Case No. CR-2019-LDS-000669

The action to be taken is as follows:• Lisa to make a formal offer of repayment to both her parents and to London Wiper Company Limited with a date for this practice to commence.• Lisa Pickering is to be removed as a Director from the following companies: Portbond Ltd, Caprina Ltd and Caprina Trading Ltd.• The formal acknowledgement of Lisa Pickering having been removed as a Director of London Wiper Company Limited following a period of suspension.”317.An entry in a desk diary, probably of James, for 10 December 2015 lists the meeting at Smith Craven as a diary entry. At the bottom of the page, in very short form, it is recorded that Lisa would pay back the money owed to Mum and Dad and LWC, that she was coming back with an offer in 7 days and that she would have liked to come back to the company but “Mum, Dad and John said NO and I wont sign checks [sic] again we all said no.”318.Of this meeting, Mr Lenon KC made the following findings:“[48] On 10 December 2015 a meeting took place at Smith Craven attended by Nora, Charles, Lisa, John and James and Messrs Fitton and Gregory, partners in the firm, to consider their reports. This meeting is referred to by Nora in her Affidavit as an occasion when she made clear that, as a 50% owner, she intended to sell her share in the Edlington properties in order to raise some money. On the basis of Messrs Fitton and Gregory’s evidence, I accept that Nora did not say anything openly about her ownership of the properties (although she may well have done so privately to Lisa). The issue of the ownership of the Annex was certainly mentioned. Mr Gregory’s note of the meeting records that Lisa described the Annex as belonging to Nora and Charles and that James confirmed that the Annex was “still Nora’s and Charles’s”.319.Lisa has attacked the minutes as being seriously inaccurate in several respects. Despite the finding of Mr Lenon set out above, she also insisted that the minutes were inaccurate in not referring to the intention of Nora to sell Edlington Woods which she said was mentioned 3 or 4 times. Although it is rare for minutes accurately to record everything that took place I am satisfied that in substance they are accurate and, in particular, that they accurately record an offer or agreement by Lisa to repay monies. I am not satisfied that the inaccuracies identified by Lisa (so far as substantial and relevant to the points that I have to decide) are in fact inaccuracies in the minutes in terms of what was said or understood at the meeting,320.It was common ground that Lisa did not raise at this meeting the cash sales: she says that is because she wanted to sort matters out and so did not raise it. This makes little sense. If there was a question (which there was in her mind) that John had been taking money out of the company by way of payments for personal expenditure there was every reason to sort things out by also raising the fact that he had taken out cash (by selling stock for cash and not accounting for the proceeds).321.According to the return filed at Companies House, Lisa ceased to be a director of each of the Companies on 11 December 2015, although the electronic filings were not made until 22 December 2015. By letter of 11 December 2015, she resigned as a director of Caprina Limited.322.By letter dated 6 January 2016 to Mr Fitton at Smith Craven, Lisa set out her position with regard to her salary. She said that her salary had been £50,000. In 2006 it had been agreed that the salary would double to £100,000 at a meeting between her parents, herself and Mr David Butler. She said that Mr Butler had a note of a telephone call to John on that date confirming the doubling of the salary. Such a note has not been produced. She said that at the meeting, it was agreed that she would not take the new salary until her divorce had been finalised. In 2013, her salary increased to £150,000 to catch up on the salary agreed in 2006 and John was aware of the salary increase.323.A Smith Craven meeting minute of a meeting on 18 January 2016 records a meeting between Lisa and Mr Fitton and Mr Gregory. Among the matters recorded are the following:“The meeting had been arranged to enable Lisa to provide an update in relation to her offer to repay the monies taken, as agreed in the meeting held on the 10th of December 2015.It materialised very early on, that this was not Lisa's agenda for the meeting. Instead the main purpose from her perspective was in fact to provide Kelvin & Paul with further details of funds in which John Hughes had benefited…. Lisa's focus was clearly to demonstrate (with written evidence) that John had also had funds from the business relating to his personal expenditure. The suggestion being that if John had had this capital, it was also acceptable for her to do the same.Kelvin reiterated the fact that what each individual had taken from the business was irrelevant really, the point of all this focus was what had been knowingly deducted and this was the fundamental difference in the Directors Loan Accounts and payroll: Everybody knew what John Hughes had had, whereas nobody was aware of all the drawings Lisa Pickering was making. This point was repeated several times during the meeting.Lisa however, continually claimed that both Mum and Dad and John did know. Kelvin highlighted the fact that they knew of some items of expenditure; the kitchen and the high court divorce settlement but nothing else.….Kelvin raised the matter of repayment of monies: Lisa advised that a mortgage would be applied for on the property that her son Charlie lives in, once the building work had been finalised and signed off. Lisa currently owns this property, but she agreed that she would sign it over to Charlie and he would then apply for a mortgage to raise some capital. Lisa also advised that she was also pursuing a Medical Insurance claim and would see if money could be released early. She accepted that this may take some time as the Insurers need to see further medical evidence.”324.On 27 January 2016 there was a meeting between Nora and Lisa on the one hand and Mr Fitton and Mr Gregory on the other at Nora’s residence. The note of the meeting by Smith Craven reveals the following matters, among others:(1)The purpose of the meeting was to discuss personal tax returns for herself, Nora, and Charles and the liabilities which arose. The personal tax arising was not tax that either of the Companies could pay on their behalf and then re-charge to them through their loan accounts.(2)Lisa confirmed that once her life insurance policy paid out, she would pay her mother some of the monies owed back, but this would not be in the short term. Also Charlie, Lisa’s son, was apparently willing to try and raise capital by way of mortgage over his property but again this would not produce funds imminently,(3)Nora indicated that in general she did not really understand all that had gone off, but she thought it might have been better to have had a meeting before it all “kicked off” to try and sort matters out between all parties.(4)Mr Fitton suggested that a round-table meeting could be held but it could require agreement of all the parties involved.325.Following the meeting with Nora and Lisa, Mr Fitton and Mr Gregory met with Charles. Again, the meeting is the subject of a Smith Craven “Meeting Minutes” document. Charles was in bed during the visit having recently had a short spell in hospital. The tax return and liability was discussed and it was reiterated that £80,000 was due by the end of January and a further £80,0000 due in July 2016. Nora was reported as having said she would be in touch with Charles regarding the joint liability and how it could be paid. Charles is recorded as saying that he did not think Lisa would make any form of repayment:“ He was clearly upset by all that has gone one, in particular the fact that Lisa had not held her hands up to the unauthorised withdrawals. Had she done so, Charlie advised that he would have worked with her to provide a solution to It all. He stated he had always told her to tell the truth and that he could help If she told the truth, but If she chose not to, then he wouldn't do anything to help.”326.By letter dated 28 January 2016, addressed to Smith Craven, Nora asked for the latest financial position for LWC (and Caprina), who was paying John’s personal tax and up to date directors loan account.327.A Smith Craven Meeting Minutes document of a meeting on 3 February 2016 between Lisa, Charles and Mr Fitton and Mr Gregory recorded the following: (1) The meeting had bene called at the request of Charles. (2)Charles had been ill. Mr Gregory commented that it was good to see Charles up again. (3)Charles expressed his concerns regarding the Bank’s desire for a prosecution of Lisa in relation to money that she had taken. He said this would have been avoided if Lisa had come to him in the first place. The Bank were pressing to know what was happening and therefore Charles explained that he wanted a letter setting out what Lisa was going to repay.(4)Lisa then said, “take me to court then”. Charles explained that that was not what they wanted to do,(5)Lisa maintained Charles knew about the.money but Charles maintained he only knew about the money for the kitchen and the divorce settlement.(6)Lisa then gave various explanations as to why there would be a delay in her raising money: options under consideration being a mortgage over the barn and release of monies from a life policy that she held.328.Lisa maintained that these minutes were inaccurate too. For example, she denied that anything was said about the Bank wanting proceedings to be brought (as set out in sub-paragraph (3) of the last paragraph above).329.A Smith Craven Note of a meeting on 18 February 2016 between Lisa and Mr Gregory records that Lisa wanted various points noted. These included that she agreed a certain sum was owed by her. She denied that the tax and salary should be part of any calculation on the basis that Nora and Charles had agreed that she could have those sums. The calculation and the comments on the notes are as follows:“£687,456.45 (per summary in report dated 10 December 2015) ( 84,000.00) less agreed monies ( 36,452.64) per Lisa exclude Barclaycard (John’s had this and not repaid) ( 1,500.00) Also JVN Architecture – Per Lisa related to Charles Pickering (29,5000.00) Lisa disputes the Wath cash-says she paid £6,500 privately only)______________ 535.21.81 per Lisa as agreed monies owed(413,707.12) says John has had this (previously provided by Lissa). Lisa tried to deduct this from what she owes.”330.By letter dated 24 February 2016, Smith Craven (by Mr Fitton) replied to Nora’s letter of 28 January regarding management accounts. The letter explained that whilst she had every right to the information, given the current dispute Charles and John had advised that they wanted such information to remain on the company premises and that therefore Smith Craven would continue to forward all accounting information there and she should seek such information directly from Charles and John. The letter hoped that she would understand the “very difficult position both myself and the firm find ourselves in and whilst trying to maintain both impartiality and transparency for all parties, I feel this is the most appropriate course of action in this instance.”331.By letter dated 29 February 2016, Lisa wrote to John asking for her P45 and stating that the date that she left was 6 November 2015.332.By letter dated 21 March 2016, a pre-action letter was sent by Ansons LLP, solicitors, on behalf of Portbond and LWC to Lisa. The letter:(1)Alleged an unauthorised increaser in Lisa’s salary some time prior to the year end 2011/12 from just above £50,000 to £150,000 and sought repayment of alleged overpayments by reference thereto of over £258,000.(2)Alleged that between 2011 and 2015 just under £717,000 had been withdrawn by Lisa from LWC. This mainly took the form of payment of personal suppliers of hers and that in a high proportion of cases the expenditure was falsely accounted for by recording it as a debit to the loan account of her parents. The letter enclosed the Smith Craven Schedule that had been gone through at a meeting on 18 February 2016. At that meeting Lisa was said to have agreed £535,212.81 had been drawn by her personally. The letter went on to deal with further additions that should be made, bringing the figure up to £632,000, certain allowances which should be deducted (e.g. the costs of her kitchen in the sum of £50,000) and claimed a balance of £478,482. As regards a number of the additional items over and above the £535,212, it was said that Lisa said that they should not be included because John had had certain sums from the Company. The general answer to this was:“It is no defence to try and compare your situation to any drawings made by your rother John [ ]. Your brother’s drawings were made with the knowledge of the Company’s board and with its approval.”333.In his letter of reply on behalf of Lisa, dated 14 April 2016, Mr Partridge asserted that the salary increase was agreed. He referred to a note of “the business” and a file note to support it, including making a call to John to make him aware of the position. As regards the other sums taken by Lisa, it was said that they were taken within the well-established operation of LWC whereby Lisa and John were allowed to have substantial drawings set against the directors’ loan accounts and that the drawings in this case had been authorised by Nora and Charles. Somewhat tellingly, the letter makes no suggestion that the allegation that unauthorised drawings were made was because of Lisa finding out that John had been selling stock for cash illicitly and retaining the proceeds. Instead:“It is my Clients view that the business is struggling financially at present.Turnover has diminished massively over recent years. She considers that she is being used as a scapegoat and that this recovery is being "sold" to lenders as an asset of the business which it patently is not and was never intended to be by the Board who were responsible for the decisions at the time they were made.”334.Further, the letter does not suggest that John had been taking money improperly or without authority so that he was in the same position as Lisa. Rather, it was in effect asserted that payments to or for both had been authorised and were within the normal operating mode of the Company.335.By a letter dated 11 May 2016, Mr Butler wrote to Mr Partridge:“ I have seen your letter dated 14th April 2016 to Anson Solicitors, with the inclusion :-"I understand that the former accountant David Butler has a note of this business and a file note to support including making a call to John Hughes to make him aware."For personal reasons I have no wish to be involved in these familymatters.”336.By letter dated 23 May 2016 to Nora, Smith Craven explained the position regarding amended tax returns. The key points, for present purposes, can be taken from the letter as follows: “The revised Returns for Mr C A Hughes having been submitted on 28 April 2016 reflect the legal action being taken against Lisa Pickering.The Accounts now reflect the monies drawn by Lisa as a Debtor in the accounts and therefore, the Tax Return being amended for the reversal of Dividends taken in previous years and effecting the 2015 Personal Tax Returns.The original Tax Return discussed in January 2016 showed a liability due to HMRC in January 2016 of £40,919.77 and in July 2016 of £39,006.59.The amended Return now shows a nil liability for January 2016 and a reduced liability in July 2016 of £15,371.91. This will, after being submitted to HMRC also generate a refund of £32,011.50. All to reflect the overpayment of tax as a result of the Dividends being overstated due to monies drawn by Lisa.…..I look forward to meeting you again on Monday 6 June at 10am to discuss your Tax Return but also to discuss Lisa's thoughts and her cash offer which will hopefully open the way to negotiations and avoid this process going further and eventually to Court.”337.By email dated 11 December 2017, Prodicus Legal wrote to Ansons referring back to their letter of 2 November 2017, enclosing the draft letter said to have been approved by Nora. In addition to the matter raised by the draft letter, a number of other concerns were raised regarding (a) an alleged failure of John/Charles to account to the Companies for prizes and winnings in relation horses which Portbond had paid the running costs of; (b) substantial sums said to have been paid in respect of the construction/renovation of residential properties at three specified addresses; (c) that John continued to “live out of the companies” spending sums on personal matters which could not be justified as legitimate business expenses of LWC; (d) that statutory accounts were filed before Nora’s concerns were addressed. No mention was made of any alleged illicit sales for cash of company stock.338.By letter dated 7 January 2017, Smith Craven wrote to Lisa referring to the meeting of December 2015 and asking for proposals regarding her agreement to repay monies owed to LWC and threatening further action in default.339.By letter dated 12 April 2017, Prodicus Legal Limited, solicitors acting for Nora, wrote to Ansons seeking information and referring to Nora’s concerns as regards the financial dealings and governance of each of the Companies.340.By email dated 15 August 2019, information was provided to Prodicus Legal Ltd.341.By letter dated 18 August 2017, Wheawill & Sudworth, accountants, acting for Nora sought information from Smith Craven.342.By letter dated 11 September 2017, Smith Craven responded to Wheawill & Sudworth pointing out that much of the information had already been provided to Prodicus Legal Limited and answering the requests for information made. 343.As said, Nora died on 25 October 2017.344.On 2 November 2017, Prodicus Legal Limited confirmed that they had been retained by the executors of Nora. They enclosed a letter said to have been approved by Nora on the day before she died, 24 October 2017. The letter stated that,“The Executors appreciate that some events have overtaken the contents of the draft letter which relate to the proposed board meetings, but we are instructed to deliver the letter to you and ask that you take your clients' instructions and return to us regarding its contents.”345.The letter enclosed dated 24 October 2017 raises 9 issues related to the 2015 Companies draft accounts, some 22 questions in relation to bank account statements and sums paid by (chiefly) LWC for or in respect of John and then raises some 6 general issues. Among the latter, is an expressed concern that John and Charles were living “the high life” at the expense of the Companies. “Our client will require all expenses to be properly accounted for and illegitimate expenses to be recovered from the individual.” Point (iv) was as follows:“It is apparent from the history of the companies that the Hughes family has become accustomed to dealing with matters informally and without due regard to, for example, due process. For the avoidance of doubt, to the extent that our client may have permitted your clients to deal with company matters informally, the same is hereby withdrawn. Our client requires each company's affairs to be conducted in accordance with all relevant statutory requirements and the articles of association of each.”346.The claim form initiating the Recovery Proceedings was issued on 28 December 2017.347.The Particulars of Claim are dated 13 December 2017. Breaches of duties owed as employee and director by Lisa are alleged. The breaches involve an allegation of removal of just under £717,000. Of that, some £134,000 (£50,000 for kitchen improvement and £84,800 in relation to her divorce settlement) were accepted as having been authorised. The total unauthorised drawings asserted were therefore just over £582,000. The agreement of Lisa to just over £535,0000 at the meeting on 18 February 2016 is pleaded.348.By email dated 8 May 2018, Mr Gregory confirmed to John that the balances on the loan accounts for the period ended 31 March 2018 were as follows (which included the proceeds for a car allocated to John’s accounts as had been discussed):John £232,898.87 overdrawnCharles £ 24,675.57 overdrawnNora £ 16,766.79 (in credit and increasing month on month re the rent split in relation to the Site)Lisa £ 1,715.41(overdrawn)349.That defence and counterclaim in the Recovery Proceedings contains a statement of truth by Lisa dated 21 September 2018. I cannot in fact find any counterclaim (a point that the reply confirms). No mention of any theft of stock or their proceeds is advanced in the defence and counterclaim. In paragraph 30 Lisa deals with her exclusion from the Companies. While the paragraph asserts that Charles and John used the allegation of unauthorised withdrawal of funds as a pretext to exclude Lisa from the operation of the Companies, that alleged to have been their desire formed by November 2015, the only (slight) explanation offered as actuating such desire is a pleaded alleged desire by Charles and John “to exclude the female side of the family” from the Companies. Tellingly, no mention is made at all of the dismissal/removal being actuated by Lisa’s discovery of improper cash sales/diversion of proceeds of cash sales of stock.350.In the reply, dated 17 October 2018, the pleading in the defence and counterclaim regarding the allegation of a desire to exclude Lisa and to exclude the female side of the family is denied. The reply pleads as follows:“As to Nora, no such. desire had been formed and no steps were taken to exclude her - she had no involvement in the day to day operation of the Claimants. In regard to Lisa, it is admitted that a desire to exclude Lisa from the Claimants had arisen - · that desire arose as a consequence of the discovery of her misappropriation of funds from the Claimants. The Claimants note that the Defendant fails to plead to any alternative motive or reason for a desire to exclude Nora and Lisa from the Claimants arising. Indeed, the contrary was true - the businesses wereoperating successfully and the roles of the various family members were established and settled - save for the unlawful removal of funds by Lisa, there was nothing that would have led to a desire to remove either her or Nora from the Claimants.”351.The petition presented on 7 June 2019 was the first occasion on which it was alleged that stock had been sold for cash and the proceeds retained by John and his father. The relevant pleading is as follows (and is in stark contrast to the Defence and counterclaim in the recovery proceedings):“16.John Hughes caused the dismissal of Lisa Pickering from her employment by the Company and the removal from her directorships of the companies because:(i) he did not want her to continue to have access to the financial information relating to the companies because he wanted to prevent her divulging the same to her mother to stop her knowing how he and his father were acting in breach of the directors' duties and duty to account as set out in paragraph 6 above; and(ii) he was acting out of personal animosity towards Lisa Pickering; and(iii) so that he could appoint his son James Hughes as a director of both companies in her place to promote the interests of his side of the family (ie himself and his son) at the expense of his sister and her side of the family (ie herself and her son, Charlie Pickering).”352.By letter dated 4 November 2019, Smith Craven confirmed to Prodicus Legal Limited that the overdrawn loan account balances as at 22 October 2019 were as follows:Charles £195.462.39John £391,656.43 James £ 19,875.34353.The letter went on to confirm that the overdrawn loan account balances had reduced as at 4 November 2019 as follows:Charles £190,902.19John £384,995.48James £ 2,979.60354.I accept and find that although the Smith Craven paper audit trial of how the investigation started is, with the benefit of hindsight, not ideal, that situation is quite understandable given the then working relationship that Smith Craven had with the Companies and the individual members of the Hughes family and what Smith Craven were being told. There is nothing suspicious in the absence of such documents.355.I also accept the evidence of Mr Fitton that, at the start of the involvement of Smith Craven, John and Charles had not started from the premise that Lisa had taken funds without permission. Rather, they had wanted the position to be investigated. This is consistent with the contemporaneous documentation. 356.I am also satisfied that the Smith Craven minutes or notes of meetings (based as they are on the contemporaneous notes of Mr Gregory, which were also in evidence) are a fair record of what took place at such meetings and what was discussed and that they are accurate in what they state. I am also satisfied that no major issues that were raised or discussed were omitted from such minutes. It follows that I reject Lisa’s evidence that she told Mr Gregory and/or Mr Fitton at an early stage (a) that John had been selling company stock for cash which he retained and/or (b) that her having raised this issue was the reason for the investigation of her own drawings.357.I also find that Nora did not immediately take the line that the payments to Lisa from the Companies, direct and indirect, were all authorised. I also find that the Smith Craven investigation was agreed to by Nora and that she wanted it to encompass drawings by John, which is what it did. 358.I also find that Nora initially agreed that Lisa would have to go as director and employee, as is confirmed by the contemporaneous documentation.359.I also find that the investigation carried out by Smith Craven was carried out fully and fairly. I also note that it was not simply an investigation into sums drawn by Lisa but also covered sums drawn by John.360.I also accept Mr Fitton’s evidence that he did not know at the time (that is late 2015) that Lisa’s case was that John had sold stock for cash and not accounted to LWC for the proceeds nor did he know that Lisa’s case at the time was that it was her confrontation of John over such stock sales which prompted the initiation of the inquiry. I also accept his evidence that there has been an Inland Revenue enquiry of John which has not substantiated Lisa’s allegations.