Case No. CR-2019-LDS-000669

486.I have dealt with the position regarding cash flow and insolvency. No relevant case is raised in that respect.487.So far as sums outstanding on the Relevant Respondent directors’ loan accounts are themselves concerned, I reject the submission that these sums were unlawful returns of capital or disguised dividends. The sums in question were and always were treated as debts owed to the Company. Indeed, the Administrators have sought to realise the same.488.The use of directors’ loan accounts to recharge personal expenditure paid on behalf of directors by the Company, was a long established custom prior to 2015. Nora’s letter of 24 October 2017 required that expenses be properly accounted for. There was no suggestion that all personal expenditure must cease. Further, the sorts of levels of personal expenditure recharged to loan account were of the same order as they had been prior to 2015 and in respect of much the same sorts of items of expenditure.489.The real complaint, it seems to me, is that the loans were either not repaid at each year end or, alternatively, that dividends were not paid and declared, as was formerly the position, to clear the sums outstanding on a loan account. Of course, had dividends been declared, Nora/Lisa would have benefitted from the dividend paid on their shares.490.The question of whether the Companies could have paid and declared a dividend on the accounting figures (i.e. whether there were available distributable reserves as Portbond level) and in terms of cash flow, was not greatly explored before me. It is undoubtedly the case that the Bank was pushing for no dividends to be declared and paid and the Companies were undergoing financial difficulties in the relevant period. There was some discussion as to whether the Relevant Respondents (or the relevant ones) were not prepared to declare a dividend because they did not want Lisa to receive a dividend when, in their eyes, she still owed the Companies money. This does not really meet the legal issue which is whether dividends could have been lawfully declared and paid. I am not satisfied that they could have been.491.The real nub of the matter is whether and if so what prejudice has been suffered (I discuss unfairness in a moment). As I have said, I am not satisfied that dividends could have been declared/paid or, put another way, that they would have been paid had the Relevant Respondents been acting properly. In my judgment, it is the fact that the Relevant Respondents had the cash flow advantage of the directors’ loans without having to repay the same at each year end which is the loss suffered by the Company and which reflects the potential unfairness to Lisa in the Relevant Respondents, on her case, having had benefits out of the Company at a time that she did not. (This is subject to the question of whether the loans by the Company under the loan accounts carried interest, as the Relevant Respondents’ assert, and whether that rate either fully compensates the Companies and/or removes any advantage for the Relevant Respondents. (Another potential basis of compensation would be to strip the Relevant Respondents of the value that they had in terms of the use of the money during the relevant periods). However, the loss to the Companies is not the loans themselves (which remained, and remain at all times, debts owed by the Relevant Respondents), but simply full interest on such sums. 492.If the potential prejudice is in effect lost interest to the Companies, then the measure of the unfairness to Lisa is simply the relevant monetary sum. Even if the Companies are not entitled as a matter of law to interest at a fair rate either properly to recompense the Companies for the loss that they suffered or to strip the Relevant Respondents of any gain measured in the value of the use of the money that they had out of the Companies, this is the sort of remedy that I would have been looking at to put right any unfair prejudice suffered by Lisa as a result of the Relevant Respondents directors’ loan accounts running (from the Company’s perspective) in credit (i.e. the directors were debtors). I would not have required the Relevant Respondents to buy out her shares. This is because she did not have a legitimate expectation of payment of a dividend, whether looked at in terms of any shareholder understanding/agreement nor in terms of establishing that non-declaration and non-payment of a dividend was simply a breach of directors’ duties. The prejudice of monetary value could be put right by an order for monetary compensation.493.There remain however two points, first, does Lisa have a sufficient interest to require, as a remedy for her, payment to the Company? Put another way, has the non-payment of what I will loosely call “interest” prejudiced her? Given the insolvency of the Companies, I doubt that she can establish prejudice to shareholders but would be prepared to allow Lisa to argue the point further were it not for my conclusion on unfairness, which I now turn to.494.The second point is whether unfairness is established and whether or not the non-payment of “interest” is unfair. Any unfairness can only be founded upon the proposition that the Relevant Respondents have had a benefit out of the Company that Lisa has not. However, Lisa has herself had a benefit, which she agreed to repay, of over £573,000 from the Companies. That sum was outstanding for many years. By way of contrast, the total capital sum outstanding in respect of the Relevant Respondents as at 7 October 2020 was some £260,000 or so. 495.This is one of those cases where I consider that the sums taken out of the Companies by Lisa and which she agreed to pay back means that it is not unfair that the Relevant Respondents owe some £260,000 or so to the Companies. Alternatively, I would not have granted a remedy in the circumstances.