Case No. CR-2019-LDS-000669

27.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.