James
Hughes, is the son of the first respondent. I refer to the first to third respondents as the “Relevant Respondents”. In considering allegations made against the Relevant Respondents I usually refer to the Relevant Respondents without differentiating between them and the expression should therefore be treated as including one or more of them as individuals. 4.One set of proceedings between family members, concerning the ownership of various properties, (the “Property Proceedings”) was determined by Mr Andrew Lennon KC (sitting as a Judge of the Chancery Division). He handed down judgment on 18 June 2021 (Pickering v Hughes [2021] EWHC 1672 (Ch)).5.Two further sets of proceedings involve another Hughes’ family company, Caprina Trading Limited (and its subsidiary Caprina Limited). I expand briefly upon those two companies later in this judgment. The other proceedings that are ongoing are a petition presented by Lisa Pickering on 9 November 2021 pursuant to s994 of the Companies Act 2006, alleging unfairly prejudicial acts or omissions by Caprina Trading Limited or unfair prejudice in the conduct of its affairs. Separately, there are Part 7 proceedings issued by Lisa Pickering on the same date seeking to establish a beneficial right to 50% of the ordinary share capital in Caprina Trading Limited. She also holds certain “B” Shares in Caprina Trading Limited.6.The current proceedings are brought pursuant to s994 of the Companies Act 2006 alleging unfair prejudice to the interests of the petitioner as a member of Portbond Limited (“Portbond”), the 4th respondent. The 5th respondent, London Wiper Company Limited (“LWC”) is the wholly owned subsidiary of Portbond (together the “Companies”). It is alleged that the conduct of LWC’s affairs formed part of the conduct of Portbond’s affairs as parent company.7.The petition was presented to the court on 7 June 2019. The petition was amended following each of the Companies having been placed into administration and a pre-pack sale by the administrators having taken place in October 2020. The relevant case of unfair prejudice said to arise in connection with these matters was originally set out in Points of Reply. A court order was made in effect requiring such a positive case to be set out in the Petition. As a result the Petition was amended to raise such a case. 8.In closing, the Petitioner sought further to re-amend the petition. For convenience and unless the context otherwise requires, I refer to the “Petition” as being the one in its amended form, after the amendments following from the raising of the case in relation to the administrations and pre-pack sale but without the re-amendments put before me.9.Section 994 of the Companies Act 2006 (“CA 2006”) enables the court to grant relief where a member of a company is able to establish that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or that an actual or proposed act or omission of the company is or would be so unfairly prejudicial. In this case, I am only concerned about past conduct of the affairs of Portbond or past acts or omissions of Portbond. For convenience, I refer in this judgment to unfair prejudice or matters amounting to unfair prejudice as short-hand for the precise formulation used in s994 CA 2006, namely conduct of the company’s affairs or an act or omission of the company which is unfairly prejudicial to the interests of the members generally or some part of its members.10.As I have said, Portbond and LWC are now in the insolvency process of administration. Their assets and businesses have been sold in a “pre-pack sale”, which I explain in more detail later in this judgment. These events took place after the Petition had been presented and the proceedings were well underway.11.LWC was, in the main, the trading company. It traded in scrap metal under the trading name “Universal Recycling Company” or “URCO”. It was primarily a waste metal processing business, specialising in the recycling of cables, and waste electrical and electronic equipment (WEEE) scrap (the “Business”). The Business operated from a seven-acre site in Mexborough, South Yorkshire. This site was leased. The freehold was (and is) owned by Hughes’ family members, as I shall explain later in this judgment. It is registered at HM Land Registry under title number SYK95230 and I shall refer to it as the “Kilnhurst Site”.12.Although the main trading company, the two Companies’ affairs and management were closely intertwined. When, in the years leading up to the administrations, Grant Thornton reported on the financial situation to the Companies’ bankers (Barclays Bank plc) (the “Bank”), it treated the two Companies as one entity. The Disputed Strip13.There is a further strip of land which was referred to before me as the “ransom strip”. It is registered with title SYK669453. That strip of land is a strip of land which borders (and fits between) the southern boundary of the Kilnhurst Site and the northern boundary of a housing development built by Ben Bailey Homes Limited. There is vehicular access road to the Kilnhurst Site over part of this strip, towards its eastern end. The access road runs through the housing development and crosses the strip to the Kilnhurst Site. The Kilnhurst Site has the benefit of a legal right of way over the access road. This provides the only access to the Kilnhurst Site. So far as the Kilnhurst Site is concerned therefore the strip is not a ransom strip in the usual sense of the word because of the legal right of way that exists. The strip also contains a 3-metre high earth bund and a 4-metre high acoustic fence, built pursuant to a planning condition by Ben Bailey Homes Limited.14.There is a dispute between Lisa and the Relevant Respondents about ownership of this strip. Title to the strip was registered in the name of John pursuant to a transfer from Avant Homes Limited in February 2019. John then sold the strip as part of the arrangements entered into at the time of the pre-pack sale. 15.Beneficial ownership of the strip by either Company, at any time, is not asserted by anyone. Rather, the potential beneficial owners are members of the Hughes’ family. Through her solicitors, Thomas Mansfield Solicitors Limited (“Thomas Mansfield”), Lisa, as executor of her mother’s estate, sent a letter dated 16 December 2021 to Charles’ and John’s solicitors enclosing draft particulars of claim. 16.As I understand it the substance of Lisa’s allegations is, in brief, as follows. Charles (her father) and Nora (her mother) were trustees of the Kilnhurst Site. They had agreed in principle to buy the strip. However, Charles, in breach of trust, wrongly diverted the opportunity to buy the land to John. John received such land as constructive trustee, knowing of the breach of trust and/or dishonestly assisting in it. John subsequently sold the strip to the same company as bought the relevant business and assets under the pre-pack sale, Remet Processing Limited. As such, John and Charles are liable to Nora’s estate and John also holds traceable proceeds of the strip on trust for the estate. Such proceeds include shares in Remet Processing Limited (“Remet Processing”), the purchaser under the pre-pack sale. I do not understand proceedings in relation to the strip to have been issued, at least at this time.17.For completeness, I summarise John’s case regarding the strip. He says that it was agreed (by way of a “gentleman’s agreement”) in about 2005 by Ben Bailey, of Ben Bailey Homes Ltd, that the strip would be transferred to LWC as part of a finder’s fee for John having put Ben Bailey Homes Ltd in touch with someone selling a plot of land. Lisa did not want LWC to acquire the land, arguing that it would be another liability for LWC to take on (particularly by reference to the need to maintain the structures on the strip). Accordingly, Charles said that he would take the transfer of the strip and Lisa was content with that course. The transfer was not formally completed until title to the strip was transferred to John in 2019 by Avanti Homes Limited, with the agreement of Charles, Charles then being concerned that given the then disputes with Lisa and his age, it would be better to deal with the matter in that manner.18. I shall refer to the strip of land as the “Disputed Strip” because the beneficial ownership of it is disputed. I have not use the term “ransom strip” because that seems to have been used as an emotive term to give the impression that ownership of the strip by the Companies or the Hughes’ family was, at relevant times, crucial to ensure access to the Kilnhurst Site whereas in fact such access is secured by an existing and long standing registered legal easement. 19.By October 2020, in addition to the trading business, the Companies owned: a number of residential properties, 70 acres of farmland and seven acres of industrial space adjacent to its own operations that was, at all material times, and is, occupied by a third party. By October 2020, the Companies employed about 40 persons in the Business.20.After the petition in this case had been presented on 7 June 2019, each of the Companies was placed into administration by its directors in October 2020. Each company is insolvent.21.The scale of the insolvencies of the two companies is indicated by the relevant reports of the Administrator(s). The most recent reports, the last of which is dated 2 November 2022, and covers the 6 months ending on 6 October 2022, envisages an anticipated outcome in the insolvencies as follows:i)The Bank, a secured creditor of both Companies, will not receive a full return of its debts from the Companies but the shortfall will be made up by way of third-party security granted to the Bank. ii)As regards unsecured creditors, it is anticipated that unsecured creditors will receive a sum by way of a distribution of the “prescribed part”, that is the sum which is set aside from the realised assets subject to a floating charge and made available to unsecured creditors of the company in question in accordance with s.176A of the Insolvency Act 1986. However, no further distributions to unsecured creditors are anticipated.iii)Unsecured creditors of LWC are anticipated to receive a payment by way of dividend of 4p in the pound by way of a distribution of the prescribed part.iv)Unsecured creditors of Portbond are anticipated to receive a payment by way of dividend of 46p in the pound by way of distribution of the prescribed part.v)It is unlikely that there will be sufficient funds to make a distribution to unsecured creditors (other than by virtue of the prescribed part) and therefore it is intended to exit the administrations and move to dissolution.vi)Unsecured claims that have been received by the Administrator amount to £113,497 in respect of Portbond and £5.6 million (including a claim by Portbond) in respect of LWC.22.The Companies played no active role in the trial before me. As a result of the Companies entering administration all legal proceedings against them were automatically stayed (see Insolvency Act 1986, Schedule B1 paragraph 43). Disclosure orders were, however, made against the Companies. 23.At the commencement of the trial, I considered that the proceedings should continue against the Companies so that there was no question that they were bound by my findings. However, I considered that no relief should be sought against either Company without further permission of the court. Accordingly, I granted permission for the proceedings to continue against the Companies on those terms, such order being served on the remaining administrator. He of course had the right, on behalf of the Companies, to apply to set aside or discharge such order within 7 days of service of such order as it had been made of the court’s own motion. No such application was made. Representation before me24.Mr Richard Wormald KC, leading Mr Oliver Phillips, appeared for the Petitioner. Mr Robert Mundy appeared for the first three respondents (the “Relevant Respondents”). As I have said, the fourth and fifth respondents were not represented and did not appear.25.I am grateful to both Counsel teams for their helpful written and oral submissions, and the additional trial aid documents that they prepared during, and indeed after, the trial itself. 26.I should also record my thanks to Thomas Mansfield, for their management, I am sure in co-operation with Geldards LLP (solicitors for the Relevant Respondents), of the paper and electronic bundles that were used during the trial, and documents as they appeared during the trial. It was, however, unfortunate that the correspondence, in particular, was not arranged chronologically but was scattered across a number of the files and that although there was an apparent basic structure to the files, containing what I am told contain over 15,000 pages, it was not always easy to locate documents.The direction for a split trial and the trial before me27.The trial before me is in effect the hearing of the first part of a split trial. As formulated by a consent order containing agreed directions:“7.1 The first trial shall determine all issues save for the valuation of the shareholding in the Fourth and Fifth Respondents. For the avoidance of doubt the issues to be determined at the first trial shall include all questions relevant to the basis on which any such valuation is to be conducted.”28.In fact, that is not the basis upon which the trial before me was conducted. The agreed direction appeared to assume that, if unfair prejudice was found, then a share buy-out order would necessarily be the relief that the court would grant. Indeed, the consistent submissions of the petitioner seemed to be based upon this assumption. However, a share buy-out on the establishing of relevant unfair prejudice does not follow automatically, either as a matter of generality nor in relation to the facts of this case. A share buy-out is but one of the orders (even if the most common one) that court may make to grant appropriate relief.29.It may well be that, in many cases, it is agreed, or fairly obvious, that, if established, unfair prejudice will result in a share buy-out order. An order that makes clear that valuation of a shareholding (if it arises) will be left over for a separate trial will be sensible in most circumstances. Questions may arise, however, as to what determinations the court may be able to make at a first trial about the parameters of such a valuation (for example, whether a shareholding should be valued as a minority holding or as a proportionate part of the value of the entire issued share capital or the date at which the valuation is to be taken) if the order for a split trial is drawn without care. In this case, however, even if unfair prejudice is established there is a very real question as to what the appropriate remedy should be.30.In this particular case, there are features of the case which are, perhaps, slightly unusual. 31.First, this is not alleged by the petitioner to be a case where either Company was what is often referred to, for convenience, as a “quasi-partnership” company. That is one where the exercise of the legal rights of shareholders set out in the constitution of the company (as supplemented by general company law, both statutory and at common law) may be subjected to equitable considerations arising from the specific relationship between the parties, usually of a quasi-partnership nature. A breakdown in a “quasi-partnership” relationship in the context of unfair prejudice applications, may not solely be relevant to the question of (for example) the basis of any valuation of shares on a share buy-our order but may also to be significant in determining the appropriate relief and even whether or not unfair prejudice is established.32.Secondly, in this case the Companies are in an insolvent administration regime. That immediately raises issues as to whether the petitioner, as a member, has any sufficient financial interest in the Companies so as to justify relief being granted, assuming she makes out a case of unfair prejudice. In general, in circumstances where a company is insolvent, a member alleging unfair prejudice under s994 Companies Act 2006 and an entitlement to relief, will have to show that her shares would have had a value but for the wrongdoing of the respondents (see Re Tobian Properties Limited [2012] EWCA (Civ) 998; [2013] 2 BCLC 567). Looked at another way, there may be a question whether any alleged unfair prejudice, assuming it is made out and is unfair, actually prejudices a member rather than the company’s creditors.33.Further, there are complications arising from the fact that the alleged unfair prejudice in this case falls into two main categories. 34.First, there are said to be acts or omissions of Portbond or the conduct of its affairs (and that of its subsidiary) which unfairly prejudice the petitioner’s interests as a member which took place before those Companies entered into administration. These involve allegations (and the following list is not comprehensive) regarding the removal of herself as director and employee; the removal of her son as employee; the initiation of an investigation into her drawings from the Companies and the subsequent initiation of proceedings against her in respect of such drawings; the alleged stealing of stock (or the cash proceeds of sales of stock) from LWC by one or more of the Relevant Respondents; payment of items of personal expenditure of the Relevant Respondents; what is said to be excessive salaries in favour of the Relevant Respondents and/or their partners; and drawings by the first to third respondents on loan account when no drawings were made for, or dividends paid to or/for the petitioner’s benefit. 35.Secondly, there is a raft of allegations of unfair prejudice arising from and in connection with the putting of the Companies into administration, which then resulted in a pre-pack sale by the administrators. These include an allegation that the Relevant Respondents conducted the process based solely in their own self-interests and with the aim of excluding Lisa from any benefits under the pre-pack sale and associated transactions which, it is said, they benefitted from. 36.In connection with the allegations that I have just outlined, I should make clear that some of them are not made in the Petition in the form that it stood at the opening of the trial. Effectively and in closing, the Petitioner sough to further re-amend her petition to bring in new allegations. 37.The parties before me accepted that the question of relief might well depend on which allegations of unfair prejudice are established, if any are, and that there may also be a need to consider the issue raised in Re Tobian Properties as to whether, assuming unfair prejudice is established, one or more further hearings are justified to deal in more detail with issues of quantification and/or of appropriate relief flowing from the fact of the apparent insolvency and therefore lack of value of the petitioner’s shares.38.Accordingly, I indicated that in this judgment I would focus primarily on the issue of whether unfair prejudice had been established and, if it had, I would then consider to what extent I could determine the issue of appropriate relief without further submissions tailored to the findings that I come to. As indicated in the Court of Appeal decision in Re Tobian Properties, particular circumstances may need the court to be flexible in deciding which issues are to be decided at which stage where there has been ordered to be a split trial. The Hughes’ family and an overview of some of the Hughes’ businesses39.For convenience, but with no disrespect intended, I use the first names of the family members as they were used before me. In this respect, I should explain that Charles Hughes is also sometimes referred to as “Charlie” but to distinguish him from Charlie Pickering 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, Mr Fitton of Smith Craven provided a proof of evidence for use at a planning inquiry relating to an Enforcement Notice served on LWC. In that proof of evidence he gave a convenient summary of the nature of LWC’s business:“The Company trades in recycled ferrous (steel) and non-ferrous (copper, aluminium, lead, nickel, brass, bronze, stainless steel and catalytic converters) metals, including recycled aluminium (including aluminium profiles), electronic waste (WEEE) and cable (lead, jelly and copper). The Company process [sic] all of the aforementioned recovered materials on site, converting them into high quality granulated products such as PVC and copper granules.”96.Lisa is recorded at Companies House as having ceased to be a director of LWC on 2 November 2015 and of Portbond on 11 December 2015. Although the relevant forms refer to her having resigned it is common ground that she was in fact removed.97.James is recorded at Companies House as having been appointed a director of each of Portbond and LWC on 11 December 2015.98.Companies House records show that Charles transferred his 2 shares in Portbond to John on 8 March 2016. It is not disputed that this transfer was by way of gift.99.GT was initially introduced to the Companies through the Bank (in its capacity as secured lender) in April 2016. 100.In 2016 the Redirack Site was rented out to Mouldings Solutions Limited on a five-year lease.101.On 21 April 2016, GT was engaged by the Bank and the Companies to carry out reviews of the then current financial position of the Companies and management's medium-term financial forecasts with a view to recommending a more suitable funding structure from the Bank; to consider the impact of any proposed revised funding structure on the cash and working capital position of the Companies; and to prepare an estimated outcome statement for the Bank illustrating its position in the event of a failure of the Companies.102.The context of this engagement was reported in the relevant SIP16 statement1 later prepared by the Joint Administrators and dated 9 October 2020, (“the SIP 16 Report”) as follows:“The context for the requirement of the work was that the Bank was becoming concerned regarding the cash position of the Companies and ultimately their debt servicing capacity. Key drivers for this were a significant (over 50%) fall in turnover in the five years to 31 October 2015, the loss of key customers, an alleged fraud to the value of c£1 million by a former employee, and deteriorating metal commodity prices.”103.The resulting report was delivered in June 2016 and focussed on the Companies’ request for an additional £2 million of banking facilities, which the report supported.104.In July 2016, the Bank borrowings were re-arranged as follows:(1)Sterling Loan term agreement (£2,900,000) dated 20 July 2016;(2)Property Investment Loan agreement (£900,000) dated 20 July 2016;(3)Trade Cycle Loan Agreement (£1,102,500) dated 25 August 2016.105.Nora, as I have said, sadly died on 25 October 2017.106.Lisa is recorded at Companies House as being a person with significant control of Portbond on 14 August 2018. This was as a result of Nora’s shares in Portbond being transferred to her by way of transmission under Nora’s will.107.On 1 March 2019, Charles assigned his beneficial interest in the Kilnhurst Site to John.108.On 15 November 2019, GT was the subject of a further engagement by the Bank and Portbond. As well as conducting, in effect, a business review by reporting on and analysing cash flow forecasts and trading and balance sheet forecasts, GT was also engaged to report key points in relation to the proposed disposal of assets to the Remet Company Limited (“Remet”), including by reference to the Letter of Intent from Remet dated 30 October 2019 and any subsequent revised offer that might be received.109.The resulting GT report was dated 15 January 2020 (the “Jan 2020 GT Report”). 110.The background to the GT report was explained as being that the Bank wished to exit its relationship with the Companies and that it had asked the Companies to explore options that would allow all amounts owed to the Bank to be settled by 31 January 2020. A potential sale of the trade and assets of the business was said currently to be being explored by management. At that point, Remet had made an offer that would result in the Bank being paid but would not satisfy other creditors in full. An offer from Sims plc was anticipated and a letter of intent had been received. Management was confident that this offer would be higher than the Remet offer. The immediate question was whether, as recommended by GT, the Bank would provide further funding after 31 January 2020 to enable the sale process to be completed.111.According to the SIP 16 Report, a continued deteriorating financial position of the Companies, compounded by the Covid pandemic, resulted in the further engagement of GT on 30 March 2020: “to consider the ongoing viability of the Companies and the options available to the Directors and the Bank. The scope of this work was as follows:• assess the Companies' current financial position, short term cash flow forecast and ongoing viability• conduct a high-level contingency planning exercise; and• update the estimated outcome statements previously shared with the Bank”112.GT delivered a further report described as “Contingency Planning” (the “May GT Contingency Planning Report”) which included a letter of delivery dated 5 May 2020. The headline message contained in the “Executive summary” was as follows:“The Group is unable to meet its liabilities as and when they fall due and is technically cash flow insolvent. Given recent (pre-Covid-19) trading, it is unlikely that is [sic] will be able to trade out of this once restrictions are lifted. We estimate that assets are sufficient to repay the Bank in full, even on a breakup basis, albeit this is heavily dependent on achieving asset valuations, around which there is material uncertainty”.113.The report considered the various options available. These included a solvent winding down and members’ voluntary liquidation; a going concern sale; an AMA; an AMA combined with a pre-pack; a closure administration and a creditors voluntary liquidation. 114.The ultimate conclusion was that:“the Group is insolvent on the cash flow basis with no prospect of trading out of or reversing the position. The Directors should be mindful of their position in this regard and seek independent advice as appropriate.”115.The recommendations for the Group were as follows:“• The Directors must therefore take proactive steps to manage the current situation for the benefit of all creditors, which given the financial position of the Group is their primary responsibility• In terms of options available, given the current financial position we are of the view that there is insufficient time or desire from Remet to execute a going concern sale. However, the Director should pursue this in short order to bring matters to a conclusion• Assuming Remet do not wish to or cannot execute, then we recommend the following steps:• The Directors should engage [GT] to undertake an AMA process, as set out on page 24 with the conclusion of the process by the end of May 2020• The Directors and/or Shareholders should work with [GT] to identify potentially interested parties who may wish to acquire the business and assets, either on a solvent or insolvent basis• All parties should plan for an administration appointment in early June 2020, followed either by a pre-pack sale or a planned managed wind down, the viability of which should be considered as a contingency option during the AMA phase.”116.The Directors, says the SIP 16 Report, “concluded that the optimal solution for the stakeholders would be to pursue a sale of the Companies on an accelerated basis, be that on a share sale or business and asset sale basis. Grant Thornton was subsequently engaged by the Directors on 3 June 2020 to commence an accelerated sale process (AMA) for LWC.”117.Various documents were prepared with professional assistance, including that of GT. The Companies, their business and assets were marketed.118.In June 2020, the proposed sale was given the name “Project Copper.” I deal with the detail of the circumstances in which a pre-pack sale eventually came about in October 2020 in more detail later in this judgment. The immediately following paragraphs summarise the outcome.119.Various offers were received but, says the SIP 16 Report, by September 2020 the directors of the Companies had determined that a solvent solution was not feasible and instructed GT on 2 September to assist in placing the Companies into administration.120.On 3 September 2020, an offer, subject to contract, was received from Remet Processing. A number of subsequent letters were received revising or stating the terms of the offer in more detail. On 15 September 2020, GT provided an analysis, including by way of estimated outcome statements, of the various options then considered to be realistic and which was provided to the Bank. GT backed the option of a pre-pack sale to Remet. Remet’s offer involved an immediate cash offer encompassing the Companies’ assets and business and the Kilnhurst Site.121.On 7 October 2020, the directors of LWC and the directors of Portbond appointed Christopher Petts and James Bulloss of GT as joint administrators of respectively, LWC and Portbond (the “Joint Administrators”). 122.On the appointment of joint administrators, a pre-pack sale (the “Pre-Pack Sale”) was entered into under which the Administrators sold the Business and the assets of the two Companies to Remet Processing Limited (“Remet Purchasing”). In their proposals to creditors the Administrators, having set out the statutory hierarchy of the purposes of administration and having explained why they could not pursue the objective of rescuing either company as a going concern given the inability to find a purchaser for the shares in the Companies, go on to say:“6.3 The administrators have pursued and achieved the objective of achieving a better result for the Companies' creditors as a whole than would be likely if the Companies were wound up. We concluded that the best way of achieving the objective of the administrations was to implement the sale of the Companies' business and assets via a pre-packaged sale…”123.The purchase price for the Company Assets was £5,783,000 apportioned as set out in clause 4 of the sale agreement. The items apportioned more than a nominal £1 value were the Properties (as defined) (£3.6 million), the Plant (£2 million) and Vehicles (£128,000). 124.On the same date, Charles and Nora, Mr Petts and Mr Bulloss (as receivers of the relevant property, appointed by the Bank), Remet Processing and Remet entered into an agreement for the sale to Remet of the Kilnhurst Site for £800,000. In total therefore, the cash offer for the Company assets and the Kilnhurst Site from which it operated from the perspective of Remet was about £6.5 million.125.Also on 7 October 2020, each of James and John entered into service agreements with Remet Processing at annual initial salaries of £80,000 (James) and £100,000 (John). They also entered into settlement agreements with LWC waiving employee claims.126.Further, by a Subscription and Shareholders’ Agreement dated 7 October 2020 between Remet Processing, Philip Reid and John Hughes:(1)John agreed to subscribe for 450 shares and Remet Processing to allot and issue, fully paid, 450 Ordinary Shares of £1 each in Remet Processing;(2)The aggregate consideration for the share allotment is stated as being, (a) John entering a Deed of Assignment referred to below relating to the transfer of any interest in the balance of the proceeds of sale of the Kilnhurst Site after discharge from those proceeds of any debt owed to the Bank. (A Deed of assignment was duly entered into on 7 October 2020); (b) the transfer by John of the “Consideration Assets” being assets owned by John and used in the Companies’ Business, including those set out in Schedule 2; and (c) the transfer of the Disputed Strip.(3)It was acknowledged that Remet had lent Remet Processing sums (secured by a debenture) to enable it to acquire the business from the Administrators and to provide ongoing working capital requirements. (In fact a £6.4 million loan facility was put in place by Remet to Remet Processing to enable the payment of the purchase price under the Pre-Pack Sale agreement and a further loan facility up to £5 million for working capital was provided for.)(4)The directors of Remet Processing were initially to be Philip Reid, Walter Reid and Shraga Cohen (all from Remet) but with a right in John and James to be appointed directors on completion. Further, there was provision for James and John, providing they retained at least 45% of the share capital of Remet Processing, to appoint up to two directors between them. (5)As is normal on a sale by administrators, the Administrators gave no warranties on their sale of the Companies’ business. However, under the Subscription and Shareholders’ Agreement, John gave warranties to Remet Processing that the business warranties set out in Schedule 5, except as disclosed, were “true accurate and not misleading” at the date of the Deed (clause 9.2). This was subject to the limits of clause 10. Clause 10.2 capped John’s liability under these warranties to a maximum aggregate liability of £6.4 million. In addition, one of the remedies for breach provided for by clause 11 was a clawback of the shares provided to John and James under the agreement. The warranties in schedule 5 were wide ranging warranties in the form that would normally be expected of a company selling a business of the nature and size of that of the Companies. In connection with these warranties, a disclosure letter, as is usual, was also provided to Remet Processing.(6)The dividend policy was set out as being (among other things) that no dividends would be declared paid or made until the loan from Remet had been repaid in full.127.Also dated 7 October 2020, is a share certificate in favour of John in respect of 450 Ordinary Shares of £1 each shares in the capital of Remet Processing. This amounted to a 45% shareholding.128.By a Deed of Assignment and Subrogation entered into between Charles and John in favour of Remet Processing and in consideration of shares being issued to John pursuant to the Shareholders’ Deed, the Subrogated Claim (as defined) was assigned to Remet Processing. The Subrogated Claim was the entitlement of John/Charles to a half share of the balance of the proceeds of the sale of the Kilnhurst Site (if any) after discharge of the Bank’s charge over the same. 129.On 26 January 2021, each of James and John are recorded at Companies House as having been appointed a director of Remet Processing.130.Mr James Bulloss resigned as an administrator on 19 March 2021. I refer to the “Administrators” or the “Administrator” accordingly.The alleged acts of, or conduct of the Companies’ affairs, said to amount to unfair prejudice: summary131.To some extent, the cases of the parties developed or were “explained” during the course of the trial. At the start of the trial, I was presented with proposed re-amendments to the Petition relating to sums said to have been wrongly expended on or for the Relevant Respondents and/or their spouses. After evidence had closed, and in closing, Lisa sought to further re-amend the Petition to bring in further substantive grounds of unfair prejudice.132.The original amendments to the Petition were made pursuant to an Order dated 7 May 2021 and primarily raise a case in relation to the entry into administration of the Companies. The amendments were made primarily to remove allegations of unfair prejudice from the points of reply into the original petition.133.In brief the allegations of unfair prejudice in the Petition can be summarised as flowing from the following alleged breaches of duty:(1)Over a period prior to and including the removal of Lisa and Charlie, John, Charles and James misappropriated the proceeds of cash sales of stock belonging to LWC.(2)John and Charles wrongly and in breach of duty caused the dismissal of Lisa from her employment by the Company and her removal as a director of each of the Companies.(3)John and Charles caused the Companies to commission an “investigation” by the auditors targeted at Lisa only. The manner of the instruction was in breach of their duties to the Companies as they supplied false information to “set up Lisa” and they failed to cause the auditors to investigate their own conduct to hide the same. Further, in breach of their duties they did not report their own alleged breaches to Lisa and Nora who would then have ensured that it was investigated by the auditors. (4)Charles, John and James caused the Companies to bring the Recovery Proceedings against Lisa. The claims were false and known to be false by Charles and John. Further, they were brought not in the best interests of the Companies but in John’s own interests to cause harm to Lisa. Part of the reason underlying the commencement and prosecution of the Recovery Proceedings was to bring improper pressure on Lisa to obtain her shares. The other directors are also in breach of duty in acquiescing in such conduct.(5)In May 2018, the employment of Charlie Pickering by LWC was terminated. This termination involved one or more breaches of duty by the directors as the dismissal was not decided upon bona fide in the best interests of the company and/or was for a collateral purpose of concealing on-going breaches of duty from Lisa. (6)Charles, John and James, in breach of their duties as directors, improperly took benefits from the Companies by way of causing LWC:(a) to discharge their personal expenses and liabilities; (b) to spend sums on their personal hobbies; (c) to provide John with more than one luxury car at a time. By way of proposed re-amendment, the matters already being set out within the points of reply, the following matters, some of which overlap with or repeat in more detail the matters referred to in (a) to (c) above are also relied upon: (d) causing John’s wife, Lorraine, to receive excessive remuneration, not justified by any work that she carried out; (e) providing two luxury cars at a time for John’s use; (f) providing the benefit of racehorses, show jumpers and associated grooms, vet bills, horsebox services, race sponsorship, stabling, livery and training costs and other expenses; (g) the employment of grooms, with such expenditure being wrongly accounted for as “research and development”; (h) payment of child support agency payments in respect of one or more of John’s children; (i) payments by LWC to James for investment in his property business (especially by way of 4 cheques between October 2016 and January 2017). The above matters pre-date and post-date the rift in 2015. In an Agreed Case Summary for Trial, it is said that, as regards John, the relevant benefits also amount to a disguised dividend or unlawful return of capital.(7)In respect of financial years after that ending 31 October 2015, the Relevant Respondents failed to cause Portbond to pay dividends (and so far as necessary LWC to pay dividends) whilst at the same time they continued to take benefits from the Companies. 134.As regards the administration and connected pre-pack sale, the allegation of unfair prejudice, so far as I understand it, was as follows:(1)The administrations of the Companies were a “device” to ensure that the Petitioner would be excluded from receiving any benefit from the Companies’ business and assets while the First and Second Respondents could continue to control and benefit from them. Put another way, the Relevant Respondents placed the Companies into administration in order to achieve a pre-pack sale to Remet Processing of the Companies’ businesses and assets so that they can continue to benefit from the businesses while the Petitioner was excluded from the business entirely (see paragraphs 34B and 34J, 34K of the Amended Petition).(2)Further, any financial difficulty that the Companies experienced was caused by the Relevant Respondents’ misconduct and mismanagement (see paragraph 34D). It was not clear to me from the Petition whether this was asserted to be a separate free-standing ground of unfair prejudice, namely that misconduct and mismanagement had caused the insolvencies and administrations or whether it was said that misconduct and mismanagement had been effected with the purpose of bringing about the administrations so as to achieve the overall “aim” referred to in (1).135.Further amendments were sought to be made to the Petition during the trial and at the time of closing submissions. The draft re-amended petition put before me at the time of closing submissions and which was then the subject of an oral application to re-amend involved the following.136.First, various “tidying up” amendments. So far as concerns proposed amendments to paragraphs (I cite the paragraph numbers in the proposed re-amended petition) 5B, 27, 33B, 33E, 33H, 33H (including its sub-paragraphs), 33J, 33K and 33M, these are, in my assessment, tidying up matters. Amendments causes no prejudice to the Relevant Respondents and I give permission for them to be made. 137.Secondly, a series of proposed amendments which I will consider in connection with my consideration of the issues in question. They are:(1)amendments to provide further examples of alleged misapplication of funds for the benefit of the Relevant Respondents and/or their partners: see paragraph 27A;(2)an amendment to bring in an allegation that, at the time of the Companies entering administration, stock with a value of £1.54 million was removed from the Companies by or with the permission of the Relevant Respondents, without any proper accounting to the Companies and without the Companies receiving consideration for the same (paragraph 33F);(3)an amendment to bring in an allegation that John had misappropriated plant and machinery belonging to the Companies in breach of duty and that he used the same as part consideration for shares in Remet Processing (paragraph 33I);(4)an allegation that in breach of duty the Relevant Respondents did not consider in good faith that the appointment of administrators would be most likely to promote the success of the companies for the benefit of their members or that it was in the interests of creditors. Rather it was made to advance their personal ends of excluding the Petitioner from any enjoyment in the Companies’ businesses and assets as thereafter owned by Remet Processing (paragraph 33L).138.I deal with those proposed amendments later in this judgment.139.It was common ground that the most important allegations (which I take it to mean are the most serious and significant if made out) are those which Lisa introduced in amending the petition, and particularly with regard to the administrations of the Companies.The Law(1)Unfair prejudice140.I did not understand the applicable law regarding s994 Companies Act 2006 to be controversial and, other than as set out in the skeleton arguments, it was the subject of few submissions.141.Under s.994 of the Companies Act 2006, a member of a company may petition the court for relief on the grounds: “(a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.”142.As regards “the company’s affairs”, this may relate to the manner in which its subsidiary’s affairs are conducted or acts or omissions of the subsidiary (see Rackind v. Gross [2004] EWCA Civ 815; [2005] 1 WLR 3505 at [26]–[33] and Re Coroin Ltd (No. 2) [2012] EWHC 2343 (Ch), [2013] BCLC 583 at [628], [629]). The court looks at the commercial realities rather than adopting a technical or legalistic approach to what constitutes the affairs of the company. In this particular case, although Portbond and LWC are parent and subsidiary they were largely viewed as being, or being part of, one business: “Universal Recycling Company”. The directors were in reality common. This intertwining of affairs is shown not only by the history of family dealings over time but also by the various GT Reports. No point was taken by the Relevant Respondents that any relevant conduct of the affairs of, or act or omissions of, LWC that were relied upon by the Petitioner would not found a remedy under s994 for Lisa as a shareholder of Portbond (but not LWC), simply because of the separate legal personality of the two companies.143.The requirement under s994 of the 2006 Act is that what must be caused must both amount to relevant “prejudice” and the prejudice must be “unfair”.144.As regards prejudice, the petitioner must usually prove “harm in a commercial sense, not in a merely emotional sense”: Re Unisoft Group Ltd (No.3) [1994] BCLC 609. Prejudice “will most often be established by reference to conduct having a depressive effect (actual or threatened) on the value of the petitioner’s shareholding”: Re Sunrise Radio Ltd [2009] EWHC 2893 (Ch), [2010] 1 BCLC 367 at [4]. 145.But a petitioner may suffer commercial prejudice in other ways, for example by being excluded from management in breach of agreements or understandings between the shareholders. Further, there may be other cases where there is relevant prejudice even if the value of the petitioner’s shares is not affected (see the example of the removal of the auditor and the associated provision under s994(1A) of the Companies Act 2006 considered by HH Judge Purle QC in the Sunrise Radio case at [9] and [10] and said by him to reflect the common law position).146.As David Richards J (as he then was) helpfully summarised in the Re Coroin case at [630]-[631]:“ [630] Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. So, for example, removal from participation in the management of a company and the resulting loss of income or profits from the company in the form of remuneration will constitute prejudice in those cases where the members have rights recognised in equity, if not at law, to participate in that way. Similarly, damage to the financial position of a member in relation to a debt due to him from the company can in the appropriate circumstances amount to prejudice. The prejudice must be to the petitioner in his capacity as a member but this is not to be strictly confined to damage to the value of his shareholding. Moreover, prejudice need not be financial in character. A disregard of the rights of a member as such, without any financial consequences, may amount to prejudice falling within the section.[631] Where the acts complained of have no adverse financial consequence, it may be more difficult to establish relevant prejudice. This may particularly be the case where the acts or omissions are breaches of duty owed to the company rather than to shareholders individually. If it is said that the directors or some of them had been in breach of duty to the company but no loss to the company has resulted, the company would not have a claim against those directors. It may therefore be difficult for a shareholder to show that nonetheless as a member he has suffered prejudice….”147.There may be circumstances where the company has suffered loss by reason of the particular conduct or act or omission but there is no financial impact on the shareholder because the company is insolvent. In general the requirement to show “prejudice” to the member’s interests will mean that “the petitioner must show that his shares would have had a value but for the wrongdoing of the respondents”: Re Tobian Properties Ltd [2012] EWCA Civ 998, [2013] 2 BCLC 567 at [11]:“ [11] Shares in an insolvent company in liquidation are clearly valueless unless the value of any claims which the company has against the respondents to the petition will eliminate the deficiency and produce a surplus for members. Section 994 of the Companies Act 2006 requires the petitioner to show that the respondent’s wrongful acts have caused him prejudice in his capacity as a member. If the company is insolvent, that means that – in general – the petitioner must show that his shares would have had a value but for the wrongdoing of the respondents.[12] There is a qualification to this requirement: the courts take a wide view of prejudice suffered by a shareholder. Where, for instance, the shares are worthless but the petitioner has suffered prejudice in some capacity connected with his shareholding, such as that of a lender under a loan made as part of the same investment as the acquisition of shares, unfair prejudice proceedings may be brought (Gamlestaden Fastigheter AB v Balti Partners Ltd [2007] UKPC 26, [2008] 1 BCLC 468).”148.In the Gamlestaden Fastigheter AB case, the main relief sought was the payment of damages to the relevant (insolvent) company in respect of relevant breaches of duty by its directors. The payment of such damages would not restore the company to solvency. However, it would enable a dividend to be paid to creditors, including the member seeking relief under equivalent legislation to s994 Companies Act 2006 in Jersey and whose debt arose by virtue of loan capital that it had injected into the company pursuant to the relevant joint venture agreement on the basis of which the company had been established as a joint venture company. On this assumed basis the Privy Council reinstated the application which had been struck out by the Courts in Jersey. Although the relief sought would not financially benefit the applicant in its capacity as member, it would in its capacity as creditor. As I read the Opinion of the Privy Council, it is a recognition that the interests of the member in that case went beyond the member’s financial interest as the holder of shares with a certain (in fact in that case, at the relevant time, zero) value, and encompassed its wider financial interests under the joint venture arrangements, including those affecting its position as a creditor in respect of the loan capital it had injected.149.So far as “unfairness” is concerned, and leaving aside for the moment quasi-partnership companies, which Portbond is not alleged to have been, unfairness:“most often connotes some breach of the articles, statute or general principles of company law”: Sunrise Radio at [4]. 150.The court will be reluctant to hold that mismanagement amounts to unfair prejudice. There may be extreme cases where the conduct of the company’s directors:“whether by reason of malevolence, crass stupidity, or something in between, fall so far short of the standards to be expected of them as to lead to the conclusion that the petitioning shareholder cannot reasonably be expected to have the minimum of trust and confidence in the integrity or basic competence of the board that any shareholder is entitled ordinarily to expect” (Sunset Radio paragraph [4])151.In such circumstances, damage to the value of the shares may not be necessary to establish relevant prejudice but that is because the member’s interests encompass wider interests than simply the monetary value of the relevant shareholding,152.To amount to unfair prejudice, such management failures would have to be extreme. The court will not resolve differences of commercial judgement on an unfair prejudice petition: Re Elgindata Ltd [1991] BCLC 959, 994. There may be circumstances: “where there is disagreement between petitioners and respondents as to whether a particular managerial decision was, as a matter of commercial judgment, the right one to make, or as to whether a particular proposal relating to the conduct of the company's business is commercially sound. In my view, it is not for the court to resolve such disagreements on a petition under s 459. Not only is a judge ill qualified to do so, but there can be no unfairness to the petitioners in those in control of the company's affairs taking a different view from theirs on such matters.”153.Further:“a shareholder acquires shares in a company knowing that their value will depend in some measure on the competence of the management. He takes the risk that that management may prove not to be of the highest quality. Short of a breach by a director of his duty of skill and care… there is prima facie no unfairness to a shareholder in the quality of the management turning out to be poor.” (Elgindata, supra)154.The conduct of the petitioner may also be relevant. It may make the conduct/act or omission not “unfair” or may affect whether a remedy will be granted. This petitioner’s conduct which may have that effect can be of various sorts. It might be misconduct by the petitioner or acquiescence in or agreement to the conduct/act or omission that might otherwise be unfairly prejudicial (see Re London School of Electronics Ltd [1986] Ch 211 at 222A–C and Richardson v Blackmore [2005] EWCA Civ 1356, [2006] BCC 276 at [53] 155.As regards acts/omissions or conduct that took place before the particular petitioning member became a member, such is capable of amounting to unfair prejudice affecting the interests of the member in question (Lloyd v Casey [2002] 1 BCLC 454). However, conduct of the former member may mean that the particular matters complained by the later member are not unfair or that no remedy should be granted (Re Batesons Hotels Ltd [2013] EWHC 2530 (Ch); [2014] 1 BCLC 507 at [59]).156.As regards relief, the court has a wide discretion as to the form of any relief that it may grant. In this case, it is submitted by the Petitioner, that it would be appropriate to make a buy-out order. It is also submitted that the price of the shares should be fixed by reference to the value of the shares at an earlier date than now and that it should be at a time when the Companies were solvent (see generally Profinance Trust SA v Gladstone [2001] EWCA Civ 1031, [2002] 1 BCLC 141). I will deal further with this submission later in this judgment. (2)Statements of case and amendment157.First, I have well in mind the particular need for statements of case in s994 cases to be properly and fully pleaded. It is also important that substantive matters relied upon by way of unfair prejudice are set out in the Petition/points of claim rather than (for example) in Points of Reply, to which a defence will not respond. As regards the latter point, the amendments made to the Petition were permitted but on the basis that they were incorrectly raised in the points of reply.158.The cases on this area are well known but include In the Matter of Tecnion Investments Ltd [1985] B.C.L.C. 434 CA (Civ Div) at 441; McKillen v Barclay [2012] EWHC 521 (Ch) at [12] and Re G&G Properties Ltd [2019] EWCA Civ 2046 at [35]–[39].159.As regards amendment I was faced with some amendments being suggested in the course of the proceedings and then further amendments being put forward after the evidence was completed in the course of closing submissions.160.The relevant law relating to late amendments is fairly clear from the authorities. First, in accordance with the overriding objective, the question is one of balancing the prejudice (if any) to the person against whom the amendment is sought against the injustice to the person seeking the amendment if it is not permitted. Secondly, all relevant circumstances are considered. These will include (among others) the stage at which the application is made, its prospects of success, the reasons given for the lateness of the proposed amendment, the other party(ies) ability to deal with (and the fairness of making them deal with) it, the effect of the proposed amendment on the overall procedural timetable and, in certain circumstances, such as where an adjournment becomes necessary, the interests of other court users, the court’s limited resources and the encouragement of compliance with court rules and orders may be further factors coming into play. Costs will, of themselves, rarely be sufficient compensation so as to justify permitting the amendment.161.As regards late amendments, of various varieties, I was referred to Quah v Goldman Sachs International [2015] EWHC 759 (Comm); Singh v. Singh [2014] EWHC 1060 (Ch); Ahmed v Ahmed [2016] EWCA Civ 686; Nesbit Law Group LLP v. Acasta European Insurance Co. Ltd [2018] EWCA Civ 268; and Kensington Mortgage Co. Ltd v. Mallon [2019] EWHC 2512 (Ch).Approach to the Evidence162.It is common in petitions presented under s994 of the Companies Act 2006 for the evidence to range widely. Such petitions are also likened to family divorce petitions and are sometimes referred to as “company divorce petitions”. Especially where the dispute is a family one, the bitterness and history of the matter can result in allegations going back over many years. In this case I have attempted to focus on the relevant matters alleged before me and have not attempted to resolve allegations and counter allegations going back over many years which would have little relevance to the main allegations. Thus, by way of example, the causes of failure of earlier family companies and whether one or more members of the family were incompetent or not are not issues that I found helpful to resolve, not least given the limited materials before me. I am grateful to Counsel for limiting cross-examination without any prompting from me, in line with my general approach that I have just outlined.163.In assessing the accuracy and truthfulness of witnesses, I am faced with the similar problems that faced Mr Andrew Lenon KC. It was submitted to me that Lisa substantially won the case that she had brought concerning the various family properties and which Mr Lenon dealt with in his judgment. This is undeniably true but it is important to have regard to what he said about the evidence of each of the witnesses. In this context he had particular things to say about the evidence from “family members”.164.In particular, it is clear that he did not simply find those members of the family who can be viewed as being in the “camp” of the first three defendants before me (including Charles himself) as being untruthful or inaccurate and that Lisa and those who gave evidence for her (including David) were truthful and accurate witnesses. I deal with what he said about each witness when dealing with that witness. For present purposes however, I refer to what he said as a matter of generality when considering the family witnesses who gave evidence before him:“The evidence of the family witnesses mainly addressed the informal agreements and understandings which it was alleged had been made concerning the disputed properties and chattels. Taking into account the inevitable fallibility of the witnesses in recalling past events, particularly events which took place many years ago, the motives of the witnesses in giving evidence concerning matters in which they had a direct financial interest, their ingrained sense of what they and other family members are entitled to and their strong personal feelings towards the other family members, I came to the conclusion that I should treat the evidence of the family witnesses with considerable caution. As noted by Robert Goff LJ in Armagas Ltd v Mundogas SA [1985] 1 Lloyd's Rep 1, 57: “It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, references to the witness' motives and to the overall probabilities can be of very great assistance to a judge in ascertaining the truth.”165.The matters that Mr Andrew Lenon KC articulates as the reasons for his conclusion that he should treat the evidence of family members with considerable caution are matters (also apparent in these proceedings) that I too take into account in reaching the same conclusion that he did. 166.The motives, engrained sense of entitlements and strong personal feelings about other members of the family, identified by Mr Lenon, also feed fire to the undoubted truth, helpfully and pithily summarised by Knowles J in the Family Division that: “Memory becomes fainter with every day that passes and the imagination becomes correspondingly more active. Thus, contemporary documents are always of the utmost importance” (And D v B, C and E [2022] EWHC 3089 (Fam) at paragraph [49]).167.As regards the difficulty of assessing the “demeanour” of a witness as a guide to truth and accuracy and the effect on memory of a continued re-consideration of a case and of documents over time, I would also refer briefly to the convenient summary set out in the judgment of Warby J (as he then was) in R (Dutta) v General Medical Council [2020] EWHC 1974 (Admin) at paragraphs 39 to 41 where he said (with emphasis removed, and inserting sub-paragraph numbers for bullets in the extracts from the judgment in the Kimathi case, referred to below): “[39] There is now a considerable body of authority setting out the lessons of experience and of science in relation to the judicial determination of facts. Recent first instance authorities include Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3650 (Comm) (Leggatt J, as he then was) and two decisions of Mostyn J: Lachaux v Lachaux [2017] EWHC 385 (Fam) [2017] 4 WLR 57 and Carmarthenshire County Council v Y [2017] EWFC 36 [2017] 4 WLR 136. Key aspects of this learning were distilled by Stewart J in Kimathi v Foreign and Commonwealth Office [2018] EWHC 2066 (QB) at [96]:“i) Gestmin:(1)We believe memories to be more faithful than they are. Two common errors are to suppose (1) that the stronger and more vivid the recollection, the more likely it is to be accurate; (2) the more confident another person is in their recollection, the more likely it is to be accurate. (2)Memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is even true of “flash bulb” memories (a misleading term), i.e. memories of experiencing or learning of a particularly shocking or traumatic event. (3)Events can come to be recalled as memories which did not happen at all or which happened to somebody else. (4)The process of civil litigation itself subjects the memories of witnesses to powerful biases. (5)Considerable interference with memory is introduced in civil litigation by the procedure of preparing for trial. Statements are often taken a long time after relevant events and drafted by a lawyer who is conscious of the significance for the issues in the case of what the witness does or does not say. (6)The best approach from a judge is to base factual findings on inferences drawn from documentary evidence and known or probable facts. “This does not mean that oral testimony serves no useful purpose… But its value lies largely… in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth”. ii) Lachaux: (7)Mostyn J cited extensively from Gestmin and referred to two passages in earlier authorities.45 I extract from those citations, and from Mostyn J’s judgment, the following:-(8)“Witnesses, especially those who are emotional, who think they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason, a witness, however honest, rarely persuades a judge that his present recollection is preferable to that which was taken down in writing immediately after the incident occurred. Therefore, contemporary documents are always of the utmost importance…”(9)“…I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective fact proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities…”(10)Mostyn J said of the latter quotation, “these wise words are surely of general application and are not confined to fraud cases… it is certainly often difficult to tell whether a witness is telling the truth and I agree with the view of Bingham J that the demeanour of a witness is not a reliable pointer to his or her honesty.iii) Carmarthenshire County Council: (11)The general rule is that oral evidence given under cross-examination is the gold standard because it reflects the long-established common law consensus that the best way of assessing the reliability of evidence is by confronting the witness. However, oral evidence under cross-examination is far from the be all and end all of forensic proof. Referring to paragraph 22 of Gestmin, Mostyn J said: “…this approach applies equally to all fact-finding exercises, especially where the facts in issue are in the distant past. This approach does not dilute the importance that the law places on cross-examination as a vital component of due process, but it does place it in its correct context. 45The dissenting speech of Lord Pearce in Onassis and Calogeropoulos v Vergottis [1968] 2 Lloyd’s Rep 403, 431; Robert Goff LJ in Armagas Ltd v Mundogas SA [1985] 1 Lloyd’s Rep 1, 57.” [40] This is not all new thinking, as the dates of the cases cited in the footnote make clear. Armagas v Mundogas, otherwise known as The Ocean Frost, has been routinely cited over the past 35 years. Lord Bingham’s paper on “The Judge as Juror” (Chapter 1 of The Business of Judging) is also familiar to many. Of the five methods of appraising a witness’s evidence, he identified the primary method as analysing the consistency of the evidence with what is agreed or clearly shown by other evidence to have occurred. The witness’s demeanour was listed last, and least of all.[41] A recent illustration of these principles at work is the decision of the High Court of Australia in Pell v The Queen [2020] HCA 12. That was a criminal case in which, exceptionally, on appeal from a jury trial, the Supreme Court of Victoria viewed video recordings of the evidence given at trial, as well as reading transcripts and visiting the Cathedral where the offences were said to have been committed. Having done so, the Supreme Court assessed the complainant’s credibility. As the High Court put it at [47], “their Honours' subjective assessment, that A was a compellingly truthful witness, drove their analysis of the consistency and cogency of his evidence …” The Supreme Court was however divided on the point, and the High Court observed that this “may be thought to underscore the highly subjective nature of demeanour-based judgments”: [49]. The High Court allowed the appeal and quashed Cardinal Pell’s convictions, on the basis that, assuming the witness’s evidence to have been assessed by the jury as “thoroughly credible and reliable”, nonetheless the objective facts “required the jury, acting rationally, to have entertained a doubt as to the applicant’s guilt”: [119].”168.The question of the significance of the demeanour of a witness has also been addressed by Leggatt LJ (as he then was) in R (on the application of SS (Sri Lanka) v Secretary of State for the Home Department [2018] EWCA Civ 1391:- “[36] Generally speaking, it is no longer considered that inability to assess the demeanour of witnesses puts appellate judges "in a permanent position of disadvantage as against the trial judge". That is because it has increasingly been recognised that it is usually unreliable and often dangerous to draw a conclusion from a witness's demeanour as to the likelihood that the witness is telling the truth. The reasons for this were explained by MacKenna J in words which Lord Devlin later adopted in their entirety and Lord Bingham quoted with approval: "I question whether the respect given to our findings of fact based on the demeanour of the witnesses is always deserved. I doubt my own ability, and sometimes that of other judges, to discern from a witness's demeanour, or the tone of his voice, whether he is telling the truth. He speaks hesitantly. Is that the mark of a cautious man, whose statements are for that reason to be respected, or is he taking time to fabricate? Is the emphatic witness putting on an act to deceive me, or is he speaking from the fullness of his heart, knowing that he is right? Is he likely to be more truthful if he looks me straight in the face than if he casts his eyes on the ground perhaps from shyness or a natural timidity? For my part I rely on these considerations as little as I can help." "Discretion" (1973) 9 Irish Jurist (New Series) 1, 10, quoted in Devlin, The Judge (1979) p63 and Bingham, "The Judge as Juror: The Judicial Determination of Factual Issues" (1985) 38 Current Legal Problems 1 (reprinted in Bingham, The Business of Judging p9). ……[39] To the contrary, empirical studies confirm that the distinguished judges from whom I have quoted were right to distrust inferences based on demeanour. The consistent findings of psychological research have been summarised in an American law journal as follows: "Psychologists and other students of human communication have investigated many aspects of deceptive behavior and its detection. As part of this investigation, they have attempted to determine experimentally whether ordinary people can effectively use nonverbal indicia to determine whether another person is lying. In effect, social scientists have tested the legal premise concerning demeanor as a scientific hypothesis. With impressive consistency, the experimental results indicate that this legal premise is erroneous. According to the empirical evidence, ordinary people cannot make effective use of demeanor in deciding whether to believe a witness. On the contrary, there is some evidence that the observation of demeanor diminishes rather than enhances the accuracy of credibility judgments." OG Wellborn, "Demeanor" (1991) 76 Cornell LR 1075. See further Law Commission Report No 245 (1997) "Evidence in Criminal Proceedings", paras 3.9–3.12. While the studies mentioned involved ordinary people, there is no reason to suppose that judges have any extraordinary power of perception which other people lack in this respect. [40] This is not to say that judges (or jurors) lack the ability to tell whether witnesses are lying. Still less does it follow that there is no value in oral evidence. But research confirms that people do not in fact generally rely on demeanour to detect deception but on the fact that liars are more likely to tell stories that are illogical, implausible, internally inconsistent and contain fewer details than persons telling the truth: see Minzner, "Detecting Lies Using Demeanor, Bias and Context" (2008) 29 Cardozo LR 2557. One of the main potential benefits of cross-examination is that skilful questioning can expose inconsistencies in false stories. [41] No doubt it is impossible, and perhaps undesirable, to ignore altogether the impression created by the demeanour of a witness giving evidence. But to attach any significant weight to such impressions in assessing credibility risks making judgments which at best have no rational basis and at worst reflect conscious or unconscious biases and prejudices. One of the most important qualities expected of a judge is that they will strive to avoid being influenced by personal biases and prejudices in their decision-making. That requires eschewing judgments based on the appearance of a witness or on their tone, manner or other aspects of their behaviour in answering questions. Rather than attempting to assess whether testimony is truthful from the manner in which it is given, the only objective and reliable approach is to focus on the content of the testimony and to consider whether it is consistent with other evidence (including evidence of what the witness has said on other occasions) and with known or probable facts.”169.These more recent iterations of judicial experience and scientific learning provide much of the rationale underlying the new regime governing witness statements, and best practice in relation to their preparation, in the Business and Property Courts (as from 6 April 2021). As paragraph 1.3 of the Appendix to Practice Direction 57AC sets out:“1.3 Witnesses of fact and those assisting them to provide a trial witness statement should understand that when assessing witness evidence the approach of the court is that human memory:(1)is not a simple mental record of a witnessed event that is fixed at the time of the experience and fades over time, but(2)is a fluid and malleable state of perception concerning an individual’s past experiences, and therefore(3)is vulnerable to being altered by a range of influences, such that the individual may or may not be conscious of the alteration.”170.In this particular case, the witness statements served by the first to third respondents (the “Relevant Respondents”) were served at a time when those respondents did not have legal representation. The petitioner, thorough her lawyers, asserts that the evidence giving process was “dishonestly ‘gamed’ ” by the Relevant Respondents.171.On 1 April 2022, the court made an order by consent extending the time for service of witness statements to 5 April 2022. By application dated 4 April 2022, the Relevant Respondents sought an order extending the time for service of their witness statements by some 10 days or so from 5 April to 15 April 2022. 172.The background was that the Relevant Respondents had had Ansons Solicitors Limited (“Ansons”) acting for them. That firm came off the record in January 2022. Clarion Solicitors Limited (“Clarion”) then started acting for them from the start of February 2022 and came onto the record for the Relevant Respondents. However, they came off the record on 29 March 2022.173.The evidence in support of the application, was a witness statement of James Hughes. As regards the circumstances of each firm coming off the record he said this:“They have come off record under the pretext of demanding money onaccount, but it has nothing to do with that. Clarion have acted for us in many cases, and they have always been paid and Ansons have been acting since 2016 and there has never been any issue over fees.”174.As regards Clarion, he went on to say:“13….It is a matter entirely of their own volition because of the tight court timetable and they cited the scale and burden of the task required for compliance with the deadlines for witness statements. They had not broached this subject in the two months they have been acting and this development came as a surprise and shock to me and my father and Grandfather.14.As with Ansons, I feel the tight deadlines and complexity of the case is too much for Clarion at this late stage. The witness statements and the requirement to complete a certificate of compliance may also have played a major part in their reluctance to help in the witness statements stage and make any extension application if necessary.”175.By application dated 16 April 2022, a further application was made to extend the time for service of the Relevant Respondents’ witness statements until 19 April 2022.176.By order dated 20 April 2022, the court, among other things, extended the time for service of witness statements until 5:30pm on 19 April 2022, the order reciting that all witness statements and relevant hearsay notices had been served before that time.177.Geldards LLP came onto the record shortly after that, the relevant notice being dated 4 May 2022.178.The consequence of the evidence being served by litigants in person at the time that a witness statement was served was that it did not need to be supported by the certificate of compliance that a legal representative has to give under CPR PD 57AC paragraph 4.3. That certificate is one that the legal representative (a) has explained the purpose, proper content and proper practice in relation to the making of trial witness statements to the maker of the statement and (b) considers that the witness statement complies with CPR PD 52AC, paragraphs 18.1 and 18.2 of CPR PD 32 and that it has been prepared in accordance with the Statement of Best Practice contained in the Appendix to Practice Direction 57AC.179.Paragraphs 18.1 and 18.2 of CPR PD 32 provide: “Body of Witness Statement 18.1 The witness statement must, if practicable, be in the intended witness’s own words and must in any event be drafted in their own language, the statement should be expressed in the first person and should also state— (1)the full name of the witness, (2)his place of residence or, if he is making the statement in his professional, business or other occupational capacity, the address at which he works, the position he holds and the name of his firm or employer, (3)his occupation, or if he has none, his description, (4)the fact that he is a party to the proceedings or is the employee of such a party if it be the case; and (5)the process by which it has been prepared, for example, face-to-face, over the telephone, and/or through an interpreter. 18.2 A witness statement must indicate— (1) which of the statements in it are made from the witness’s own knowledge and which are matters of information or belief, and (2) the source for any matters of information or belief.”180.The relevant Statement of Best Practice has certain provisions which apply to the preparation of all witness statements and certain provisions which apply only to witness statements prepared when the relevant party is legally represented and certain provisions which apply only where the relevant party is not legally represented.181.Paragraph 5 of CPR PD 57AC provides as follows: “Sanctions 5.1 The court retains its full powers of case management and the full range of sanctions available to it and nothing in paragraph 5.2 or paragraph 5.3 below confines either. 5.2 If a party fails to comply with any part of this Practice Direction, the court may, upon application by any other party or of its own motion, do one or more of the following –(1)refuse to give or withdraw permission to rely on, or strike out, part or all of a trial witness statement, (2)order that a trial witness statement be re-drafted in accordance with this Practice Direction or as may be directed by the court, (3)make an adverse costs order against the non-complying party,(4)order a witness to give some or all of their evidence in chief orally.5.3 The court may, upon application by any other party or of its own motion, strike out a trial witness statement not endorsed with a certificate of compliance pursuant to paragraph 4.3 above if there is reason to consider that the relevant party was acting in person when it was signed in order to avoid the application of paragraph 4.3 above to the statement”.182.At the PTR on 22 May 2022, I made an order (in part) as follows:“1.By 4pm on Friday 27 May 2022, the First to Third Respondents serve and file a certificate of compliance for each of the witnesses on whose evidence they intend to rely at trial (whether by way of oral evidence or hearsay notice) in the form set out at paragraph 4.3 of CPR Practice Direction 57AC, save that:1.1 Paragraph 1 of the certificate of compliance may be amended to reflect the fact that the First to Third Respondents’ legal representatives were not the relevant legal representative within the meaning of Practice Direction 57AC when the witness statements were originally served.1.2 Paragraph 3 of the certificate of compliance may be omitted.2.By 4pm on Friday 27 May 2022, the First to Third Respondents shall serve and file a short supplemental statement from each witness on whose evidence they intend to rely at trial (whether by way of oral evidence or hearsay notice) setting out proper details of the matters required by CPR Practice Direction 32 paragraph 18.1(5).”183.These directions were complied with. I set out later in this judgment what emerged from the further witness statements that I required. In their closing submissions, Mr Wormald and Mr Phillips submitted that the history revealed, and I should infer, that funding per se was not the problem or reason why Clarion came off the record; that the compliance problem (or more accurately requirements of CPR PD 57AC regarding legal representatives) was avoided by the engineering of a situation where there were no solicitors acting for the Relevant Respondents at the crucial phase and that the Relevant Respondents “dodged” the relevant requirements on the basis that they were not represented. This, it was said, was in line with a broader pattern of a willingness on the part of the Relevant Respondents to “game the litigation” and was a factor that I should “take into account”. 184.I am not prepared to make the inferences that the Petitioner seeks. In my judgment, Clarion came off the record because they did not have the resources (assuming in the petitioner’s favour, because the Relevant Respondents would not provide sufficient funds) to complete the evidential process within the time available. In terms, James said that the Relevant Respondents did not have the sort of immediate funds to pay the large on account payment that was being required. This rings true. The short period for which Clarion had been instructed and the sheer volume of procedural matters that they were then having to deal with speaks volumes. Clarion did not go back the record, but a new firm, Geldards LLP did. So far as possible my order made at the PTR sought to redress the balance somewhat. The result of that order is dealt with later in this judgment with regard to each witness for the Relevant Respondents, but I did not detect any underlying problems with the manner in which the evidence had been prepared. No specific sanction was relied upon as being appropriate to be applied. I would, in any event, have been unhappy with a general exhortation to “take into account” the manner in which the witness statements were prepared without a more precise steer as regards particular matters and the precise reasons therefore.185.I turn to the evidence of the individual witnesses, starting with the petitioner’s witnesses.Nora186.In evidence was an affidavit of Nora made on 24 September 2017. As Nora said in that witness statement, at that date she was 87 years old and although relatively fit and healthy then, had recently spent a period in hospital. The affidavit was to deal with issues relating to ownership of and dealings with relevant family properties, but especially Edlington Wood. 187.Mr Lenon’s assessment of Nora’s evidence was as follows:“The reliability of the Affidavit could not be tested by cross-examination and I accept the defendants’ submission that her account of the background was partial and her description of the circumstances in which the Edlington Wood properties were acquired was incomplete and inaccurate in material respects.”188.In those circumstances, I consider that I should treat her evidence with care. That view is confirmed by the history of what happened in 2015 onwards as dealt with later in this judgment,189.In her evidence Nora complains about historic appointments of John as director of LWC in September 2006 and of Portbond in July 2009 and says that she was not consulted. Whether or not she was consulted in advance I have no doubt that at the time (or when he found out about them) she acquiesced in those appointments and there was nothing contentious about them at the time. She also complains about the appointment of James as a director of each of LWC and Portbond in December 2015. Again, whether or not she was formally “consulted” I am satisfied that she acquiesced in the same thereafter.190.So far as relevant to these proceedings, the main passage of her affidavit are those where she confirmed that she is awaiting provision of relevant documents but that, as regards sums taken from the Companies by Lisa:“I agreed to the relevant amounts being removed from LondonWiper and being treated as dividends paid to myself and Charles. I understand that Charles also agreed to this at the relevant time. In the circumstances, it appears that the factual background was manipulated by Johnny in order to create a convenient set of reasons to dismiss Lisa from the business.”191.This wording is somewhat curious. She does not say that Charles did agree to the removal of the relevant by Lisa but that she “understands” that he did. The reference to the “factual background being manipulated” also strikes me as being something of a circumlocution given the clear case of Lisa that the facts were simply lied about. These points, plus the relevant evidence as a whole, are areas where cross-examination could have been key.192.Nora goes on to say that Lisa’s removal was something she was never consulted about nor did she agree to it. The contemporaneous documentary evidence is to the contrary. 193.The other main point that she makes, relevant to these proceedings, is that she considers that Lisa was removed because it was inconvenient to have her as bookkeeper in circumstances where John wished the company to pay for his horse racing interests and for clothes. No mention is made of preventing Lisa reporting to Nora or anyone else about theft of stock (or the cash proceeds thereof) by John and/or by, or with the consent of, the other Relevant Respondents, which is one of Lisa’s main allegations. Further, as will become clear, the evidence shows that although personal expenses of John (and the other Relevant Respondents) was paid for by the Companies, such sums were recharged to director’s loan accounts and the Companies therefore at most loaned the relevant monies and further that this was a course that was agreed to until at least late 2015 and one over which Lisa, as bookkeeper, had full transparency over and actually implemented.194.In short, other than for what her affidavit does not say, the assessment of Mr Lenon KC applies equally to Nora’s evidence relevant to these proceedings in the sense that I reach the same assessment.Lisa195.Mr Lenon KC’s assessment of Lisa as a witness was as follows:“Lisa worked as the bookkeeper for the family business and gave evidence as to, amongst other things, the funding of the purchase price and renovation works at Wood House. Her recollection on a number of matters (such as her adamant assertions that her mother 5 invariably signed guarantees given on behalf of the family companies and that David had been a director of the family company J.L.D. Metals Ltd) was shown to be inconsistent with the contemporaneous documents and overall I did not regard her testimony as entirely reliable.”196.In these proceedings Lisa made serious allegations that personal expenditure by the Relevant Respondents, or some of them, prior to November 2015 was expenditure paid by the Companies that had not been agreed to and that payment of the same amounted to acts of unfair prejudice. The complaints included payments made as long ago as 2006. As I shall explain, early in the trial it was conceded that such payments by the Companies prior to November 2015 did not amount to unfair prejudice. This is because they were consistent with the informal basis upon which the Companies operated, by common consent of the shareholders, and that Nora’s acquiescence meant that the such payments would not provide an independent ground of relief. This was a significant concession which seriously calls into doubt Lisa’s reliability as a witness.197.I examine other areas where I find her evidence to be unreliable in the course of this judgment. In short, the contemporaneous documents show in a number of respects that Lisa’s evidence is simply wrong. I am sure that Lisa believes in the truth as she sees it but I regret to say that my assessment is that she has simply convinced herself of the truth of her narrative and that she is unable to retreat from that. As did Mr Andrew Lenon KC. I am slow to accept her evidence to the extent that it is uncorroborated either by other reliable evidence or the factual probabilities. David198.Mr Lenon KC’s assessment of David was as follows:“It was submitted on behalf of the defendants in closing that David’s participation in the proceedings stemmed from his dependence on Lisa for provision from Nora’s estate. Whether or not this was true (and it was not put to him in cross-examination), I did not regard him as a neutral observer given his obvious antipathy towards John.”199.It was not suggested to me that David’s evidence turned on any dependence on Lisa. I agree, however, with Mr Lenon’s assessment of his obvious antipathy to the Relevant Respondents and the underlying lack of neutrality and balance of David’s evidence. That antipathy, lack of a balanced approach and lack of neutrality given his involvement as a person acting for Lisa in the last year or so of the Companies’ trading, are all demonstrated by the contemporaneous documents. In particular, the long-term breakdown in relations and hatred of and complete lack of trust of David in the Relevant Respondents is readily identifiable. Again, I place little weight on his evidence unless corroborated in the manner that I have expressed. Charlie Pickering200.The evidence of Charlie Pickering was mainly directed at what he considers to be his removal from office. He characterised that removal as being unjustified on the facts and as being effected to “gain control” of the Companies once his mother, Lisa, had been removed from her employment and directorship. Given his rather different job and status in the Companies (he was not a director) compared with his mother (who was bookkeeper), it was unclear to me how “control” was gained by his removal. He asserted in his witness statement that the Relevant Respondents had removed stock for unaccounted for cash payments and that he had told his mother and Nora about this but did not in terms say that that was why he was removed.201.I deal with his evidence in more detail later in this judgment but again am extremely cautious in accepting it when uncorroborated by other contemporaneous records or the inherent probabilities. In Spring 2020 he sent a series of text messages, saying he has all sorts of things on James and John and, in the context of then ongoing attempts to save the Companies, saying things such as:“I don't care anymore about if we have nothing because I will fuck the job up, if you don't play ball”202.I turn to the witnesses relied upon by the Relevant Respondents.Mr Fitton203.Mr Fitton had made two witness statements for the trial in support of the Relevant Respondents. The first was dated 18 April 2022, the second 26 May 2022. The second witness statement was as a result of my order, that I have referred to earlier, requiring explanations as to how witness statements put forward for the Relevant Respondents had been prepared. 204. In his second witness statement, Mr Fitton explained how his first witness statement had been prepared. In brief, he had spoken to Ansons in a remote (Teams) meeting/call) about his witness statement and Ansons provided him with a list of questions they were going to ask to obtain necessary information from him to prepare his witness statement. James then contacted him in about March/April 2022 asking him if he could prepare a witness statement based upon the questions that Anson had earlier sent to him. James emailed Mr Fitton a template witness statement which had the heading for the proceedings at the start and a statement of truth at the end. There was nothing else in the draft document sent to Mr Fitton. Mr Fitton then looked at various documents, referred to in his witness statement. He recalled a lot of the detail from memory. He then wrote the statement without input from anyone else. When he was happy with the draft statement and the detail contained within it, he emailed it to James. James asked that the statement be formatted with numbered paragraphs. That was done Mr Fitton signed the statement and returned them He confirmed that the same applied, mutatis mutandis, to Mr Gregory.205.I have not hesitation in accepting Mr Fitton’s evidence as to the circumstances and process of preparing his witness statements and as to the contents of the same. I do not consider that anything in the preparation of his first witness statement causes me concern as to the truthfulness and accuracy of the same.206.When giving evidence, Mr Fitton was clear but careful. Many of the questions put to him he was unable to answer given the passage of time, I did not find that surprising. I consider that his evidence was truthful and accurate and I unhesitatingly accept it.Mr Gregory 207.Mr Gregory also gave evidence for the Relevant Respondents. He too had made two witness statements, one dated 18 April 2022, the second dated 26 May 2022.208.In his second witness statement, Mr Gregory explained the process that he went through in preparing his first witness statement. In substance it confirmed what Mr Fitton said about the matter. There had been an initial call with Anson at which specific questions were put (and the questions then sent to Mr Gregory) as well as a general discussion. In April 2022, James contacted him by email to ask him to prepare a witness statement. Mr Gregory was out of the office at the time and did not then see the relevant email. The email had sent a “top” and “tail” of a witness statement but with no substantive content. On his return to the office, Mr Gregory saw the email. 209.Thereafter:“9.I drafted my own witness statement from my own memory and using my fi les and contemporaneous notes. To start, from memory, I made a note/outline of what I wanted to cover in my witness statement; I also made a note of the documents that Smith Craven had prepared historically. I then got out one of the files and reviewed my notes on the file to remind myself how the management accounts etc had been prepared and what specific documents were called as each client is slightly different in what their documents are called and what they provide. The Hughes' always provided a very detailed pack of documents for the preparation of their management accounts.10.I also looked at two reports that I had been involved in collecting financial information for back in 2015; there were two reports regarding potential / alleged financial misappropriation by Lisa, one regarding the company and one regarding 'mum and dad' i.e. Charles and Nora.11.When I had finished my statement one of my colleagues read through it to proofread it for spelling mistakes and grammatical errors.12.I then emailed my finished signed statement to James Hughes. James then emailed me back asking if I could insert paragraph numbers into my statement which I did; I resigned the statement and emailed it back to James.”210.As in the case of Mr Fitton, I have not hesitation in accepting Mr Gregory’s evidence as to the circumstances and process of preparing his witness statements and as to the contents of the same. I do not consider that anything in the preparation of his first witness statement causes me concern as to the truthfulness and accuracy of the same.211.My assessment of Mr Gregory’s evidence is effectively the same as my assessment of Mr Fitton’s evidence. In short, I consider that on matters of substance the evidence was truthful and accurate and that he made clear where he could not now remember things.212.As regards Mr Fitton and Mr Gregory, Mr Lenon did not as such say anything about their evidence as a matter of generality. He did however accept their evidence over that of Nora. 213.The evidence of Mr Fitton and Mr Gregory was inevitably largely dependent on their memories being “jogged” by the contemporaneous documents, though they were frank when they could not remember or their recollection varied from the precise formulations of matters set out in the contemporaneous documents.David Clarkson214.The Relevant Respondents relied upon evidence of Mr David Clarkson, He was not called to be cross-examined and his evidence was admitted without challenge. However, that evidence was largely irrelevant to the issues before me and I did not find it assisted me at all in my determinations and assessment.Lisa Davey215.The Relevant Respondents has also relied upon the evidence of Lisa Davey but she was not called and her witness statement was not admitted into evidence. As it happens, her witness statement did not appear to advance matters further in any event so this was not a situation where the failure to call her was one leading to the drawing of any adverse inferences. Charles Hughes216.Charles was not called to give evidence. Reliance was placed upon his witness statements. He was not called because of his state of health. Lisa objected to this presentation saying (correctly) that there was no expert medical evidence demonstrating why Charles could not give evidence. However, I take into account what Mr Lenon KC said about Charles in terms of his age, health and the evidence that he gave.217.Mr Lenon’s findings about Charles were as follows:“[11] Charles is now aged 91 and frail. In view of his age, poor eyesight and hearing difficulties certain accommodations were made in order to facilitate his giving of oral evidence. Charles stated in cross examination that he did not recall having agreed, read, or signed his witness statement around six weeks previously and he answered many questions by stating that he could not remember, did not know, or provided no response to the question asked, including where these questions directed at matters discussed within his own witness statement. My impression was nevertheless that Charles was able to follow the questions put to him. [12] Charles has a close relationship with John and was plainly keen to support John’s claim. He confirmed the truth of John’s witness statement and, in cross-examination, volunteered supportive evidence about material matters which, if accurate, I would have expected to have been included in his and John’s witness statements. Overall, I consider that I should not rely on Charles’s uncorroborated evidence.”218.It was accepted by Mr Mundy that Charles’ statement is inaccurate in, for example, suggesting that he agreed that Lisa’s salary should be increased to £150,000 at a time when John’s salary increased to £250,000. In fact it appears that Lisa agreed a salary increase to £100,000 but that, because some was paid in arrears, the actual payment at least in one year was £150,000. Mr Mundy’s submission was that uncorroborated neither Nora’s nor Charles’ statements were a sage guide to the truth on contentious issues. I have deal with Nora’s statement already. I take the same approach to Charles’ witness statement.John219.As regards John, Mr Lenon KC said:“He was unable to explain satisfactorily some inherently implausible features of the alleged arrangement with Nora and Charles to which I refer later in the judgment.”220.It was, as I understood it, accepted that John was not in the best of health. As well as suffering from dyslexia he also suffers from dysphagia and tires easily. An agreed text was read to him at the start of his evidence stressing certain matters (such as the ability to have more frequent lavatory breaks). At times his evidence was somewhat confused. He also explained, which I accept, that his memory was not good in respect of the period when he had been in hospital.221. As regards preparation of his witness statement for the trial, John explained in his second witness statement that some work had been done by Ansons and in particular there had been a meeting at which they had put questions and taken down answers. It was not entirely clear to me whether John had been by himself or with James when that had been done. Later, says John, he enlisted the help of a Mr Chaudhary, a solicitor who had been struck off to help prepare witness statements. Mr Chaudhary asked questions. Certain evidence was taken, at John’s request, from his witness statement in the Property Proceedings. James passed through the room on occasion and found and/or showed documents when requested to by John. According to John, James did not suggest answers that John gave to Mr Chaudhary or correct James in what he was telling Mr Chaudhary. I accept this evidence but also note that the realities are that John and James have been liaising closely over some years not only during the course of the family proceedings but earlier on. 222.In short, in giving his evidence both oral and written, I consider that John was telling the truth as he saw it but that I should treat his evidence with care when not corroborated in the ways that I have earlier referred to in relation to the evidence of other witnesses.223.For Lisa, it was submitted that the evidence of John (and James) was fatally undermined by the evidence that they gave to the effect that GT had been informed by them of the details of the deal that they had done with Remet Processing not long before the Pre-Pack Sale and the entry into separate agreement by John/James with Remet Processing at the same time. I deal with that evidence below. Although finding that evidence to lack accuracy I do not consider that the evidence shows that they were knowingly and deliberately lying rather than telling the events as they (wrongly) remembered them. I do not therefore regard John’s evidence as untruthful whenever it conflicted with what Lisa says occurred. In my judgment it is necessary to judge John’s (and James’) evidence in a similar way to the evidence of Lisa: that is to be cautious about accepting it where uncorroborated.James224.In his second witness statement, James, explained that the demand by Clarions for an on account payment could not be met and this was why they came off the record as acting for the Relevant Respondents. I therefore reject the submission that the Relevant Respondents were “gaming the system” so far as the changes in legal representation are concerned and the fact that they had no lawyers acting at the time that witness statements were prepared and filed.225.I also accept James’ evidence as to how his witness statement came to be prepared being based about 40% on a draft prepared by Ansons from questions asked by and answers provided to them. I also accept his evidence regarding the manner in which he then took the benefit of help and advice from Mr Chaudhary, how the “new” rules under what is now PDF 57AC was explained to him and how he then prepared his witness statement and took into account the limited counsel’s input on the draft which was possible in the time available.226.I should note that James’ evidence was much more relevant to the period in the year or so up to the administrations of each of the Companies when he was, on the whole and for at least the majority of the relevant time, in the “driving seat” (as compared with his father). His evidence largely matched that of the contemporaneous documents and he was not slow to admit matters that might be seen as damaging his case and which a less truthful witness would simply deny on that basis. Nevertheless, as with the other family witnesses, by and large I looked to corroboration (of the sort previously described) where there was a major factual dispute between him and other witnesses.
- Approved Judgment
- Introduction
- The Disputed Strip
- Representation before me
- The direction for a split trial and the trial before me
- The Hughes’ family and an overview of some of the Hughes’ businesses
- Portbond and LWC: Directors, shareholders and entry into administration
- The alleged acts of, or conduct of the Companies’ affairs, said to amount to unfair prejudice: summary
- Unfair prejudice
- [630]
- [631]
- [11]
- [12]
- Gamlestaden Fastigheter AB v Balti Partners Ltd
- Statements of case and amendment
- Approach to the Evidence
- Gestmin SGPS SA v Credit Suisse (UK) Ltd
- Lachaux v Lachaux
- Carmarthenshire County Council v Y
- Kimathi v Foreign and Commonwealth Office
- Gestmin:
- iii) Carmarthenshire County Council:
- Armagas Ltd v Mundogas SA
- Armagas v Mundogas
- The Ocean Frost,
- Charlie Pickering
- Mr Gregory
- David Clarkson
- Charles Hughes
- James
- Mr Greg Lacey: Expert
- Conduct in relation to other Hughes’ family companies
- 7,500
- Allegations in the Petition regarding alleged “cash sales” (stock sold for unaccounted cash); false allegations concerning, and unfair investigation of, payments to Lisa; removal of Lisa and Charlie from the Companies; legal proceedings against Lisa known to be on a false basis
- Cash sales
- Dismissal/Removal of Lisa
- (3) Investigation
- Causing the company to issue proceedings against Lisa
- Dismissal of Charlie from employment
- Directors’ loan accounts and the alleged cash sales of stock
- Lisa Pickering
- Repayment
- Proceedings
- Conclusion
- Charlie Pickering’s dismissal
- Cash Sales: conclusions
- Conclusions: investigations and removal of Lisa, the Recovery Proceedings
- Conclusion: dismissal of Charlie Pickering
- Benefits alleged to be taken from the Company by the Relevant Respondents: Funding of “extravagant personal lifestyles”
- (a) Salaries: John’s salary including Lorraine’s salary; James’ salary; Charles’ salary
- (b) Company credit card expenditure of John and Charles
- (c) Car expenditure
- Horse related expenditure
- Gallops:
- (e) Child support agency payments
- Payments to James for investment in his property business
- The evidence
- Discussion and conclusions
- General conclusion: allegation of financial support to fund extravagant personal lifestyles.
- Allegations relating to the Pre-Pack sale: summary
- The facts: the path to administration