UT-2024-000019 - [2025] UKUT 00257 (TCC)

Our short answer to this question is “No” and our main reason for coming to this conclusion is that, despite being invited to do so, the Regulator has not explained how the detriment said to be linked to these acts should be calculated or factored into the calculation of the CN figure.

Leaving that point to one side, so far as the monthly extractions of cash for CW and his wife are concerned, AP was clearly a party to these payments (as she signed the contracts under which they were paid). However, there is no evidence before us to suggest that these payments (which resulted from what appears to have been a robust discussion between CW and the other shareholders covering a number of issues, where CW was not always successful) were anything other than what CW was seeking, appropriate market-level compensation for the significant role he said he was playing in the business and which the other shareholders appeared to agree with.

The means of delivering this compensation appears less than straightforward and was questioned by CW’s father, who was reassured by Ashgates, but that is beside the point. If CW was simply being paid the “going rate” for the work he was doing (and there is no evidence or assertion that he was not), there is no detriment in the arrangements, however roundabout the way of delivering CW’s compensation. That means that, looked at on its own, this act would fail the “material detriment” test. Even if the “material detriment” test were applied by looking at all three acts taken together (on the basis that they comprise a series), the act we are looking at would not increase the level of detriment as the cash outflows would be matched by the value of what was obtained for them (CW’s services) and we cannot see how it would be reasonable to increase the figure in AP’s CN on account of amounts paid under an arm’s length employment/services arrangement from which she obtained no benefit.

Turning to the final act asserted against AP, use of DFL’s resources to support associated companies leading to a loan write-off, her involvement here is said to be her failure to stop these arrangements when she knew that the company being supported was in a difficult financial position. AP’s unchallenged evidence is that she thought that the business being supported performed important functions for DFL and therefore this support was commercially necessary. Putting the point broadly, it does not seem to us that it would be reasonable to increase the figure in AP’s CN on account of her failing to intervene to stop a payment which appeared commercially appropriate and from which she obtained no benefit.

Our conclusions at [215] and [216] mean that it has not been necessary for us to come to a conclusion on whether the three acts complained of constitute a “series” or the limitation point in relation to the monthly extractions of cash.