“you were in charge of finance”? “I was in charge of finance”, and evading the essence of the question: “And this was but one example of the day-to-day problems that Aubrey was experiencing with you in the accounts department, in your role as running the accounts department?”
“Aubrey worked in Hatfield, I worked in London, there was not a day-to-day communication about the accounts department.”
“commercial subterfuge”
“there was always difficulties with this Company and this client”
“…..are wide and anything that the company does or fails to do can be relied upon. But wide as the category of acts may be it is necessary that the act or omission is done or left undone by the company itself or on its behalf. Thus, voting at a general meeting, whether annual or extraordinary, may result in a resolution being passed or defeated. The resolution is, obviously, an act of the company notwithstanding that the votes which pass or defeat it are the votes of members which are their private rights which…can be exercised as they choose. The acts of the members themselves are not acts of the company and cannot found a petition under [section 994].”
“(1) The concept of unfairness, although objective in its focus, is not to be considered in a vacuum. An assessment that conduct is unfair has to be made against the legal background of the corporate structure under consideration. This will usually take the form of the articles of association and any collateral agreements between shareholders which identify their rights and obligations as members of the company. Both are subject to established equitable principles which may moderate the exercise of strict legal rights when insistence on the enforcement of such rights would be unconscionable. (2) It follows that it will not ordinarily be unfair for the affairs of a company to be conducted in accordance with the provisions of its articles or any other relevant and legally enforceable agreement, unless it would be inequitable for those agreements to be enforced in the particular circumstances under consideration. Unfairness may, to use Lord Hoffmann's words, “consist in a breach of the rules or in using rules in a manner which equity would regard as contrary to good faith”…; the conduct need not therefore be unlawful, but it must be inequitable.”
“Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. So for example, removal from participation in the management of a company and the resulting loss of income or profits from the company in the form of remuneration will constitute prejudice in those cases where the members have rights recognised in equity if not law, to participate in that way. Similarly, damage to the financial position of a member in relation to a debt due to him from the company can in the appropriate circumstances amount to prejudice. The prejudice must be to the petitioner in his capacity as a member but this is not to be strictly confined to damage to the value of his shareholding. Moreover, prejudice need not be financial in character. A disregard of the rights of the member as such, without any financial consequences, may amount to prejudice falling within the section. Where acts complained of have no adverse financial consequences, it may be more difficult to establish relevant prejudice”
“if the management had been in breach of duty to the company but no loss to the company resulted, the company would not have a claim against those directors”
“But the concept of unfair prejudice which forms the basis of the jurisdiction under section 459 enables the court to take into account not only the rights of members under the company’s constitution but also their legitimate expectations arising from the agreements or understandings of the members inter se. There is an analogy in Lord Wilberforce’s analysis of the concept of what is ‘just and equitable’ in In reWestbourne Galleries Ltd [1973] A.C.360, 379. The common case of such expectations being superimposed upon a member’s rights under the articles is the quasi-partnership, in which members frequently have expectations of participating in the management and profits of the company, which arise from the understandings upon which the company was formed and which it may be unfair to other members to ignore…. Although the answer to the question “of whether such a legitimate expectation exists” must in each case depends upon the particular facts, it is well to recall that In re Westbourne Galleries Ltd, Lord Wilberforce said that in most cases the basis of the Association would be “adequately and exhaustively” laid down in the articles. The “super imposition of equitable considerations” requires, he said, something more. This was said in the context of the “just and equitable” ground for winding up, but in my judgment it is equally necessary for a shareholder who claims that it is “unfair” within the meaning of section 459 for the board to exercise powers conferred by the articles to demonstrate some special circumstances which create the legitimate expectation that the board would not do so. Section 459 enables the court to give full effect to the terms and understandings upon which the members of the company return associated but not to rewrite them.”
“How can it be unfair to act in accordance with what the parties have agreed? As a general rule, it is not. But there are cases in which the letter of the articles does not fully reflect the understandings upon which the shareholders are associated. Lord Wilberforce drew attention to such cases in a celebrated passage of his judgement in Ebrahimi v. Westbourne Galleries Ltd[1973] AC 360 at 379, which discusses what seems to me to be the identical concept of injustice or unfairness which can form the basis of a just and equitable winding up…Thus the personal relationship between a shareholder and those who control the company may entitle him to say that it would in certain circumstances be unfair for them to exercise a power conferred by the articles upon the board or the company general meeting…”
“Once a company has the character of a quasi-partnership, the exclusion of one of the “quasi-partners” will engage the equitable considerations to which Lord Wilberforce referred. In the Westbourne Galleries case, two of the three directors (a father and son) used their combined majority shareholding to remove the third shareholder from his directorship. On the facts, it was made clear to the latter that he was no longer regarded as a partner but only as an employee. Although removed as a director in accordance with the articles, the conduct of the majority was held to be unjust and inequitable. And Lord Wilberforce made clear that the just and equitable provision is not confined to a case where the exclusion was made in bad faith, nor did it matter that the majority genuinely considered that the interests of the company were better served without the director who was excluded.”
“it is my view that, in considering whether the conduct of the controllers amounts to conduct unfairly prejudicial to the interests of a member, it is also relevant to take into account any agreement, understanding or clearly established pattern of acquiescence on the part of that member which may have led the controllers to act or continue to act in a particular way, even if their action may have involved a departure from a strict adherence to the terms of the Articles. In such a case, in the light of their common understanding as to what conduct will be regarded as acceptable between themselves despite the terms of the Articles of Association, it would not be correct to characterise the action of the controllers as unfair within the context of the whole relationship between them and the member. In my view, this is a corollary of the approach to the test of unfairness adopted in the authorities to which I have referred above, whereby the agreement between the members as set out in the Articles of Association may be subject to equitable considerations and obligations arising out of the particular circumstances of their relationship overall. There is no good reason why such equitable considerations should not qualify, as well as add to, the expectations about how the controllers of the company ought to behave to be derived from a simple reading of the Articles of Association. In Anderson v Hogg 2000 SLT 634, a decision of the Outer House of the Court of Session (Lord Reed) on s. 459 , provides an example of this approach being applied. In that case, there was a finding that the petitioner had acquiesced in a departure by the controller of the company from strict adherence to the articles (see p. 639D– K). Lord Reed held (p. 640B–D) that the parties: “agreed, by their words and conduct, to conduct the affairs of the company on an informal basis which allowed the respondent to exercise powers of management more freely than the articles may have envisaged or permitted. In these circumstances, unfairness has to be assessed against what the members actually agreed rather than against the articles.”
“Benny had told me that Aubrey had gone to him and told him that I was stealing from the company, and that is why they brought in the auditors behind my back without me knowing about it, Cook & Partners…”
“In order for things to work, to discuss things in a civilised way, to have a more open working relationship, to make everyone accountable to everyone else, to put an end to inane discussions and bullying we need to have a more democratic environment. At the moment you and Bobby are the only directors. Any decision he makes cannot be stopped because even if you disagree then his voting power as Managing Director gives him the casting vote. At the moment he has no need to sit down and talk to anybody. I propose and wish you to consider it very carefully, the following. I have managed to convene for the first time in 12 years even though by law they should happen annually, a shareholders meeting. It is due to take place on Monday the 13th when I will be in Elba. I have asked for a postponement and Bobby has said he sees no problem with that. At the meeting the Directors of the Company have to be voted back in. As you know, being a director has no remunerative advantage. Remember you and I outvote Bobby. I propose that we vote to create two new Directors, Richard and myself. This would make the Board who make the decisions consist of four……it would be a Democracy and everyone would have to sit down and talk to everyone else in spite of personality clashes…..To put this into action would take real courage from you, and Bobby would not be kind as a result. I believe that it is the best hope we have to keep the company and what consider to be equally important, the family together.”
“every effort has been made over the year to persuade Andrew Michel to perform to an acceptable standard. These efforts have failed. Earlier this year Andrew Michel announced that the Company was in trouble and had cash flow problems. Three meetings took place without any accounting information being produced. No progress was being made. Benny Michel and myself (the two Directors) were becoming extremely concerned. After lengthy discussions we agreed to find a firm of chartered accountants in order to have an independent objective report on the company - Cook and Partners were appointed. Andrew Michel throughout this period was extremely aggressive towards Cook and Partners and questioned their ability. For the first time complete accounts were presented with a management report. The work that Cook and Partners carried out also brought to light Andrew Michel’s shortcomings. I was becoming desperate with Andrew Michel’s lack of co-operation my health was suffering and I could only see potential disaster for the company if Andrew Michel’s attitude did not change immediately. There is no change and I discussed my concerns with Pam. I informed her that I would rather leave than see the company destroyed as all my efforts have made no impact. Unbeknown to me she discussed this conversation with Benny Michel and Richard Michel who were greatly concerned. Neither Benny Michel nor Richard Michel made any effort to talk to me on the subject. On the contrary Benny Michel informed me at a later date that I was responsible for the company’s problems. On Monday 8 November there was a shareholders meeting for the trading period to June 1998. Richard Michel, who is not a shareholder, was present. Andrew Michel came with a tape recorder as he had done at a previous meeting. He ridiculed me by wanting me to describe the accounts and asking me to explain the meaning of “directors emoluments” ……. After the conclusion of the shareholders meeting Benny Michel said that Andrew Michel and Richard Michel should become directors. Neither Andrew Michel nor Richard Michel made any statement outlining the contributions or commitments that they would be making for the benefit of the company. I do not own sufficient shares to change this. I resigned as managing director to show my strong disapproval that this conduct was an attack on me personally and my position in the company…..”
“we said that we did not understand how the shares were to be valued or even at what date and that our representatives would sort all this out. He repeated several times that the date today the shares had been agreed and that it was the date of his leaving…… We said that we were unaware of any dates. He said that there were no management accounts for the end of Jan 2000 and he did not want excessive delay because of this. He kept repeating he wanted a letter from us and not Geoffrey Lent giving a “critical path”
“I, Andrew, believe that we should write to him urging him to meet Geoffrey to work out the basis for a share valuation and when that is agreed then a “critical path” or time–table could be given, after all he can delay the purchase by disagreeing with everything. We should also write and remind him of his duty to the company as a shareholder. We agreed that his shares should be bought as soon as possible.”
“a minority shareholding is to be valued for what it is, a minority shareholding unless there is some good reason to attribute to it a pro rata share of the overall value of the company. Short of a quasi-partnership or some other exceptional circumstance, there is no reason to accord to it a quality which it lacks”: per Blackburne J Irvine v Irvine (No 2)[2007] 1 BCLC 445 . I am mindful that there is dictum from Deputy High Court Judge Hollington QC to the contrary: Re Blue Index Ltd[2014] EWHC 2680 (Ch) albeit it has been subjected to some valid criticism: see Minority Shareholders Law, Practice and Procedure (sixth edition- 7.95-7.101);Estera Trust (Jersey) Ltd v Singh[2018] EWHC 1715 (Ch) . I accept the evidence of Aubrey, which was not undermined in cross-examination, that “as I was a minority shareholder there was clearly a discount to be had.”
“I have had a long and boring and frankly irritating phone call with Bobby. At one stage I lost it when for the ninth time he went on about him being “thrown out of the company” and I told him that he and I knew this was all crap and I was fucking fed up with him fucking repeating the same old crap that I was not prepared to listen to any more….. At one stage he told me that I just call him a liar all the time because according to me everything he said wasn’t true. I told him that indeed everything he said wasn’t true……. His new line was that CK looked after Benny, Kangy, Mother and so it should look after him. Also irritating…”
“I am sorry to have to say this, but your behaviour is becoming increasingly rude, obnoxious and sarcastic. I do not appreciate this behaviour and to say that you are under extreme pressure is unacceptable to say the least. Your present conduct is regrettably no more than a rather unpleasant aspect of your personality. I will no longer accept this and give fair warning that if you do not pull yourself together Bobby’s prophecy will be proved correct.”
“I am surprised if you think that I am not worried about the cash flow of the company. I spend most of my time trying to minimise the outlay in most areas of the company whilst still maintaining a level of customer service which is by far the companies (sic) weakest point. As it was pointed out to you on the phone the other day by a competitor that manufacturing wise we are superior we are let down by our sales and marketing (basically customer service) which includes:- shipping, costings, accounts, sales itself and development. Most of which you control.”
“I am also aware that many times were (sic) you have not told me the truth to questions I have asked you.”
“The Company and SLG entered into a non-disclosure/confidentiality agreement. This was of the utmost importance to SLG. The Company and SLG were direct competitors, and the due diligence phase would require the disclosure by SLG of highly commercially sensitive information and our most intimate commercial secrets. If the acquisition did not proceed, and if the Company then used the information it obtained during due diligence to attack and undercut SLG, the impact on SLG is likely to have been extremely serious. The Company (by Andrew) and SLG (by me) agreed heads of terms for a straightforward deal -£1,040,000 plus stock, with full payment on completion. I would emphasise that full payment on completion was a fundamental term as far as I was concerned…. At one stage during this time, I became concerned that Andrew was playing games. I was not impressed and I made it clear to him that SLG was not going to change the terms. I should make clear that but for Andrew's disturbing behaviour at the meeting in Oxford, we may still have sold the business. I was unimpressed by Andrew's attempts to keep changing the terms. His conduct at the meeting really was the end of any chance whatsoever of selling our business as long as Andrew was in any way involved with the Company.”
“[T]he Petitioner and the Second Respondent agreed in principle that the Petitioner would from the beginning of 2006 onwards work mainly from home and be responsible for new projects, and would step back from day-to-day management of the Company (except in relation to overall management of the finance function which, given there was an accountant in-house who could provide him with the necessary information, he could do from home)”
“As a result of Richard’s brother’s efforts he got them all together and they have now taken some time to talk and see what happens. The upshot of the meeting was that Andrew would be paid his salary until he was 65 (he wanted 70 but they hit on 65 as being appropriate). I questioned Richard whether he was suggesting whether Andrew, who had already been paid two years’ salary, should be paid another seven years? He said that was what was agreed.”