Kiani v Cooper & Ors [2010] EWHC 577 (Ch)

Case No 20539 OF 2009[2010] EWHC 577 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of JusticeDate Thursday, 4 February 2010
Strand
London WC2A 2LL
Before
MRS JUSTICE PROUDMAN
Between
KIANIClaimantCOOPER & OTHERSDefendant
Digital Transcript of Wordwave International, a Merrill Communications Company101 Finsbury Pavement London EC2A 1ERTel No: 020 7422 6131 Fax No: 020 7422 6134Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com(Official Shorthand Writers to the Court)
MR NIGEL DOUGHERTY (instructed by Messrs Laderman & Co) appeared for CLAIMANTMR PETER IRVIN (instructed by Messrs Gepp & Son) appeared for DEFENDANT
JUDGMENT
[1]MRS JUSTICE PROUDMAN: This is the return date of an application under section 261 of the Companies Act 2006 by Mrs Kiani, a director and shareholder of the second defendant, Woodlands Properties 2006 Limited, to bring and continue a derivative action as defined by section 260 on behalf of the company against Mr Cooper and the third defendant, DPM Property Services Limited, whom I shall call DPM. Mrs Kiani and the first defendant, Dean Ryan Cooper, are the sole directors and shareholders of the company. The company was formed to sell and develop a particular property at Woodlands Road in Essex, but it is common ground that by a subsequent agreement another development was undertaken of properties in Essex, known as Red Croft Cottages and Cranham Gardens.[2]The dispute between Mrs Kiani and Mr Cooper is part of a wider dispute also involving Mrs Kiani's husband in relation to development ventures undertaken by Mr and Mrs Kiani and Mr Cooper. I am told that many properties are involved and there are several sets of proceedings to which Mr and Mrs Kiani, Mr Cooper and DPM are parties.[3]The application with which I am concerned is in respect of various alleged breaches of fiduciary duty by the first defendant, Mr Cooper. It extends to applications restraining the presentation of winding up petitions threatened by Mr Cooper and DPM as alleged creditors of the company.[4]Interim permission to commence the derivative action was given on paper by Arnold J on 6 November 2009. On 9 November Lewison J made without notice orders restraining Mr Cooper and DPM from petitioning for the winding up of the company as creditors. I have not seen the note of that hearing. On 16 November Mr Cooper and DPM agreed to the continuation of that order until the determination of this hearing. I should add that on 30 November 2009 Norris J granted an injunction against Mr Cooper restraining him from advertising a petition he presented on 23 November on the just and equitable ground in his capacity as a member of the company. That just and equitable petition is not before the court today but the claimant says that as the petition positively asserts that the company is insolvent Mr Cooper could not disclose any tangible interest as a member entitling him to relief. I am told that Mr Cooper intends to amend his petition. Mrs Kiani's application to strike out that petition on various grounds is to be heard by the registrar on 29 April 2010.[5]Before me today are the two issues of permission to continue the derivative claim and of continuation of the restraint of Mr Cooper and DPM from petitioning to wind up the company as creditors.[6]A derivative claim is defined by section 260 as a claim brought by a member seeking relief on behalf of a company in respect of a cause of action vested in the company. Although the cause of action may be against a director of the company or another person or both, it must arise from an actual or proposed act or omission by the director involving negligence, default, breach of duty or breach of trust (see section 260(3)).[7]Permission to continue a derivative action is required by section 261. The court must by that section dismiss the application for permission if there is no prima facie case for giving permission. Otherwise it may give directions as to the evidence to be provided and adjourn the proceedings to enable such evidence to be obtained. It has very wide powers to adjourn the application, to give directions and to give or refuse permission. It has wide powers to impose terms on the grant of permission.[8]Section 263 specifies the criteria for permission. Section 263(2) is mandatory and states that permission must be refused if the court is satisfied that a person acting in accordance with the duty imposed by section 172 to promote the success of the company would not seek to continue the claim, or where the cause of action arises from an act or omission which has been pre-authorised or has been ratified by the company.[9]Section 263(3) sets out the factors which the court must in particular take into account in deciding whether to give permission. They are: whether the member is acting in good faith in seeking to continue the claim, the importance that a person acting in accordance with section 172 would attach to continuing it, whether the cause of action could be authorised or ratified by the company, whether the company has decided not to pursue the claim and whether the act or omission in respect of which the claim is brought gives rise to a cause of action that the member could pursue in his own right rather than on behalf of the company. Further, the court is required by section 263(4) to have particular regard to any evidence before it as to the views of members of the company who have no personal interest, direct or indirect, in the matter. In this case there are no such persons.[10]Although Mrs Kiani and Mr Cooper were the only two directors and members of the company, Mr Kiani was the driving force behind his wife's involvement and for present purposes they have an identity of interest. No question of authorisation or ratification arises or is likely to arise. The crucial factors of those listed in section 263(3) are therefore likely to be good faith, the availability of an alternative remedy and, in particular, the attitude of a person acting in accordance with the duties imposed by section 172 of the Act.[11]The provisions of the Companies Act 2006, to which I have referred, came into force on 1 October 2007 under and by virtue of the Companies Act 2006 (Commencement Number 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007 (SI 2007/2194). There are transitional provisions which, because some of the alleged defaults took place before 1 October 2007, require the court to consider the grant of permission on the basis of restrictions immediately before that commencement date. However, I am told that nothing turns on this in the present case as there are no relevant distinctions under the applicable law immediately before that date.[12]The authorities on the approach of the court under section 263 were examined by Lewison J in Iesini and Others v Westrip Holdings Limited and Others [2009] EWHC 2526(Ch). He said at paragraph 78:
"The Act now provides for a two-stage procedure where it is the member himself who brings the proceedings. At the first stage, the applicant is required to make a prima facie case for permission to continue a derivative claim, and the court considers the question on the basis of the evidence filed by the applicant only, without requiring evidence from the defendant or the company. The court must dismiss the application if the applicant cannot establish a primafacie case. The prima facie case to which section 261 (1) refers is a prima facie case ‘for giving permission’. This necessarily entails a decision that there is a prima facie case both that the company has a good cause of action and that the cause of action arises out of a directors' default, breach of duty (etc.). This is precisely the decision that the Court of Appeal required in Prudential. As mentioned, Norris J considered the application on paper, and considered that there was a prima facie case. Hence the hearing before me."
Pausing there, it seems to me that in the same way Arnold J considered the first stage of the test in the present case. A very substantial body of evidence has now been adduced on both sides. Lewison J went on to say at paragraph 79:
"However, in order for a claim to qualify as a derivative claim … at all (whether the cause of action is against a director, a third party or both) the court must, as it seems to me, be in a position to find that the cause of action relied on in the claim arises from an act or omission involving default or breach of duty (etc.) by a director. I do not consider that at the second stage this is simply a matter of establishing a prima facie case (at least in the case of an application under section 260) as was the case under the old law, because that forms the first stage of the procedure. At the second stage something more must be needed. In Fanmailuk.com v Cooper … Mr Robert Englehart QC said that on an application under section 261 it would be ‘quite wrong … to embark on anything like a mini-trial of the action’. No doubt that is correct; but on the other hand not only is something more than a prima facie case required, but the court will have to form a view on the strength of the claim in order properly to consider the requirements of section 263 (2)(a) and 263 (3)(b). Of course any view can only be provisional where the action has yet to be tried; but the court must, I think, do the best it can on the material before it."
[13]By section 263(2) the court must refuse permission if satisfied that a person acting in accordance with the duty imposed by section 172 to promote the success of the company would not seek to continue the claim. Of course some directors might properly in accordance with that duty wish to continue the claim while others equally properly would reach the opposite conclusion. As Lewison J went on to say in Iesini:
"There are … a number of factors that a director, acting in accordance with section 172, would consider in reaching his decision. They include: the size of the claim; … the cost of the proceedings; the company's ability to fund the proceedings; the ability of the potential defendants to satisfy a judgment; the impact on the company if it lost the claim and had to pay not only its own costs but the defendant's as well; any disruption to the company's activities while the claim is pursued; whether the prosecution of the claim would damage the company in other ways … and so on. The weighing of all these considerations is essentially a commercial decision, which the court is ill-equipped to take, except in a clear case. "
In my judgment therefore … section 263 (2)(a) will apply only where the court is satisfied that no director acting in accordance with section 172 would seek to continue the claim. If some directors would, and others would not, seek to continue the claim the case is one for the application of section 263 (3)(b). Many of the same considerations would apply to that paragraph too."[14]I should say that this is a case where there are very many factual disputes between the parties. The time estimate for the hearing was half a day and the case was set down for half a day accordingly. That estimate was far too short as the factual disputes are many, various and involve the consideration of many documents. The parties curtailed their arguments because of time constraints but still took up a day of argument. It is difficult in such a case to form a sensible provisional view as to the strength of the evidence on each side. The court is well aware that at trial with proper cross-examination a very different picture may well emerge from that appearing on documentary evidence alone. However, to quote Lewison J, the court must do the best it can on the material before it.[15]The prerequisite for a derivative claim is, as I have said, that the cause of action must arise from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director.[16]Mrs Kiani alleges that Mr Cooper has acted in breach of his director's duties in various respects. Three heads of breach are relied upon.[17]The first head relates to sums claimed by Mr Cooper personally as a creditor of the company. He has demanded repayment and sought to wind the company up on the basis that the monies are due and owing.[18]The sums claimed arise out of money Mr Cooper has put into the company for the acquisition, development and sale of its properties. Mrs Kiani relies on what she says are the express terms of an oral agreement that those sums were paid as member's contributions, not to be released from the company until after development and sale. But she says that even if they were loans the same agreement applied.[19]On the one hand, Mr Irvin submits that it is inherently improbable that the monies were not to be repayable until after development, bearing in mind the large sums, larger than those put in by the Kianis, which Mr Cooper contributed to the project. The disproportionate amount is relevant, he submits, in the context of the fact that the ultimate profit was only to be split 50/50 between Mr Cooper and Mrs Kiani. It is, he submits, unlikely that in a company with equal shareholding Mr Cooper would lock himself into an agreement whereby he was unable to obtain repayment. He says that he only contributed such a disproportionate amount when the Kianis failed to honour an agreement to contribute equally. On the other hand, Mr Dougherty for Mrs Kiani submits that in a development project of this nature it would be absurd if an investor were able to withdraw his contribution to the development at will. No sensible person would invest in a development where the other party was free to pull the plug at any stage.[20]Mr Cooper seems to admit that there was or may have been some agreement with the Kianis that monies put into the company would not be withdrawn until the development was complete. I say this because Mr Irvin submitted, and I quote from his skeleton argument, that: "There was no agreement with the company itself that he should not be entitled to withdraw money advanced to the company. Mrs Kiani appears to be confusing a practical understanding or even agreement between shareholders that neither would seek to withdraw advances to the company until the company had made the profits to withdraw the advances. Even if that was once an enforceable shareholders' agreement, it does not prevent Mr Cooper's advances to the company being treated as a director's loan.” In oral argument he developed this submission by saying that a shareholders' agreement would not bind Mr Cooper vis-à-vis the company. It seems to me that there is a strong argument that this is not correct and that in the present circumstances such an agreement would be binding for all purposes.[21]Mr Irvin submits that the sums were plainly loans as they were shown in the accounts as director's loans, just as Mr Kiani's advances were shown as loans (although not of course as director's loans), and that supports Mr Cooper's case that he was a creditor of the company. However, the Kianis say that they had no input into the relevant accounts. They were prepared solely on Mr Cooper's instructions and the Kianis were only sent a copy after they had been filed with the Companies Registry. Mrs Kiani did not sign the accounts and there is no evidence before the court that she either gave instructions to Mr Williamson, the company's accountant, or was aware of the item in the accounts until after filing.[22]Mr Irvin further argues that any shareholders' agreement not to withdraw money advanced by the company had (and I quote his expression) "gone out of the window" by the stage that the statutory demand was served. I do not accept that that argument is correct. For present purposes it seems to me that there is a strong argument that if there were such an agreement it would remain binding on Mr Cooper at that stage.[23]Secondly, Mr Cooper is said to be in breach of fiduciary duty in relation to claims made by DPM. Mr Cooper is a director of DPM and the majority shareholder. DPM too alleges it is a creditor of the company and seeks to wind it up on that ground.[24]The claim by DPM relates to invoices for works and architects’ fees. The invoices contain a 15 per cent flat rate “overhead charge” in favour of DPM. Mrs Kiani asserts that the invoices were raised for the purpose of increasing the charge by 15 per cent for the benefit of Mr Cooper without any agreement that the fees could be so invoiced or that DPM could make a 15 per cent or any commission charge.[25]Mr and Mrs Kiani accept that they knew that DPM was involved in the development of the company's properties. However, their case is that DPM was a main contractor and that there was no agreement as to commission or an overhead charge.[26]The court was taken to a note from Mr Cooper to Mr Kiani referring to an agreed overhead charge of 10 per cent by DPM. However, there was nothing else showing either an agreed rate of charge or any record of the work done by DPM. Mr Irvin submitted that as it was known that DPM was financing the development it was an obvious inference that a percentage commission had been agreed. However, he was unable to point to any document in evidence showing either the nature of the financing undertaken by DPM or the alleged level of commission.[27]DPM obtained a default judgment in respect of the amounts of its invoices. Mr Cooper was the sole person involved in the rendering of the invoices both on behalf of DPM and on behalf of the company. He was the sole person involved in the court claim and he unilaterally took the decision not to acknowledge service on behalf of the company so that a default judgment inevitably issued. He was able to take these steps because DPM and the company share a registered office and because he was a director of both. A statutory demand was served by DPM. DPM threatened a winding up petition, again through Mr Cooper wearing both the hats of the company and DPM. A petition is still threatened even though DPM has, through its solicitors (which act for both Mr Cooper and DPM in the current application), agreed to withdraw the default judgment. No explanation for the withdrawal by DPM has been offered.[28]Mr Cooper denies all wrongdoing in failing to inform Mrs Kiani about DPM's claim or to take any steps to defend it. The basis for this is that it is not part of his duty as a director of the company to defend a legitimate unanswerable claim. He alleges that the invoices relate to the fact that DPM in fact financed the underlying bills. He says that Mr Kiani knew of and agreed the invoicing and commission arrangements. However, the evidence he relies on is in relation to a property that did not belong to the company and is the subject of a different dispute between Mr Cooper and Mr Kiani. The only evidence suggesting any agreement between Mr Cooper and Mr Kiani in relation to the company is the note from Mr Cooper to Mr Kiani referring to a 10 per cent overhead charge. Mr Kiani says that that subject was discussed but never agreed. Further, Mr and Mrs Kiani say that, although they were aware that DPM was a main contractor on site, they were not aware of the alleged financing arrangements and that the 15 per cent overhead charge was a unilateral and extortionate mark-up.[29]Mrs Kiani says that if she had known of the action for the alleged debt she would have taken steps to defend it. She alleges that Mr Cooper sought to abuse his position as director by securing the liquidation of the company without her consent. She says that the winding up process was undertaken for the collateral and improper purpose of trying to frustrate a derivative claim and force her to submit to Mr Cooper's wishes.[30]The fact remains that Mr Cooper has adduced no evidence of any agreement to pay an overhead charge of 15 per cent, nor has he adduced any evidence that any invoices had been paid by DPM as alleged for the company. When I say any evidence, I mean any corroboration of the primary evidence in witness statements from Mr Cooper himself. Mr Cooper asserts through his counsel that there is such corroborative evidence, but he has not produced it. When I asked Mr Irvin why not, his only reply was that it would be produced in due course and there had not been time to do so in relation to the present hearing. However, his client has had some six weeks to support his position and in that six weeks he has produced, I believe, five witness statements but has not produced a single corroborative document. I take that fact together with what on the face of it seems to be underhand conduct in relation to the default judgment.[31]It seems to me that a director acting in the interests of the company would, particularly bearing in mind the conflict of interest he had as a director of both the company and DPM, have ensured that there was on file some cogent evidence to support the alleged arrangements about DPM's involvement before submitting to a default judgment. On the evidence I have seen it seems to me, without deciding the point of course, that there is a strong case that Mr Cooper was in breach of his duties as a director in rendering the invoices and in effect submitting to judgment without involving his fellow director in the process. Further, it seems to me that on that basis the alleged debts to both Mr Cooper and DPM are disputed on genuine grounds.[32]Thirdly, Mrs Kiani relies on payments made out of the company's bank account by Mr Cooper to a company called Cranham Facilities Limited. The payments are in lump sums of round amounts. Those sums fell at or under the limit at which Mr Cooper could act as a sole signatory. The invoices call for immediate payment, but the work alleged to have been done to support them is unspecified, being described in the briefest and most general terms. As with DPM, no evidence has been adduced to support any work alleged to have been done in accordance with the invoices. Again on instructions Mr Irvin said only that supporting documentation is available and will be produced in due course.[33]CFL's shares are registered in the name of Mr Cooper's secretary, Ms Simmonds. Mr Cooper has been evasive about the ownership of the shares in CFL in the face of allegations that he is the beneficial owner. In view of Ms Simmonds's statements as to her personal financial difficulties, as contrasted with CFL's healthy turnover, I accept for present purposes that there is a strong case that CFL is in fact owned by Mr Cooper. If there were nothing to hide about CFL's involvement I do not see why Mr Cooper was not prepared to specify his connection with it in less ambiguous terms.[34]In weighing the assertions of Mrs Kiani against those of Mr Cooper I am asked by Mr Dougherty to take into account certain other conduct of Mr Cooper which is said to affect his credibility. In particular there is his conduct in failing to give keys to Mrs Kiani and in demolishing buildings on one of the development sites without her knowledge or consent. It is impossible to be sure about what actually happened in the face of the allegations made on both sides and in the absence of oral evidence. However, for present purposes I accept Mr Dougherty's submission that Mr Cooper's explanation that he would not hand over the keys because they were requested by Mr Kiani rather than Mrs Kiani does not ring true in circumstances where it is accepted that Mr Cooper dealt primarily with Mr Kiani. He asserts that Mr Kiani was a shadow director of the company and he accepts that Mr and Mrs Kiani have and always have had an identity of interest as far as the company is concerned. I also accept that Mr Cooper's assertion that he had to demolish the buildings at Cranham Gardens because of vandalism on site is unsupported by corroborative evidence of, for example, an insurance claim, a police report or contemporaneous correspondence. Photographs that Mr Cooper has adduced in which he says that the vandalism is shown do not, as far as I can see, support that contention.[35]Mr Irvin on behalf of Mr Cooper submits that Mrs Kiani does not even have a prima facie case for a derivative claim and that the case she advances is improbable and contains many transparently false allegations and inconsistencies. However, it seems to me that Mr Cooper has a strong case to answer and he has not yet at any rate answered it. It therefore seems to me that Mrs Kiani has made out for present purposes a case for breach of fiduciary duty to the relevant standard to give rise to a derivative claim. The issue is therefore whether permission should be given to continue it. I therefore go on to consider the matters to which I should have regard.[36]Perhaps logically the first question is whether Mrs Kiani is acting in good faith within section 263(3)(a). Her good faith is impugned by Mr Cooper. He says that Mrs Kiani's husband has himself covertly withdrawn £50,000 in £10,000 tranches from the company before the bank account was frozen and this was done on Mrs Kiani's instructions. It is said that this amount was paid into their bank account and mixed with their own monies. Mrs Kiani accepts that this money belongs to the company and has given evidence that it has only been used to the tune of some £8,000 to pay a creditor. Her case is that the money was withdrawn in order to have a pool of money to pay creditors since Mr Cooper had ceased to co-operate and the account had to be frozen. Mr Cooper is cynical and says that this is justification after the event. However, the money is still in existence and I do not find that the withdrawal is evidence of bad faith on the part of the Kianis. If I were to grant permission as asked, I would attach a condition in order that the money be transferred in some way to a separate designated account.[37]In all the circumstances of this case it seems to me is that Mrs Kiani is acting in good faith in making the present application.[38]Another factor prescribed by section 263(3) is the availability to Mrs Kiani of an alternative remedy in respect of the alleged breaches of duty. Mr Irvin submits that one proper remedy would be a personal action under the shareholders' agreement. However, it seems to me that such an action could meet real difficulties in that the loss claimed could be viewed as loss reflective of the company's loss, irrecoverable under the principle enunciated in Johnson v Gore Wood.[39]Mr Irvin's principal submission is however that Mrs Kiani's proper remedy is an unfair prejudice petition under section 994 of the Companies Act 2006. Under section 996 the court has a very wide discretion as to the relief it may grant, including, by section 996(2)(c), authorising civil proceedings in the name of and on behalf of the company.[40]There is a lot to be said for this procedure in a case of a two-person company where the real dispute is between those two persons alone. However, the jurisdiction to make an order under section 996(2)(c) can only be exercised if the court is first satisfied that the unfair prejudice petition is well-founded. Mrs Kiani would not therefore have standing on behalf of the company to restrain a winding up petition. It may well be the case that the court would have jurisdiction on her application to restrain a winding up petition pending the outcome of section 994 proceedings. I have not been addressed on that issue. Moreover, yesterday Mr Cooper and DPM, through Mr Irvin, said for the first time that they were willing to offer an undertaking not to present creditors petitions pending section 994 proceedings.[41]Taking all those factors into consideration, it seems to me that Mrs Kiani's position is this. She says that she and the company have been deprived of the opportunity to pursue the development venture. She does not want the company to be wound up on the petition of Mr Cooper, at whose door she places responsibility for the deadlock which has occurred. She wants her opportunity to be preserved. She wishes to pursue Mr Cooper on behalf of the company in a derivative action. It seems to me that the fact that she could in a more roundabout way achieve the relief she seeks does not mean that she ought not to be granted permission in the present case. It is merely one of the factors that I have to take into account.[42]I go on to consider the important issue of whether a notional director acting in accordance with his duty to promote the success of the company under section 172 of the 2006 Act would not seek to continue the claim, in which case it is mandatory to dismiss the application, or, if not, what importance such a person would attach to continuing the claim under section 263(3)(b).[43]Mr Irvin submitted under this head that the case is one for mandatory dismissal. He prayed in aid the fact that the company is deadlocked and development cannot continue. The company has ceased trading. He submitted that liquidation in one form or another was the only realistic option and the proper person to take decisions about whether there has been any breach of duty is a liquidator. I observe that although this could have been a case for the court to appoint a receiver, neither side has requested such an appointment. The evidence of Mr Rubin, an insolvency practitioner, given on the basis of information provided by Mr Cooper, is that the company may be cash flow insolvent, although it seems to be common ground that on a balance sheet basis there is a surplus of assets over liabilities. Mr Irvin submitted that faced with the practical options a director would not expend money in what might be very considerable costs of these proceedings. One of the factors specified in section 172 is the need to act fairly between members of the company. In any event Mr Irvin submitted that it would be grossly unfair to pursue Mr Cooper in circumstances where even if he won he would be bearing a significant proportion of the costs of the proceedings.[44]However, taking all the factors I have stated into account, it seems to me that so far from there being a mandatory bar on the application, a director acting in accordance with his section 172 duties would decide to continue the proceedings on the basis that at present there is some strong evidence in favour of the case advanced by Mrs Kiani. The notional director would take into account the size of the claim in relation to the payments to Cranham Facilities Limited (some £296,000), which if successful would be bound to ensure full return for all creditors. Mr Irvin submitted that the costs of such an action would be disproportionate. However, that depends on the ability to recover in full.[45]I believe that a director acting in accordance with his duty would wish to continue the claim down to disclosure. Mr Cooper says he has supporting documentation and that is the time to assess what documentation he can in fact produce. At the moment there are liquid assets in the company to pay costs and indeed there is an extra £42,000 (£50,000 in effect because the outstanding debt referred to by Mr Rubin was paid by the Kianis out of that fund) in the hands of Mr and Mrs Kiani which Mr Rubin did not take into account. If the claim that DPM and Mr Cooper are not creditors succeeds, the company is likely to be solvent. There are apparently no significant pressing debtors and the only liability, apart from site insurance which is at present being paid by Mr Kiani at his own risk in the event of a winding up, is for interest which is being rolled up on the bank mortgage of the site. I am told that the value of the site greatly exceeds the amount secured by the mortgage.[46]It seems to me that, balancing all the relevant factors, Mrs Kiani's application to continue the action in the name of the company ought to be granted. However, I am prepared to give permission only down to disclosure in the action, for the reasons I have already explained.[47]That brings me to the second issue, which is the discrete one whether Mrs Kiani should be indemnified from the company's assets in respect of her costs. Mr Dougherty pressed me to make such an order. He said this is the usual order. He submitted that the claim is properly brought on behalf of the company in accordance with the statutory framework. The company is the loser as a result of the acts and defaults of the director and there is no justification for departure from the usual course. He prayed in aid the well-known comments of Lord Denning, Master of the Rolls, in Wallersteiner v Moir (No 2).[48]However, it seems to me that in a case of this kind, where the dispute is one between the two directors and shareholders, the court ought to take a realistic view. There are no significant unsecured creditors of which Mrs Kiani is aware whose interests come into the equation. There is some analogy with the trustee beneficiary who brings a Beddoe summons for directions to sue his fellow trustee beneficiary and asks for his costs of doing so out of the fund. In such circumstances the court is likely to refuse to force the defendant to fund proceedings against him. The claimant must take the risk as to costs.[49]On that basis I am prepared to make an order that Mrs Kiani's costs should be borne by the company, but I am not prepared to grant her an indemnity in respect of any adverse costs order, that is to say, any order that Mr Cooper or DPM should be entitled to costs. It seems to me that she should be required to assume part of the risk of the litigation. However, that part of the order will be subject to review after disclosure.[50]It follows that, unless the court is offered undertakings in lieu, I am also prepared in principle to continue the existing orders restraining presentations of creditors petitions. It follows because on the basis of the action the debts are disputed. I will hear further argument, however, on that matter.[51]There is one more application before me and that is to change the registered office from its present location to the address of the chartered accountants, Messrs Haslers. The reason is to avoid process being served at offices which the company shares with DPM in circumstances where Mr Cooper has in the past been shown to take the unilateral decision not to disclose process to his fellow director. I accept that Mr Cooper's conduct in relation to the default judgment establishes that there is such a risk. If satisfied that I have jurisdiction to do so, I will therefore accede to that application also.

Cited in 3 later judgments