Hughes v Weiss Re Iuvus Ltd [2012] EWHC 2363 (Ch)

[2012] EWHC 2363 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue LEEDS DISTRICT REGISTRY, Leeds Combined Court Centre

Oxford Row

Venue Leeds LS1 3BG

Date 15 August 2012

Before

His Honour Judge Keyser Q.C.

sitting as a Judge of the High Court

Between

SUZY BELINDA HUGHESClaimant

NIGEL RICHARD WEISSDefendant

IUVUS LIMITEDDefendant

HUGH JORY (instructed by Walker Morris of Kings Court, 12 King Street, Leeds, LS1 2HL) for Claimant

NEIL BERRAGAN (instructed by the First Defendant) for First Defendant

Hearing Hearing date: 11 July 2012

Judgment

H.H. Judge Keyser Q.C. :

[1]This is an application by the claimant, Ms Suzy Hughes, under section 261 of the Companies Act 2006 (“the Act”) for permission to carry on against the first defendant, Mr Nigel Weiss, derivative claims in respect of causes of action that are vested in the second defendant, Iuvus Limited (“Iuvus”).

[2]By way of background, Ms Hughes is a qualified barrister and before the matters giving rise to these proceedings she carried on, through a limited company, the business of providing legal advice in the field of commercial leasing. Mr Weiss is a solicitor and, at a time when he was a partner in a firm of solicitors in London, he provided legal services to Ms Hughes’s company.

[3]Ms Hughes and Mr Weiss decided to go into business together. On 18 February 2005 Iuvus was incorporated as the vehicle of a joint venture between them for the provision of commercial legal consultancy services in the field of asset finance (there is a dispute between them as to whether the services extended to project finance). They became the two directors of Iuvus, each holding one of the two issued shares. It was agreed that, at least initially, they would each draw the same small salary from the company and supplement that income by receiving equal dividends at such times and in such amounts as might be appropriate. The venture was an equal quasi-partnership.

[4]The relationship between Ms Hughes and Mr Weiss had become strained by the autumn of 2006. It is unnecessary for the purposes of this judgment to explore the problems in detail; one of them, however, was that Mr Weiss felt that Ms Hughes was not “pulling her weight” and that he was responsible for bringing in the greater part of the company’s income but was not being commensurately rewarded. By the summer of 2007 it was clear that the joint venture could not continue. On or about 21 June 2007 Ms Hughes and Mr Weiss agreed to terminate their quasi-partnership and to go their separate ways. That brought an end to the business of Iuvus, though it remained in existence as a dormant company and Ms Hughes and Mr Weiss continued to be the only members and directors. On 26 July 2011 Iuvus was dissolved after it had failed to file annual returns, and its assets of a little more than £15,000 vested in the Crown as bona vacantia. With a view to bringing these proceedings, Ms Hughes has procured the restoration of Iuvus to the register.

[5]In these proceedings Ms Hughes seeks to advance three claims that, if they are valid, vest in Iuvus. She alleges that Mr Weiss:(a) Wrongfully transferred £100,000 out of Iuvus’s bank account and into his own personal bank account and has thereafter failed to return it or any part of it or to account for it;

(b) In breach of his fiduciary duties to Iuvus, carried on business in competition with Iuvus, whether on his own account or on the account of a company in which he was interested;

(c) In breach of fiduciary duty, diverted payment of invoices from Iuvus to himself and thereafter failed to account for the receipts.

[6]The claim form was issued on 3 April 2012 and was accompanied by particulars of claim drafted by counsel. On the same day Ms Hughes issued an application for permission to continue with the derivative claim under section 261 of the Act and rule 19.9A of the Civil Procedure Rules 1998.

[7]On 16 April 2012 the application was considered on paper by HH Judge Behrens sitting as a judge of the High Court. He did not dismiss the application under section 262 (2) but gave directions.

[8]The evidence before me has consisted of two witness statements from Ms Hughes and one from Mr Weiss. Although I have had regard to it all, I shall refer to it and to the more detailed history of the parties’ business relationship only to the extent necessary to outline the parties’ competing cases and to explain my conclusions. An extended narrative is unnecessary, as the course of events is well known to the parties.

[9]I am grateful to Mr Jory and Mr Berragan, whose written and oral submissions have been of great assistance.

The Pleaded Claims

[10]The derivative claims are summarised in paragraph 5 above and I shall explain them a little more fully below. Each of those claims is free-standing; but both the particulars of claim and Mr Jory’s submissions make clear that it is her case that the three matters complained of were part of “a course of conduct designed to give [Mr Weiss] control over the Company’s funds” (particulars of claim, paragraph 9). The thrust of the case is that, feeling dissatisfied with his rewards from the joint venture, Mr Weiss rewarded himself by taking moneys belonging to Iuvus on the pretext of investing them more advantageously but instead applied them to his own use or that of his family; and that he sought further to improve his own position by competing with Iuvus, while retaining his directorship of Iuvus for the purpose of preventing Ms Hughes from gaining control of the company and thereby making it more difficult for her to seek redress from him.

Removal of, and failure to account for, £100,000

[11]The first head of claim is set out in paragraphs 11 to 29 of the particulars of claim, where the matter is put as follows. When Ms Hughes was on holiday in September 2006, Mr Weiss withdrew £100,000 from Iuvus’s bank account. Although they had previously spoken about possible ways of investing the company’s moneys to greater advantage, they had never reached any decision or agreement on the matter, and the withdrawal was made without her knowledge or consent. When she learned what had happened, Ms Hughes asked Mr Weiss to tell her what had become of the money. On 29 September 2006 he told her that he had paid the money into his own interest-bearing personal bank account pending transfer to an account that paid a higher rate of interest or, possibly, into premium bonds. In November 2006 he informed her that he had used £30,000 of the moneys to buy premium bonds and that he proposed to transfer the rest into an account with an advantageous rate of interest. However, no documentary evidence has ever been produced to show what became of the money, and Mr Weiss has resisted all requests to repay it. Further, when in January 2008 Mr Weiss made a witness statement in response to an application that Ms Hughes brought for pre-claim disclosure, he stated that he had retained the money only until August 2007, when “it became clear that it was in the best interests of the Company to discharge genuine Company expenses rather than allow [Ms Hughes] to make claims against it for unauthorised expenditure.” In fact, the “genuine Company expenses” turn out to be payments of £10,000 p.a. to Mr Weiss’s wife, £5,000 p.a. to his son and the remaining balance to himself by way of(a) quantum meruit for his additional efforts for Iuvus,

(b) relocation expenses resulting from the necessity of moving to a smaller house because of the reduction in his income, and

(c) payment of a £30,000 dividend that had been declared in March 2006. As for the dividend, Ms Hughes says it had been agreed that it would not be taken until such time as it should be convenient to withdraw the moneys from the company. As for the other bases of payment, none of them (says Ms Hughes) were agreed or legitimate; they are “pure invention which Mr Weiss has engineered to justify keeping the monies he seized” (Mr Jory’s skeleton argument, paragraph 15). If indeed he made the payments as claimed, he did so in breach of trust or fiduciary duty.

[12]Mr Weiss states that the initial transfer of the £100,000 from Iuvus’s bank account was within his authority on the bank mandate and was pursuant to discussions—he stops short of saying agreement—with Ms Hughes concerning the more advantageous investment of the company’s funds. The placing of the funds in Mr Weiss’s own account was “the quickest solution to avoiding the problems we had discussed and was a temporary measure until a better account could be found (with no charges and a higher interest rate)”: statement, paragraph 18. When Ms Hughes learned of the transfer of the funds, she initially made no request for their return to Iuvus, other than saying in November 2006 that sufficient funds would have to be returned for the payment of certain outgoings. In May 2007 Ms Hughes suggested that he retain the £30,000-worth of premium bonds as payment of a dividend in that amount that had been declared for each of the two shares in March 2006. In fact, she also then demanded the return of the balance of £70,000, from which she would take her own dividend.

[13]As for the payments to himself, Mr Weiss relies first on the declaration of the dividend in March 2006 and on the terms of the resolution dated 31 March 2006, which appears to contemplate immediate payment; his case is that there was an immediate entitlement to take the dividend. Ms Hughes, however, says that it was agreed to defer receipt of the dividend until a time to be agreed between the parties. In this respect, it is notable that neither shareholder had taken the dividend by September 2006, when Mr Weiss withdrew the money from the company bank account, and that he did not initially justify any part of the withdrawal as being in respect of his own entitlement. In his witness statement, Mr Weiss says that he does not understand why Ms Hughes did not take her dividend when it was declared, and he suggests a nefarious motive; but he did not take his own dividend when it was declared. He also observes that in May 2007 Ms Hughes suggested that he keep £30,000 as payment of his dividend; he omits to mention that her proposal was that the balance of £70,000 be repaid to the company.

[14]So far as concerns the appropriation of moneys as a quantum meruit, Mr Weiss says that at a meeting on 8 November 2006 Ms Hughes “agreed in principle that the profits of the Company would be distributed equitably”. He does not suggest that any agreement was reached as to precisely how the profits would be divided; his statement is inconsistent with any such agreement having been reached, and indeed Ms Hughes denies that there was any agreement.

[15]As for the cost of moving house, I can put the matter no better than does Mr Weiss in his witness statement:

“… the payment of moving expenses incurred when I moved house and therefore my office largely due to the poor performance of the Claimant. The Claimant is aware that I was authorised to discharge third party expenses incurred in the best interests of the Company and it seems clear that moving to a new office was essential for me to continue working. Section 263(2)(a) clearly applies to this payment, which was made in the best interests of the Company and the Company derived substantial benefit from this.”

[16]As for the payments to his wife, Mr Weiss says that she provided him with “significant support with client arrangements, document management, research, the provision of an office, marketing, catering and administration”, and that it would have been far more expensive to obtain these services on the market. As for the payments to his son, Mr Weiss states that it had been agreed in principle that his son would be paid for the considerable amount of time he spent assisting with computer-related issues for Iuvus. The breakdown of the relationship between Mr Weiss and Ms Hughes meant that no agreement as to the amount of the remuneration was reached; in the circumstances it was legitimate to make a reasonable payment for the work done. Ms Hughes says that Mr Weiss’s son received an agreed payment of £100 in 2005 but that he did not carry out substantial amounts of work for Iuvus and that there was no agreement to give him any further payment. She points out that he was aged 15 or 16 years at the relevant time and was still at school.

[17]Mr Weiss states that he made the payments to his wife and his son at a time when Ms Hughes had removed him from the mandate on Iuvus’s bank account and when he had concluded that she had no intention of providing him with the explanation he had sought for her expenses claims during 2006 or her inadequate performance at work. He was therefore under a positive duty not to repay the moneys to the company until he had completed his investigation into those matters, and it was reasonable to pay his wife and son for the services they had rendered rather than keeping them out of their money any longer.

Competition with Iuvus

[18]The second head of claim is set out in paragraphs 5 and 30 to 35 of the particulars of claim and may be summarised as follows. When the joint venture started, the parties agreed that they would carry out legal consultancy work exclusively for Iuvus; therefore Mr Weiss left his existing solicitor’s practice and Ms Hughes ceased trading through her existing limited company. However, in May 2006, and without Ms Hughes’ knowledge, Mr Weiss became director of a company called New Avenue Finance Ltd, of which his wife was previously the sole director and secretary and in which the sole shareholders were Mr Weiss, Mrs Weiss and their son. The following month that company changed its name to New Avenue Projects Ltd (“NAP”). At some point during the financial year 2006/2007 NAP started trading. She accepts that Mr Weiss was free to compete with Iuvus after 21 June 2007, which was the effective date of the termination of the joint venture, but contends that business carried on before that date was in wrongful competition with Iuvus and constituted a breach of fiduciary duty by Mr Weiss.

[19]Ms Hughes says that she is unable to provide particulars of the business carried on in competition with Iuvus and in breach of Mr Weiss’s fiduciary duty, because Mr Weiss has refused to provide proper details of its activities. In January 2008 an order was made by consent upon an application by Ms Hughes for pre-claim disclosure, whereby Mr Weiss was required to produce a list of the work that he had carried out “for [his] own account” since Iuvus was incorporated. The list produced in compliance with that order did not provide information to support the claim now brought. Ms Hughes says that, when she made her application and agreed to the terms of that order, she was unaware of the existence of NAP; had she known of it she would have sought disclosure of work carried out on NAP’s account as well. She points out that disclosure of work done on NAP’s account was not a specific requirement of the order. (That this point is well made is indicated by Mr Weiss’s remark, in paragraph 45 of his statement: “any work that I did undertake was not for my own account”.)

[20]Ms Hughes complains, further, that Mr Weiss was advancing his own business interests at Iuvus’s expense, because from March 2007 until March 2009 (well after the termination of the joint venture) he was causing searches to be carried out at Companies House on Iuvus’s account and at Iuvus’s expense.

[21]In her first witness statement, Ms Hughes suggests that it is no coincidence that Mr Weiss’s appointment as a director of NAP and its change of name occurred so soon before the removal of the £100,000 from Iuvus’s bank account; rather it indicates “that he was already planning to provide his legal services through that new company rather than [Iuvus], so that any profits would be for the sole benefit of himself and his family rather than for the benefit of himself and me”.

[22]In an email dated 26 October 2007 to Ms Hughes’ solicitors, Mr Weiss maintained that he had carried out no work in competition with Iuvus. Such work as he had done was only for existing friends of himself or his family and in circumstances where the work would not otherwise have gone to Iuvus. In his witness statement, he says that the work that he carried out “was work that could not have been undertaken by the Company in any event because either the clients would not have instructed the Company or the Company did not own or have any right to utilise the intellectual property required to undertake the work.” He also denies any attempt to divert to NAP work that Iuvus was undertaking.

[23]Mr Weiss further denies that the work of NAP was of the kind that was undertaken by Iuvus. He says that NAP carried out project finance work, whereas Iuvus carried out asset finance work. In response, Ms Hughes refers to Iuvus’ website, which states:

“Our finance services include: … Project finance”

. Mr Weiss also states that by an email on 1 November 2006 (the relevant part of which is set out in paragraph 25 below) he made clear his intention to carry out work on his own behalf, and that at a meeting on 8 November 2006 Ms Hughes had accepted that he could do so. Ms Hughes gives a different account of the meeting; the point is in issue between the parties.

Diverting the invoices

[24]In respect of this third head of claim, Ms Hughes relies on one specific matter. On 1 November 2006 Mr Weiss issued an invoice in the name of Iuvus to Landsbanki Commercial Finance for £1787.50. At the foot of the invoice the payment details were the details of his own bank account, not Iuvus’s bank account. She states that neither she nor Iuvus authorised this diversion of moneys owed to the company into Mr Weiss’s bank account and that she does not know how many other payments may have been wrongfully diverted.

[25]Ms Hughes suggests that it is not without significance that the invoice was issued on the very day that Mr Weiss sent her an email containing the following passages:

“I have had a chance to consider all the figures … [I]t would appear that your net contribution to the company since we started is negligible. I was absolutely amazed when I worked it out as I had thought we were roughly equal in terms of contribution. I also thought we were roughly equal in terms of expenses but you have spent far more. … To be honest, if things don’t improve, I don’t really see the point of continuing although pride would prevent me from closing Iuvus down. However, we do need to spend some time working out what to do and how we can continue. When we started we said we would not fix things in advance but instead look at things once the business had got going. However we did agree that whatever we decided would be equitable. I think now would be the best time to do that so we should resolve this when we meet tomorrow. In terms of the future, I would like to continue with Iuvus as I still believe in it. I also believe that you do too but that you have been distracted by other things this year and could improve things if you focused your whole attention on the business (although this is unlikely in the immediate future given your current situation). [I note that this is likely to be a reference to Ms Hughes’ pregnancy.] However, until you are able to generate a reasonable amount of income, I will have to concentrate on my project finance practice for my own account and put only the asset finance work through Iuvus. I suggest that until you have brought your side into line, the profits should be distributed on the basis of who brought in the work/client. Expenses will have to be fully justified and approved in advance as I originally suggested. This should just about allow me to manage my finances in the immediate future and to continue to develop Iuvus into a good company. To be honest this is the only way I can continue without selling my house.”

[26]Mr Weiss says that a copy of the invoice was sent to Ms Hughes shortly after it was issued and that she made no complaint or observation with respect to it. He says that the justification for taking payment into his own account was the same as the justification for the transfer of the £100,000, namely the financial advantage of Iuvus. It must follow that by November Mr Weiss had not set up a more advantageous account for the company. Ms Hughes says that she saw the invoice but did not notice the account details at the foot of the document.

The Statutory Framework

[27]Derivative claims are dealt with in Chapter 1 of Part 11 of the Act. Section 260(1) defines a derivative claim as proceedings in England and Wales or Northern Ireland by a member of a company—(a) in respect of a cause of action vested in the company, and (b) seeking relief on behalf of the company. Section 260

(2) provides that a derivative claim may only be brought under Chapter 1 or pursuant to an order of the court in proceedings for protection against unfair prejudice under section 994. Section 260

(3) provides:

“A derivative claim under this Chapter may be brought only in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.”

[28]The procedure for derivative claims under Chapter 1 is dealt with in section 261, which (so far as material) provides as follows. “(1) A member of a company who brings a derivative claim under this Chapter must apply to the court for permission … to continue it. (2) If it appears to the court that the application and the evidence filed by the applicant in support of it do not disclose a prima facie case for giving permission …, the court—(a) must dismiss the application, and

(b) may make any consequential order it considers appropriate. (3) If the application is not dismissed under subsection (2), the court— (a) may give directions as to the evidence to be provided by the company, and (b) may adjourn the proceedings to enable the evidence to be obtained. (4) On hearing the application, the court may— (a) give permission … to continue the claim on such terms as it thinks fit, (b) refuse permission … and dismiss the claim, or

(c) adjourn the proceedings on the application and give such directions as it thinks fit.” (a) must dismiss the application, and (b) may make any consequential order it considers appropriate. (a) may give directions as to the evidence to be provided by the company, and (b) may adjourn the proceedings to enable the evidence to be obtained. (a) give permission … to continue the claim on such terms as it thinks fit, (b) refuse permission … and dismiss the claim, or (c) adjourn the proceedings on the application and give such directions as it thinks fit.”

[29]The criteria for determining an application under section 261 are set out in section 263, the material provisions of which for present purposes are as follows. “(2) Permission … must be refused if the court is satisfied—(a) that a person acting in accordance with section 172 (duty to promote the success of the company) would not seek to continue the claim, or … (c) where the cause of action arises from an act or omission that has already occurred, that the act or omission— (i) was authorised by the company before it occurred, or (ii) has been ratified by the company since it occurred. (3) In considering whether to give permission … the court must take into account, in particular— (a) whether the member is acting in good faith in seeking to continue the claim;

(b) the importance that a person acting in accordance with section 172 (duty to promote the success of the company) would attach to continuing it; … (d) where the cause of action arises from an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company; (e) whether the company has decided not to pursue the claim; (f) 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. (4) In considering whether to give permission … the court shall 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.” (a) that a person acting in accordance with section 172 (duty to promote the success of the company) would not seek to continue the claim, or …

(c) where the cause of action arises from an act or omission that has already occurred, that the act or omission— (i) was authorised by the company before it occurred, or (ii) has been ratified by the company since it occurred. (a) whether the member is acting in good faith in seeking to continue the claim; (b) the importance that a person acting in accordance with section 172 (duty to promote the success of the company) would attach to continuing it; …

(d) where the cause of action arises from an act or omission that has already occurred, whether the act or omission could be, and in the circumstances would be likely to be, ratified by the company;

(e) whether the company has decided not to pursue the claim;

(f) 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.

[30]Section 172 (1) provides as follows:

“A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to— (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company.”

As Iuvus is a dormant company with neither employees nor operations nor business relationships, the only relevant matter specifically listed in section 172 (1) is paragraph (f). (a) the likely consequences of any decision in the long term, (b) the interests of the company’s employees, (c) the need to foster the company’s business relationships with suppliers, customers and others, (d) the impact of the company’s operations on the community and the environment, (e) the desirability of the company maintaining a reputation for high standards of business conduct, and (f) the need to act fairly as between members of the company.”

[31]The acts complained of by the claimant all occurred before 1 October 2007. In those circumstances it is necessary to have regard to the transitional provisions contained in paragraph 20 (3) of Schedule 3 to The Companies Act 2006 (Consequential No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007. That paragraph provides that the power to give permission under section 263 must be exercised “so as to secure that the claim is allowed to proceed as a derivative claim only if, or to the extent that, it would have been allowed to proceed as a derivative claim under the law in force immediately before that date.”

[32]Accordingly, in a case concerning acts that occurred before 1 October 2007 the correct approach is as follows. First, the court must decide whether or not permission would be given under section 263. Second, if the decision is that permission would be given under section 263, the court must decide whether permission would have been refused under the law in force before 1 October 2007. To the extent that permission would have been refused under the old law, it must be refused now.

[33]Section 263 does not require a derivative claim to satisfy any particular merits test before permission to continue it will be given (for example, that it shows a reasonably arguable case, or a case that is likely to succeed). No doubt, an applicant under section 261 must establish a prima facie case that the company has a good cause of action which arises out of the defendant’s breach of duty; cf. Iesini and others v Westrip Holdings Ltd

[2009] EWHC 2526 (Ch)

, [2011] 1 B.C.L.C. 498, per Lewison J at [78] and [79]. Lewison J went on to say at [79] that, in order to consider the requirements of section 263 (2)(a) and (3)(b), the court must form the best view it can on the strength of the claim on the material before it. Although that is true, it does not mean that any particular threshold must be crossed in all cases. In Stainer v Lee

[2010] EWHC 1539 (Ch)

, Roth J said this at [29]:

“I consider that section 263 (3) and (4) do not prescribe a particular standard of proof that has to be satisfied but rather require consideration of a range of factors to reach an overall view. In particular, under section 263(3)(b), as regards the hypothetical director acting in accordance with the section 172 duty, if the case seems very strong, it may be appropriate to continue it even if the likely level of recovery is not so large, since such a claim stands a good chance of provoking an early settlement or may indeed qualify for summary judgment. On the other hand, it may be in the interests of the Company to continue even a less strong case if the amount of potential recovery is very large. The necessary evaluation, conducted on, as Lewison J observed, a provisional basis and at a very early stage of the proceedings, is therefore not mechanistic.”

I respectfully agree with that approach. Discussion A preliminary view of the merits

Discussion

[34]Having considered the evidence before me, I consider that Ms Hughes has good prospects of establishing that Iuvus has a claim against Mr Weiss for breach of duty. Of course, the case is at an early stage and might appear differently to a judge at trial. But I am singularly unimpressed by Mr Weiss’s evidence and explanations.

[35]In his witness statement in these proceedings, Mr Weiss complains that he is being painted as the villain of the piece, while it was Ms Hughes who brought about the demise of the joint venture by her own financial misconduct and her subsequent failure to give full and proper information that would be necessary to achieve an accurate final account of the company’s affairs. He says that he was compelled to take steps to protect Iuvus’s assets and to discharge its properly incurred debts because of three particular things:(i) Ms Hughes’ unauthorised borrowing from the company in the late summer of 2006;

(ii) her wrongful use of company moneys to pay personal debts, such as credit card bills, and her subsequent failure to provide full and proper particulars of her expenses claims;

(iii) her removal of him from the mandate for the company’s bank account, so that she obtained sole control of the bank account. Before dealing with the specific claims brought by Ms Hughes, I shall say something about the three particular things raised by Mr Weiss. (1) In July 2006 Ms Hughes asked whether she could borrow £10,000 from Iuvus to fund the purchase of an investment property; she said she would pay it back at the end of the month. Mr Weiss agreed. In fact, Ms Hughes borrowed a little more than £14,000 and did not pay it back until November. But pay it back she did. Mr Weiss describes as “fatuous” her observation that, when she borrowed the money and when she paid it back, Iuvus owed her £30,000 for a dividend that she had not withdrawn, and he describes her conduct as involving a “deception”. However, as it is his own case—not, by the way, Ms Hughes’ case—that she was entitled to have taken the full £30,000 already, his comments seem inappropriate. He was refusing to pay back the £100,000 into the company at a time when he well knew that Ms Hughes had not taken her dividend. He can hardly justify his conduct by reference to Ms Hughes’ borrowing. (2) As for the expenses, there is a dispute. Mr Weiss alleges that Ms Hughes has claimed moneys to which she is not entitled. She says that there was an agreement that all possible expenses would be recorded and notified to the accountants, with the question of reimbursement being deferred; that she has provided a full statement of her expenses, which the accountants have approved; and that she has taken reimbursement at the end of the financial year, and then only for a proportion of her allowable expenses. It is unnecessary for me to form any concluded view as to the detail of the expenses. It suffices to say that, on the evidence before me, I see no reason to suppose either that Ms Hughes has acted dishonestly in respect of expenses or that Mr Weiss has at any time genuinely held the view that she has done so or that it has been necessary for him to take any action to protect the company from her. (3) It is, to say the least, bold of Mr Weiss to protest at his removal from the mandate on the company’s bank account. He justifies his removal of £100,000 from that account on the ground, among others, that each director had a mandate to act alone on the account. All that means is that the bank acted correctly in paying the funds to him at his request. It does not itself establish justification for his act in removing the moneys and placing them in an account that was solely controlled by him. He has never thereafter returned the moneys or provided documentary confirmation of what became of the greater part of them. That is the context in which his mandate to act on the company’s bank account was terminated. His complaints about Ms Hughes’ conduct in that respect do not impress me in the least.

[36]I turn to consider the three derivative claims advanced by Ms Hughes.

[37]In respect of the first head of claim (relating to the £100,000) I make the following observations, some of which echo what I have already said.(1) The fact that the parties had discussed the need for putting company moneys into more efficient investments than its existing bank account does not provide justification for unilateral action in transferring the money into the personal bank account of one of the directors.

(2) No such justification is provided, either, by the fact that the director in question had authority as a sole signatory on the company’s bank account.

(3) The contention that the transfer was required or justified as an urgent way of addressing the high charges and lack of interest on the company’s account, pending identification of a suitable replacement account, is wholly unconvincing. The obvious thing to do would be to give prompt consideration to the best account for the company, set it up and transfer the money directly. In fact, the transfer took place in September, and by November there was still no new company bank account. So far as I can see, there is no evidence that Mr Weiss ever set up a new company account.

(4) The explanation for what has become of the money is equally unconvincing. (a) The application of part of the moneys by way of quantum meruit has every appearance of being nothing more than a rationalisation of misappropriation of company money. The original agreement between the parties was for equal division of profits, by way of a modest salary and the declaration of dividends from time to time. It may be that it was expected that this arrangement would be reviewed when the company had traded for a period of time. But even Mr Weiss’s evidence does not show any agreement for a new basis for or apportionment of remuneration; the furthest he goes is to say that Ms Hughes agreed in principle to “equitable” division but that no agreement could be reached as to what that meant. She denies that any agreement was made. On the basis of the information before me, it seems to me that Mr Weiss has just decided that it is unfair that he received no greater remuneration and has decided to help himself. (b) Although each party was entitled to a dividend of £30,000, the fact that they did not take it for many months after it had been declared lends support to Ms Hughes’ evidence that they had agreed to leave the money in the company until a mutually agreed time. She was content that Mr Weiss retain £30,000 for his dividend, provided he return the balance of the moneys. He returned nothing. (c) As for the appropriation of moneys for moving expenses, Mr Weiss’s argument amounts to this: that he worked at home (which is correct); that his low levels of income meant that he had to sell his home and purchase another home; and that this amounts to relocation of his office, which is a business expense. Mr Jory described the argument as “absurd”. I agree. It seems to me to be nothing more than another rationalisation of the misappropriation of company moneys. (d) As for the contention that payments were made to Mr Weiss’s wife and son, no documentation has been produced to confirm that any such payments were made. If they were made, they seem to me to be another rationalisation of misappropriation. The moneys were neither removed from the company nor retained during 2006 and 2007 for the ostensible purpose of making those payments; it was only later that Mr Weiss sought to justify the failure to return the moneys by reference to a supposed obligation to pay his wife and son. As it appears to me on the basis of the information available at present, the contention that there was any such obligation is very weak. There is no documentary evidence to support the claim that Ms Hughes agreed that such payments should be made, and I think it implausible that she did so. The fact that Mr Weiss received support from his wife does not justify putting her on the company payroll. The claim for payment of £5,000 p.a. to a teenage schoolboy is unsupported by the evidence before me; occasional tokens of appreciation would be understandable, and there is evidence that a single payment of £100 was agreed; but it is entirely clear to me that nothing of the sort contended for by Mr Weiss was ever envisaged.

(5) In short, it seems to me that Ms Hughes has a strong case for saying that Mr Weiss has misappropriated company moneys and is trying to find ways of justifying his wrongdoing and avoiding repayment.

[38]In respect of the second head of claim (carrying on a competing business in breach of fiduciary duty), the evidence is incomplete and any view at this stage can only be provisional. However, my provisional view is that Ms Hughes’ case is a strong one. I might mention a number of matters. First, in assessing the available material, I take into account my clear impression that Mr Weiss was dissatisfied with the returns provided by Iuvus and my clear, albeit provisional, view that he was willing to misappropriate company moneys for his own advantage. Second, the Iuvus website gives reason to prefer Ms Hughes’ evidence of the scope of the company’s activities to Mr Weiss’s evidence and tends to undermine his claim that the business of NAP did not overlap with that of Iuvus. Third, Mr Weiss’s witness statement shows surprising lack of understanding of the scope of his fiduciary duties to Iuvus; in the circumstances there is no particular reason to suppose that he would have been astute to avoid conflicts of interest. Fourth, when viewed in the context of other matters, the appointment of Mr Weiss as a director of NAP and the change of name of that company and the dates when those things occurred lend some support to, though they do not establish, the pleaded case of a course of conduct calculated to achieve Mr Weiss’s advantage at Iuvus’ expense. Fifth, the diversion of funds from Iuvus to Mr Weiss’s own bank account by means of the invoice to Landsbanki Commercial Finance colours my view of Mr Weiss’s conduct at the material time; see further below. Sixth, Ms Hughes’ contention that the parties’ agreement from the outset was that all their legal work would be done through Iuvus is likely to be correct: it is inherently credible, having regard to the parties’ commercial relationship; it represents what would be the default position of the parties as the directors of Iuvus in the absence of agreement; and Mr Weiss’s assertion that Ms Hughes later agreed to him carrying on business outside Iuvus (which she denies) implies that there was not already an agreement to that effect.

[39]On behalf of Mr Weiss, Mr Berragan made the point that Ms Hughes has already obtained an order for pre-claim disclosure, including disclosure of work that Mr Weiss has carried out on his own account since the incorporation of Iuvus; that she has received a signed disclosure statement from Mr Weiss; and that she has taken no further steps in respect of that application or any renewed application for disclosure; yet she brings this derivative claim with no information or particulars of work done in unlawful competition with Iuvus. He submitted that it was an abuse of process to embark on these proceedings on the basis merely of an implicit assumption that further documents, which were not disclosed previously, would somehow come to light now.

[40]I disagree with that submission. The pre-claim disclosure application related to work done on Mr Weiss’s own account. He himself has in these proceedings recognised the distinction between such work and work done for NAP and it is likely that he recognised the distinction when he gave disclosure. Ms Hughes was not obliged to apply for pre-claim disclosure at all; having done so, she was not obliged to make a further application in terms that would include work done for NAP. Anyway, Mr Weiss does not deny that he carried on work for NAP; the essential question is not whether he did so but whether he did so lawfully.

[41]In respect of the third head of claim (diverting funds), there is clear evidence of wrongdoing as regards the Landsbanki Commercial Finance invoice. It is credible that the payment details at the foot of the document should have escaped Ms Hughes’ attention. The contention that the collection of book debts into Mr Weiss’s personal account was justified by low interest rates and high charges on the company’s bank account is, to say the least, unpersuasive.

Is there a mandatory bar under section 263 (2)?

[42]I should be required to refuse permission, if I were satisfied that the acts or omissions complained of were authorised by the company before they occurred or were ratified by the company since they occurred: section 263 (2) (c). But I am not so satisfied.

[43]Mr Berragan did not rely on ratification but on prior authorisation. I reject his contention that the initial transfer of the £100,000 was authorised; neither an agreement that the company’s moneys should be placed in a more advantageous bank account than its existing account nor the existence of a bank mandate permitting a single director to effect transactions on the account constitutes authorisation for the transfer of the company’s funds to Mr Weiss’s personal bank account. As regards what happened thereafter, there is clearly a dispute between the parties, but I am far from satisfied that any of the money was either disposed of or retained in a manner that had been authorised.

[44]The other mandatory bar on the giving of permission is where the court is satisfied that a person acting in accordance with section 172 would not seek to continue the claim: section 263 (2) (a). In Iesini, Lewison J said at [86]:

“… 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.”

[45]In my judgment, it cannot be said that no director acting in accordance with section 172 would seek to continue the derivative claims in this case. Accordingly I do not refuse permission on this ground. Because section 172 is also relevant for the purposes of the exercise of the discretion under section 263 (3), I shall not state here my reasons for the conclusion I have reached under section 263 (2) (a); they will be apparent from what follows.

Section 263 (3)

[46]I turn to the matters falling for consideration under section 263 (3).

[47]As regards paragraph (a), I consider that Ms Hughes is acting in good faith. The issue of good faith turns on whether the derivative claim is being brought for the purpose of vindicating the company’s rights or for some ulterior purpose unrelated to the subject-matter of the litigation. A claim will not be in bad faith merely because, in addition to the proper purposes of the litigation, the claimant is seeking to achieve a collateral purpose: see Iesini at [113] to [121]. In this case, the object of the litigation is to obtain for the company repayment of moneys and compensation for breach of duty. Of course, the claims may fail. But if they succeed they will vindicate the company’s rights in these respects. The fact that they will also provide a benefit to Ms Hughes personally, by increasing the value of her share in the company, does not convert the purpose of the litigation into an improper purpose.

[48]Insofar as Mr Weiss contends that Ms Hughes is bringing this derivative claim as a smokescreen for her own wrongdoing, I reject the contention for reasons already sufficiently indicated.

[49]As regards paragraph (b) and section 172, the justification, if any, for the proceedings is “the need to act fairly as between members of the company”. As Iuvus is a company with no business, no employees, and no future save dissolution, the other factors that will often be important under section 172 do not apply.

[50]Mr Berragan submitted that the claims for diversion of opportunity and diversion of payments would not justify proceedings. There was nothing in the evidence to suggest that the former claim had any significant value, even if it were established. As for the latter claim, the claimant has had disclosure of all relevant invoices and documents pursuant to the order for pre-claim disclosure; there is no reason to suppose that anything further will come to light. A single invoice for less than £2,000 would not justify proceedings.

[51]On the basis of the available information, I consider that the claim for diversion of opportunity has sufficient merit to justify its pursuit by a person acting in accordance with section 172. It is unclear whether it has significant value; that is frequently the position with such claims when proceedings are at an early stage. On the other hand, Mr Weiss’s apparent financial expectations, as appearing in the email communications between himself and Ms Hughes in 2006 and 2007, make it reasonable to believe that any business opportunity he thought worth exploiting generated relatively significant levels of income.

[52]The position is rather different regarding the claim for diversion of payments, because Ms Hughes has not established any substantial likelihood that further examples will come to light, beyond the invoice to Landsbanki Commercial Finance. If the claim stood alone, it is doubtful whether it would justify permission for continuation of a derivative claim. However, the claim does not stand alone: whether or not it is pursued as a distinct head of claim, it can hardly be excluded from consideration as part of the wider circumstances, given the way in which Ms Hughes puts her case. Further, I can at present see no obvious defence to the claim in respect of the invoice that has been identified: it was for money due to Iuvus, and Mr Weiss has received the payment. In the circumstances, I consider that a person acting in accordance with section 172 would attach some limited importance to continuing this particular claim in conjunction with the other heads of claim.

[53]Mr Berragan submitted, further, that any cost/benefit analysis would show that the proceedings were not in the company’s interests, even if the claim in respect of £100,000 were included. The submission had two limbs. First, even if the claim were successful, any moneys recovered would go to Ms Hughes and Mr Weiss—the company will not resume trading but will be dissolved, and the proceedings will not in any way promote the “success” of the company. Second, the company will be at risk as to costs: if the claim is not wholly successful, the company will be at risk of a partial costs order; and if it is wholly unsuccessful it will lose all of its entire assets (some £15,610) and become insolvent.

[54]I am not persuaded by that submission. As to the first limb, the only meaning that can be given to the notion of the “success” of the company in the present circumstances is in respect of the fair distribution of benefits to its members. That is squarely within the scope of section 172. The fact that the company will not resume trading but will be dissolved is not a compelling objection to the conclusion that a person acting in accordance with section 172 would attach importance to continuing the proceedings. Indeed, in my judgment such a person would attach considerable importance to continuing the claim for the purpose of remedying the unfairness that (if Ms Hughes is right) will exist if she is deprived of the substantial benefit of her entitlement to half the assets in Iuvus when it is dissolved.

[55]As to the second limb of Mr Berragan’s submission, I accept that the incidence of costs is relevant both under section 263 (3) (b) and in connection with the question, which I shall address below, of the availability of an alternative remedy. However, I do not consider that it is a significant objection to the continuation of these derivative claims. Mr Berragan’s submission rested implicitly on the fact that, ordinarily, a company on whose behalf a derivative claim is pursued will be ordered to indemnify the claimant, whether or not the claim succeeds: Iesini at [124] to [126], following Wallersteiner v Moir (No. 2) [1975] Q.B. 373, 391-2. The justification for this prima facie rule is that the claimant is acting for the benefit of the company, with the approval of the court. However, the rule is not applied invariably or without regard to the facts of the particular case, and it seems to me to have no plausible application in the present case. Although the purpose of the derivative claim is to vindicate rights that vest alone in the company, the substance of the dispute is between the two persons who alone are entitled to the company’s assets. If Ms Hughes fails in this claim, there is no good reason that I can see why the company should indemnify her in costs or pay Mr Weiss’s costs. That would be to make him partially liable for the costs of a claim he had won. On the facts of this case, Ms Hughes and Mr Weiss must conduct the proceedings at their own risk, subject of course to insurance (Ms Hughes brings the claim with the benefit of a conditional fee agreement and an ATE policy of insurance). Mr Jory submitted in terms that Ms Hughes was able to bring the claim at no expense to Iuvus and accepted that she could not hope to look to the company for an indemnity.

[56]As regards paragraph (d), there is no likelihood of ratification of any of the acts or omissions complained of. This is, of course, because the company is deadlocked. For the same reason, paragraph (e)—whether the company has decided not to pursue the claim—presents no good reason to refuse permission to continue these proceedings.

[57]Paragraph (f) raises the question of the availability of an alternative remedy. Because of the importance of this question in the present application, I shall address it separately.

Alternative remedy

[58]In Barrett v Duckett [1995] B.C.C. 362, at 367, Gibson L.J., giving the leading judgment, summarised the general principles governing actions in respect of wrongs done to a company or irregularities in the conduct of its affairs. He expressed the sixth and final principle as follows:

“The shareholder will be allowed to sue on behalf of the company if he is bringing the action bona fide for the benefit of the company for wrongs to the company for which no other remedy is available. Conversely if the action is brought for an ulterior purpose or if another adequate remedy is available, the court will not allow the derivative action to proceed.”

[59]In section 263 (3) the existence of an available remedy, whether one that can be pursued by the claimant in his or her own right or by a class procedure such as a winding up, is a factor to be taken into account in the exercise of the court’s discretion.

[60]It has sometimes been supposed that the position was different under the law as it stood before October 2007—which, for reasons already stated, is relevant in this case—and that Peter Gibson LJ’s sixth principle states an absolute bar to derivative claims where an alternative remedy is available.

[61]In my judgment there was no such absolute bar under the law as it stood before October 2007. The statement of principle in Barrett v Duckett ought not to be read as a legislative formula or without any regard to the circumstances of the case in which it was made.Indeed, it has generally not been read in such an inappropriately narrow way. For example, in the Scottish case of Wilson v Inverness Retail & Business Park Ltd 2003 S.L.R. 301, Lord Eassie said at 307 - 308:

“I do not consider that the admissibility of the derivative action is removed by any provision in the legislation relating to what are now s 459 proceedings. Point 6 of the Barrett v Duckett summary raises issues as to the English courts' power to control proceedings on the basis of both good faith and the appropriateness of other proceedings. In the very special factual context of Barrett v Duckett … one can understand the court’s concern with those issues. But as counsel for the pursuers pointed out, in that case the plaintiff had admittedly, and for other ultroneous reasons, opposed the defendants’ efforts to put the corporate assets into neutral control by means of liquidation. The other cases from which proposition 6 was derived were similarly liquidation cases. … In my opinion neither the court in Barrett v Duckett nor the judges in the decisions referred to by way of elaboration of point 6 were stating that proceedings under s 459 of the Companies Act constitute an alternative remedy which either absolutely, or possibly, depending on the discretion of the court, precluded the bringing of a derivative action.”

In Konamaneni v Rolls Royce Industrial Power (India) Ltd [2002] 1 W.L.R. 1269,

[2002] 1 BCLC 336

, Lawrence Collins J considered Peter Gibson LJ’s sixth principle at [29]:

“The defendants also rely on a further proposition, namely that there must be no other adequate remedy available, which is derived from Barrett v Duckett [1995] BCC 362 at p.367. That was a case in which the alternative remedy was a claim by the liquidator, since a petition had been presented to wind up the company. Both Peter Gibson and Beldam L JJ considered that the decision whether to pursue an action against directors alleged to have diverted the business of the company was best left to the judgment of an independent liquidator. Peter Gibson LJ relied on two other decisions (Ferguson v Wallbridge [1935] 3 DLR 66, PC; Fargro Ltd v Godfroy (1986) 2 BCC 99,162) in which derivative actions failed because there was a liquidator who was in a position to take action. This is not the occasion to express a final view, but it seems to be that the notion that there must be no alternative remedy expressed in Barrett v Duckett is not an independent bar to a derivative action, but simply an example of a case where there will be no relevant wrongdoer control.”

In Mumbray v Lapper

[2005] EWHC 1152 (Ch)

, [2005] B.C.C. 990, H.H. Judge Reid QC, sitting as a judge of the High Court, cited Lawrence Collins J’s remarks and said at [5]: 62. In Parry v Bartlett

[2011] EWHC 3146 (Ch)

, H.H. Judge Behrens, sitting as a judge of the High Court, was also content to “follow the steer” given by Lawrence Collins J and to conclude that, under the old law, the existence of an alternative remedy was not an absolute bar to a derivative claim.

[62]I respectfully agree with Judge Reid QC and Judge Behrens.

[63]In fact, Mr Berragan did not submit that the existence of an alternative remedy constituted an absolute bar to the derivative claim in the present case, but he did submit that it was a powerful and compelling reason why permission to continue the derivative claim should be refused. In particular, he submitted that the appropriate way of resolving the issues between the parties was by means of either an unfair prejudice petition under section 994 of the Companies Act 2006 or a members’ voluntary liquidation of Iuvus, in which the liquidator would be able to form an objective view of where the company’s advantage lay.

[64]One reason given by Mr Berragan for concluding that a section 994 petition or a winding up would be more appropriate was that in either of those cases the issues would be resolved at the risk, as regards costs, of the members rather than the company, which would be at most only a nominal party. I have already stated my reasons for rejecting that argument.

[65]More generally, Mr Berragan submitted that a derivative claim was an inappropriate procedure because it did not permit the court to consider all of the outstanding issues between the parties that would have to be resolved before the affairs of Iuvus could be finally resolved. By contrast, he said, that could be done in a liquidation or in proceedings under section 994.

[66]In my judgment, Mr Jory was correct to submit that the issues raised by Ms Hughes are more appropriately dealt with by a derivative claim than by a section 994 petition. Ms Hughes is not seeking an order that Mr Weiss buy her shares, nor does she desire to buy his. Rather she seeks financial remedies for the company for misfeasance. The proper way of achieving that is by a derivative claim, not a section 994 petition. In Stainer v Lee, Roth J at [51] emphasised “the fundamentally different nature of the two forms of proceedings” and cited the dictum of Millett J in Re Charnley Davies Ltd (No. 2)

[1990] BCLC 760

at 784:

“The very same facts may well found either a derivative action or a s [994] petition. But that should not disguise the fact that the nature of the complaint and the appropriate relief is different in the two cases. Had the petitioners’ true complaint been of the unlawfulness of the respondent’s conduct, so that it would be met by an order for restitution, then a derivative action would have been appropriate and a s [994] petition would not. But that was not the true nature of the petitioners’ complaint. They did not rely on the unlawfulness of the respondent’s conduct to found their cause of action; and they would not have been content with an order that the respondent make restitution to the company. They relied on the respondent’s unlawful conduct as evidence of the manner in which he had conducted the company’s affairs for his own benefit and in disregard of their interests as minority shareholders; and they wanted to be bought out. They wanted relief from mismanagement, not a remedy for misconduct.”

[67]It is true that the court seized of the section 994 petition could itself permit a derivative claim to be brought: see sections 260 (2) and 996 (2) (c). But there is no point in ensuring the need for yet more proceedings, when I am able to give permission for the existing proceedings to continue. And if the purpose of a section 994 petition would be to obtain permission for a derivative claim, the matter is more appropriately dealt with under section 260.

[68]As to Mr Berrigan’s submission that proceedings under section 994 would be more appropriate because they would provide an umbrella under which Mr Weiss’s concerns regarding expenses could be dealt with, I make two observations. First, for reasons already indicated, the appropriate procedure is under section 261 rather than section 994; a collateral convenience in respect of the expenses issue does not somehow alter the fact that what Ms Hughes seeks is appropriate for a derivative claim but not for an unfair prejudice petition. Second, I am far from convinced that any proceedings are likely to be required in respect of the expenses issues raised by Mr Weiss; it seems to me very likely that, once these proceedings have been resolved, they will prove easy of negotiated resolution, if they do not fall away entirely.

[69]I do not consider that permission to continue these proceedings should be refused because of the availability of voluntary liquidation as a method of winding up the company’s affairs and resolving the issues necessary to that end. It is highly unlikely that a liquidator would fund litigation. The company has only about £15,000 in the bank and no other assets, apart from any value to be attached to these claims. Mr Berragan submitted that the liquidator would properly seek directions from the court in order to enable Ms Hughes and Mr Weiss to resolve the issues directly between themselves. There is no point at all in such a convoluted solution. They can litigate the issues in these proceedings far more conveniently.

[70]In the circumstances, I shall give permission for the derivative claims brought in these proceedings to be continued.

[71]Of course, the views I have expressed regarding the substantive merits of the derivative claims will not bind the judge at any subsequent trial.

A personal claim

[72]Paragraphs 38 to 40 of the particulars of claim advance a personal claim by Ms Hughes to reimbursement from the company in respect of debts that she has discharged on behalf of the company in the total sum of £5,490. This is not a derivative claim and it is not brought on behalf of the company. It is a personal claim brought against the company.

[73]Mr Jory explained that the personal claim had been included in these proceedings simply as a matter of convenience, in order to avoid the need for a second set of proceedings and the disproportionate costs that would involve.

[74]I was at first attracted to the robust view that it would be cheaper and simpler to permit all of the claims to be dealt with in the same proceedings. On reflection I am inclined to the opposite view. In the derivate claims Ms Hughes speaks for the company. In the personal claim she speaks against it. Any defence to the personal claim would presumably be advanced by Mr Weiss, who is in effect defending proceedings by the company on the derivative claims. The position relating to costs is likely to be very different in the one case from what it will be in the other. Although I have much sympathy with what Mr Jory was trying to achieve by the inclusion of the personal claim, I am not sure that the effort is successful.

[75]The personal claim does not fall within the scope of the present application, which relates only to the derivative claims. Understandably, the focus of attention at the hearing of the application was on the latter rather than the former. In the circumstances, I shall stay the personal claim until the case management conference, when it can be further considered. In the meantime the only defence required of Mr Weiss will be in respect of the derivative claims. It may be that the proper course will be to remove the personal claim from these proceedings or, perhaps, to stay it until the derivative claims have been determined. The parties and their representatives will no doubt give thought to the most convenient way of proceeding.

[76]I mention, finally, that it may be that there is no issue as to Ms Hughes’ entitlement to the relief she seeks on her personal claim. If that is the case, there is no reason why she and Mr Weiss, as the sole members of Iuvus, cannot dispose of this small part of the litigation by agreement. ____________________________