25 October 2017. This was in the midst of disputes about some of the matters before me.43.After their separation, Nora and Charles remained on speaking terms. They continued to work together in, or in relation to, various family businesses and continued to own a number of properties together.44.Nora and Charles had three children. John Hughes (“John”), the first respondent, is the oldest, born in 1958. Lisa is the middle child, born in 1961. David Hughes (“David”) is the youngest child, born in 1969. He is not a party to these proceedings, but he gave evidence for Lisa before me.45.John married Lorraine Hughes in 1979. Their eldest son, John, sadly died in 2005. Their daughter, Jodie, was born in 1985. Their third child, James Hughes (“James”), born in 1988, is the second respondent. Lorraine and John have lived apart since 2005 but remain on good terms.46.Lisa married Peter Pickering in 1988. They had a son, Charlie Pickering (“Charlie”). Lisa and her husband separated in about 1994. Matrimonial proceedings were commenced but not concluded at the time of Peter’s death.47.Charlie gave evidence for Lisa before me. He was employed by LWC between about 2008 until he was dismissed in about May 2018. It is said that his dismissal involved relevant breaches of duty by the directors in that it was effected for an improper purpose: to hide the misconduct of the remaining directors and to prevent him from reporting on it to Lisa. His removal is said to have caused loss and damage to LWC in terms of the legal costs incurred and the settlement paid to Charlie.48.Nora and Charles are, in effect, the founders of what was, for many years, the successful business run by LWC. Prior to establishing LWC, Nora and Charles had worked together in the rag trade in Bow in the East End of London before branching out into other businesses including (among others) wholesale rag and metal, scrap metal, property and haulage businesses. 49.“In the 1960s Charles and Nora ran a business known as C & N Wholesale Rags. On 12 May 1964 they incorporated C.& N. Hughes (Wholesale Rags) Limited (‘Wholesale Rags’) and ran that company with their business partner” (DJB Judgment).50.In about 1968, Nora moved with the children to Doncaster to develop a scrap metal and rag yard business there. Initially, Charles remained working in London.51.“In the late 1970s Charles and Nora personally bought 455 Wick Lane, Bow in London’s east end. Wholesale Rags used the Wick Lane property as its trading premises. In around 1979 Charles and Nora bought Tilts Hill Farm in Doncaster, a substantial part of which was given over to a caravan park” (the “Caravan Park”) (DJB Judgment).52.The properties from which the Doncaster scrap metal business operated were the subject of a compulsory purchase order in 1973. Notice to treat was served in January 1976. Possession was obtained in November 1981. Until the local authority took possession the business continued to operate from the premises. There was then a legal dispute regarding the compensation payable which was eventually resolved by a decision of the House of Lords in December 1990 (see Hughes v Doncaster Metropolitan Borough Council [1991] AC 381). Once possession was taken, the Doncaster-based business was essentially terminated. However, what eventually became substantial compensation was paid for the loss of the premises and the business. The goodwill of the business and some of its assets were acquired by a successor family company, JLD Metals Limited. Nora became semi-retired from the family business on the sale pursuant to the compulsory purchase order.53.JLD Metals Limited was incorporated in 1980. It operated as a scrap metal trading company. It later acquired the business and assets of a company called Brookside Metals in Newcastle Upon Tyne and operated from there, the premises coming to be owned by its holding company. The initial shareholders, Lisa says, were the three children, John, Lisa and David. John and Lisa were initially directors (David being too young at that stage). Lisa took up the role that she was to take in other family companies, namely being responsible for the accounts department while her brothers were involved in the day to day running of the business, John being the overall manager.54.Charles and Nora, as I have said, were married in 1982.55.“Caprina [Limited] was incorporated on 21 July 1986 for the purpose of acquiring Charles and Nora’s interest in Wholesale Rags following the death of their business partner. ….On 30 April 1987 Caprina [Limited] acquired the Wick Lane property from Charles and Nora.” (DJB Judgment).56.“In 1989 Caprina [Limited] sold the Wick Lane property. To mitigate what would otherwise have been a large capital gains tax liability two further transactions were entered into. First, Caprina [Limited] agreed to purchase the caravan park at Tilts Hill Farm from Charles and Nora…. The transfer completed on 1 April 1992, although it appears that the monetary consideration may never have been paid. Secondly, Charles and Nora acquired the assets of a third-party waste disposal business through a new company incorporated on 17 January 1991 called Preston Cable Granulation Limited (‘PCGL’). Charles and Nora were directors of PCGL and each held one ordinary share in PCGL.” (DJB Judgment).57.JLD Metals Limited and its holding company were placed into administrative receivership in 1992, as I explain later in this judgment.58.From about 1993/4, Caprina started using Preston Cable Granulation as a trading name.59.Nora and Charles separated in the mid 1990’s. Mr Lennon KC described the relationship between them as follows:“17…..After raising their family, Nora and Charles married in 1982 and lived together until 1993 after which they lived apart although they remained on reasonably good terms until 2015. 18.Nora’s relationship with Charles was a strained one because of Charles’s extra-marital affairs over the years. Charles described his relationship with Nora as follows:“Whatever else happened we had a bond. But I did feel guilty about the affairs and it meant that I tended to over-compensate in some ways. I would let Nora make the final decision about things in order that I had a quiet life. If it was a business decision or involved a large sum of money we would discuss together. But anything relating to my daughter Lisa, Nora decided and I would usually back down if I disagreed. She was the apple of Nora’s eye. Nora would always stick up for her whatever she did”.60.“In the late 1990s PCGL got into financial difficulties. As a result Caprina gave an unlimited guarantee in respect of PCGL’s bank borrowings and in 2000 Caprina agreed to acquire PCGL’s business in consideration for an allotment to PCGL of 600,000 new B ordinary shares in Caprina.” (DJB Judgment).61.From about 2001, Lisa worked at LWC with much the same role that she had had at JLD, namely responsibility for the accounts department and working as bookkeeper. In a letter from her then solicitor, Mr John Partridge, dated 14 April 2016 and replying to a pre-action protocol letter from Ansons, it was said that Lisa had worked as “the financial manager” of LWC. At this time, the accountants of LWC were John S Ward & Co LLP, the main individual there dealing with LWC matters being David Butler.62.“In 2003 PCGL went into insolvent liquidation. On 27 April 2005 PCGL (presumably by its liquidators) transferred half of its B shares in Caprina to Charles and half to Nora.” (DJB Judgment)63.David fell out with Charles and John in about 2005. At about this time, he ceased to be involved with the family businesses and went his own way.64.In 2006 Nora and Charles acquired the Kilnhurst Site.65.On 16 October 2007, Caprina Trading Limited was incorporated. 66.“In 2009 it was considered desirable, for reasons which have not been gone into, for [Caprina Trading Limited] to acquire the caravan park at Tilts Hill Farm. This involved a corporate reorganisation to enable the transaction to benefit from share for share exchange relief….. Apparently to that end, on 2 March 2009 a share for share exchange was effected and Caprina Trading Limited became the holding company of Caprina Limited.” (DJB Judgment)67.On 1 April 2010, Nora and Charles entered into a written lease agreement with LWC regarding the Kilnhurst Site. The rental amount payable was later increased by agreement. On the whole, the payment of rent was dealt with over the coming years through credits (viewed from the directors’ perspective) to director’s loan accounts. An account in this respect was part of the relief granted by Mr Lenon KC.68.In 2011, Smith Craven replaced John S Ward & Co LLP as auditors of LWC and Portbond. Prior to this John S Ward & Co LLP had been carrying out the audit work and Smith Craven had been involved in assisting with payroll matters and monthly management accounts. At the relevant times considered further below, Mr Kelvin Fitton and Mr Paul Gregory of Smith Craven were giving general accountancy and related advice. Mr Gregory was also largely preparing and commenting on monthly management accounts which would involve him coming over to LWC’s premises for a day each month. However, the annual accounts and audit side was, when it transferred to Smith Craven, handled by a separate team headed by Mr Andrew Cribb as senior statutory auditor. In effect, that section of Smith Craven took over the work previously carried on by John S Ward & Co LLP. 69.In early 2013 Lisa was diagnosed with breast cancer. The initial prognosis was poor. The cancer was multifocal and spreading rapidly. An operation to remove a tumour from her breast in August 2013 was only partially successful. Between about September 2013 and February 2014 she underwent chemotherapy. During that six-month period, apart from treatment days, she continued to attend LWC’s offices every day and helped looked after her mother outside office hours. In about May 2014 she had a mastectomy on the right side and then follow-up radiotherapy in August and September 2014. Further related operations took place, as I understand it, in October 2014 and May 2015. 70.Lisa was briefly appointed a director of each of the Companies. She held that position for about 22 months between February 2014 and December 2015. In 2015, as described by Mr Lennon KC:“there was a dispute between members of the family which led to it splitting into two “camps”. The two camps comprise, on the one hand, Lisa, Nora and David, and, on the other, John and his immediate family and Charles.”71.The fact of the family rift in 2015 is common ground. The reasons for it, and the circumstances of it, are not. In short, (and I will need to go into this area in a greater amount of detail) the Relevant Respondents say that the break down was caused by the discovery that Lisa had taken sums totalling in the region of about £582,000 from the Companies without authorisation. Lisa says that the drawings were made with her parents’ full knowledge and approval and was consistent with family practice at the time, which was that sums would be withdrawn from the Companies by members of the family as they needed them and that there would then be appropriate adjustments to relevant loan accounts with the company.72.Lisa, says that the case put up and said to justify her removal was because, in 2015, she discovered that John was selling stock of LWC off the books and keeping the sale monies for himself. These alleged sales forms the basis of one of her allegations of unfair prejudice. She says that, in response to this discovery, John and Charles came up with a strategy to exclude her and her son from any involvement in the Companies’ affairs and that that included removing her as a director of each of the Companies and falsely making the allegations about her having taken sums from the Companies without authority. This conduct is also relied upon as conduct unfairly prejudicing her as a shareholder.73.In fact, the Companies issued proceedings against Lisa on 28 December 2017 in the Business and Property Courts in Leeds. In those proceedings they claimed (among other things) repayment of just over £582,000 said to have been taken by way of unauthorised drawings as well as damages in a sum of over £89,000 and various heads of relief (the “Recovery Proceedings”).74.The Recovery Proceedings were issued after the death of Nora on 25th of October 2017. Under Nora’s last will, made on 2 June 2016, Lisa was appointed an executor and the residual beneficiary, provided she survived Nora. In the event that Lisa predeceased Nora, the residue of Nora’s estate was to be held on trust for Lisa’s son, Charlie. Probate was granted solely to Lisa, with power reserved to the other executor.75.Following her removal as director, Lisa asserts that the Companies continued to be used as family “piggybanks” but now for the benefit of John and his family rather than the family as a whole. This conduct, and the various acts involved, again, are said to amount to conduct/acts unfairly prejudicial to her interests as a member.76.As I explain later in this judgment, between 2016 and 2020, Grant Thornton (“GT”) was engaged on various occasions to advise about the financial position and financial problems facing the Companies and possible solutions to those problems. 77.In April 2019, John was diagnosed with oesophageal cancer. He started chemotherapy in June 2019. He went into hospital for an operation in September 2019 and was discharged in mid-December 2019.78.John has also been found to suffer from lung damage which has left him with a greatly reduced lung capacity. In February 2020, he underwent a course of radiotherapy. He remains on what he has described as a cocktail of drugs and is unable to function properly without painkillers. 79.In March 2020, the Covid-19 pandemic began to effect the UK. The UK was placed into “lock down”. That and other restrictions brought about by the pandemic impacted on a number of businesses, not least those of the Companies. GT and other professionals were called into to give various opinions and advice during that year. A process known as an Accelerated Merger and Acquisition (“AMA”) was pursued during that year as a means of salvaging the Companies, or at the least their Businesses, and to do the best for creditors. I deal with the detail of the AMA later in this judgment.80.In October 2020, the directors appointed joint administrators from GT and a pre-pack sale was entered into whereby the Companies’ business and assets were sold to a company called Remet Processing Limited (“Remet Processing”).81.Remet Processing was a company in which John eventually held 45% of the shares and there were agreements to employ him and James as directors. Lisa complains that Charles, John and James “drove the Companies into the ground” and then engineered the pre-pack sale while keeping secret their interest or potential interest in Remet Processing. The result, says Lisa, is that John has been left with a 45% interest in the company which has the benefit of the on-going assets and business of the Companies whilst she has nothing. This, submits Lisa,“amounts to a comprehensive stripping of the Companies’ value in favour of John and at the expense of Lisa: a classic example of unfairly prejudicial conduct giving rise to relief in the form of a share purchase order, which is what Lisa seeks.”82.On 15 January 2021, the Recovery Proceedings against Lisa were dismissed. This followed a letter of the Administrators to Lisa dated January 13 January 2021 confirming that they did not intend to pursue the claims in question. However, the claims against Lisa brought by the Companies were then largely relied upon by way of amendments made to the points of defence on the petition before me.Portbond and LWC: Directors, shareholders and entry into administration83.LWC was incorporated on 30 September 1987.84.From very early days, each of Nora and Charles was a 50% shareholder of LWC. They each held one of its two issued shares of £1 each. 85.For many years, up and including the accounts for the seven-month period ending 31 October 2002, LWC filed dormant company accounts, showing LWC as having £2 of issued share capital and assets of £2. As at 31 October 2002, Nora and Charles were the two directors of LWC. They had been the two directors of that company for some years.86.In respect of the year ending 31 October 2003, LWC filed abbreviated accounts showing it to have traded, with significant transactions with a related family company, Caprina Limited. The abbreviated balance sheet shows net assets of just over £85,000, with Caprina Limited being a creditor for just over £222,000. Fixed assets of just under £58,000 are shown, having been acquired in that year (the value takes into account a small disposal and depreciation). 87.Although not a director, Lisa was employed by LWC between about June 2005 to 31 August 2010, when Portbond became its holding company.88.In September/October 2006, John became a third director of LWC.89.Portbond was incorporated on 9 March 2009. It was on “off the shelf” company. The two issued shares were transferred one each to Charles and one to Nora in that year and Charles and John were appointed directors in November 2009. According to Companies House, Nora was also appointed a director in November 2009, but the relevant filing was not made until 20 December 2012. She did not appear as a director on the annual return filed for the period ending March 2010. It seems likely therefore that she was only formally appointed in December 2012 but purportedly with retrospective effect.90.On 1 September 2010, Portbond became the holding company of LWC. Two further shares were issued in consideration of the transfer of the shares in LWC. Nora and Charles then became the indirect owners of LWC through their respective ownerships of 50% of the issued shares of Portbond, being two shares each.91.At this point, Lisa became an employee of Portbond until she was initially suspended (in November 2015) and then removed. From February 2014 she was a director of each of the Companies, again until removed in December 2015. 92.Consolidated accounts for Portbond and LWC for the period ending 31 October 2010 show that Portbond did not act solely as holding company but also owned and hired out plant and machinery. The consolidated accounts show Portbond as having some over £154,000 of plant and machinery in its balance sheet as at 31 October 2010. The consolidated accounts show a combined turnover of over £11.4 million, with a gross profit of just over £1.2 million and a net profit of just over £195,000 after tax. The accounts also show, on a consolidated basis, fixed assets of over £5.2 million (after depreciation) of which the vast majority (£3 million) was plant and machinery and some £1.5 million represented freehold land and buildings and some £184,000 represented short leasehold property. 93.Lisa is recorded at Companies House as having become a fourth director of each of LWC and Portbond on 7 February 2014.94.In July 2014, LWC purchased the site next to the Kilnhurst Site. That site was known as, and I shall refer to it as, the “Redirack Site”. The purchase price was just over £1.1. million. A Regional Growth Fund grant was obtained, with the assistance of Smith Craven. However, ultimately the project was not completed due to objections raised by the Environmental Agency. 95.In December 2014,