“Thirdly, however little insight a judge may gain from the demeanour of a witness of his own nationality when giving evidence, he must gain even less when… the witness belongs to some other nationality… If a Greek, [accused of lying], becomes rhetorical and voluble… what (if any) significance should be attached to that? … To rely on demeanour is in most cases to attach importance to deviations from a norm when there is in truth no norm.”
“In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”
“We have been using our service companies since 1989 with no problems”
“Being a small company we had difficulty competing financially with large corporations when recruiting high level technical people and the personal service company was a tool to enhance the tax efficiency of our remuneration package. The relationship between us was governed by the contracts and [Dr Potamianos] adhered to them”
“The over-arching objective from my point of view for recruiting Mark is to start building the succession team”
“5) In order to achieve our reduced time at work we need to hand the day to day running of the business over to the younger generation. How and if this is possible is the key topic for our up coming meetings. 6) we both agree that when this occurs we should take a back seat on the management side and dovout (sic) our work time to the technical side of our respective roles.”
“We have a meeting with Gary and Mark. We explain to them that we are preparing for our eventual retirement and have considered all of our options. These boil down to 3 routes. 1) Find an acquirer for [SEL] 2) Bring in a new management team. 3) Form a management team from within [SEL]. We tell them our favoured option is number 3 and we want to try this first… Comments appreciated as usual.”
“It was agreed that we need to start looking for an AP replacement NOW since it could be some time before we find an individual with the right technical and personality attributes.”
“Actions Technical: AP replacement – embedded s/w specialist but with wider skill-set – start search process immediately… Actions: Enabling Functions. Investigate getting additional resource from Martlets – short term requirement – Requires SM to acknowledge difficulties …”
“Day-to-day running will be handed over to Gary and Mark but as sole shareholders Aris and Edwin will continue to have a strategic interest. What happens in the longer term depends mainly on how successful Gary and Mark are in running the business. If Sprint continues to thrive then the arrangement will continue. …Both Edwin and Aris will be in Sprint Electric three days a week after handover. They will be engaged purely in technical tasks but, if required, they will be available for consulting on management matters.”
“Handover: Wednesday 11-Jun-2104 (internal announcement) End of transition period: Monday 01-Sep-2014.”
“Totally unacceptable angry bad tempered aggressive rant to me about me in front of others (MG). I personally would have removed her from the business at that point. No question. However, the special circumstances surrounding SM meant I was not able to act. No apology has ever been made. This just highlights the total lack of respect given to me (and everyone except AP).”
“providing Stephanie wishes to stay, we will have another 5 way meeting to see if Mark, Gary and Stephanie can be reconciled”
“if we manage to effect a “reconciliation” of Stephanie with the managing directors, we can stay on the present course until either of us reconsiders his options. 2. In the event that we cannot secure a satisfactory agreement on reconciliation, I still intend to monitor day to day the business operations and intervene when necessary… 3. If we end up in scenario 2, then it is obvious that this situation would not be viable for very long, so we should immediately start taking soundings from the market for possible sale. This can happen either with both of us going together to achieve maximum value or just myself (in case yourself sees no reason to exit) trying to sell my minority state with the technical support/commitment attached to the sale.”
“As I said to you in the meeting, we have now, individually & collectively, reached the point of “no-return” and (among other things) “your task to keep Stephanie on board will be fraught due to your lack of strong leadership qualities”
“(1) budgets for each element of the business are to be agreed by the Board; (2) the Managing Directors will apply the budgets as they see fit in the running of the business and will not exceed the budgets without further Board approval ….. (6) All Board Directors will abide by the resolutions of the Board. In the event of a breach then any Director will inform the other Directors as quickly as possible so that the Board can be re-convened to come to a resolution on the matter. (7) the MDs will be left to run the business within the framework outlined without day to day interference from the owners”
“I must stress that there was no question about your work effort, your innovative ideas, your desire to protect my interests. I consider you to be extremely proficient. This made my decision all the more agonising for me. I am sorry for the pain it has brought you.”
“The route discussed is work to remove known bug. Edit commentary. Place compileable code in secure place. Then recruit engineer for transfer. I am not clear whether this is agreed.”
“The problems these bugs create are being managed by Jim [Lock] but this will become increasingly difficult as time goes on. This is particularly true of JL/X; once we have exhausted our stock of v1 control boards the product will no longer have the correct MM1 strings.”
“do their best to agree a fair value for whatever solution is deemed appropriate. In general for SE this means considering: a) An element of multiplier on profit (AP suggested 4, EP thought this seemed right) b) spare cash to be a separate element c) Excess stock to be considered d) Taking account of previous higher performing years to provide a fair value not only based on the current low year.”
“We are vulnerable to any chronic technical problem with our products due to our resources. For example a recall on a PLX would have very serious consequences. I have been very cautious over the years to ensure the designs are resilient. We have had a few instances over time and the impact is far reaching. So far we have survived them. The Company relies on a lot of goodwill from the workforce and I have always tried to foster a happy workplace… Product Elephant in the room is software and the PLX product range which is the main earner… Source code for the PLX that belongs to SE is not available to it and no one apart from Aris knows where it is. This to me is the single biggest threat. Aris is refusing to hand over the source code because there is no shareholder agreement. There is no shareholder agreement because Aris does not agree that my 60% should allow me to appoint 3 directors and his 40% only 2. (This was intrinsic in the original agreement). So now we have to rely on the articles … Without Aris available for whatever reason to further develop the software then the PLX is not a product we can build our future on as the software platform is not stable. This makes debugging and development difficult, if not impossible. Without knowing the status of the source code and documentation it is hard to assess the development effort required to create a robust and reliable platform but in the worst case it is likely to mean a complete code re-write. This is a formidable task (multiple man years) … In conjunction with Mark I have assessed what resource would be needed to replace Aris. It requires 2 high level engineers with complimentary (sic) skills … The 2 engineers would have to be under the direction of Mark. However, Aris has told me that he would refuse to train Mark. This presents a further difficulty. I was lucky to find Aris in 1998 in that he had the skills of E1 plus E2 plus the experience of designing the 590 series. It was for this reason that when the opportunity arose with DVDW buyback I facilitated Aris becoming a significant shareholder in 2007 because I wanted ongoing security of software”
“1) Recent buyout offer The offer was insufficient because it was based on an investment profits multiple plus assets formula. You now indicate that you would only consider selling at a price that reflects the higher multiples typical of a strategic sale. 2) Source code I asked you where the PLX source code was and you told me it was hidden in your personal domain on your Sprint machine. 3) Re Shareholder Agreement/source code From earlier discussions I understood that the reason you would not reveal the source code location was because the original shareholder agreement had been obsoleted by the formation of the holding company and If (sic) a new agreement were to be reached then the source code problem would disappear. In our latest meetings I offered to try and negotiate a new shareholder agreement but your opinion was that this was not worth pursuing. 4) Re Other Directors You told me that you would be willing to converse with Mark and Gary on Company matters but under no circumstances would you work with either of them on any project... 8) Software and source code … You said that you alone would decide if and when it was made available to Sprint and that might be one or even two years. You did acknowledge that the source code was the property of Sprint.”
“ … only Item 5 (out of 9) represents an accurate account of our conversation. Also Item 1, whilst correct in the information it conveys, it is incorrect as to how it is contextually phrased regarding the words “now” and “only” in the second sentence of the paragraph …”
“[SEL] is at risk because you are the only person who can support the software. Although you say the current source code is on your works machine, you have placed it in your personal domain and it is unavailable to anybody else. Furthermore you are the sole depository in [SEL] of the knowledge of how it works. I think it is your duty as a director of [SEL] to co-operate fully in rectifying this immediately. Surely you can see that this is best for [SEL]? …Also can you assist in the transfer of your knowledge to the [SEL] technical team… Surely you can see that at the moment [SEL] is at risk… Obviously we need to do sensible things to limit the risk of employees damaging the software. But if you went under a bus tomorrow then we would be in very vulnerable position. Please indicate if you agree to this program. Happy to include appropriate protections against accidental damage by other employees. If you don’t agree, can you let me know why…”
“My pressing concern is the 2nd subject of my email of 6th Feb i.e. the software. I need to know what your position is on this. I want [SEL] to be able to independently support and develop the existing platform. This will require you/BDL to assist in the training of a new engineering resource. I want this to be in place before commencing on any other software project…”
“If I were to be considering a private valuation, then we would be in the£500k -£700k range … As a business sale, to obtain the higher values that you may have in mind will need some strong growth and a return to the strong net profits over a 3-5 year period.”
“If it was not for the fact of the dispute with Aris then I believe Mark and Gary would have no issues in being open and frank with you on any topic related to the accounts as would normally be expected. However, when operating under the cloud of legal action by Aris with his avowed intention to reverse their business plan, and with Stephanie invariably copying him in on everything then I for one understand their reticence. I also understand that Will offered to have an introductory meet and greet and discussion on how to work together with Stephanie, but she wanted Aris and me in attendance. You may say what is wrong with that. My experience is a lot could be wrong with that. Although I am not saying she was wrong to ask given her difficult position.”
“It is no longer appropriate on a number of levels for Martlet Partnership to continue acting for Sprint and Sprintroom on a long term basis aside for completing ongoing assignments in hand… Under the terms of our agreement for Sprintroom we will carry out the pure accounting function for a period of 3 months or less should you find somebody before then.”
“… contracts are with BDL for delivery of specific projects. This has nothing to do with any dispute over IPR. If indeed there is such a dispute, it is with Aris Potamianos as an individual and hence a different entity to BDL.”
“EJP went on to say there is another solution making the proposal unnecessary and that is for AP to confirm that the IPR is owned by Sprint Electric and to make available the latest 6.13 source code with an explanation together with all deliverables of previous contracts by BDL. AP said it is not relevant to discuss this as it is part of an ongoing process.”
“… a decision such as this is not the remit of the board of directors, but, in accordance with the shareholders’ agreement, is a decision that can only be taken by the shareholders themselves. I have been informed by one of the shareholders that he does not support the appointment of [LB] in any capacity and therefore I am not willing to risk legal action by failing to adhere to that information, unless and until I am notified to the contrary… Please understand that this in no way should be interpreted by you as me being uncooperative but simply then I have to respect the rules and regulations of my professional body.”
“Employees are liable to income tax on their earnings under Schedule E, and they and their employers have to pay National Insurance contributions (“NIC”) on the Class 1 (employed) basis. Taxation under Schedule E has several well-known disadvantages as compared with the taxation (under Schedule D Case I or II) of those who carry on a business or profession. These disadvantages include immediate taxation at source under PAYE, and a much more restricted scope for the deduction of expenses. Moreover, if an individual employee of a company became the controlling shareholder of a service company which (as an independent contractor) provided his services to the former employer as a client, he could achieve a double advantage. The service company would pay a low rate of corporation tax on its profits as assessed under Schedule D, and the individual could decide how much of the company’s revenue should be distributed either as remuneration or by way of dividend (free of NIC) to himself and other members of his family who might be employed by or shareholders in the service company.”
“The Chancellor announced today that changes are to be introduced to counter avoidance in the area of personal service provision. This move underlines the Government’s commitment to achieving a tax system under which everyone pays their fair share. There has for some time been general concern about the hiring of individuals through their own service companies so that they can exploit the fiscal advantages offered by a corporate structure. It is possible for someone to leave work as an employee on a Friday, only to return the following Monday to do exactly the same job as an indirectly engaged “consultant” paying substantially reduced tax and national insurance. The Government is going to bring forward legislation to tackle this sort of avoidance … The new rules will take effect from April 2000.”
“The basic conditions for the application of the new regime are set out insection 4A of the Social Security Contributions and Benefits Act 1992 … as inserted by section 75 of the 1999 Act, in paragraph 6(1) of the Regulations and in paragraph 1(1) of Schedule 12 to the 2000 Act. These are in almost identical terms and it is sufficient to set out the provision in the 2000 Act: This Schedule applies where— (a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for the purposes of a business carried on by another person (“the client”), (b) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and (c) the circumstances are such that, if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client.”
“Where the intermediary is a company the IR 35 regime applies … only if the worker has a material interest in the company (in broad terms at least a five per cent interest, aggregating the interests of the worker himself and any associates of his) or receives what the judge called a “traceable dividend”
“…The judge rightly emphasised the point, which I have already noted, that the service contractors adversely affected would be those who provided the equivalent of employees services (and not the services of self-employed independent contractors). The extra tax paid by the companies would be Schedule E tax and NIC paid on account of the workers who were equivalent to employees … Instead of certainty as to the impact of tax and NIC, service contractors as a result of IR 35 have uncertainty as to whether IR 35 will or will not apply to a particular engagement … Service companies did until6 April 2000 shield those who used them from having to face up to the often difficult question of whether they would, on the terms and in the context of a particular engagement, be on the employed or the self-employed side of an elusive dividing-line. The immunity conferred by the service company had now gone, and the service contractor had to decide the question for himself, with such help as the Revenue could provide either in the way of informal advice or (once an engagement had been entered into) a formal ruling in the course of the tax year…”
“[The judge’s] conclusions were that IR 35 is a general measure (and not an exception to or a derogation from a general measure). Its aim is to ensure (so far as possible) that all those who supply employee-like services should pay income tax and NIC under the system appropriate to employees, and should not be able to avoid that system by the interposition of an intermediary.”
“The fundamental test to be applied is this: ‘Is the person who has engaged himself to perform these services performing them as a person in business on his own account?’ If the answer to that question is ‘yes’, then the contract is a contract for services. If the answer is ‘no’, then the contract is a contract of service. No exhaustive list has been compiled and perhaps no exhaustive list can be compiled of the considerations which are relevant in determining that question, nor can strict rules be laid down as to the relative weight which the various considerations should carry in particular cases. The most that can be said is that control will no doubt always have to be considered, although it can no longer be regarded as the sole determining factor; and that factors which may be of importance are such matters as whether the man performing the services provides his own equipment, whether he hires his own helpers, what degree of financial risk he takes, what degree of responsibility for investment and management he has, and whether and how far he has an opportunity of profiting from sound management in the performance of his task.”
“In order to decide whether a person carries on business on his own account it is necessary to consider many different aspects of that person’s work activity. This is not a mechanical exercise of running through items on a check list to see whether they are present in, or absent from, a given situation. The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another. The process involves painting a picture in each individual case. As Vinelott J said in Walls v Sinnett (1986) 60 TC 150, 164: ‘It is, in my judgment, quite impossible in a field where a very large number of factors have to be weighed to gain any real assistance by looking at the facts of another case and comparing them one by one to see what facts are common, what are different and what particular weight is given by another tribunal to the common facts. The facts as a whole must be looked at, and what may be compelling in one case in the light of all the facts may not be compelling in the context of another case.’”
“A contract of service exists if these three conditions are fulfilled. (i) The servant agrees that, in consideration of a wage or other remuneration, he will provide his own work and skill in the performance of some service for his master. (ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the other’s control in a sufficient degree to make that other master. (iii) The other provisions of the contract are consistent with its being a contract of service.”
“I accept what the parties accept, namely, the label, as a guide and no more. I regard the concept of ‘the lump’ in the circumstances of the present case as no more than a device which each side regarded as being capable of being put to his own advantage in a manner that I have attempted to describe earlier in this judgment, but which in reality did not affect the relationship of the parties or the performance of the substance of the contract between them.”
“… if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it. If they should put a different label upon it and use it as a dishonest device to deceive the Revenue, I should have thought that it was illegal and could not be enforced by either party and they could not get any advantage out of it – at any rate not in any case where they had to rely upon it as the basis of a claim: see Alexander v Rayson(1936) 1 KB 169 . An arrangement between the two parties to put forward a dishonest description of their relationship so as to deceive the Revenue would clearly be illegal and unenforceable. On the other hand, if the parties’ relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them. This is clearly seen by referring back to Inland Revenue Commissioners v Duke of Westminster(1936) AC 1 .”
“Fairness and justice have throughout inclined me to accept the minority view in this case. If Mr West chooses to call himself self-employed for fiscal advantages which are denied to an employee, why should he claim the advantage of statutory rights which are available to an employee but denied to the self-employed? And why should the agreement of employers to treat him as self-employed make any difference to the injustice or unfairness of his having both advantages? But, in my judgment, the answer is that he and his work should be classified not by appearance but by reality. If he is really self-employed the Industrial Tribunal should refuse to consider his statutory rights as an employee. If he is really an employee or servant the Inland Revenue should reclaim tax deductions which have been granted to him as self-employed; and, if this court declares that the true legal position between him and his employers is not in accordance with the agreement deliberately chosen by the parties and put before them for their information, I do not suppose that the Inland Revenue would fail to discharge their statutory duty. But I have come to the conclusion that the minority view cannot prevail. I have come to the conclusion that the decision of the Industrial Tribunal was right and that the true legal relationship of the parties was not that of a self-employed agent working independently for this company. … I am satisfied that the parties can resile from the position which they have deliberately and openly chosen to take up … It would, in my judgment, be impossible to regard Mr West - self-employed though he asked to be treated, self-employed though his employers agreed that he should be treated and the Inland Revenue agreed that he should be treated - as a person in business on his own account as Mr Massey, in very different circumstances, was clearly rightly regarded. Unjust as it may seem in this case that Mr West should be able to get away from the bed which he has made, or to eat his cake and still keep it, or to wear two hats according to which one happens to suit him at the time - whatever metaphor is used - nevertheless it is in my judgment the duty of an Industrial Tribunal, once a person goes to it and says, “Though I was self-employed, nevertheless I am an employee entitled to enforce my statutory rights”, to see whether the label of self-employed is a true description or a false description by looking beneath it to the reality of the facts, and it must be its duty to decide on all the evidence whether the true legal relationship accords with the label or is contradicted by it.”
“Ensure that there is clear evidence of cash being moved from [SEL] to [Dr Potamianos] for the [Intellectual Property Rights] and then back for the share subscription…At the time of the [Intellectual Property Rights] sale, [Dr Potamianos] should not have given any undertaking that he will subscribe for shares …”
“Purchase of [Dr Potamianos’] [Intellectual Property]. (1) If [Dr Potamianos] is not associated with [SEL] at the time of the purchase then [SEL] can amortise the cost of the [Intellectual Property]. (2) If [Dr Potamianos] were to use the proceeds of sale of his [Intellectual Property] for a qualifying investment then he would be able to obtain [Enterprise Initiative Scheme] relief on the [Capital Gains Tax]. Both of the above conditions can be fulfilled providing the process is in the correct sequence and certain other conditions are observed. Obviously we are keen to qualify for these reliefs as [SEL] could save approximately£80k and [Dr Potamianos] approximately£50k … Summary of sequence of events to get optimum deal … [SEL] purchase [Dr Potamianos’] [Intellectual Property]. Next day [Dr Potamianos] makes investment in [SEL] and [Intellectual Property] loan repaid to Barclays …”
“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to “what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean”, … And it does so by focusing on the meaning of the relevant words … in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provision of [the contract], (iii) the overall purpose of the clause and the [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party’s intentions.”
“Section 11 of the Copyright, Designs and Patents Act 1988 says: “(1) The author of a work is the first owner of any copyright in it, subject to the following provisions. (2) Where a literary, dramatic, musical or artistic work is made by an employee in the course of his employment, his employer is the first owner of any copyright in the work subject to any agreement to the contrary.”
“I find that conclusion fantastic. If an officious bystander had asked at the time of contract whether Mr Evans was going to retain rights in the combined logo which could be used against the client by Mr Evans (or anyone to whom he sold the rights) anywhere in the world, other than in respect of point of sale material in the UK, the answer would surely have been “of course not.”
“The general principles governing the respective rights of the contractor and client in the copyright in a work commissioned by the client appear to me to be as follows: (1) the contractor is entitled to retain the copyright in default of some express or implied term to the contrary effect; (2) the contract itself may expressly provide as to who shall be entitled to the copyright in work produced pursuant to the contract. Thus under a standard form Royal Institute of British Architects (‘RIBA’) contract between an architect and his client, there is an express provision that the copyright shall remain vested in the architect; (3) the mere fact that the contractor has been commissioned is insufficient to entitle the client to the copyright. Where Parliament intended the act of commissioning alone to vest copyright in the client, e.g. in case of unregistered design rights and registered designs, the legislation expressly so provides … In all other cases the client has to establish the entitlement under some express or implied term of the contract; (4) the law governing the implication of terms in a contract has been firmly established …; (5) where … it is necessary to imply the grant of some right to fill a lacuna in the contract and the question arises how this lacuna is to be filled, … [t]he principle is clearly stated that in deciding which of various alternatives should constitute the contents of the term to be implied, the choice must be that which does not exceed what is necessary in the circumstances … In short a minimalist approach is called for. An implication may only be made if this is necessary, and then only of what is necessary and no more; (6) accordingly if it is necessary to imply some grant of rights in respect of a copyright work, and the need could be satisfied by the grant of a licence or an assignment of the copyright, the implication will be of the grant of a licence only; (7) circumstances may exist when the necessity for an assignment of copyright may be established. … [T]hese circumstances are, however, only likely to arise if the client needs in addition to the right to use the copyright works the right to exclude the contractor from using the work and the ability to enforce the copyright against third parties. Examples of when this situation may arise include: (a) where the purpose in commissioning the work is for the client to multiply and sell copies on the market for which the work was created free from the sale of copies in competition with the client by the contractor or third parties; (b) where the contractor creates a work which is derivative from a pre-existing work of the client, e.g. when a draughtsman is engaged to turn designs of an article in sketch form by the client into formal manufacturing drawings, and the draughtsman could not use the drawings himself without infringing the underlying rights of the client: (c) where the contractor is engaged as part of a team with employees of the client to produce a composite or joint work and he is unable, or cannot have been intended to be able, to exploit for his own benefit the joint work or indeed any distinct contribution of his own created in the course of his engagement … (8) if necessity requires only the grant of a licence, the ambit of the licence must be the minimum which is required to secure to the client the entitlement which the parties to contract must have intended to confer upon him. … (9) the licence accordingly is to be limited to what is in the joint contemplation of the parties at the date of the contract, and does not extend to enable the client to take advantage of a new unexpected profitable opportunity …”
“BDL undertakes that it shall: 4.1 Use its best endeavours to develop Sprint’s Business to its full potential in the most economic efficient and profitable way with best business practice 4.2 Disclose all material information concerning the running of Sprint’s Business.”
“[BDL] agrees to undertake technical services in motion control (the Services) to [sic] [SEL] (“the Contract Works”). How [BDL] fulfils its contractual obligations is a matter for [BDL].” (3) Clause 5 provides: “[BDL] agrees to undertake the Services in a professional manner at all times and undertakes the Services in the capacity of a specialist.” (4) Clause 6 provides: “[SEL] shall not control, nor have any right of control as to how [BDL] is to perform the Contract Works …” (5) Clause 11 provides: “[BDL] may, at its absolute discretion, send a substitute or delegate to perform the Contract Works …” (6) Clause 13 provides: “The whole or part of this Contract for Services may be assigned or subcontracted to any third party at the sole discretion of [BDL] and [SEL] may not object …” (7) Clause 15 provides: “The Contract Price for the Contract Works will be negotiated and agreed as between [SEL] and [BDL] from time to time and this will be detailed in Schedule A attached.” (8) Clause 18 provides: “Both [SEL] and [BDL] agree that this is a Contract for Services essentially in respect of specialist services only.” (9) Clause 21 provides: “Defective work by [BDL], its directors, employees, consultants, substitutes or hired assistance will be corrected by [BDL] at its own cost or in its own time.” (10) Clause 25 provides: “[BDL] is not entitled to partake in any grievance procedure and as an independent limited company is not entitled to any employment law rights.” (11) Clause 33 provides: “[BDL] is free to undertake other Contracts for Services for other parties at any time, either before, after, or concurrently with this Contract for Services.” (12) Clause 38 provides: “At the end of the term of this Contract for Services [BDL] undertakes to deliver to the [SEL] or as directed by the [SEL] all documents relating to the Contract Works.” (13) Clause 39 provides: “All copyright and other intellectual property rights in all work, including all work of a preparatory or design nature, or developed or created from such work in performing the Contract Works for [SEL] shall be deemed to be the undisputed property of the [SEL].” (14) Clause 42 provides: “[BDL] will prepare invoices for all Contract Works undertaken, on a frequency confirmed in Schedule A.” (15) Clause 46 provides: “Both parties agree and intend that this legal relationship is one of undertaking independent specialist services and specifically is not a relationship of master and servant or employer and employee.”
“[BDL] agrees to supply and [SEL] agrees to engage [BDL’s] Services on the following terms.” (2) Clause 1.1 provides: “This is a Master Agreement, and defines the terms under which [BDL] will undertake such Services for [SEL] as may be agreed between the parties from time to time.” (3) Clause 1.3 provides: “Where it is agreed … that any Services are to be provided, a schedule in the form annexed to this Agreement setting out the nature of the Services, the charging basis, and any other material terms (a ‘Schedule’) will be produced by [BDL] and provided to [SEL].” (4) Clause 4.1 provides: “‘Deliverable’ means a work produced by [BDL] in the course of Services for delivery to [SEL]. 4.1.1 Where pre-existing works are within the knowledge and consent of the Client incorporated into any Deliverable, the Client has non-exclusive irrevocable world-wide royalty free licence to use modify and distribute such pre-existing works, but only as part of the Deliverable; all other rights in the pre-existing works are reserved. 4.1.2 Subject thereto, all rights in any Deliverable pass to the [SEL] upon payment of all fees due to [BDL] which relate to that Deliverable; and [BDL] will execute a formal assignment thereof on request by [SEL].”
“Any personnel offered by BDL to fulfil its obligations under this agreement must be approved beforehand by [SEL]”
“An assignment of copyright is not effective unless it is in writing signed by or on behalf of the assignor”
“All the parties were conscious that there [might] be tax implications (both for [Dr Potamianos] and possibly [for] SEL) if BDL assigned the rights but [Dr Potamianos] acquired the shares”
“I think that the general principle is that the share price was aligned with the price that Mr Van Der Wee sold at the time”
“a director or de facto director of a company who is not employed under a contract of service may nevertheless hold the copyright in works he makes for the company on trust and will have to assign the copyright to the company when called upon to do so. This will usually be so because the director will have created the work for the company’s business, using the company’s property and in the company’s time.”
“At our last meeting you told me we should be able to find 6.13 on the system. We have searched for it but couldn’t find it. Please could you tell me the location.” (5) Dr Potamianos replied as follows by email of the same day: “I am pretty certain we did not discuss software issues in our last meeting of August 19, is that what you mean by 6.13? I have full notes myself of what we discussed, would you like me to sit down with you to produce such notes as accurately as we possibly can? In order to help further with my understanding of what you are trying to do, can you tell me who you are referring to as “we” (“we have searched for it”), and what is the reason for searching in the first place, please?” (6) Mr Prescott replied by email dated26 August 2016 as follows: “No need to go over notes as there must be some misunderstanding. I am referring to the latest version of the source code. We is Mark [Gardiner] and myself on behalf of the Company which I believe owns it and should be in possession of it. So I would appreciate you letting me know where it is located.” (7) This reflects, and I so find, that right up to August 2016, while Mr Prescott was being open and clear about SEL’s position both as to ownership of the Source Code and as to the right to access it, Dr Potamianos was not being direct, frank or remotely helpful about those matters. On the contrary, Dr Potamianos was professing a standpoint which contradicts the stance that he has adopted in these proceedings, and was then avoiding answering a direct and simple question by professing a lack of understanding of what was being asked of him that I am certain he did not have, and by asking questions which he knew to be irrelevant. (8) There was nothing unclear about Mr Prescott’s email dated25 August 2016 , but even if there had been, any lack of clarity was resolved by his email dated26 August 2016 . However, Dr Potamianos did not reply to that second email. (9) Moreover, his suggestion that software issues had not been discussed at the meeting was disingenuous, especially as he suggested (at a time when he did not know the meeting had been taped) that he could back this is up with “full notes”
“I want the Company to be able to independently support and develop the existing platform. This will require you/BDL to assist in the training of a new engineering resource. I want this to be in place before commencing on any other software project.”
“The principles can, in large part, be distilled from the well-known cases of Saul D Harrison & Son plc[1995] 1 BCLC 14 and O’Neill v Phillips[1999] 1 WLR 1092 . A shareholder generally needs to establish one of the following: (a) A breach of the terms on which he agreed that the affairs of the company should be conducted; (b) That equitable considerations (those referred to by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd[1973] AC 360 at 379) arising at the time of the commencement of the relationship or subsequently, make it unfair for those conducting the affairs of the company to rely on their strict legal rights; (c) That the board of directors has exceeded the powers vested in them or have exercised their powers for an illegitimate or ulterior purpose; or (d) Some event putting an end to the basis on which the parties have entered into association with each other, making it unfair that one shareholder should insist on the continuance of the association.”
“(1) an association formed or continued on the basis of a personal relationship involving mutual confidence; (2) an understanding that all, or some, of the shareholders shall participate in the conduct of the business; and (3) restrictions on the transfer of shares, so that a member cannot take out his stake and go elsewhere”
“the standard case in which shareholders have entered into association upon the understanding that each of them who has ventured his capital will also participate in the management of the company. In such a case it will usually be considered unjust, inequitable or unfair for a majority to use their voting power to exclude a member from participation in the management without giving him the opportunity to remove his capital upon reasonable terms.”
“In the present case, Mr Phillips fought the petition to the end and your Lordships have decided that he was justified in doing so. But I think that parties ought to be encouraged, where at all possible, to avoid the expense of money and spirit inevitably involved in such litigation by making an offer to purchase at an early stage. This was a somewhat unusual case in that Mr Phillips, despite his revised views about Mr O’Neill’s competence, was willing to go on working with him. This is a position which the majority shareholder is entitled to take, even if only because he may consider it less unattractive than having to raise the capital to buy out the minority. Usually, however, the majority shareholder will want to put an end to the association. In such a case, it will almost always be unfair for the minority shareholder to be excluded without an offer to buy his shares or make some other fair arrangement. The Law Commission Report on Shareholder Remedies, at pp. 30–37, paras. 3.26–56 has recommended that in a private company limited by shares in which substantially all the members are directors, there should be a statutory presumption that the removal of a shareholder as a director, or from substantially all his functions as a director, is unfairly prejudicial conduct. This does not seem to me very different in practice from the present law. But the unfairness does not lie in the exclusion alone but in exclusion without a reasonable offer. If the respondent to a petition has plainly made a reasonable offer, then the exclusion as such will not be unfairly prejudicial and he will be entitled to have the petition struck out. It is therefore very important that participants in such companies should be able to know what counts as a reasonable offer. In the first place, the offer must be to purchase the shares at a fair value. This will ordinarily be a value representing an equivalent proportion of the total issued share capital, that is, without a discount for its being a minority holding. The Law Commission (paragraphs 3.57–62) has recommended a statutory presumption that in cases to which the presumption of unfairly prejudicial conduct applies, the fair value of the shares should be determined on a pro rata basis. This too reflects the existing practice. This is not to say that there may not be cases in which it will be fair to take a discounted value. But such cases will be based upon special circumstances and it will seldom be possible for the court to say that an offer to buy on a discounted basis is plainly reasonable, so that the petition should be struck out. Secondly, the value, if not agreed, should be determined by a competent expert. The offer in this case to appoint an accountant agreed by the parties or in default nominated by the President of the Institute of Chartered Accountants satisfied this requirement. One would ordinarily expect the costs of the expert to be shared but he should have the power to decide that they should be borne in some different way. Thirdly, the offer should be to have the value determined by the expert as an expert. I do not think that the offer should provide for the full machinery of arbitration or the half-way house of an expert who gives reasons. The objective should be economy and expedition, even if this carries the possibility of a rough edge for one side or the other (and both parties in this respect take the same risk) compared with a more elaborate procedure. This is in accordance with the terms of the draft Regulation 119: Exit Right recommended by the Law Commission: see Appendix C to the report, p. 133. Fourthly, the offer should, as in this case, provide for equality of arms between the parties. Both should have the same right of access to information about the company which bears upon the value of the shares and both should have the right to make submissions to the expert, though the form (written or oral) which these submissions may take should be left to the discretion of the expert himself. Fifthly, there is the question of costs. In the present case, when the offer was made after nearly three years of litigation, it could not serve as an independent ground for dismissing the petition, on the assumption that it was otherwise well founded, without an offer of costs. But this does not mean that payment of costs need always be offered. If there is a breakdown in relations between the parties, the majority shareholder should be given a reasonable opportunity to make an offer (which may include time to explore the question of how to raise finance) before he becomes obliged to pay costs. As I have said, the unfairness does not usually consist merely in the fact of the breakdown but in failure to make a suitable offer. And the majority shareholder should have a reasonable time to make the offer before his conduct is treated as unfair. The mere fact that the petitioner has presented his petition before the offer does not mean that the respondent must offer to pay the costs if he was not given a reasonable time.”
“The directors may, in their absolute discretion, decline to register the transfer of a share whether or not it is a fully paid share.”
“In this company there were only four shareholders, they held an equal number of shares, they were all directors and no one shareholder could transfer his shares without the consent of at least two of the others. These facts may go some way to establish that the relationship between the shareholders share some of the attributes of a partnership. But in the absence of any further indications or oral assurances the petitioner would not discharge the burden of proving that the other shareholders were not entitled to use their voting powers in the company to oust the petitioner without due cause and in the interests of the company and were under an obligation to continue to appoint the petitioner as a director of the company.”
“This appeal concerns a situation that often arises in a closely-held company. The sole or principal shareholder of the company brings in a person (“the new participant”) to help him run the company. The new participant is given an executive role. The parties get on well, and the principal shareholder gives him or sells him an equity stake. Then, after some time, the parties fall out and the principal shareholder causes the dismissal of the new participant. He and the principal shareholder part company. In these circumstances, should the principal shareholder purchase the shares of the new participant and if so, should he do so on terms that the new participant receives the full value of the shares, i.e. their non-discounted value, or should those shares be valued on the basis that they represent a minority shareholding, i.e. on terms that their value is discounted to reflect their non-saleability in the open market? The general principle is well settled. Normally, in “quasi-partnership” companies the appropriate basis of valuation is on a non-discounted basis. This is established by the decision of this court in Re Bird Precision Bellows Ltd (1984) 1 B.C.C. 98,992;[1984] 1 Ch. 419 and the speech of Lord Hoffmann in O'Neill v Phillips [1999] B.C.C. 600 at p.614; [1999] 1 W.L.R. 1092, at p.1107 with which the other members of the House agreed. But Lord Hoffmann added: “This is not to say that there may not be cases in which it will be fair to take a discounted value. But such cases will be based upon special circumstances …”” “This is not to say that there may not be cases in which it will be fair to take a discounted value. But such cases will be based upon special circumstances …””
“… It is also relatively easy to establish whether a relationship between shareholders constitutes a “quasi-partnership” when a company was formed by a group of persons who are well known to each other and the incorporation of the company was with a view to them all working together in the company to exploit some business concept which they have. It is much less easy to determine whether a company is a “quasi-partnership” in a case such as this. Mr Strahan did not know Mr Wilcock when the company was formed. He joined the company as an employee. It was only subsequently that he acquired some of its shares from Mr Wilcock and became a director. However, it is clear on the authorities that a relationship of “quasi-partnership” may be acquired after the formation of the company. Lord Wilberforce specifically refers to an association “formed or continued” on the basis of a personal relationship.”
“Logically, the appropriate question is whether, if the company had been formed (viz. incorporated) at the time the company is alleged to have become a “quasi-partnership” (that is, in this case, at the time when Mr Strahan acquired his shares), the company would have qualified as a “quasi- partnership”, applying the guidance set out by Lord Wilberforce.”
“First, pursuant to the second option, Mr Strahan bought 5 per cent of the company’s shares, a not insignificant percentage. The only other shareholder was Mr Wilcock. Secondly, the evidence showed that Mr Wilcock agreed to the second option as a reward for Mr Strahan’s efforts in the company and as an incentive to him and this is confirmed by the fact that under the second option Mr Strahan had to pay for the shares he acquired out of his bonuses. Thirdly, at the relevant time Mr Strahan was participating in management decisions of the company. Indeed, as I have said, Mr Wilcock had in effect become a sleeping partner. Mr Strahan became a signatory and possibly the only signatory on the mandate for the company’s bank account. Fourthly, the terms of the option agreement were informally agreed between them. The terms were never committed to writing, and this reinforces the conclusion that there was a personal relationship involving mutual trust and confidence between the parties. Fifthly, while Mr Strahan was rewarded by the payment of remuneration, he also received a share of the profits in the form of his bonus. In addition, it was in effect agreed that Mr Wilcock should receive his return from the company in the form of dividends … The fact that Mr Wilcock and Mr Strahan came to an understanding or agreement as to the form of the return they were each to obtain from the company’s profits is indicative that their relationship was more a “quasi-partnership” relationship than a relationship between a majority shareholder and company executive…”
“In truth, the relationship between Mr Wilcock and Mr Strahan was multi-layered and multi-faceted, involving aspects arising from Mr Strahan's employment, his right under the options and his participation in the management of the company's business. Moreover, the terms of the option agreements did not inevitably mean that the parties adopted the position of vendor and purchaser under a commercial contract. On the contrary, Mr Wilcock considered that, under the terms of the second option agreement, he was giving Mr Strahan the opportunity to acquire shares in the company at a price representing about half their value, something he was most unlikely to have done if the relationship was a purely commercial one. Moreover, the second option opened the door to Mr Strahan becoming a shareholder without acquiring all the shares under the first option. Again, this is something that Mr Wilcock is hardly like to have wanted to do under a purely commercial contract of purchase and sale. Mr Wilcock must have contemplated that in that half-way house Mr Strahan and he would run the company together. Seen overall the relationship between the parties met the description laid down by Lord Wilberforce in the Westbourne Galleries case. In addition, like the judge … I do not accept the argument that Mr Strahan bore no risk by acquiring shares in the company. He bore the risk that the company might go into liquidation or that (as happened) Mr Wilcock might be unwilling to repurchase his shares at their full value if he caused the removal of Mr Strahan from the company or that he (Mr Strahan) might be unable to find a purchaser for his shares in the company because he held a minority shareholding or that if he did find a purchaser Mr Wilcock would cause the directors to refuse to register the share transfer.”
“logically, a reasonable offer can only cure unfair prejudice that has already been suffered. It cannot cure unfair prejudice that has yet to occur”
“This offer pre-dates by some years the unfairly prejudicial conduct which I have held to be established. It cannot be relied on as a remedy for conduct yet to occur.”
“There are cases …. in which it has been said that if a breakdown in relations has caused the majority to remove a shareholder from participation in the management, it is usually a waste of time to investigate who caused the breakdown. Such breakdowns often occur (as in this case) without either side having done anything seriously wrong or unfair. It is not fair to the excluded member, who will usually have lost his employment, to keep his assets locked in the company. But that does not mean that a member who has not been dismissed or excluded can demand that his shares be purchased simply because he feels that he has lost trust and confidence in the others.”
“This trial concerns a boardroom coup perpetrated by Mr Prescott …against his fellow director and shareholder, Dr Potamianos. The result is that [Mr Prescott] has unfairly and unlawfully deprived [Dr Potamianos] of his right to participate in management. Furthermore, [Mr Prescott] and SEL seek retrospectively to invent a right to obtain the source code of certain computer “firmware” developed by Dr Potamianos’ service company, BDL. They thereby seek to obviate the need to retain BDL’s services and to exclude [Dr Potamianos] from the business more generally.”
“There will, however, be cases where the excluded minority has brought his exclusion upon himself by his own wrongful or unconscionable conduct. The courts then have to wrestle with the individual facts of particular cases to determine whether the majority were justified in excluding the minority …” “… In the case of quasi-partnerships where the minority has been unfairly excluded from management, there is a strong presumption that no discount should be applied … It has been suggested obiter, however, that a discount may be applied if the petitioner’s conduct has contributed to the actions on the part of the majority of which complaint is made, but this seems anomalous, although there is no reason in principle why a court should not apply a discount in such circumstances if the justice of the case exceptionally so required …”
“Sameaim’s contracting levels remained at the same rate as they had done for several years previously apart from adding the cost of Graham Fells. The existing monthly rate was for£22,500 which Aris had never objected to in the past, having approved Sameaim’s contracts at this rate. This was increased to£27,000 per month to take account of the cost of Graham Fells. It is important to bear in mind that when Graham started with Sameaim he needed to be brought up to speed with DC drive technology. I took on the financial risk of this, and Sameaim did not start charging SEL for Graham’s cost element for 6 months. It was not until September 2016, and when Graham had commenced unravelling the source code that I started to invoice at the higher amount.”