Case No. CR-2019-LDS-000669

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.Mr Greg Lacey: Expert227.I had the benefit of an expert report from Mr Greg Lacey of FAR Consulting dated 7 April 2022 on behalf of Lisa, together with an Addendum to that report dated 25 April 2022 and his answers to various questions put to him by the Relevant Respondents. Some of his evidence was excluded by an earlier order by me, permission for such expert evidence not having been sought or given.228. Mr Lacey gave oral evidence before me. I deal with his evidence later in this judgment. At this stage I should simply say that I regarded his evidence as balanced and reliable.229.However, I have to comment on the scope of Mr Lacey’s expert report.230.As regards the scope of the expert report of Mr Lacey, the position was wholly unsatisfactory. The initial directions agreed between the parties purported to allow the experts to agree between them the scope of their reports and the issues that they would cover. However, ultimately the expert issues can only be determined from the pleadings. It is not for the experts to agree what the legal issues are nor which issues require expert evidence to address them. Further, the solicitors for the Petitioner seemed to regard the permission to call expert evidence as a carte blanche permission to ask him any questions that they wanted to, going beyond even the scope of the somewhat badly defined issues that he was permitted to opine upon. The result was that at an earlier hearing, before the trial, I struck out various sections of the expert report as clearly not having the permission of the court and it being too late to obtain such permission.231.Further, there was a wholly unclear agreed direction that the expert evidence would be permitted to deal with:“ iii) verifying the transactions and accountancy treatment of the transactions which form the subject of this dispute.” This omnibus description is wholly unclear. A further and later court order, again by consent, repeated the direction that was previously made regarding “verifying transactions and accountancy treatment of transactions”. The result was that Mr Lacey (admittedly on instructions) appears to have investigated almost any transaction mentioned anywhere in the pleadings whether or not there was a legal issue about them or not. As such, rather than dealing with issues put to him Mr Lacey’s role in large part turned into one of investigation as to whether or not there might be issues.232.Although the court ultimately controls expert evidence, when presented with a draft consent order, as in this case, a Judge will often have inadequate time in which to consider the issues separately him or herself so as to determine whether the consent order is appropriate. In this, as with agreed extensions of time, the lawyers need to consider carefully whether to advise their client to consent to orders and not simply to take the easy course. 233.A considerable section of the report dealt with matters that I found on an earlier occasion the court had granted no permission for (and on that basis I had struck out the relevant sections of the expert report).234.Furthermore, a lot of Mr Lacey’s evidence was not expert evidence but simply evidence of fact as to what documents were or were not available to him and what those available to him showed. 235.I should make clear that I do not blame Mr Lacey. He did what he was asked to do. However, I do consider that the way in which the obtaining of expert evidence was approached, sought to be used and permission obtained from the court was all unfortunate and the cause of a lot of unnecessary cost. 236.The Respondents failed to comply with relevant court directions and accordingly there was no expert evidence on their behalf. Conduct in relation to other Hughes’ family companies237.The Hughes family have owned and managed a number of companies over the years. Two such companies were JLD Metals Limited (“JLD Metals”) and JLD (Holdings) Limited (“JLD Holdings”). The latter company, as its name suggests, was the holding company of JLD Metals. Both companies went into administrative receivership on 13 November 1992 when Mr Katz and Mr Gleave of Arthur Anderson were appointed joint administrative receivers of each of the companies. There is in evidence before me two reports of meetings of creditors held on 12 February 1993, one for each company (the “JLD Reports”).238.From those reports, the following can be gleaned. By the time of the administrative receivership, JLD Holdings held 70,100 of the issued ordinary shares in JLD Metals, and John held one such share. The shares in JLD Holdings were held as follows:Charles 52,500Nora 52,500John 37,500Lisa 7,500 150,000239.John and Lisa were directors of each of the companies. John was the managing director.240.JLD Metals was incorporated in December 1980 to operate a non-ferrous metal reclamation business in Wath-upon-Dearne, Rotherham. By the time of the administrative receivership it operated from premises at Hobson Industrial Estate, Burnopfield, Newcastle-upon-Tyne, owned by its parent company.241.The business operated by JLD Metals was substantial. Audited accounts for the 17 months ended 30 June 1991 showed a turnover of over £31 million with a net profit, after tax, of £319,000. Management accounts incorporating the results of JLD Holdings showed a turnover of over £19.6 million a gross profit of over £1.1 million but a net loss, after, among other things, overheads and tax, of £449,000.242.The report to the meeting of creditors of JLD metals contained the following under the heading “Receivership strategy”:“2.1 Immediately following our appointment we conducted an investigation into the business to establish whether it was feasible to allow the company to trade for a limited period. We decided that it would be possible to trade the business profitably and thereby achieve a sale of the business as a going concern, which would ensure maximum possible realisations.We also discovered that the majority of the company’s finished goods stock had been removed from the company’s premises during the morning prior to our appointment. However, following extensive negotiations and injunctive proceedings, the entire stock that had been removed was returned and subsequently realised at trade prices.”243.Lisa’s case is that it was John who removed the stock, that he did so wrongfully and that I should take this into account, as demonstrating a propensity to act in this way, when considering her allegation that stock was wrongfully removed and/or otherwise wrongfully excluded from the sale by the administrators to Remit Processing in this case and/or her allegation that, well before the administrations in this case, stock was removed and sold without any accounting to the Companies for the proceeds of sale.244.I am unable to draw any of the inferences that Lisa invites me to make in this respect. I have no idea who was responsible for the removal of the stock in the case of JLD Metals, nor the precise circumstances in which the removal and then return took place. I have no details of the “extensive negotiations” nor what they were about. Accordingly, I leave this matter out of account in considering the allegations of improper dealings in relation to stock of the Companies.245.According to David, he and John each owned half of a company called Prontex Limited. They worked together in that company sometime prior to 2002. Prontex Limited was wound up in 2001. 246.In his witness statement, David asserted, of John:“He was stealing from that company back then, he would pay cash and do false weighbridge tickets. That’s why Prontex failed and why I left.”247.This is relied upon by Lisa as showing a propensity on the part of John. I am not able to accept such a general assertion, with no corroborative material and accordingly am not satisfied that this allegation by David is true. I leave this alleged matter out of account.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 basis248.These allegations are all intertwined. (1)Cash sales249.There is a general allegation that the Relevant Respondents enjoy significant benefits from (and/or allowing LWC and Portbond) to suffer from diversion to all of some of them of cash received from sales which ought to be accounted to LWS as set out in paragraphs 31-2 of the Petition (see paragraph 10(iii)(b) Petition). Paragraph 31 of the Petition refers to the allegation being a matter for “expert evidence”. There is then a reference back to paragraph 25, which is an allegation that Charlie Pickering became aware of the cash sales and that employees had been instructed by John to use “internal tickets” so that the sales could not be traced. Paragraph 32 alleges that the cash sales and retention of the cash proceeds by John involved breaches of duty by the Relevant Respondents as directors. Of course, as regards James that could only be in respect of alleged cash sales after he had been appointed a director.250.The alleged cash sales also appear in the context of the allegations regarding the investigation of sums apparently received by Lisa and her dismissal/removal.251.In brief, the allegations regarding the cash sales are as follows.252.Lisa’s duties, it is said, included the checking of finished stock of granules on Friday evenings after employees had gone home and that on Mondays she would re-check the stock levels of finished materials as well as reviewing invoices delivery notes, weighbridge tickets and paperwork and input the data into the Pegasus system (paragraph 12 of the Petition). (The Pegasus system did not however contain detailed stock records).253.In about September/October 2015, Lisa confronted John about missing and unaccounted finished stock. His excuse was that the finished stock was not of a good enough quality and had had to be “re-run”. In fact however, this explanation was false. He was selling the stock for cash on Saturdays (to avoid detection by the claimant) and not accounting for the same. He refused to put the stock into the Pegasus system because he did not want to lose the cash sales (paragraphs 13 and 14 of the Petition.)(2) Dismissal/Removal of Lisa254.In breach of his duties, John caused the dismissal of Lisa as employee and removal in breach of his duties as a director:(1)To stop her having access to company financial information so that she would not be able to divulge breaches of duty by John and Charles relating to the alleged cash sales and other benefits being taken personally;(2) Out of personal animosity;(3)In order to appoint his son James as director of each of the Companies to promote the interests of himself and his son over Lisa and her son.(paragraphs16 and 18 of the Petition)(3) Investigation255.The investigation commissioned of the auditors was targeted at Lisa only. Its aim was to provide a pretext to dismiss Lisa. “Accordingly” John and Charles failed to cause the auditors to investigate their own misconduct and/or supplied false information to the auditors to set up Lisa and disguise their own misconduct, all of which amounted to one or more breaches of directors’ duties by them (paragraph 17 of the Petition).256.I should make clear at this point that, as the evidence emerged, the persons dealing with the investigation were doing so as company accountants not the separate team that dealt with audit matters.(4) Causing the company to issue proceedings against Lisa257.Proceedings were delayed whilst Nora was alive because the relevant Respondents knew that she would tell the truth. On Nora’s death the proceedings were issued (paragraphs 19 and 20 of the Petition).258.The claim was a false claim and known to be such. They were brought to bring unfair pressure to bring about a position in which John would become sole owner of the Companies and would be able to “milk” them for what they are worth (paragraphs 22/23).259.It is to be inferred from the administrators’ decision not to pursue the same that this was because they believed that it would not be likely to succeed (paragraph 23A).(5)Dismissal of Charlie from employment 260.The allegations are that his dismissal was motivated (among other things) by a desire to prevent him passing information to Lisa about the financial misconduct of the Relevant Respondents regarding cash sales and other benefits taken from the Companies and that loss and damage had been caused by the legal and settlement costs incurred by LWC in relation to the matter (paragraphs 24-26 of the Petition).Directors’ loan accounts and the alleged cash sales of stock261.To understand the allegations against Lisa and how they emerged, it is helpful to set out the accounting position as it operated within the Companies in the relevant 4 or 5 years prior to 2015, that being the period in relation to which investigations took place and allegations were subsequently made.262.The accounting position regarding drawings from the Companies for the benefit of members of the family is described by Mr Gregory in his witness statement. I do not understand this account to be contentious but, if it is in any respect, I have no hesitation in accepting his account in full.263.In short, the accounting function was under the control of Lisa. Up until about August 2015, a directors’ loan account was operated as a joint account in the sense that all family expenses/drawings for family members over and above any salaries, was debited to the directors’ loan account. This loan account, usually in debit from the perspective of the account holder at the accounting year end was then historically cleared by crediting to the account the proceeds of a dividend declared annually in favour of Nora and Charles, as shareholders.264.The sort of personal expenses debited to the account included, by way of example, costs incurred in relation to vehicles used by the family, including related hire purchase payments; credit card payments and other payments made for the benefit of family members.265.From about November 2015 onwards, the directors loan accounts were split into separate sub loan accounts covering each of Nora, Charlie, John, Lisa and James. This enabled the tracking of balances owed by individuals.266.It is also helpful to set out, in a little more detail, what Lisa says was taking place in the period prior to the investigations concerning her drawings (and thereafter) regarding the sale of stock for cash and the failure to account to the Companies for the proceeds of sale.267.The Companies operated a Pegasus accounting system but that system did not and/or was not used to record daily stock movements. Instead, the accounting records for stock were kept on a separate laptop maintained by another employee, Mr Steve Mower, and recorded on an Excel spreadsheet outside the immediate control of the accounts department under the control of Lisa.268.As regards the monthly management accounts prepared with the assistance of Mr Gregory, the latter explains that purchase and expense invoices were stamped with a company authorisation grid/grid checklist (completed in the main by Lisa) and supported by delivery notes and weighbridge tickets. Sales invoices and credit notes were also generated by the team working under Lisa and entered onto the accounting software. They were kept sequentially and supported by delivery notes and weighbridge tickets. A stock figure would separately be provided to Mr Gregory at the month end, which was mainly unsupported and consisted of primarily a handwritten value. This was usually provided by John. At the year end a full stock sheet was made available to the audit team, initially at John S Ward and later at Smith Craven.269.In brief, Lisa says that John operated a separate system of “internal tickets” in order to misappropriate stock from LWC without it being traced as missing from the records of LWC.270.In her witness statement, Lisa said that at some point between August and October 2015 she had become suspicious about missing stock. In cross-examination, she was not able to explain what it was that triggered her suspicions. Indeed, her evidence that she was under a duty to check the stock position on a Friday (and Monday) appears to have been put forward as the reason that she discovered the alleged missing stock. However, she ultimately accepted that this was not part of her duties as employee or director. She decided to do this and/or, she said, was asked to do this, by her mother to keep an eye on the situation. Accordingly, what prompted this decision to check the position was not made clear.271.She goes on to say that on most Fridays, after the employees had left for the day, she was under a duty to and would inspect the warehouse to check the quality of finished stock. On a Monday she would re-inspect the warehouse to check stock levels. On several occasions, she says, she noticed that substantial amounts of finished stock was missing. She says that this came to her attention by checking the finished copper stock ready for dispatch on a Friday, and then looking at the dispatches made on a Monday and comparing the two. 272.As regards the checking process, Lisa explained that there were bags of finished stock which would usually have a label on with a weight and description. She would usually be more interested in the high value finished stock, copper and would “jot down” what she had counted. However such notes were not produced and she confirmed that she did not give them to or make enquiry of Steve Mower who actually kept the stock records. She did say that she gave the information to Nora.273.I should add that this evidence was in substance inconsistent with Charlie’s witness statement. In that statement, he said that he was employed from 2008 and carried out a similar process to that described by Lisa. On many occasions he says he found missing stock and he reported that to Lisa and Nora. It is difficult to believe that Lisa and Charlie were carrying out the same sort of process with the same result in any period and also difficult to believe that Nora was told about their findings when stealing of stock (or not accounting for the cash proceeds) is not an allegation that Nora ever seems to have raised.274.In their Defence, the Relevant Respondents had made the point that the relevant areas were covered by CCTV cameras so that of stock had been removed on a Saturday that would show upon on the CCTV recordings. Lisa had not answered this point is her points of reply. When asked about CCTV cameras in cross-examination she said that John had turned off the CCTV on Saturdays so that the movements of stock sold by way of illicit cash sales were not recorded. This was the first time that this allegation was made. She later went on to allege that Kevin Taylor from security had told her that John had turned off the CCTV cameras. Later again, she said that she asked Mr Taylor if it was John who turned off the CCTV cameras and he said that he did not know. I do not accept this late and internally inconsistent evidence.275.Lisa was also asked in cross-examination whether existing stock might need to be weighed (e.g. for stock takes). She accepted that this might happen and that in those circumstances an “internal” weighbridge ticket would be used. She asserted however that internal tickets were also used illicitly. 276.She continued in her witness statement to say that she confronted John and asked him where the missing granules were. He told her that the finished stock was not good enough and that it had had to be “re-run”. She says that she later learned that John was selling stock at the weekends for cash and that she “understood” that stock was loaded onto vehicles on Saturday mornings or early Monday mornings for delivery.277.Lisa says that she understands that a lot of employees were aware of Johnny’s weekend dealings in stock and cash and that she reported her brother’s dealings to her mother and also discussed it with her son Charlie and that she told Paul Gregory at Smith Craven.278.In her witness statements she then refers to a Mr Robert Andrew, a driver, formerly at LWC and now working at Remet Processing. She says that she spoke to him on a monthly basis until 2020. She says that he has confirmed to her that he, Mr Andrew, is aware of several regular customers who routinely bought substantial amounts of stock from LWC in cash, usually on Saturdays; that John regularly instructed employees at LWC to load vehicles under his instruction without the correct paperwork “including weighbridge tickets” for the stock; that the stock sale was recorded on an “internal” ticket instead of the normal “outs” ticket; the cash sales were on Saturday and not properly accounted for all under the instruction of John; and finally that one of the regular Saturday customers was a firm called Booths.279.Her witness statement was the first time that these allegations by Robert Andrew were raised. He was not called to give evidence.280.Lisa’s evidence was that she had challenged John (again) about the sales of missing stock at a meeting on 6 November 2015 when she was, in effect suspended. However, in her defence and counterclaim in the Recovery Proceedings, in recounting what occurred at this meeting she did not mention this matter even though, if it was true, it would have been the first thing one would expect to have been said. Instead she pleaded that at the meeting, the focus of her remarks had been how the sums paid for her benefit from the companies had been agreed and that John too had had sums paid on his behalf by the Companies. 281.I will come onto the evidence regarding the investigations by Smith Craven and the course of communications thereafter. It is telling that despite saying that she told Smith Craven about the thefts they have no recollection of that and it is not minuted. Further, she says that she refused to hand over the evidence (or copies of the evidence) of such cash sales to Smith Craven, although this seems an inconsistent approach to that she says she took of informing Smith Craven of what was going on in terms of illicit cash sales.282.Finally, I note that although she says she had very full records of what had been taken and the relevant “false” weighbridge tickets by which this scheme was purportedly operated, she was unable to produce much documentation and that which she did produce was, to my mind, of little assistance.The history of the claims against Lisa and her removal as employee and director283.As various solicitors have been involved over time it is probably helpful to set out the various firms and who they have acted for:284.A draft report prepared by Smith Craven in about December 2015, explained, and defined as the “Draft LWC Report”, later in this judgment refers to a meeting having been held on 8 May 2015 to review the overall operations of LWC and its financial standing, in the light of its trading performance, the barriers that the business was said to have encountered over recent months and the impact of legislation on the sector which was said arguably to have placed restrictions on LWC. The relevant extract continues:“This meeting was held in the presence of the Directors; John Hughes and Lisa Pickering, Barclays Bank and Smith Craven.It was acknowledged that the company had been less successful in terms of profitability during the last financial year and performance against previous years was poor. Given the discussions that took place and the financial evidence presented at that meeting, It was agreed that the dividends would be minimized, in order to maintain the stability of London Wiper.All parties present in that meeting, agreed that reduced dividends along with other measures, would undoubtedly assist the sustainability of the company.The serious cashflow issues experienced recently by the company, resulted in the need to increase the bank borrowing from Barclays Bank plc. The implications of this being that John Hughes, had to give a personal guarantee to the bank of £600,000, before the additional financial support was extended to the company.”285.In my judgment, this gives a reason why there may have been greater concern to check the operation of the directors’ loan account. It also explains the references to concerns of the Bank as to its operation as referred to in various documents.286.In 2015, Smith Craven was instructed to carry out investigations regarding drawings from LWC and also drawings on a joint bank account of Charles and Nora. In evidence before me were two draft reports from Smith Craven dated December 2015. One draft report is stated to be an independent report prepared for Charles and Nora (the “Draft C&N Report”), the other is stated to be an independent report prepared for LWC (the “Draft LWC Report”) (together, the “Draft SC Reports”). 287.The Draft SC Reports record that Smith Craven had been instructed to write the reports as a result of “financial anomalies highlighted in the August Management Accounts” for LWC. The Draft LWC Report says that“the entry that initiated the enquiries was £35,000, paid out to [Charles and Nora]. Detailed recipients were unable to substantiate this transaction, they were left questioning whether other drawings and the company accounts were indeed legitimate.”288.The Draft LWC Report, says that Smith Craven had been instructed by “the shareholders of LWC” to write the report. The Draft C&N report says that the instruction came from Charles.289.I deal with the contents of the Draft SC Reports in more detail below. However, for present purposes it is important to understand what each was dealing with in broad terms.290.The Draft LWC Report sets out a summary of withdrawals by the two non-shareholding directors Lisa and John for the period 1 November 2011 to 31 October 2015. Schedule 1 sets out drawings by Lisa. Schedule 2 sets out drawings by John. These schedules were agreed, as to schedule 1 by Lisa and as to schedule 2 by John.291.In addition, the directors’ loan account for Charles and Nora was analytically reviewed. Those items that were believed to relate to Lisa form part of the drawings within Schedule 1, which Lisa is said to have agreed. Schedules 3 and 4 relate to specific items which John asserted should form part of the drawings by Lisa but the allocation of which was unresolved at the time of the Draft Report.292.The alleged “anomalies” said to have been discovered in Smith Craven’s examination of LWC’s financial records, resulted in further investigations and analysis including in relation to the personal bank account of Charles and Nora. The results of the investigation and analysis of that personal bank account is set out in the Draft C&N Report.293.The Draft C&N Report sets out sums received into the joint bank account of Charles and Nora. Schedule 2 highlights withdrawals from LWC apparently recorded as being for the benefit of Charles and Nora. According to the Draft Report, whilst a figure in excess of £574,000 had been withdrawn from LWC, only some £238,500 or so had been received into the personal joint bank account of Charles and Nora. Furthermore, sums had been paid out of the personal joint bank account which Charles claimed that he was unaware of.294.Having set the background, it is now possible to turn to various meetings notes.295.On 3 November 2015, Lisa met with Mr Gregory of Smith Craven. Lisa is recorded as bringing in Pegasus printouts for the Directors’ Loan account summaries for the past four years which she wanted to go through and discuss. She is then recorded as going through in “great detail the expenses relating to both herself and John Hughes, although greater emphasis was placed on the expenses of John, which Lisa spent most of the time on”. Lisa is recorded as having confirmed that “the Barn expenses” directly related to her. She is said to have informed Mr Gregory of her illness and got upset when doing so. The note ends, that it was agreed that the summaries of total expenditure of John and Lisa would be updated by Smith Craven with the benefit of the additional information that Lisa had provided at the meeting.296.In her third witness statement, Lisa referred to a meeting at Smith Craven’s offices, later confirmed in oral evidence by her to be the meeting on 3 November 2015. She asserted that she took to that meeting a file with paperwork which included the weighbridge tickets that John had used for copper granules which he had sold on internal weighbridge tickets. She said that Mr Gregory looked at them and told her to hand over the tickets on the basis that they were company property and that she could not keep them, even though, says Lisa, she told him that she had to keep them for her mother who wanted them. She said she felt intimidated and then left (with the weighbridge tickets). A few days later, she said, her solicitor received a letter from Smith Craven saying that all weighbridge tickets had to be returned to LWC.297.The alleged letter from Smith Craven has not been identified. The note of Smith Craven is conspicuously silent as regards what would have been a very serious allegation. If it had been made I am sure that it would have been noted. There is no reason to think that those at Smith Craven were partial or prepared to cover up allegations of fraud. The internal weighbridge tickets referred to have not been produced.298. I am not satisfied that this aspect of the meeting, that is that Lisa produced internal weighbridge tickets and described or made the allegations of stock being sold for cash and Mr Gregory demanded that she leave them behind, took place.299.A Smith Craven attendance note of a meeting on 6 November 2015, being a meeting with John, Charles, Mr Fitton and Mr Gregory records the following matters.(1)The meeting was a brief meeting of 45 minutes to enable Mr Fitton and Mr Gregory to outline what had been happening with directors’ loans accounts in respect of the year ends 2012-2015.(2)Mr Fitton and Mr Gregory explained the implications for Charles personally in relation to sums drawn by Lisa from LWC and paid into his joint personal account, which was subsequently redrawn from the joint account for Lisa’s benefit.(3)Lisa’s expenditure and payroll was closely analysed. From the Draft LWC Report, it become clear that part of the concerns became focussed on an apparent increase in Lisa’s salary from £52,000 per annum to £150,000 per annum in the financial year 2013/14.(4)There was a discussion about what actions the directors could take going ahead.(5)John and Charles agreed that due to the seriousness of the potential situation, they would visit Nora personally to share the matter with her.300.According to a letter from Ansons to John Partridge dated 10 January 2017:“In relation to Lisa Pickering's resignation from the Companies, she was suspended on 6th November 2015 following receipt of the Accountants' Report. Charles and John Hughes visited Nora Hughes to discuss the position that day and explained the position to her. Her response was: "Lisa has to go". A Meeting was held at Smith Craven on 10th December and Minutes of that Meeting are Enclosure 9. Lisa Pickering subsequently sent in a letter of resignation and request for P45 which are Enclosure 10.”301.According to Lisa, she was called into the board room by John on 6 November. Charles was sitting there already. She was accused of taking money from the Companies which had not been authorised in terms of payments for works on her house and she was shocked because, according to her, there was a longstanding arrangement that she could take such sums. She says that she was told that she had to look after Nora and she would be paid £30,000 (a year) and could change her Range Rover every 3 years but that she could not work for the Companies any more. She said that she raised the issue of all the money that John took from the Companies and also the cash sales of stock. As regards the latter she says that “this was all about” her having told John about her having found out about him carrying out the cash sales and pocketing the cash “a few months ago” when she had apparently said it had to stop or she would go to the police.302.Despite telling the court in cross-examination that this meeting was “seared in her mind” she did not in her reply to the points of defence rely upon this meeting on an occasion on which she had raised the issue of the cash sales, notwithstanding the pleading in the points of defence that:“this allegation [regarding the cash sales] has never been raised before - neither at the time of the Petitioner's dismissal from the companies for unlawfully removing funds from the companies (the cotemporaneous notes of the meeting with John, Lisa and SmithCraven accountants make no reference to these issues), in the course of pre-action correspondence, in the course of the parallel proceedings or at all.”303.I am not satisfied that Lisa did raise this issue at this time.304.By letter dated 10 November 2015, addressed to Lisa, Nora, signing herself as “Director/50% shareholder” wrote:“I Nora Louise Hughes was fully aware myself and Charles Arthur Hughes agreed to the house expense would be charged to our loan account with the group of companies, to be cleared as normal by a dividend from Portbond Limited the holding company.With regard to your wage entitlement of £100000.00 per year you had a catch up. Where you only received £50000”.305.On 11 November 2015, there was a further meeting between Lisa and Mr Gregory. This time Nora was also present. The relevant Smith Craven attendance note records the following.(1)Lisa agreed the summary of her expenditure and agreed it save for one item. This was for some £84,000 regarding her High Court divorce settlement. This was entered into a separate column and the amended schedule copies and given to Lisa for reference.(2)Lisa and Nora requested and were given the similar analysis undertaken for John. (3)Lisa had prepared her own document of expenditure which she considered was expenditure of John’s. This varied to some extent (“there were some discrepancies”) from the version prepared by Smith Craven. Lisa suggested that the Smith Craven document should include car finance for two cars owned by John and an analysis of expenses relating to Mr Cooper. Mr Cooper is the person who looked after and stabled horses owned by LWC and by Charles and James personally.306.The Draft LWC Report confirms that the sums which had been contained within Charles and Nora’s loan accounts with LWC but which were believed to relate to Lisa were agreed by Lisa and form part of Schedule 1. Schedule 1 in fact includes certain elements identified as “Directors Loan account” and some items identified as being direct payments to third parties. After removing the element attributable to the High Court divorce settlement the sums in question amount to just over £567,000 of which approximately £516,000 is derived from “Directors Loan account” and the remainder from payments direct by LWC as shown by its nominal ledger.307.On 23 November 2015, Charles entered into a guarantee with the Bank in respect of the liabilities of LWC to The Bank plc up to a maximum sum of £600,000.308.On 10 December 2015, a meeting was held at Smith Craven’s offices. Present were Mr Fitton and Mr Gregory of Smith Craven, John, James and Charles and Nora and Lisa. The Smith Craven Note of the meeting records, among other things, the following:(1)“A full copy of the draft report inclusive of all appendices was presented to each person present.”(2)“Kelvin Fitton opened the meeting by presenting the report and commenced the outline of evidence with Schedule 2-The transactions of the Director's Loan Account relating to John Hughes. John confirmed that the entries outlined related to his expenditure, which was known by all shareholders and fellow directors. Cheques In respect of these transactions were under the control of Lisa Pickering.”(3)“Kelvin explained that John's expenses in the Directors loan Account were mainly showing as John's, while Lisa Pickering's (documented In Schedule 1) were shown as CA &NL Hughes”.(4)Lisa asked for time to review the items set out in Schedules 3, 4 and 5.(5)“The question of how things had been documented was raised again: Why was John Hughes's expenditure documented clearly in the Directors Loan Account, yet Lisa Pickering's wasn't?”(6)“.”(7)“Smith Craven had challenged Lisa Davy previously about the recording of expenditure and she had advised that everything that was recorded on the spreadsheet corresponded to the cheque stubs. Therefore if Lisa's name had appeared on the cheque stub at the time of recording on the spreadsheet, she would have documented It. She also advised that the cheques and cheque stubs were in the main written by Lisa Pickering.”309.The note of the meeting goes on to deal with the Draft C&N Report. The following matters emerge:(1)The Draft Report considers the personal income and expenditure of Charles and Nora.(2)Most of the funds apparently withdrawn for the benefit of Charles and Nora were in fact for Lisa Pickering’s benefit. Lisa accepted that this was so in relation to a sum of just over £212,000 which she said was in relation to the expenditure on her house and barn.(3)Copies of the relevant cheques from the personal joint account had been obtained. They were apparently signed by Nora. Nora could only remember signing two or three of the cheques. The day before, Kelvin had been advised by Charles and James, Nora could only remember signing two of the cheques. John asked Lisa if she had forged Nora’s signature on any of the cheques. She denied this but could not confirm who had signed the cheques.(4)Lisa asserted Charles and Nora had agreed all the monies spent on the house and barn but Charles denied it. Nora claimed that she had known.310.The Note then continues to deal with a discussion regarding Lisa’s salary. It is simplest to set the matter out in full, but I break it up into sub-paragraphs for ease of reading:(1)“Lisa advised that back in 2006 during a meeting with the company's previous accountant, David Butter (John. S Ward), she was advised that it would be better for her £100,000 salary to be deferred, until after her divorce proceedings were finalised. This was then delayed further as Peter died. Lisa was adamant that this was discussed at the meeting, yet neither Charles, nor John could remember the conversation.”(2)“John asked Lisa why this hadn't been mentioned at previous year ends and the figure accrued. No explanation was offered as to why it hadn't been mentioned but Lisa stated that the £100,000 was increased to £150,000 to catch up the arrears”(3)“Kelvin asked Lisa why she hadn't mentioned the Increase to either Charles or John, so they could confirm they were in agreement to the amount at the time of amendment. Lisa referred back to the meeting In 2006 when it was allegedly agreed.”(4)“A conclusion was drawn to 'park' this matter as no party could agree on whether an increase in Lisa's salary to £150,000 had been sanctioned by the shareholders. Lisa suggested that the minutes from that meeting should be obtained. These would need to be sought from John S. Ward [the previous accountants of the Company]”311.The meeting, having returned to the question of the signatures on the cheques and possible forgery then gives the heading Lisa Pickering and the sentence:“Lisa PickeringLisa offered to remortgage her house and put everything right.”312.The Note then continued with a note of discussions about various assets of Lisa’s that might be utilised in this endeavour.313.Under the heading “Repayment”, the following is then noted:“RepaymentJohn advised that recently when all this started to come to light, Lisa offered John £80,000 which Lisa denies.John & James confirmed, that if Lisa were to repay Charles and Nora in full and offer some repayment back to London Wiper Company, In view of the hardship the company was experience whilst Lisa was drawing heavily from it, then they would repay £120,000, as a contribution in respect of their drawings documented in schedule 2.”314.Under the heading, “Employment”, the following is then noted:“EmploymentCharles Pickering was discussed and whether his job and role within the company was secure.Lisa wanted to come back to work within the company for a few days a week, but not be Involved in the finances. She said she would no longer sign company cheques if she returned to work.Charles agreed with John that Lisa was not to return to the business. When questioned by Nora If this was his final word on the subject, he replied yes.”315.Under the heading “Proceedings” the first two paragraphs were as follows:“ProceedingsIt was shared that the Bank had questioned whether criminal proceedings and the repayment of funds from their overdraft was appropriate.Kelvin asked Lisa why she had paid the funds from London Wiper into Charles and Nora Hughes'~ account and then withdrawn the amounts plus additional capital. Lisa explained that her intention was to drawn from her parents and then catch up with the company payments.Lisa was also asked why the money was taken at a time when London Wiper Company Ltd was struggling financially and why neither John or Charles were not aware of the transactions.Lisa suggested it was taken at that time because of her Illness and because of the building work that needed completing.”316.The note of the meeting ended with the heading “conclusions” and the following:“ConclusionThe action to be taken is as follows:• Lisa to make a formal offer of repayment to both her parents and to London Wiper Company Limited with a date for this practice to commence.• Lisa Pickering is to be removed as a Director from the following companies: Portbond Ltd, Caprina Ltd and Caprina Trading Ltd.• The formal acknowledgement of Lisa Pickering having been removed as a Director of London Wiper Company Limited following a period of suspension.”317.An entry in a desk diary, probably of James, for 10 December 2015 lists the meeting at Smith Craven as a diary entry. At the bottom of the page, in very short form, it is recorded that Lisa would pay back the money owed to Mum and Dad and LWC, that she was coming back with an offer in 7 days and that she would have liked to come back to the company but “Mum, Dad and John said NO and I wont sign checks [sic] again we all said no.”318.Of this meeting, Mr Lenon KC made the following findings:“[48] On 10 December 2015 a meeting took place at Smith Craven attended by Nora, Charles, Lisa, John and James and Messrs Fitton and Gregory, partners in the firm, to consider their reports. This meeting is referred to by Nora in her Affidavit as an occasion when she made clear that, as a 50% owner, she intended to sell her share in the Edlington properties in order to raise some money. On the basis of Messrs Fitton and Gregory’s evidence, I accept that Nora did not say anything openly about her ownership of the properties (although she may well have done so privately to Lisa). The issue of the ownership of the Annex was certainly mentioned. Mr Gregory’s note of the meeting records that Lisa described the Annex as belonging to Nora and Charles and that James confirmed that the Annex was “still Nora’s and Charles’s”.319.Lisa has attacked the minutes as being seriously inaccurate in several respects. Despite the finding of Mr Lenon set out above, she also insisted that the minutes were inaccurate in not referring to the intention of Nora to sell Edlington Woods which she said was mentioned 3 or 4 times. Although it is rare for minutes accurately to record everything that took place I am satisfied that in substance they are accurate and, in particular, that they accurately record an offer or agreement by Lisa to repay monies. I am not satisfied that the inaccuracies identified by Lisa (so far as substantial and relevant to the points that I have to decide) are in fact inaccuracies in the minutes in terms of what was said or understood at the meeting,320.It was common ground that Lisa did not raise at this meeting the cash sales: she says that is because she wanted to sort matters out and so did not raise it. This makes little sense. If there was a question (which there was in her mind) that John had been taking money out of the company by way of payments for personal expenditure there was every reason to sort things out by also raising the fact that he had taken out cash (by selling stock for cash and not accounting for the proceeds).321.According to the return filed at Companies House, Lisa ceased to be a director of each of the Companies on 11 December 2015, although the electronic filings were not made until 22 December 2015. By letter of 11 December 2015, she resigned as a director of Caprina Limited.322.By letter dated 6 January 2016 to Mr Fitton at Smith Craven, Lisa set out her position with regard to her salary. She said that her salary had been £50,000. In 2006 it had been agreed that the salary would double to £100,000 at a meeting between her parents, herself and Mr David Butler. She said that Mr Butler had a note of a telephone call to John on that date confirming the doubling of the salary. Such a note has not been produced. She said that at the meeting, it was agreed that she would not take the new salary until her divorce had been finalised. In 2013, her salary increased to £150,000 to catch up on the salary agreed in 2006 and John was aware of the salary increase.323.A Smith Craven meeting minute of a meeting on 18 January 2016 records a meeting between Lisa and Mr Fitton and Mr Gregory. Among the matters recorded are the following:“The meeting had been arranged to enable Lisa to provide an update in relation to her offer to repay the monies taken, as agreed in the meeting held on the 10th of December 2015.It materialised very early on, that this was not Lisa's agenda for the meeting. Instead the main purpose from her perspective was in fact to provide Kelvin & Paul with further details of funds in which John Hughes had benefited…. Lisa's focus was clearly to demonstrate (with written evidence) that John had also had funds from the business relating to his personal expenditure. The suggestion being that if John had had this capital, it was also acceptable for her to do the same.Kelvin reiterated the fact that what each individual had taken from the business was irrelevant really, the point of all this focus was what had been knowingly deducted and this was the fundamental difference in the Directors Loan Accounts and payroll: Everybody knew what John Hughes had had, whereas nobody was aware of all the drawings Lisa Pickering was making. This point was repeated several times during the meeting.Lisa however, continually claimed that both Mum and Dad and John did know. Kelvin highlighted the fact that they knew of some items of expenditure; the kitchen and the high court divorce settlement but nothing else.….Kelvin raised the matter of repayment of monies: Lisa advised that a mortgage would be applied for on the property that her son Charlie lives in, once the building work had been finalised and signed off. Lisa currently owns this property, but she agreed that she would sign it over to Charlie and he would then apply for a mortgage to raise some capital. Lisa also advised that she was also pursuing a Medical Insurance claim and would see if money could be released early. She accepted that this may take some time as the Insurers need to see further medical evidence.”324.On 27 January 2016 there was a meeting between Nora and Lisa on the one hand and Mr Fitton and Mr Gregory on the other at Nora’s residence. The note of the meeting by Smith Craven reveals the following matters, among others:(1)The purpose of the meeting was to discuss personal tax returns for herself, Nora, and Charles and the liabilities which arose. The personal tax arising was not tax that either of the Companies could pay on their behalf and then re-charge to them through their loan accounts.(2)Lisa confirmed that once her life insurance policy paid out, she would pay her mother some of the monies owed back, but this would not be in the short term. Also Charlie, Lisa’s son, was apparently willing to try and raise capital by way of mortgage over his property but again this would not produce funds imminently,(3)Nora indicated that in general she did not really understand all that had gone off, but she thought it might have been better to have had a meeting before it all “kicked off” to try and sort matters out between all parties.(4)Mr Fitton suggested that a round-table meeting could be held but it could require agreement of all the parties involved.325.Following the meeting with Nora and Lisa, Mr Fitton and Mr Gregory met with Charles. Again, the meeting is the subject of a Smith Craven “Meeting Minutes” document. Charles was in bed during the visit having recently had a short spell in hospital. The tax return and liability was discussed and it was reiterated that £80,000 was due by the end of January and a further £80,0000 due in July 2016. Nora was reported as having said she would be in touch with Charles regarding the joint liability and how it could be paid. Charles is recorded as saying that he did not think Lisa would make any form of repayment:“ He was clearly upset by all that has gone one, in particular the fact that Lisa had not held her hands up to the unauthorised withdrawals. Had she done so, Charlie advised that he would have worked with her to provide a solution to It all. He stated he had always told her to tell the truth and that he could help If she told the truth, but If she chose not to, then he wouldn't do anything to help.”326.By letter dated 28 January 2016, addressed to Smith Craven, Nora asked for the latest financial position for LWC (and Caprina), who was paying John’s personal tax and up to date directors loan account.327.A Smith Craven Meeting Minutes document of a meeting on 3 February 2016 between Lisa, Charles and Mr Fitton and Mr Gregory recorded the following: (1) The meeting had bene called at the request of Charles. (2)Charles had been ill. Mr Gregory commented that it was good to see Charles up again. (3)Charles expressed his concerns regarding the Bank’s desire for a prosecution of Lisa in relation to money that she had taken. He said this would have been avoided if Lisa had come to him in the first place. The Bank were pressing to know what was happening and therefore Charles explained that he wanted a letter setting out what Lisa was going to repay.(4)Lisa then said, “take me to court then”. Charles explained that that was not what they wanted to do,(5)Lisa maintained Charles knew about the.money but Charles maintained he only knew about the money for the kitchen and the divorce settlement.(6)Lisa then gave various explanations as to why there would be a delay in her raising money: options under consideration being a mortgage over the barn and release of monies from a life policy that she held.328.Lisa maintained that these minutes were inaccurate too. For example, she denied that anything was said about the Bank wanting proceedings to be brought (as set out in sub-paragraph (3) of the last paragraph above).329.A Smith Craven Note of a meeting on 18 February 2016 between Lisa and Mr Gregory records that Lisa wanted various points noted. These included that she agreed a certain sum was owed by her. She denied that the tax and salary should be part of any calculation on the basis that Nora and Charles had agreed that she could have those sums. The calculation and the comments on the notes are as follows:“£687,456.45 (per summary in report dated 10 December 2015) ( 84,000.00) less agreed monies ( 36,452.64) per Lisa exclude Barclaycard (John’s had this and not repaid) ( 1,500.00) Also JVN Architecture – Per Lisa related to Charles Pickering (29,5000.00) Lisa disputes the Wath cash-says she paid £6,500 privately only)______________ 535.21.81 per Lisa as agreed monies owed(413,707.12) says John has had this (previously provided by Lissa). Lisa tried to deduct this from what she owes.”330.By letter dated 24 February 2016, Smith Craven (by Mr Fitton) replied to Nora’s letter of 28 January regarding management accounts. The letter explained that whilst she had every right to the information, given the current dispute Charles and John had advised that they wanted such information to remain on the company premises and that therefore Smith Craven would continue to forward all accounting information there and she should seek such information directly from Charles and John. The letter hoped that she would understand the “very difficult position both myself and the firm find ourselves in and whilst trying to maintain both impartiality and transparency for all parties, I feel this is the most appropriate course of action in this instance.”331.By letter dated 29 February 2016, Lisa wrote to John asking for her P45 and stating that the date that she left was 6 November 2015.332.By letter dated 21 March 2016, a pre-action letter was sent by Ansons LLP, solicitors, on behalf of Portbond and LWC to Lisa. The letter:(1)Alleged an unauthorised increaser in Lisa’s salary some time prior to the year end 2011/12 from just above £50,000 to £150,000 and sought repayment of alleged overpayments by reference thereto of over £258,000.(2)Alleged that between 2011 and 2015 just under £717,000 had been withdrawn by Lisa from LWC. This mainly took the form of payment of personal suppliers of hers and that in a high proportion of cases the expenditure was falsely accounted for by recording it as a debit to the loan account of her parents. The letter enclosed the Smith Craven Schedule that had been gone through at a meeting on 18 February 2016. At that meeting Lisa was said to have agreed £535,212.81 had been drawn by her personally. The letter went on to deal with further additions that should be made, bringing the figure up to £632,000, certain allowances which should be deducted (e.g. the costs of her kitchen in the sum of £50,000) and claimed a balance of £478,482. As regards a number of the additional items over and above the £535,212, it was said that Lisa said that they should not be included because John had had certain sums from the Company. The general answer to this was:“It is no defence to try and compare your situation to any drawings made by your rother John [ ]. Your brother’s drawings were made with the knowledge of the Company’s board and with its approval.”333.In his letter of reply on behalf of Lisa, dated 14 April 2016, Mr Partridge asserted that the salary increase was agreed. He referred to a note of “the business” and a file note to support it, including making a call to John to make him aware of the position. As regards the other sums taken by Lisa, it was said that they were taken within the well-established operation of LWC whereby Lisa and John were allowed to have substantial drawings set against the directors’ loan accounts and that the drawings in this case had been authorised by Nora and Charles. Somewhat tellingly, the letter makes no suggestion that the allegation that unauthorised drawings were made was because of Lisa finding out that John had been selling stock for cash illicitly and retaining the proceeds. Instead:“It is my Clients view that the business is struggling financially at present.Turnover has diminished massively over recent years. She considers that she is being used as a scapegoat and that this recovery is being "sold" to lenders as an asset of the business which it patently is not and was never intended to be by the Board who were responsible for the decisions at the time they were made.”334.Further, the letter does not suggest that John had been taking money improperly or without authority so that he was in the same position as Lisa. Rather, it was in effect asserted that payments to or for both had been authorised and were within the normal operating mode of the Company.335.By a letter dated 11 May 2016, Mr Butler wrote to Mr Partridge:“ I have seen your letter dated 14th April 2016 to Anson Solicitors, with the inclusion :-"I understand that the former accountant David Butler has a note of this business and a file note to support including making a call to John Hughes to make him aware."For personal reasons I have no wish to be involved in these familymatters.”336.By letter dated 23 May 2016 to Nora, Smith Craven explained the position regarding amended tax returns. The key points, for present purposes, can be taken from the letter as follows: “The revised Returns for Mr C A Hughes having been submitted on 28 April 2016 reflect the legal action being taken against Lisa Pickering.The Accounts now reflect the monies drawn by Lisa as a Debtor in the accounts and therefore, the Tax Return being amended for the reversal of Dividends taken in previous years and effecting the 2015 Personal Tax Returns.The original Tax Return discussed in January 2016 showed a liability due to HMRC in January 2016 of £40,919.77 and in July 2016 of £39,006.59.The amended Return now shows a nil liability for January 2016 and a reduced liability in July 2016 of £15,371.91. This will, after being submitted to HMRC also generate a refund of £32,011.50. All to reflect the overpayment of tax as a result of the Dividends being overstated due to monies drawn by Lisa.…..I look forward to meeting you again on Monday 6 June at 10am to discuss your Tax Return but also to discuss Lisa's thoughts and her cash offer which will hopefully open the way to negotiations and avoid this process going further and eventually to Court.”337.By email dated 11 December 2017, Prodicus Legal wrote to Ansons referring back to their letter of 2 November 2017, enclosing the draft letter said to have been approved by Nora. In addition to the matter raised by the draft letter, a number of other concerns were raised regarding (a) an alleged failure of John/Charles to account to the Companies for prizes and winnings in relation horses which Portbond had paid the running costs of; (b) substantial sums said to have been paid in respect of the construction/renovation of residential properties at three specified addresses; (c) that John continued to “live out of the companies” spending sums on personal matters which could not be justified as legitimate business expenses of LWC; (d) that statutory accounts were filed before Nora’s concerns were addressed. No mention was made of any alleged illicit sales for cash of company stock.338.By letter dated 7 January 2017, Smith Craven wrote to Lisa referring to the meeting of December 2015 and asking for proposals regarding her agreement to repay monies owed to LWC and threatening further action in default.339.By letter dated 12 April 2017, Prodicus Legal Limited, solicitors acting for Nora, wrote to Ansons seeking information and referring to Nora’s concerns as regards the financial dealings and governance of each of the Companies.340.By email dated 15 August 2019, information was provided to Prodicus Legal Ltd.341.By letter dated 18 August 2017, Wheawill & Sudworth, accountants, acting for Nora sought information from Smith Craven.342.By letter dated 11 September 2017, Smith Craven responded to Wheawill & Sudworth pointing out that much of the information had already been provided to Prodicus Legal Limited and answering the requests for information made. 343.As said, Nora died on 25 October 2017.344.On 2 November 2017, Prodicus Legal Limited confirmed that they had been retained by the executors of Nora. They enclosed a letter said to have been approved by Nora on the day before she died, 24 October 2017. The letter stated that,“The Executors appreciate that some events have overtaken the contents of the draft letter which relate to the proposed board meetings, but we are instructed to deliver the letter to you and ask that you take your clients' instructions and return to us regarding its contents.”345.The letter enclosed dated 24 October 2017 raises 9 issues related to the 2015 Companies draft accounts, some 22 questions in relation to bank account statements and sums paid by (chiefly) LWC for or in respect of John and then raises some 6 general issues. Among the latter, is an expressed concern that John and Charles were living “the high life” at the expense of the Companies. “Our client will require all expenses to be properly accounted for and illegitimate expenses to be recovered from the individual.” Point (iv) was as follows:“It is apparent from the history of the companies that the Hughes family has become accustomed to dealing with matters informally and without due regard to, for example, due process. For the avoidance of doubt, to the extent that our client may have permitted your clients to deal with company matters informally, the same is hereby withdrawn. Our client requires each company's affairs to be conducted in accordance with all relevant statutory requirements and the articles of association of each.”346.The claim form initiating the Recovery Proceedings was issued on 28 December 2017.347.The Particulars of Claim are dated 13 December 2017. Breaches of duties owed as employee and director by Lisa are alleged. The breaches involve an allegation of removal of just under £717,000. Of that, some £134,000 (£50,000 for kitchen improvement and £84,800 in relation to her divorce settlement) were accepted as having been authorised. The total unauthorised drawings asserted were therefore just over £582,000. The agreement of Lisa to just over £535,0000 at the meeting on 18 February 2016 is pleaded.348.By email dated 8 May 2018, Mr Gregory confirmed to John that the balances on the loan accounts for the period ended 31 March 2018 were as follows (which included the proceeds for a car allocated to John’s accounts as had been discussed):John £232,898.87 overdrawnCharles £ 24,675.57 overdrawnNora £ 16,766.79 (in credit and increasing month on month re the rent split in relation to the Site)Lisa £ 1,715.41(overdrawn)349.That defence and counterclaim in the Recovery Proceedings contains a statement of truth by Lisa dated 21 September 2018. I cannot in fact find any counterclaim (a point that the reply confirms). No mention of any theft of stock or their proceeds is advanced in the defence and counterclaim. In paragraph 30 Lisa deals with her exclusion from the Companies. While the paragraph asserts that Charles and John used the allegation of unauthorised withdrawal of funds as a pretext to exclude Lisa from the operation of the Companies, that alleged to have been their desire formed by November 2015, the only (slight) explanation offered as actuating such desire is a pleaded alleged desire by Charles and John “to exclude the female side of the family” from the Companies. Tellingly, no mention is made at all of the dismissal/removal being actuated by Lisa’s discovery of improper cash sales/diversion of proceeds of cash sales of stock.350.In the reply, dated 17 October 2018, the pleading in the defence and counterclaim regarding the allegation of a desire to exclude Lisa and to exclude the female side of the family is denied. The reply pleads as follows:“As to Nora, no such. desire had been formed and no steps were taken to exclude her - she had no involvement in the day to day operation of the Claimants. In regard to Lisa, it is admitted that a desire to exclude Lisa from the Claimants had arisen - · that desire arose as a consequence of the discovery of her misappropriation of funds from the Claimants. The Claimants note that the Defendant fails to plead to any alternative motive or reason for a desire to exclude Nora and Lisa from the Claimants arising. Indeed, the contrary was true - the businesses wereoperating successfully and the roles of the various family members were established and settled - save for the unlawful removal of funds by Lisa, there was nothing that would have led to a desire to remove either her or Nora from the Claimants.”351.The petition presented on 7 June 2019 was the first occasion on which it was alleged that stock had been sold for cash and the proceeds retained by John and his father. The relevant pleading is as follows (and is in stark contrast to the Defence and counterclaim in the recovery proceedings):“16.John Hughes caused the dismissal of Lisa Pickering from her employment by the Company and the removal from her directorships of the companies because:(i) he did not want her to continue to have access to the financial information relating to the companies because he wanted to prevent her divulging the same to her mother to stop her knowing how he and his father were acting in breach of the directors' duties and duty to account as set out in paragraph 6 above; and(ii) he was acting out of personal animosity towards Lisa Pickering; and(iii) so that he could appoint his son James Hughes as a director of both companies in her place to promote the interests of his side of the family (ie himself and his son) at the expense of his sister and her side of the family (ie herself and her son, Charlie Pickering).”352.By letter dated 4 November 2019, Smith Craven confirmed to Prodicus Legal Limited that the overdrawn loan account balances as at 22 October 2019 were as follows:Charles £195.462.39John £391,656.43 James £ 19,875.34353.The letter went on to confirm that the overdrawn loan account balances had reduced as at 4 November 2019 as follows:Charles £190,902.19John £384,995.48James £ 2,979.60354.I accept and find that although the Smith Craven paper audit trial of how the investigation started is, with the benefit of hindsight, not ideal, that situation is quite understandable given the then working relationship that Smith Craven had with the Companies and the individual members of the Hughes family and what Smith Craven were being told. There is nothing suspicious in the absence of such documents.355.I also accept the evidence of Mr Fitton that, at the start of the involvement of Smith Craven, John and Charles had not started from the premise that Lisa had taken funds without permission. Rather, they had wanted the position to be investigated. This is consistent with the contemporaneous documentation. 356.I am also satisfied that the Smith Craven minutes or notes of meetings (based as they are on the contemporaneous notes of Mr Gregory, which were also in evidence) are a fair record of what took place at such meetings and what was discussed and that they are accurate in what they state. I am also satisfied that no major issues that were raised or discussed were omitted from such minutes. It follows that I reject Lisa’s evidence that she told Mr Gregory and/or Mr Fitton at an early stage (a) that John had been selling company stock for cash which he retained and/or (b) that her having raised this issue was the reason for the investigation of her own drawings.357.I also find that Nora did not immediately take the line that the payments to Lisa from the Companies, direct and indirect, were all authorised. I also find that the Smith Craven investigation was agreed to by Nora and that she wanted it to encompass drawings by John, which is what it did. 358.I also find that Nora initially agreed that Lisa would have to go as director and employee, as is confirmed by the contemporaneous documentation.359.I also find that the investigation carried out by Smith Craven was carried out fully and fairly. I also note that it was not simply an investigation into sums drawn by Lisa but also covered sums drawn by John.360.I also accept Mr Fitton’s evidence that he did not know at the time (that is late 2015) that Lisa’s case was that John had sold stock for cash and not accounted to LWC for the proceeds nor did he know that Lisa’s case at the time was that it was her confrontation of John over such stock sales which prompted the initiation of the inquiry. I also accept his evidence that there has been an Inland Revenue enquiry of John which has not substantiated Lisa’s allegations.Charlie Pickering’s dismissal361.The allegations in the Petition are that the dismissal of Charlie was unfairly prejudicial because it was motivated to prevent him identifying breaches of duty by the Relevant Respondents (including in relation to cash sales), so that he would not be able to report the same to Lisa; it was effected in breach of director’s duties to make it easier to hide breaches of duty from Lisa and it caused loss to LWC being the cost of the settlement with Charlie and legal costs incurred by LWC.362.On 26 April 2018, there was an incident at LWC’s premises. Charlie used a mobile phone while outside. This was not permitted. He was told off by John. John asserted that Charlie was aggressive back. 363.By letter dated 30 April 2018, Prodicus Legal wrote to John on behalf of Charlie complaining about the “extremely aggressive and provocative behaviour” to which he had been made subject “over the last 12 months or so”, culminating in an alleged assault on 26 April 2018. The first part of the assault was alleged to have arisen when John “confronted [Charlie] over a non-issue relating to use of telephone in the car park/skip storage area of the company site”. Having confronted Charlie it was said that John then “gestured towards his face with [his] hand with keys held at the same time” which “caused [Charlie] to legitimately fear that he would be subject to injury on or about the Area of his eyes from the keys”. Then, it was said, having returned indoors Charlie “pushed my client from behind causing him to stumble forward”. This was said to be “evidence of instability”. Charlie had been advised not to attend work until the board had dealt with the matter. 364.On 9 July 2018 a grievance hearing, followed immediately by a disciplinary hearing took place. The chair was Vicky Stoneman, a director of Effective HR Solutions Limited. That company provides an outsourced human resource function to small and medium sized companies that may not have the resources to have its own specialist human resources function. Charlie was accompanied by his union representative, a Mr Ron Stanley.365.As regards the grievance hearing, two complaints were identified: (a) that John Hughes had bullied Charlie since Charlie’s mother had left and (b) that Charlie’s employment terms were less favourable than they had previously been. 366.As regards the disciplinary hearing, the allegations were:(1)Using a mobile phone repeatedly in the yard, having previously been asked not to;(2)Speaking aggressively toward John on 26 April 2018.367.During the investigation, Ms Stoneman spoke to James John, and 4 employees as referred to in a letter of 11 July which I shall come onto.368.I have a very full note of the hearings which reads like a transcript (“the DH Note”). Among the points of note are the following:(1) Charlie had had statements from various witnesses which he went through with Ms Stoneman to the extent that he wished to.(2)When asked if he had sworn at John on 26 April 2018 he said he could not remember swearing at John.(3)According to the union representative: it was “custom and practice that employees do not use their phone, but John, so its creating a double standard”.(4)It was suggested by the union representative that the process was “contrived and John was doing [it] after the fact”. Ms Stoneman asked if they were content that she should hear the case, given that if they felt that the process was contrived then they must feel she was involved. The union representative confirmed that, on the contrary, they were “very happy” for her to hear the case as she was “unbiased”.(5)Ms Stoneman asked specifically whether there was any reason Charlie could think of as to why John would make up his statement that he had given previous warnings to Charlie about not using a phone and Charlie simply said: “it suits for me not to be here at the time”.(6)The union representative in summing up, said that John should withdraw the allegations against Charlie and find an appropriate method of mediation between himself and Charlie’s mother rather than bringing Charlie into the situation.(7)There was therefore no suggestion that the matter had been engineered to prevent Charlie finding out, or continuing to report to Lisa or Nora, about stock illicitly sold for cash and the proceeds not accounted for to LWC. 369.In a letter dated 11 July 2018, Ms Stoneman wrote to Charlie setting out her findings regarding his complaints under the grievance procedure. 370.As regards the allegation of bullying, this allegation was not upheld. Employees who had been asked did not want to get involved and so it was therefore very much one person’s word against another’s. The allegation broke down into three sub-allegations. 371.The first sub-allegation was that Charlie had been called into the board room on several occasions by John and was then told things like “Your mother is a fucking cunt”. As regards this, Ms Stoneman considered that the probabilities were against such allegations being true: first they had not been raised before and secondly it was unlikely that John would behave in this way knowing there were legal proceedings on foot and given the impact such conduct could have on those proceedings. She did not believe John would behave in that manner in any event.372.The second sub-allegation related to events on 26 April 2018 and were that John had waved his keys at Charlie in an aggressive manner and pushed him out of the doorway to his office. Ms Stoneman considered that John would not have waved keys in a threatening, let alone a bullying, manner and that the aggressor was in fact Charlie. As regards John pushing Charlie, she believed Charlie to be the aggressor and as he had never followed the matter up at the time did not consider that it could have been as serious an incident as Charlie had stated. It emerges from the DH Note that the keys being waived in his face was a matter that he had reported to the police which had never been followed up. 373.The third matter related to a “significant amount of paperwork with solicitors” regarding “numerous incidents” which Charlie said he would share with her. He did not do so. She could only base her decision on the facts before her. 374.Ms Stoneman also commented on a text from Charlie to an employee, Lisa Davey, in which he referred to feeling discriminated against. However, Ms Stoneman felt she had insufficient information on this matter or on what grounds Charlie felt discriminated against. She also noted that Lisa’s messages did not come across to her as someone who was concerned for him on a serious level but simply as though it was a family dispute “I am not getting in the middle”. This implied to Ms Stoneman that the situation was nothing out of the ordinary. She also noted that Charlie had at no point stated how the alleged conduct had left him feeling, which is what she would normally expect to see in a complaint of bullying and harassment.375.With regard to an alleged change in employment terms, the only differences identified were an absence of a company car for four months, but apparently at a time when Charlie had had an accident. The four month gap was not ideal. However, the fact that by the time of the hearing he had a car again did not suggest an intentional change in employment terms. As regards absence of the fuel card, this would not prevent him claiming expenses like any other employee and therefore she did not consider that the employment terms were less favourable on a permanent basis than they had been.376.In a further letter dated 11 July 2018, Ms Stoneman wrote to Charlie setting out the outcome of the disciplinary hearing. Both allegations were found to be made out and to amount to gross misconduct meriting immediate dismissal, which is what the letter give notice of. Ms Stoneman referred to two letters to employees about mobile phones but Charlie had said he had not seen them. Ms Stoneman does not seem to have relied upon these letters but rather upon Charlie having been verbally told on three earlier occasions in the same week not to use his mobile phone. She also referred to CCTV coverage but did not rely upon it as she felt it added nothing of value: both Charlie and John confirming Charlie had used his mobile phone. She said that she had spoken to James, and the four named employees who were made aware that their statements would be shared with Charlie.377.As regards the allegation of using the mobile phone, some key points coming out of the letter were as follows:(1) Both parties confirmed that Charlie did use his phone in the yard.(2)Charlies suggested (a) he was in the car park not a heavy plant area, so in fact there was no problem in him using his phone and (b) he had not received letters setting out a prohibition on employees using mobile phones and (c) the prohibition did not apply to him anyway as he did not operate heavy machinery.(3)As regards (a) and (c), Ms Stoneman considered that there are lorries driving in and out of the site on a regular basis and to be on the phone at any time was a distraction and dangerous.(4)As regards (b), Ms Stoneman accepted John’s evidence that Charlie had been told by John on three occasions in the three days immediately preceding the relevant incident that he should not use his phone. Charlie had denied this and suggested that John had made it up to get rid of him. Ms Stoneman considered that John did not fabricate his statement. He had worked alongside Charlie for at least two years even after Lisa left the business (in November 2015). If John had wanted to remove Charlie he would have done it at an earlier stage. If John used his phone that might appear to be double standards but ultimately employees should abide by the rules and the relevant instructions of their managers. Given this was the fourth relevant occasion, it was serious and the conduct likely to recur.(5)Ms Stoneman also commented: “I think the other issue is that whilst you are a relative of John and James, you are still an employee, and that the family ties are muddying the water somewhat.”378.As regards the allegation of speaking aggressively to John on 26 April 2018:(1) The conclusion was that Charlie did speak to John aggressively by using phrases such as “you are not my fucking boss”.(2)This conclusion was based upon the following matters: (a) When John challenged Charlie about using the phone, Charlie he did not just put the phone down but went up to him and challenged him and followed him into the building, that not being the actions of someone who has “just taken” verbal abuse from John as Charlie had asserted; (b) a text message from Charlie to another employee, Lisa Davey, 10 days earlier had been to the effect that Charlie was upset about the whole situation and that he felt he had been discriminated against, yet nothing had happened on the previous days when he had been spoken to by John about using his mobile phone. If John was the aggressor why didn’t anything different happen on those prior days?; (c) the reason for this behaviour was not provocation by John but a build-up of frustration and on the 26th Charlie decided to do something about it.379.On 14 December 2018, Charlie and LWC entered into an ACAS agreement under which LWC agreed, without any admission of liability, to pay Charlie £17,000 in full and final settlement of all and any claims that he might have under existing employment tribunal claims and all any and other claims that he had or might have then or in the future against LWC or any associated companies or its officers or employees whether arising from his employment, its termination or from events occurring after the agreement.380.I also have a transcript for the hearings on 9 July 2018.381.In his witness statement Charlie said that he started working at LWC in 2008, but that once his mother ceased working in the business day-to-day (which I took to mean after her suspension in November 2015), John “systematically” sought to dismiss him on numerous occasions. No examples were given as to what form this attempted dismissal had taken. Rather, he referred to verbal abuse that he received with regard to himself and his mother which he said was to try and provoke a reaction from him and to get him out of the business. He says that “when all this failed” John tried “other tactics”, which resulted in Charlie bringing an unfair dismissal claim.382.As regards the incident on 26 April 2018, in his witness statement Charlie asserts much of the same points that he raised at the disciplinary hearing: he was in the car park/skip storage area and there were no heavy machines in the area; he would not have used his phone near heavy plant; the use of his phone was critical for his job; heavy machine operators were not supposed to use mobile phones but he did not use heavy plant and was not such an operator. He, James and John used phones at the yard as they had done for years. The first time that the use by him of his mobile phone was criticised was after his mother was dismissed. 383.In his witness statement, Charlie said that once his mother left John systematically sought to dismiss me “so as to gain full control”. As Charlie was not a director it is unclear what this means.384.In his witness statement Charlie also alleged that he would take stock figures in an evening, count the tonnes of granules in the yard and then find “on a Monday morning” that there was “missing stock”. John, he says would use internal tickets rather than out tickets “when stock was being sold for cash deals”. He says that he told his mother and grandmother on “numerous occasions”.385.In cross-examination he accepted that he did not need to carry out stock takes for the purposes of his work for the Companies in doing deals and invoicing customers. Nevertheless he said that “every night” he would check and record the stock positions and that he would definitely do this every Friday. His explanation was that he just did this historically and not because his mother had raised an issue about it. In effect he said that he carried out a full audit on a daily basis of stock, reconciling the stock there with what finished stock had been produced in the day and what had been sold in the day. I consider this inherently unlikely and it would be a job that would have taken a long time. If it was so simple there is no real explanation as to why stock takes were so infrequent or difficult.386.For the first time, in cross-examination, he asserted that he had asked Steve Mower about where missing stock had gone and that he was told it had gone to C F Booth. He said that there were internal tickets that John had, in effect, doctored.Cash Sales: conclusions387.In his report, Mr Lacey pointed out that given the purpose of selling stock for cash (and then not accounting for the proceeds) would be to avoid reporting sales, it would be innately difficult to directly demonstrate through available accounting records that sales had been for cash. I accept that there would be a difficulty but of course if the stock records were well kept then absence of stock, not accounted for by sales, should show up. This is particularly so given the detailed records required to be kept under legislation by scrap metal merchants.388.Mr Lacey identified the records available to him and that he had not been given access to the detailed stock records that were alleged to exist as being maintained on John’s laptop computer. Such records of stock as were available to him were very limited, such that he had no visibility at all over what stock was purchased and sold each month and no ability to reconcile stock.389.Accordingly an exercise that would in normal circumstances be difficult “has become impossible”.390.He therefore attempted to comment on movements in gross profit margin and reviewing the amounts realised from the sale of stock. He concluded that there was a significant increase in LWC’s gross profit margin between August 2015 and August 2016 and that this coincided with a drop in the overall price of copper and a period in which Lisa was said to have been applying a degree of scrutiny to potential cash sales. The inference (although this was not expressly stated) was that the increase in the gross profit margin could not be explained by a rise in copper prices and that the likelihood is that it was to be explained by sales being put through the books and the alleged practice of selling stock for cash without accounting to the Companies for the proceeds being restricted or suspended.391.However, in his answers to questions, Mr Lacey accepted that:“I do not know specifically why the margin was higher in that year, there are likely to have been a number of factors that impacted this. For example, in his Witness Statement John Hughes has referred to an increase in profitability post 2015 arising from a short term contract with BT. I am unable to verify whether that is correct, or, assuming it is correct, the effect this may have had on gross margins.”392.At the end of the day, I do not find Mr Lacey’s evidence on this area as being of any great assistance to me. There is a possible pointer to there having been the alleged cash sales in terms of the gross profit margin change, but that evidence is equally consistent with other explanations. At the end of the day the expert evidence on this point is simply neutral.393.It is therefore necessary to turn again to the evidence of fact.394.I have made a number of findings of fact earlier in this judgment. I have them all well in mind.395.As regards the alleged cash sales I find that these are not made out. The most significant factor in this respect is, in my assessment, the fact that this allegation was only raised by the petition and not in the course of the investigations and negotiations thereafter and not even in the defence to the Recovery Proceedings. 396.In addition: Charlie’s account is inconsistent with Lisa’s account so far as it suggests that they were both identifying cash sales at the same time. Further, he too did not raise cash sales as an issue in connection with his removal. Nora also did not raise the issue or even do anything about it though according to Lisa and Charlie she was told all about it.397.Although there were said to be copious records demonstrating the fraud, nothing significant has been produced and nothing was produced to Smith Craven.398.There are also other matters: Lisa’s unsatisfactory, late and inconsistent evidence regarding the CCTV. Her inability to explain what prompted her suspicions in turn prompting her alleged investigations into stock levels.Conclusions: investigations and removal of Lisa, the Recovery Proceedings399.I am satisfied that the investigations inot Lisa were not prompted by any misconduct or allegations of misconduct against any of the Relevant Respondents.400.I am also satisfied that they were genuinely instituted to find out what had happened with regard to the directors’ loan account of Charles and Nora and payments by the Companies for the benefit of Lisa.401.I am also satisfied that Nora agreed to the investigations (even if after their immediate institution) and that they were not carried out by Smith Craven in an unfair manner nor was anything that the Relevant Respondents did motivated by making the investigations unfair nor did they make them so. The investigations were clearly not targeted at Lisa only: Nora and Lisa were vociferous that the investigations should also be into John’s dealings with the Companies. I reject the case that the investigations were instituted as a “pretext” to get rid of Lisa. Her removal flowed from the product of the investigations.402.I am unaware of any misconduct of the Relevant Respondents which, it is said was sought to be disguised by then in the course of the investigations.403.As regards “false information”, I accept that the assertions as to her salary turned out to be wrong but given the time lapse between the relevant events and the paucity of evidence I do not find the allegations or the attempt to investigate the same as having been instituted maliciously knowing the true position and that here had been nothing to investigate.404.As regards sums wrongly taken by Lisa, it is accepted by her expert that a sum of at least £573,000 was taken by her by way of personal expenditure from the Companies. It is said by the expert that he was told that Nora had approved the same. However, Nora’s approval alone would not have been enough. Furthermore, even on this case, such sums should then have been re-charged to Lisa personally (or possibly through Nora’s and Charles’ directors’ loan account, if Charles as well as Nora had agreed to this). On the evidence I find that Charles had not agreed to this course. After all, Lisa herself agreed to repay sums back in the course of the investigation even though there now may be a dispute as to the precise sum which was agreed.405.As regards Lisa’s removal as employee and director, it seems to me that that followed from the result of the investigations. There was no breach of duties by the Relevant Respondents. Indeed, Charles was reluctant to take this step (see the Smith Craven note of the meeting on 3 February 2016) and John in his oral evidence explained that he did not want to remove her believing at the time she was terminally ill from cancer and described her removal as similar to “chopping off his right arm”. In any event, it is not a matter of which she as successor in title to Nora’s shares can complain about because Nora clearly (and understandably) acquiesced in the matter at the time.406.As regards the initiation of proceedings against Lisa (which proceedings did not carry forward any claim about Lisa’s increase in salary, though that had been threatened), there were, in my judgment, good grounds for the claim to be brought. I do not consider that it was brought for improper purposes or without belief in its validity. The fact that the Administrators, who I believe were under threat of a security for costs application, decided not to adopt the proceedings on behalf of the Company does not of itself lead to the conclusion that the proceedings were bound to fail or that they were wrongly brought (including being brought for the wrong reasons).Conclusion: dismissal of Charlie Pickering407.I was not addressed on the question of whether the conclusions of Ms Stoneman were inadmissible hearsay. On any view however, it seems to me that they demonstrate that an independent person, experienced in the area, and who conducted a longer hearing on the matter with a great deal of material came to the conclusions that she did. It does not seem to me that it is possible to say that the claims brought against Charlie Pickering were baseless nor that they were not brought bona fide in the interests of the company but for the collateral purpose of preventing him reporting back to Lisa on alleged wrongdoing by the Relevant Respondents. The only relevant wrongdoing could be the alleged cash sales which I have found did not take place. That leaves wrongdoing in terms of alleged wrongful payment by the Companies of matters of personal expenditure etc. but there is no reason to think that Charlie had ready access to such information or that he in fact did report on such matters.408.On the more limited evidence available to me, I am satisfied that there were good grounds to dismiss Charlie Pickering and on the face of the evidence before me he was correctly dismissed. However, even if I am wrong about that, I agree with Mr Mundy’s submissions that any fault in this respect would at most be mismanagement not amounting to unfair prejudice. There was no right, even of a quasi-partnership nature, in Lisa to have her son employed. The only damage is said to have been one of the legal and settlement costs involved, which I suspect did not significantly affect the value of Lisa’s shareholding. In any event, even if I am wrong and there was unfair prejudice, the conduct in question is not such as I would have ordered a share buy-out as a result. Benefits alleged to be taken from the Company by the Relevant Respondents: Funding of “extravagant personal lifestyles”409.At the time when the trial commenced, the Petitioner’s case regarding sums drawn from the company by the Relevant Respondents was as follows.410.Although the same allegation was scattered throughout the pleading, the nub of the matter appeared in paragraphs 27 and 30 of the amended Petition (and relevant Schedules to the Petition):“27.The First to Third Respondents have in breach of their directors’ duties used the Subsidiary’s monies (including since August 2016 those borrowed from the bank at commercial rates as set out in paragraph 28 below) to fund their individual extravagant lifestyles including causing the Subsidiary to pay monies under the pretence that they are legitimate and necessary expenses of the Subsidiary when they are not. At this stage and pending disclosure the best particulars that the Petitioner can give are:(i)Sums spent by the Subsidiary on personal expenses and liabilities of the First to Third Respondents in breach of their directors’ duties set out in Schedule 1; and(ii)Sums spent by the Subsidiary on the personal hobbies of the First to Third Respondents including horseracing and show jumping in breach of their directors’ duties set out in Schedule 2;(iii)Sums spent on providing John Hughes with more than one luxury car at a time.”411.The matter was then complicated because, despite the amendments brought about to bring substantive allegations of unfair prejudice into the Petition and remove them from pleadings elsewhere (especially the Points of Reply), paragraph 27 concluded by placing reliance on, or at least said that the Petitioner “refers to”, paragraph 61 of her Defence in the Recovery Proceedings. In fact that paragraph of the Defence simply referred to the Petition and said that the defendant would seek an order for the petition to be heard together with the Recovery proceedings. The Schedules to the Petition were, unhelpfully, not included in the Trial Bundles with the amended Petition.412.As far as I could tell the Schedules to the Petition remained in their original form and in the trial bundle followed on from the original unamended petition. 413.Schedule 1 to the original Petition set out various matters referred to as “Personal Expenses and Liabilities” . The first series of listed items was a list of dates and amounts of money apparently obtained from Barclaycard statements of each of the Relevant Respondents. The dates in question fell within the period October 2015 to April 2017. The total of these amounts was approximately £215,000. Finally there was an item described as “John Hughes-Work at Tilts House” (with the address) Watch Construction Ltd and Lewmar Construction Limited said to have been expended between 2011 and 2012 (£197,220.20).414.Schedule Two to the original Petition set out various matters referred to as “Personal Hobbies including horseracing and show jumping”. The matters appeared to relate to what I will refer to as “equestrian matters”. The quantum of many matters was said to be “unknown”. Those that were specified totalled approximately £121,390,000. The items in question dated as far back as 2006.415.Paragraph 30 amounted to an allegation that, in leaving outstanding sums on directors’ accounts which the Relevant Respondents owed one or other of the Companies, the Relevant Respondents caused damage to LWC by reason of its tax liability under s455 of the Corporation Tax Act 2010.416.Finally in this context, it was said that the relevant personal benefits taken by the Relevant Respondents were disguised dividends in circumstances where dividends were not paid/declared after those in respect of the year 31 October 2015.417.In the petitioner’s skeleton argument for trial, the “particular matters of complaint” in connection with the allegation characterised as being the use of the Companies “as piggybanks to support the lifestyles of John and his family” were set out in five sub-paragraphs, but by reference to the expert’s report and not the Petition. The two did not match and different periods were referred to. In particular, for the first time reference was made to “substantial expenditure on salaries for family members”.418.In these circumstances I asked on the first day of the trial for the provision of one document setting out the petitioner’s case as regards the alleged financial irregularities relating to improper benefits taken from the Companies said to fund the Relevant Respondents “extravagant lifestyles”. That document set out at paragraph 2.1 the following:“2.1 It is accepted that payments prior to November 2015 do not of themselves constitute unfairly prejudicial acts or conduct of the Companies’ affairs. That is because they were consistent with the informal basis on which the Companies were operated, by common consent of the shareholders, whereby the Companies would be used to make payments for the benefit of family members, and in particular John and Lisa. Nora’s acquiescence to that means that such payments would not provide an independent ground for relief.”.419.In fact, Lisa had been well aware of these payments as she had been, in effect, the Companies’ bookkeeper. 420.The document went on to identify the following eight categories of expenditure relied upon. In this list I exclude the separate items that related to what is said to be the costs incurred by the Companies on the Recovery Proceedings and in relation to the dismissal of Charlie Pickering which of course do not form part of the financial complaints relating to using the Companies as a “piggybank”. The items were:421.By the time of closing submissions, it was sought to re-amend the petition to insert a new s27A relying on the following matters:(a)Lorraine’s salary of approximately £181,000 per annum;(b)The provision of two luxury cars at a time for the First Respondent’s use;(c)The provision of the benefit of racehorses, show jumpers and associated grooms vet bills horsebox services (including fuel and insurance) race sponsorship, stabling, livery, and training costs and other expenses;(d)The employment of Debbie Shawcroft and Martin Cooper as grooms, with payments being accounted for as R&D;(e)Payment of child support agency payments in respect of one or more of John’s children;(f)Payments by the LWC to James for investment in his property business (including four cheques in the sum of £25,000 on four dates between October 2016 and January 2017).The original paragraphs 27 and 30 and schedules 1 and 2 remained unchanged. However, after closing, a revised schedule, Schedule 3, was lodged which as I understand it sets out the entirety of the relevant financial allegations that the Petitioner relies upon. This schedule was thereafter subject to comment by the Relevant Respondents.422.I now turn to the matters in Schedule 3, but I take them in a different order to that set out in the Schedule.(a) Salaries: John’s salary including Lorraine’s salary; James’ salary; Charles’ salary423.As regards John’s and Lorraine’s combined salaries the sums complained about are as follows:424.As regards Lorraine’s salary looked at in isolation, the question was raised in the trial as to whether there could be unfair prejudice if it had been decided to split John’s salary between Lorraine and John in circumstances where the overall salary of the two was not significantly different from the salary previously received by John. This was the evidence in the case. I assume that it was in light of that issue that the complaint (not raised in even the proposed amendments to the petition) is raised on the basis of the combined salaries of Lorraine and John being excessive. As I understand the case finally brought by the petitioner it was simply with regard to the salaries of John and Lorraine taken on a combined or pooled basis. 425.As regards Lorraine’s salary that was raised expressly in the Points of Reply by amendment following the order of HH Judge Jackson based upon the proposition that substantive points of unfair prejudice should be pleaded in the Petition and not in the points of reply. I should note that as regards Lorraine’s salary, the issue raised in the re-amended Points of Reply was that payment of Lorraine’s salary was one of the matters damaging the cashflow and financial position of the Companies and pleading to paragraph 10A of the amended points of defence which, in relation to the overall case about the insolvency of the Companies, asserted, as party of the background to the financial difficulties, that in 2015 the Companies were experiencing cashflow difficulties. As such the point made by the Points of Reply was to the effect that the payments to Lorraine exacerbated the financial position of the Companies and brought about the insolvency and administrations of the Companies. As will be seen that case was subsequently not pursued.426.As regards salaries, reliance is placed on Mr Lacey’s report. That report identified from the available accounting records of the Companies what the salary payments were. No other relevant evidence is given.427.I would not allow the amendment to be made to raise a case as to the combined salaries of John and Lorraine. Quite simply it is too late to do so, as the history of the case brought in this respect demonstrates. To permit the amendment would unfairly prejudice the Relevant Respondents who have not had an opportunity to adduce evidence on the point. I would also not permit the amendment sought to enable a case to be brought as regards Lorraine’s salary in isolation. Again, it is too late and would prejudice the Relevant Respondents. 428.In any event, I am wholly unsatisfied that the remuneration was excessive. Looked at in isolation the salary paid to Lorraine cannot be justified. However, in reality, the evidence was that John “diverted” part of his salary to Lorraine and took a cut himself. In the family context, there was no significant change in salary overall. The allegation is (under Schedule 3) an allegation that the two salaries taken together were excessive (looking at the work that John and Lorraine did on a pooled basis of the pooled salaries). There is no objective evidence that the pooled salaries were excessive for the pooled work undertaken. Neither GT nor the Bank (who can be taken to have looking at the Companies’ financial positions in the period after 2015) apparently raised any issue.429.As regards any allegation that the salaries taken were taken whilst the petitioner (or Nora) was excluded from a salary, the answer is that neither Nora nor Lisa had any legitimate expectation that they would be employed. On the other hand the employment of John was obviously necessary and appropriate. Lorraine had been employed prior to 2015, with what must be assumed to be Nora’s acceptance. Although her salary went up considerably, John’s reduced and the salaries were looked at and justified on a pooled basis. Prior to 2015, the pooled salaries (according to Mr Lacey) were £236,195.21 (9 mths to 31.10.11); £283,984.54 (y/e 31.10.12); £273,375.32 (y/e 31.10.13); £270,243.90 (y/e 31.10.14). The salaries on a joint basis did not significantly increase after that as can be seen from the table set out earlier. I infer that joint salaries at this sort of level were acquiesced in by Nora (and in circumstances where she, Nora, was not employed and receiving a salary).430.Without any objective evidence that the salaries were excessive such that they amounted to a disguised distribution, there is no ground to find that the payment of these salaries amounted to unfair prejudice. For completeness, I should also say that I reject the submission on behalf of Lisa made in closing that the salaries should have been reduced when the Companies entered into financial difficulties. There is no evidence that the Bank or GT took this view. The same job had to be done. There is no evidence as to what sort of level the salaries should have been reduced to or why.431. As regards the salaries of James and Charles, similar points apply (mutatis mutandis).432.The salaries complained of as regards Charles are as follows:433.This compares with salary as follows in the preceding period: £31,426 (9 mths to 31.10.11); £32,396.45 (y/e 31.10.12); £32,316.84 (y/e 31.10.13); £39,363.32 (y/e 31.10.14); £41,449.33 (y/e 31.10.15).434.As regards James, the complaints are of the following remuneration from the Companies:435.This compares with salary as follows in the preceding period: £32,160.20 (9 mths to 31.10.11); £38,376.14 (y/e 31.10.12); £40,609.94 (y/e 31.10.13); £65,610.86 (y/e 31.10.14); £46,281.39 (y/e 31.10.15).436.First, as regards each of Charles and James, I would not allow the case to be raised: the matter being raised by Schedule 3 and not even by the proposed re-amended Petition. In any event the amendments are too late and if allowed would unfairly prejudice the Relevant Respondents by removing an opportunity for them to adduce relevant evidence.437.Further, and on the merits, for the same reasons, mutatis mutandis as apply to the combined salary of James and Lorraine, I do not consider that a case of excessive salaries is made out or that unfair prejudice is made out regarding the salary payments. As regards James, it is notable that his salary increased considerably in 2018 but it was still a £100,000 or so less than John and Lorraine’s combined salary and that at this point there may well have been more onerous duties falling upon him, particularly as the financial position deteriorated and later as his father became ill.(b) Company credit card expenditure of John and Charles438.Each of John and Charles had the benefit of use of a company credit card, from LWC as it happens though that is an unimportant detail, being a Barclaycard. As I understand it the payments from those cards formed the basis of Schedule 1 to the Petition. The majority of the payments on these credit cards were re-charged to the relevant director’s loan accounts. Such expenditure was therefore treated as personal expenditure and not company expenditure. There is a separate complaint about the use of DLAs and this aspect of the use of the Barclaycards adds nothing to it and will be considered in that context.439.However, certain matters charged to the Barclaycards were not re-charged to John and Charles by way of the DLAs. The claim in respect of John is a figure of £67,410.38 said to cover the period October 2015 to April 2017. The claim in respect of Charles is a sum of £5,871.15, said to cover the period October 2015 to 2017. 440.In his report Mr Lacey identifies from Schedule 1 of the Petition the sums charged to Barclaycard. He then identifies in relation to those sums, which of such sums have been re-charged to the individuals through director’s loan account as personal expenditure. The difference is the figures identified above. However, Mr Lacey’s Report does not deal with whether those balances were properly spent on company matters or whether they amounted to personal expenditure. The most that he says is that based on his “limited review” it appears that private expenditure generally appears to have been posted correctly to DLAs. The inference therefore is that the balance of such expenditure was properly company expenditure. No examples are given of personal expenditure not being posted to a relevant DLA. There was no cross-examination of John regarding any alleged use by him of his company credit care for personal expenditure which was not then posted to an appropriate DLA. I am not satisfied that this head of claim is made out.441.For completeness I should add that the only other item in Schedule 1 is not pursued as it took place prior to November 2015.(c) Car expenditure442.The claims under this head, as set out in Schedule 3, relate to the following expenditure:443.It is accepted by the petitioner that these sums were all re-charged to relevant director’s loan accounts. As such they were not treated as company expenditure. Further the relevant complaint about DLA’s remains to be considered but this particular head adds nothing to it. It follows that the existing claim of unfair prejudice in paragraph 27(iii) of the Petition, to the effect that the costs of providing John with “more than on luxury car at a time” were wrongly treated as proper expenses of LWC when they were not, also fails on the facts and the case as now put.(d) Horse related expenditure444.In the current Petition, a claim about expenditure on personal hobbies (mainly, if not entirely, equestrian related) is set out in paragraph 27 and Schedule 2. In Schedule 2 a number of items are said to be of unknown value/monetary amount. I treat the relevant part of Schedule 3 as now setting out the petitioner’s case on this head of claim of unfair prejudice.445.The claims are as follows:446.It is apparent that these figures are taken from a table in Mr Lacey’s report at paragraph 7.12 where he summarises the total costs of the services provided to horses said to be owned by James, Charles and LWC. On the face of it therefore, to the extent that sums were paid in respect of LWC, such expenditure was proper company expenditure (rather than personal expenditure). There may or may not be a separate issue as to whether it was proper of the Company (LWC) to be running an equine venture. However, LWC had done this without complaint and in any event this aspect was not explored in evidence.447.Schedule 17 of Mr Lacey’s Report sets out the individual items which LWC paid for in terms of equestrian costs for the period from the year ended 31 October 2013 to the year ended 7 October 2020. The breakdown of the items on which money was spent for the years that I have detailed above are as follows:448.Mr Lacey’s schedule at his Appendix 17 also shows that considerable sums were spent by LWC on equine-related matters in the years before:449.In the Draft LWC Report, the question of expenses of Martin Cooper were considered. Paragraph 2.3 of the draft report under the heading “horses” states as follows:“ 2.3 HorsesA schedule of the expenses relating to horses and stabling paid out to M. Cooper, appears as schedule 7. We have been advised that Charles Hughes owns 6 horses, James Hughes owns 4 and there are 3 racehorses owned by the company (London Wiper Company Ltd Trading as Universal Recycling Company).A total of 13 horses are therefore looked after and stabled by M. Cooper. The costs relating to these animals have been apportioned appropriately. The costs relating to James Hughes's 4 horses total £16,627.69 during the period evaluated, this amount subsequently appears as part of John Hughes's overall drawings/expenditure in schedule 2.”450.Schedule 7 shows the following sums as paid to M Cooper for the years 2013 to 2015. The equivalent sums attributed to M Cooper by Mr Lacey (which match) are also shown below.451.Accordingly, what the LWC Draft Report confirms (among other things) is that an attribution process was gone through under which (for example) M Cooper’s costs were attributed between the Company (LWC) and John, James and Charles dependent on the number of horses that each held at the time. This is not challenged or specifically dealt with by Mr Lacey in his report. Further, there is no evidence that that position altered after 2015.452.In any event, James confirmed that Martin Cooper did not just work on James’ horses. He also looked after the driving ponies at Edlington Farm, maintained the menage owned by LWC, worked on the grounds of Edlington Wood and oversaw the livery business at Holywell Farm (originally bought by Portbond in 2011, Portbond then spending sums on indoor and outdoor stables and earning an income from letting it out).453.My conclusions are as follows. First, the petitioner cannot complain about possible mismanagement in Portbond/LWC maintaining horses, getting involved in horseracing and equine related matters. That commenced long before 2015 and was agreed to or acquiesced in by Nora. Furthermore, the Companies’ business had a product that was relevant to the horse racing world. In the proof of evidence of Mr Fitton in relation to an appeal against the service in May 2014 of an enforcement notice in respect of the Kilnhurst Site, Mr Fitton dealt with the Companies’ Products. Having dealt with cable processing, copper granules, aluminium recycling, WEE Recycling, and secure data processing, he stated the following:“ 7.6 Equestrian Surfaces, Arenas & Gallops: All the Equestrian products were born out of the passion for horses and riding, of one of the Senior Leadership Team and the Company's commitment to reducing the amount of waste sent to waste treatments sites, namely landfills. By using their strong connections in the industry, they discovered that previously discarded waste from the jelly cable plant could actually be used as artificial ground for horses at arenas. Mixed with wax it becomes a product which is outstanding for such purposes and superior to anything else on the market.Through the recycling of both jelly filled and dry scrap cables, the equestrian department provide plastic granules for the equestrian surface industry. These surfaces are designed to help prevent freezing in cold weather and are suitable to mix with sand for application in both indoor and outdoor arenas and gallops. These granules are of the PVC variety and are known as PVC granules, although the Company also supply the petroleum jelly polythene type, which are known by a patented name of Vasa Track.Vasa Track is a petroleum jelly covered polythene riding surface produced from jelly filled cables through a water separation granulation plant. These are used to create a springy and stable surface when mixed with sand. It creates excellent stability due to the petroleum jelly in the polythene and is used in many arenas, gallops and all weather race tracks throughout the UK, Europe and the rest of the world.”454.Secondly, so far as concerns any element of personal benefit to any of the Relevant Respondents flowing from the employment of Martin Cooper who also looked after their personal horses, the position is as follows. At the end of 2015 the contemporaneous evidence is that there had been a proper apportionment/allocation exercise of such expenses as between the Companies and the individual Relevant Respondents. There is no evidence that that practice did not continue. I am unable to decide that it did not.455.However, even if it did not continue and some form of claim remains against the Relevant Respondents, that is a claim of the relevant Company. It is a monetary claim. I would not by itself have regarded that situation, even if being unfairly prejudicial, as justifying a buy-out order but rather consider that the correct remedy would be for the relevant sum to be repaid to the Company. If that is correct, then even if there is a claim, it is one that the administrators can bring and it seems unlikely, given the overall deficiency in LWC that the petitioner has sufficient interest in the matter to justify relief being granted on the Petition.456.As regards the payment to or in respect of Doncaster racecourse, John’s position was that LWC had long rented a box at Doncaster Racecourse (which it shared with another company) and used it for corporate hospitality. Lisa confirmed that this was the position. In the circumstances I do not consider that any case of unfair prejudice is made out in relation to this item.457.As regards the payment to Dan Skelton Racing Limited, this expenditure is said by John to have been to the trainer of the Companies’ racecourses for which the Company paid. I am not satisfied that he is incorrect on this point and I am not satisfied that there was anything unfairly prejudicial about such payments.458.As regards the payments to the vets, the sums are de minimis. Further, I am not satisfied that the expenditure related to anything other than LWC’s own horses (which is John’s evidence). Accordingly the complaint is not made out.459.As regards the payments to James Hughes and Neil Cartwright, in my judgment an application to amend is needed to bring these claims in which claims are not contained within Schedule 2 to the Petition. I would not allow such amendment given the late time at which it is raised and the de minimis nature of the sums involved. In any event, on the evidence that I was referred to and heard I am not satisfied that any unfair prejudice is made out in relation to such payments. 460.To the extent that I am wrong in relation to any of the payments of the vets bills, and to James Hughes, Neil Cartwright and Dan Skelton, the same point arises about these being monetary claims which the administrators can bring and that I would not have ordered a share buy-out based on those facts (whether taken alone or with the other equine related expenditure points).(e) Child support agency payments461.The complaint that is sought to be raised is that Child Support Agency payments were paid by LWC in respect of attachment of earnings orders requiring LWC as employer to pay sums from the employee’s remuneration in respect of a court order. The payments in question total £44,422 in respect of the years ended 31 October 2016 to 31 October 2019 and then the part year ended 7 October 2020.462.This is a new allegation for which permission to amend is required. At the start of the trial the Child Support Agency payments were mentioned in the Points of Reply in answer to an allegation about the Company’s insolvency. The position in this respect is the same as the position applying to the case about Lorraine’s salary. A case on this issue was only clearly raised when what was to become Schedule 3 appeared in an early iteration. I do not allow permission to amend. Again, it is too late and would be unfair to the Relevant Respondents.463.In particular, John’s position is that the payments were in fact deducted from his current salary rather than being an additional benefit to him on top of his salary. John’s position reflects what would be the usual position. Mr Lacey simply says that he has seen no evidence that they were deducted from the gross pay paid to John. I am not satisfied that the payments were not so deducted.464.It is also submitted on behalf of John that, even if these payments were, in effect, a top up on his salary (they are approximately £10,000 a year), then such a top up would not bring his salary within the “excessive salary” range. This and the last point demonstrates why it is unfair to allow this amendment now to be made. 465.Accordingly, I am not satisfied that there is relevant unfair prejudice in this respect.(f) Payments to James for investment in his property business 466.In the pre-cursor schedule to Schedule 3 produced during the trial, one of the headings of claim was £100,000 being the subject of cheques payable to Oxley & Coward solicitors from 5 October 2016 to 5 January 2017. This claim also appears in the Points of Reply but as part of an answer to an allegation that Lisa was properly removed as a director given the allegations and investigations into the financial management of the companies for which she had sole responsibility. They were not raised as a separate matter of unfair prejudice. As I have already said, in my judgment it would be unfair to allow this allegation to be raised so late. The fact that the factual allegation may have been raised is not sufficient, it is of key importance for a respondent to know what allegations of unfair prejudice are being made and his/her decision as to the amount of time and effort to be put into contesting allegations can well be affected by the relevance of the factual issue raised.467.In any event, this matter is not contained within Schedule 3 and, as I understand matters, it is not therefore now pursued.468.For completeness, however, I will deal with the point briefly.469.The allegation is that the payments, made to solicitors (Oxley & Coward), were in fact made for the benefit of James’ property investment business. The only evidence of this is double hearsay: Lisa says that Charlie Pickering was told this by Chris Earl who worked at LWC.470.However, the explanation given and repeated in witness statements was that the four payments in question represented payment of part of the outstanding purchase price of the Redirack site, adjoining the Kilnhurst Site. The purchase price was £1.15 million together with a deferred consideration of £200,000 agreed to be paid over two years. The four cheques, say the Relevant Respondents, were to pay the then outstanding £100,000. There is no evidence that the £100,000 was otherwise paid to the former owners of the Redirack site. The likelihood is that the respondents’ account is correct. Certainly, I would not be prepared to rely upon the hearsay evidence to the contrary. James (whose companies were said to have received the sums) was not cross-examined about them. John was criticised for not producing relevant documents but the documents would be company documents. Oxley & Coward were asked about the matter by Lisa’s solicitors but did not respond.471.If I am wrong in refusing permission to amend for the reasons that I have given, I would in any event hold that I am not satisfied that the payments were made for James’ personal benefit as alleged and therefore I am not satisfied that there is any unfair prejudice with regard to the cheques in question.(g) Directors’ loan accounts and associated tax liabilities The allegations472.The allegations in this respect are that the operation of the directors’ loan accounts for each of the Relevant Respondents during the period after November 2015, when they showed sums owing to the Companies (primarily if not exclusively LWC) from each of them at the relevant year end, was unfairly prejudicial as being: (1) in breach of their directors’ duties as being “interest free unsecured loans at LWC’s expense to themselves and/or each other” (Petition, paragraph 29(ii)); (2) by not repaying the loans, the Relevant Respondents have benefitted themselves at LWC’s expense in breach of their director’s duties (Petition, paragraph 29, conclusion) (3) by leaving the sums outstanding at the year end, the Relevant Respondents have caused further damage to LWC by reason of the liability to tax of LWC in arising in respect of such outstanding loans pursuant to section 455 Corporation Tax Act 2010 (the “s455 Liability”) (Petition, paragraph 30).473.In closing, it was confirmed that the main thrust of the complaint was that, whereas, prior to November 2015, outstanding loan accounts had been cleared in respect of each year end by way of a declared dividend, this practice ceased thereafter and the loan accounts were not cleared. Had the loan accounts been cleared by way of a declared dividend then Nora or Lisa as shareholder would have participated in benefits taken from the Company by reason of their share of the dividend. If a dividend was not something the Companies could afford, then it is said, it was unfair to continue the practice of taking the benefit of the Companies funding personal expenditure though director’s loan accounts when that benefitted one part of the family over another part of the family.474.Although as pleaded there was more than a suggestion that the damage to the Companies was that they were spending money they could not afford and that this had a detrimental effect on their solvency and forced the Companies into insolvency, that case was, at the end of the day, not pursued. In any event, other than the fact of financial difficulty, there was no real evidence and no substantive submissions by reference to the financial position of the Companies over time so as to make out such a case. Indeed, one of the problems with it is that neither the Bank nor GT seem to have raised concerns in this respect which one would have thought they would have done given the detailed financial analyses and concerns raised by or of both of them. The evidence475.Save in two respects, Mr Lacey’s Report was not substantively challenged so far as it dealt with the quantum of the relevant director’s loan accounts. The two respects in which there were challenged was that James denied that he owed anything whereas Mr Lacey considered that the accounting records showed that James owed just over £1,279. James was not cross-examined on this point. The second respect in which there was an issue with the figures put forward in Mr Lacey’s main report concerns a payment of £300,000 injected into LWC in November 2019. According to Mr Lacey there were two payments of £50,000 and £250,000 respectively. In the Companies’ accounting records, this sum is shown as a loan by Caprina Trading. However, the administrators have accepted that this sum, is to be treated as an injection by John and part repayment of the sums outstanding from him to LWC on his director’s loan account. On this basis, the sum would presumably have been lent by Caprina Trading to John. The Administrators in their progress report to 6 October 2021 say:“ Following my investigations into the matter during the Period, it was established that £364,929 was received prior to my appointment in partial repayment of the outstanding balance. It is understood that this transaction was not correctly accounted for in LWC's books and records. The remaining balance is considered to be outstanding, and I am currently in discussions with the parties in order to seek recoveries of these monies. To date, no funds have been recovered”.476.I was not taken through all of this in any detail. Mr Lacey in his addendum report explained what the accounting records seemed to show. As I understand it the Relevant Respondents for the purposes of the directors’ loan balances put forward by Mr Lacey in his main report only assert that John should have the benefit of a payment of £300,000. Accordingly, I ignore the other nearly £65,000 referred to by the Administrators in their progress report but assume that sum is taken into account to the extent that the relevant Respondents say that it should be.477.From his analysis of the Companies’ accounting records Mr Lacey identified that the directors’ loan accounts at the relevant year ends, 31 October, to be as follows. The tables set out below are taken from the detailed analysis of the loan accounts carried out by Mr Lacey in Appendix 15 to his report. Where the end date is prior to 7 October 2020, I understand him to say that there was no further change between the last entry in the table below and 7 October 2020.478.The state of John’s loan account was as follows:479.Taking into account what the administrators have accepted to be an injection of £300,000 by John in November 2019, it follows that his ultimate liability as at 2020 was £64,929.31. 480.The state of Charles’ loan account was as follows:481.The state of James’ loan account was as follows:482.These figures, (a) on a combined basis and also showing the position prior to 31 October 2016, at which point separate loan accounts were set up for Charles and John contrasted with the one “NL Hughes” loan account for the year endings 31 October 201 and 31 October 2015, (b) rounded, (c) leaving out of account any further sums owed by Lisa and James and the £300,000 paid by Caprina Trading in November 2019 are as follows:483.Taking into account the further reduction in his loan account by £300,000 as a result of the payments by Caprina Trading, the combined liabilities for October 2020 are reduced to £286,397.484.According to the Relevant Respondents, interest ran on the directors’ loan accounts at a rate of 3% p.a. I am not prepared to assume that this is untrue. The burden of providing the loan accounts did not carry interest lies at the petitioner’s door.485.So far as the tax position is concerned, Mr Lacey was unclear from the available records whether or not relevant tax had been paid in respect of these loans. Based on the movements in the overall outstanding DLA balances in accordance with the trial balances that he earlier sets out, he calculates the penalty tax charge that should have been payable each year which has the result of a cumulative tax liability in respect of the accounting years ended 31 October, from 2016 through to 2020 of some £190,868. The management accounts apparently show a sum of £117, 915 as paid which is the figure he uses in suggesting what impact this matter had on cash flow. The Administrators in their progress report to 6 October 2021 say in relation to this matter:“ Also included on the directors' statement of affairs was a tax debtor with a book value of £117,915 in relation to the overdrawn directors' loan accounts. This is likely to be irrecoverable but will depend on the outcome of the directors' loan account recoveries.”