King & Ors v Kings Solutions Group Ltd [2020] EWHC 2861 (Ch)

“The ‘fair value’ of the AK Option Shares shall be (as agreed between AK and the Investor [Primekings] or, in the absence of such agreement, as calculated by an independent accountant appointed by the board under paragraph 5) of the AK Option Shares shall be valued on the following assumptions…..”

“The [Petitioners] also suspect, but do not at this stage advance a positive case to the effect (but reserve the right to plead one a later stage), that Mr Stiefel may also have known about and participated in the deception of the [Petitioners] either at the time the Statements were made to them or soon afterwards (prior to completion). His involvement in negotiations and arranging for the necessary funding was such that it would be surprising if he was not fully appraised of what Mr Swain and Mr Fisher intended to do or had done on behalf of Primekings, whether before, at the time, or soon afterwards.” vii) On 20 December 2013 the parties completed the Transaction. After completion, Mr Stiefel acting on behalf of Primekings gave indications that it would seek “to be generous” and restore trust by reverting to the Original Deal: see paragraph 42. In particular, at a visit to the Company’s offices over 29 and 30 January 2014 also attended by Mr Fisher, Mr Stiefel told James and Anthony that the Primekings Parties “were big enough and ugly enough to tear up the agreement and start again”: see paragraph 42.2. viii) Although the shareholder levels were restored to 60% for Primekings and 40% for Anthony and the Trust in October 2014, the additional consideration was only paid in April 2015 following receipt of a letter before action. Despite assurances, the Original Deal was not restored and the Primekings Parties gave further indications that they did not intend to restore it: see paragraph 43. ix) The Petitioners claimed rescission of the SPA and the Subscription Agreement: see paragraphs 44 and 45. In the alternative, the Petitioners claimed damages: see paragraph 46. 20. In their Amended Defence dated 6 May 2016 the Primekings Parties denied the allegations that they owed a duty of care to the Petitioners or that they made negligent or fraudulent misrepresentations or that they were liable for economic duress and unlawful means conspiracy. For present purposes, it is enough to note that they advanced a positive case that the statements which Mr Swain made on 18 December 2013 were true. In particular, their defence was as follows: i) Mr Swain spoke on the telephone with GE and told them that Mr Evans would not be attending the meeting and he telephoned Mr Evans and told him that his presence was not required. He did not tell Mr Evans that GE had decided that he should not be at the meeting but made it clear that the decision was his: see paragraph 26e. ii) The gist of the statements made by Mr Swain at the meeting itself were admitted. However, Mr Swain stated that GE had told him that the Company’s account was frozen and would remain frozen until a deal was done. He did not say that GE had excluded Mr Evans from participation in the meeting and would not let him in the building. He also stated that GE had told him that there would be no further funding support unless a deal was done to inject cash into the business: see paragraphs 28a. to c. iii) Mr Swain’s statements were true and in all material respects represented the position which GE had taken with him at the meeting: see paragraph 28. iv) For the avoidance of doubt, Mr Stiefel was not involved in any deception or conspiracy: see paragraph 37. v) On 29 January 2014 Mr Stiefel made the statement that “we are big enough and ugly enough to tear up the agreement and start again”

“My Lord, part of the consideration of whether to add any further conspirators is that, firstly, it’s highly unlikely we would add them as a party because we are unlikely to be seeking a remedy against anyone other than these defendants. The principal remedy sought by my clients, as you will have seen, is rescission.” 22. On Thursday 4 May 2017 and in the course of his cross-examination Anthony was asked about an email to DWF in which he had said the following: “If this deal doesn’t happen tomorrow GE will cease to advance us anymore monies.”

“GE frozen --- unless pay tax and do deal…”

“What happened was Robin left the room and he goes out after this big bombshell has been dropped on us, he goes out of the room. Then he comes back in, I don’t – I can’t recall whether it was half an hour or 45 minutes later, and he says he’s spoken to GE and he’s – what Peter has said is true but he’s managed to convince them to stay with us and, if we do a deal, if we do a deal, it will be okay, but he can’t possibly do it now on these same terms.” 23. Shortly after this passage Anthony also gave evidence that he believed that Mr Stiefel had been a party to the fraud: “Barry Stiefel absolutely knew what happened. I’m convinced of that now, absolutely. Not - - whether he knew it on the night, I’m not sure, but on 27 January when he went to GE with Robin, he knew we were complaining about what Peter was saying and what he had said and it wasn’t true, and he went to GE knowing that and he’ll have asked GE. When he comes to see us on the 29th and 30th he makes no mention of that meeting with GE, none at all. He could have quite easily have killed it at that point, said: Anthony, I’ve been to GE two days ago and they said everything that Peter said was true, what you are complaining about is nonsense. But he never said a word to us. What he did say to us: mistakes have been made and we are big enough and ugly enough to tear up the contract and start again. He was struggling with what he now had in his hands. He knew – I believe he knew this was a fraudulent transaction but how does he deal with it. How does he now deal with it. So he became party to it, if you like. I don’t know the legalities around that, but he became party to it at that point, and for three and a half years these men have sat on a lie, they’ve sat on a lie knowing it’s a lie, just for a few – they should have taken my offer, sir, when I was broken, and taken the business for a pound and I’d have never found out. I would have never found out. I have wept this weekend believing that human beings can do this to each other.” 24. Mr Newman stressed that there was a real difference between the defence that GE had frozen the Company’s accounts unless a deal was done and Anthony’s evidence that Mr Fisher told him that GE would continue to provide funding if a deal was done. At all events, at the end of that day leading counsel for Primekings raised the point that Anthony was now advancing a new case which had not been pleaded. 25. On Tuesday 9 May 2017 Mr Thomas Weedall of GE gave evidence. Subject to some qualifications he accepted that if a deal could not be concluded by 20 December 2013 GE could not provide additional payments. On Monday 15 May 2017 when they had closed their case (apart from expert evidence), the Petitioners discontinued the Misrepresentation Claim. Their counsel made the following apology on their behalf: “The Kings accept that the order for costs should be that they pay the costs, to be assessed on the indemnity basis if not agreed. However, in light of the seriousness of this claim and the allegations made in it, the Kings and we felt that it is also right to say something specific and in open court by way of apology. Although there is some residual concern about the way in which Mr Swain went about things, GE’s evidence was that he did not fraudulently misrepresent GE’s position on that day. James and Anthony’s reluctance to call Mr Stiefel and Mr Fisher liars or fraudsters in court was evident for all to see, but they would now like to go further and apologise unreservedly for the allegations made in the claim and in court. Their conclusion, in light of the evidence as it has developed, is that they got it wrong, and that unfortunately has soured their relationship with the defendants and the Kirsh interests ever since. This claim made serious allegations, but those allegations and the assault on the reputations of those involved are unreservedly withdrawn.” 26. On 15 May 2017 Mr Justice Marcus Smith made an order recording that the Petitioners had filed and served a notice of discontinuance. In paragraph 1 the judge ordered the Petitioners to pay the costs of the claim on an indemnity basis to be assessed (if not agreed). In paragraph 2 he ordered them to pay the sum of £1,700,000 on account of costs by 4 pm on 12 June 2017. I will refer to the order in paragraph 2 as the “Interim Costs Order”. 27. The Petitioners failed to comply with the Interim Costs Order and on 3 August 2017 Deputy Master Cousins granted final charging orders over their shares in the Company and a number of properties. He also issued stop notices preventing the Petitioners from dealing with their shares. 28. On 24 August 2017 Deputy Master Linwood also made orders requiring each of the Petitioners to attend for oral examination under CPR Part 71. On 11 October 2017 those oral examinations took place before him and he ordered that they should be adjourned generally with liberty to restore. 29. On 2 April 2019 the Primekings Parties applied to Court for detailed assessment of the costs of the Misrepresentation Claim. The notice of commencement stated that their bill of costs totalled £2,452,657.51. I was told that the detailed assessment has been listed for final hearing on 12 November 2020 with a time estimate of seven days. The Bribery Claim 30. On 19 May 2017 and following the conclusion of the Misrepresentation Claim, Anthony entered into an agreement with KSSL under which he agreed that his employment was terminated with immediate effect and to accept £70,000 (less PAYE deductions) within 14 days. In compliance with the relevant employment legislation, Anthony confirmed that he had received independent advice and his solicitors also provided a certificate to that effect. 31. KSSL did not pay the sum of £70,000 to Anthony within 14 days. On 15 August 2017 KSSL commenced proceedings (the “Bribery Claim”) against Anthony and Mr Evans claiming that TC Harrison 1960 Ltd (trading as “TCH Leasing”)had agreed with Mr Evans to provide two range rovers as a bribe to keep KSSL’s share of the profits on the resale of certain vehicles. KSSL claimed a number of remedies including rescission of the agreement terminating Anthony’s employment. On 20 September 2017 Anthony was also removed as a director of the Company and KSSL. 32. By a Tomlin order dated 11 September 2018 KSSL and Mr Evans agreed to settle the claim against him and by letter dated 24 August 2018 he admitted that he was involved in financial transactions which were not in KSSL’s best interests which should have been disclosed to – and approved by – the full board of directors. 33. The Bribery Claim against Anthony has not yet been determined and is listed for trial in November 2020. There have been a number of interim applications but, subject to one point, it is unnecessary for me to set out the history of the claim. On 21 November 2018 Deputy Master Arkush granted permission to Anthony to re-amend his Defence and to bring a counterclaim for damages for the tort of abuse of process. 34. Mr Newman placed particular reliance on the Deputy Master’s observations at [100] where he expressed “a lingering sense of unease about the real reasons why these proceedings have been launched”

“Therefore, what you have on the face of the particulars of claim as issued, is a claim for something like £42,000 and certainly when I read it for the first time, it did raise my eyebrows as to why so much money seems to have been spent, and is expected to be spent in the future, on proceedings for a relatively minor sum. It is true that subsequently the claimant has sought to bolster that sum by higher amounts, but it is notably vague what these sums are, and it is not at all clear to me whether those sums were thought of at the time or whether in fact they were an afterthought designed to resist the application. Against the value of the claim on its face, the costs associated in bringing the claim must viewed as completely disproportionate.”

“Mr King expressed considerable distress and concern as to the valuation placed upon the Shares by Mr Eastaway, and the method proposed by the Claimants for the Sale of the Shares, which he expressed as creating a “windfall”, and being, in effect a “takeover” of KSGL. He made a number of submissions in relation to this. His principal concern was that the Shares were grossly undervalued by Mr Eastaway. He referred to the fact that the previous year the Shares were valued at £11.7m. He also submitted that Mr Eastaway was not sufficiently independent, and that he, Mr King, had been unable to provide any input to Mr Eastaway prior to the making of the Valuation Report. This had been commissioned by the Claimants’ own solicitors, namely, Teacher Stern LLP, and there had been no sight of the letter of instruction. He also expressed strong concern as to the unconscionability, and unfairness, and the fact that the circumstances did not produce a level playing field.” 37. In paragraphs 22 to 31 the Deputy Master also recorded that at the hearing he had refused an application to adjourn on the basis that the Petition had been issued shortly before (on 19 March 2018). In paragraph 43 he also recorded Anthony’s oral submissions in relation to the order for sale: “Insofar as the Defendants are concerned, Mr King made a number of detailed submissions on the perceived unfairness and unconscionability of making the Order for Sale in the circumstances. He emphasised the fact that such an order would severely disadvantage the Defendants without there being a full and proper valuation of the current value of the Shares. He was also very concerned that the Shares would in effect be transferred to the Claimants, which would place the Defendants under a considerable disadvantage, especially if there had not been due process of the true and proper assessment of their worth, particularly given the value placed upon the Shares by Mr Eastaway in the Valuation Report. Mr King submitted that the Valuation Report was not a truly independent report, as it had been commissioned by Teacher Stern LLP, and that the letter of instruction had never been disclosed.” 38. The Deputy Master made it clear that at the hearing he had rejected these arguments. One reason which he gave was that the Petition should not be allowed to stand in the way of the Part 8 Claim: see paragraph 48(4). He then dealt with the principles upon which it was permissible for him to review his earlier decisions to reject the adjournment application and to make the order for sale and concluded that he should do so. Having reviewed them, he confirmed his decisions and gave directions for enforcement. 39. The parties were unable to agree directions and a further hearing took place at which the Petitioners were represented by leading and junior counsel. In a second detailed judgment dated 6 August 2018 the Deputy Master refused to stay the order for sale pending the hearing of the Petition. He recorded the following submissions by leading counsel: “20. However, the thrust of the Defendants’ submissions is that as a matter of practicality the Order for Sale should be stayed pending the consideration of the Section 994 Petition. In paragraph 18 of Leading Counsel’s written submissions, it stated that the valuation issues can only justly, and without duplication, be resolved within the context of the Section 994 proceedings. By doing so it is submitted that such a course of action causes no material prejudice to the Claimants’ legitimate interests as a judgment creditor for all the reasons set out in paragraph 38 of Leading Counsel’s written submissions Stifling of the Defendants’ Rights 21. Thus, a crucial element of the Defendants’ case is that the Order for Sale, and in particular the facilitation of the sale process, stifles the Defendants’ rights and is therefore sought for an improper purpose. It is said that the Claimants seek to destroy the rights of Mr King under the put-option (“the Put Option”) arising under Clause 10 of the Shareholders’ Agreement. Mr King asserted during the course of the Disposal Hearing, and Leading Counsel continues to make the submission, that Mr King was/is entitled to exercise the Put-Option and sell the Option Shares at a price to be determined in accordance with Part 1 of Schedule 5 of the Shareholders’ Agreement.”

“(8) Further, it is somewhat challenging to understand how the Costs Order the subject matter of Final Charging Orders, upon which the Order for Sale was founded, can somehow be the subject matter of consideration during the course of the hearing of the Section 994 Petition, absent any appeal. It is possible that the Companies Court may find some difficulty in being seised of this issue when the Final Charging Orders have never been the subject matter of an application for permission to appeal, and permission to appeal has been refused in so far as the Order for Sale is concerned. The principles of res judicata must apply unless and until the Final Charging Orders and/or the Order for Sale of the Shares are/is overturned on appeal….. (11) I also agree entirely with Leading Counsel for the Claimants that it cannot remotely be successfully asserted that in pursuing the Claimants’ desire to seek satisfaction of the large Costs Order, which still remains unpaid, in some way the Claimants have acted unfairly, or there is an abuse of process, or they are seeking some form of collateral advantage, or stifling of the Defendants’ case. The Claimants have been pursuing their legitimate interests in seeking such satisfaction. Insofar as the assertion made that there is a “real goal” behind the Claimants’ aims, it is perfectly legitimate for the Court to Order a Sale of the Shares in the present circumstances in accordance with the terms laid down by the Articles. In effect, the Shares are to be transferred to the First Claimant in accordance with the procedure laid down in the Articles, subject to a fair valuation.” 41. It is important to note, however, that although he dismissed the application for a stay, the Deputy Master directed that an independent valuer be appointed in order to avoid any perceived taint of unfairness. He also directed the parties to prepare directions for the parties to agree a letter of instruction: see paragraphs 38 and 39. 42. Directions were never agreed and the order for sale was never carried into effect because on 10 October 2018 the Petitioners’ solicitors, who were then Reynolds Porter Chamberlain LLP (“RPC”), paid the sum of £1,881,200 in satisfaction of the Interim Costs Order. In paragraph 195 of the Points of Claim the Petitioners pleaded that this payment was funded by DWF’s insurers and Mr Newman confirmed that this was correct. 43. It remained necessary, however, for the Deputy Master to decide the incidence of costs in relation to the Part 8 Claim. In a third judgment dated 18 December 2018 he ordered the Petitioners to pay the costs of the Part 8 Claim on an indemnity basis. In paragraph 48 of his judgment the Deputy Master explained that he considered that it was “eminently a case where indemnity costs should lie” for the following reason: “From the commencement of the Part 8 Claim and throughout the Part 8 Proceedings the Defendants opposed the Part 8 Claim in its entirety and made repeated applications for a stay and/or an adjournment of the Part 8 Proceedings. There were many attempts to raise, and re-address, issues which had already been determined in the Judgment and Further Judgment.” 44. On 21 May 2019 the Primekings Parties applied to Court for detailed assessment of the costs of the Part 8 Claim. The notice of commencement stated that their bill of costs totalled £363,295.46. I was told that the detailed assessment of the costs of the Part 8 Claim has been listed with the detailed assessment of the costs of the Misrepresentation Claim on 12 November 2020. The Professional Negligence Claim 45. By Claim Form dated 6 December 2019 the Petitioners commenced proceedings against DWF for breach of contract, negligence and breach of fiduciary duty in relation to the conduct of the Misrepresentation Claim (the “Professional Negligence Claim”). The Claim Form asserted that: “the chance to win an overwhelmingly strong case was thrown away by the negligence and breach of duty of DWF”

“Placing pressure on the Kings and their legal team to discontinue the case (thus avoiding a fair adjudication on the facts) by (i) misleading the Kings into believing that if they did not discontinue then they might ultimately become liable to Primekings for an amount of legal costs which in fact Primekings knew it would not incur (ii) using threatening conduct to intimidate the Kings and their lawyers for that purpose.” 47. The Petitioners also allege that a number of the Defendants made fraudulent misrepresentations to them about the amount of costs billed by Teacher Stern to Primekings: see paragraphs 48 to 60. IV. The Petition (the Allegations) 48. Both parties have served detailed Points of Claim and Defence in the Petition (and I set out the relevant procedural chronology below). The Points of Claim are dated 20 January 2019 and are divided in twenty sections. Section I contained formal information, section II explained the relationship between the Company and KSSL and section III set out the statutory duties of the directors. (1) Post-deal events and restoration of original terms 49. Section IV set out the details of the Transaction. In paragraph 33 the Petitioners gave particulars of the meeting on 18 December 2013 and pleaded that “Primekings introduced certain changes to the terms of the deal”

“233. The Campaign has had serious consequences for the business and has very significantly contributed to any decline in its fortunes: a. Money and management time that could have been spent on investment, servicing customers, and business development, has been squandered on the Campaign. Expenditure on legal expenses has fed through (it is to be inferred) into increased borrowing from from Mr Kirsh’s vehicles, at interest rates of circa 9%..... c. The concerted and unjustified efforts of the Respondents (via the Campaign) to damage the reputation of Mr King will, it is to be inferred, have seriously damaged the reputation of the Company itself because of the close association between the Company and the Kings, as its founders. Likewise, the exclusion of the Kings from the Company and the attempt to distance the business from the King family by rebranding it has deprived the Company of the positive benefits to be derived from the Company’s association with the King family, from its longevity as a business, and from the benefit of Anthony King’s skills and reputation. d. It is to be inferred from the matters set out herein, including the Respondents’ wilful disregard of the best interests of the Company in failing to file accounts on time, their pursuit of the “Campaign at the expense of the Company, and in their own reliance on the recent asserted poor financial performance of the Company as supporting a low valuation for the Petitioners’ shares, that the Respondents have in other respects damaged at least the short term financial position of the business in ways that are unfairly prejudicial to the Petitioners. The Petitioners reserve the right to amend following disclosure and the taking of an equitable account.”

“I should mention that I am only able to have representation due to the kindness of a number of legal professionals who have been willing to act for me on a conditional basis which does not require payment at the outset. Primekings calculates that if I have no money, then I will not be able to pay the sort of adverse costs orders which occur during most pieces of litigation given the ‘pay as you go’ principle, which will eventually (they calculate) stop this claim in its tracks, even though it is overwhelmingly strong on the facts.”

“In light of the above, our clients take the entirely reasonable and justified view that if your clients (and their advisers) are willing to make false representations to the Court in an attempt to secure financial advantage they can have no confidence at all that your clients will not try to do the same again and mislead and influence any Valuer in order to achieve an outcome which suits them commercially. This is particularly so where any valuation would be binding on the parties and would not be subject to the Court’s scrutiny. For these reasons our clients are not, under any circumstances, willing to consent to a valuation process taking place outside the normal trial processes of the High Court, because such a process involves too much risk of an unfair and unjust outcome.”

“994 Petition by company member (1) A member of a company may apply to the court by petition for an order under this Part on the ground – (a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.”

“The requirement in section 994 for an “act or omission of the company” means that the petitioner must identify something which the company does or fails to do. The alternative requirement — that “the company's affairs are being or have been conducted in a manner that is unfairly prejudicial” to members or the petitioner — does not contain the same stipulation. Mr Graham can rely on the actions of some other persons, including his fellow shareholders. But the actions must still amount to the conduct of the company's affairs.”

“Petitions under s. 459 have become notorious to the judges of this court – and I think also to the Bar–for their length, their unpredictability of management, and the enormous and appalling costs which are incurred upon them particularly by reason of the volume of documents liable to be produced. By way of example on this petition there are before me upwards of thirty lever-arch files of documents. In those circumstances it befits the court, in my view, to be extremely careful to ensure that oppression is not caused to parties, respondents to such petitions or, indeed, petitioners upon such petitions, by allowing the parties to trawl through facts which have given rise to grievances but which are not relevant conduct within even the very wide words of the section. The section requires there to have been conduct of the company's affairs, or an act or omission of the company, so one has to look and see that the activity complained of is an activity in the course of conduct of the company's affairs or is by the company, so that the petitioner can show that the affairs have been conducted in a manner prejudicial to the interests of the members. The requirement of prejudice means that the conduct must be shown to have done the members harm and I believe harm in a commercial sense, not in a merely emotional sense. The further requirement that the prejudice is ‘unfair’ is a more uncertain but necessary thing to show, but before the fairness or unfairness of the conduct or act is considered ‘prejudice’ – that is harm or damage – must be shown. Those requirements set out the basic rules that the court must in my view be careful to insist upon to restrain this procedure from breaking all reasonable bounds.”

“13. The requirements relevant to this appeal are that (1) there is an act or omission on the part of the company and (2) that act or omission is unfairly prejudicial to Mr McKillen. 14. These requirements are cumulative. If the court concludes that the first requirement is not satisfied, the second requirement does not arise. Moreover there is nothing to stop the court considering the requirements on the basis most favourable to Mr McKillen and, if it concludes that the case could not succeed on that basis, restricting its consideration of other issues raised. Cases under section 994(1) can be very resource-intensive. This case is an example of a heavy section 994(1) petition since the trial below occupied 30 days of court time. Courts must, where possible, find ways and means of reducing the hearing times for these cases. In this case it may have been possible for significant amounts of court time to have been saved by focusing on the statutory requirements for an act or omission of Coroin which is unfairly prejudicial.”

“Paragraph 7, it is conceded by counsel for the petitioners, is mere narrative and no act by the respondent is averred in it. Paragraph 8 alleges the service on the company of a notice under s 518 requiring repayment of a loan of £75,000 and that the notice was of no effect. As it seems to me, the observation of counsel for the respondent that the allegation is self-cancelling in itself is well-founded. The service of a notice which is of no effect seems to me to be incapable of being unfairly prejudicial or prejudicial to anybody. Secondly, the act of serving or procuring the service of a notice in respect of a loan seems to me to be an act entirely adverse to the company and plainly not taken by the respondent in the course of or as in any way part of the company's business. It is the opposite of being part of the company's business; it is a demand for a personal benefit; personal repayment, in this case, of a loan to the respondent's father. As it seems to me, such an allegation is incapable of being within the section at all. It is not conduct of or in the company's affairs. Paragraph 9 alleges a board meeting at which the respondent's personal solicitor, plainly acting in her personal interest and plainly not acting in any sense in the company's affairs, asked the petitioners in this petition in their personal and individual capacity to transfer their shares to the respondent and to resign as directors. That seems to me plainly a matter which is not in the course of the conduct of the company's business. It would be an extraordinary thing if one cannot ask for a transfer of shares without being held to be conducting the company's business and, it seems to me, it is, on the face of it, quite incapable of being prejudicial, let alone unfairly prejudicial, to anybody to make such a request. The final two sentences of that paragraph allege further things said by the solicitor which quite plainly are nothing to do with the company's affairs; they are to do with the conduct, good or bad as it may be, of the petitioners personally and not in any other sense. Paragraph 10 is conceded by counsel for the petitioners (Mr Hollington) to be narrative, properly there but in no sense conduct of the company's affairs which could be unfairly prejudicial to anybody.”

“40. In the normal way, pre-emption agreements fall outside s 994(1) but in the present case the directors were, as I have explained, not to be remunerated by salary but by way of dividend. Thus the size of a director's shareholding would dictate his reward for his work on the Company's business. How directors were to be remunerated and the Company's distributions policy are within the conduct of the Company's affairs. So, by denying Mr Graham's pre-emption right at a time when Mr Graham was still a director, Mr Every was arguably interfering with the way in which the parties had agreed that the Company would remunerate its directors. 41. On this basis, there is sufficient for this court to allow the allegation to stand on the basis that Mr Graham provides proper particulars to justify Mr Stewart's submission to us that the noncompliant share purchase allegation is an allegation that the affairs of the Company have been or are being conducted in a manner which is unfairly prejudicial to the interest of Mr Graham as a member. There is a possibility that he will be able to do so. The point is important because Mr Graham seeks an order that his present shareholding ought to be valued on the basis that he could have acquired the impugned shares. However, Mr Stewart's submission to us can only be made good if there is an appropriate link between the impugned share sale allegation, the conduct of the Company's affairs, unfair prejudice to Mr Graham and the relief.”

“In cases of this sort, I regard the factual context as being of great significance. On Mr Graham's case the affairs of the Company, which he contends were conducted in an unfairly prejudicial manner, consisted of his exclusion from the management in breach of a collateral agreement between shareholders. On his case, the transaction in issue was an important aspect of the campaign. I do not see it is necessary thereafter to point to some subsequent use of the changed shareholding as an aspect of the impugned conduct, for the transaction to be a relevant aspect for the purpose of s 994. It is to me striking that the effect of the dealing was to put the other shareholders, at Mr Graham's expense, into a position in which those others might pass a special resolution against Mr Graham's opposition, which, if Mr Graham had acquired the additional shares to which he says he was entitled under the pre-emption agreement, they could not have done.”

“As it seems to me, the petition as presently drafted pleads both that (a) the consequence of the Respondents conduct was that Mr Graham sought to and was unable to increase his influence within the Company: ie that he was diluted, and that as a result (b) the affairs of the Company have been conducted in a manner that is allegedly unfairly prejudicial to his interests. It is true that these allegations are not particularised in the way they should be, and that they do not explain how it is alleged that Mr Every used his control of the impugned shares to take decisions of which Mr Graham did not approve, or why the non-compliant share purchase caused Mr Graham any loss in the way that the Company's affairs were thereafter directed, but those lacunae can be dealt with in the way that Arden LJ has suggested. As Mr Stewart explained in argument, the allegation is, in effect, that the Respondents denied Mr Graham the additional shares he ought to have had, and have thereafter used their greater control of the Company's affairs to his disadvantage by, for example, excluding him from the management of the Company and reducing the (greater) profit share he would otherwise have had. These matters have been unfairly prejudicial to his interests.”

“(1) The court must further the overriding objective by actively managing cases. (2) Active case management includes—…. (b) identifying the issues at an early stage; (c) deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others;….(h) considering whether the likely benefits of taking a particular step justify the cost of taking it;….” “(1) The court must further the overriding objective by actively managing cases. (2) Active case management includes—…. (b) identifying the issues at an early stage; (c) deciding promptly which issues need full investigation and trial and accordingly disposing summarily of the others;….(h) considering whether the likely benefits of taking a particular step justify the cost of taking it;….”

“3.1- The court’s general powers of management (1) The list of powers in this rule is in addition to any powers given to the court by any other rule or practice direction or by any other enactment or any powers it may otherwise have. (2) Except where these Rules provide otherwise, the court may— ….(k) exclude an issue from consideration….(m) take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case.” “3.4 – Power to strike out a statement of case (1) In this rule and rule 3.5, reference to a statement of case includes reference to part of a statement of case. (2) The court may strike out a statement of case if it appears to the court— (a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; (b) that the statement of case is an abuse of the court’s process or is otherwise likely to obstruct the just disposal of the proceedings; or (c) that there has been a failure to comply with a rule, practice direction or court order. (3) When the court strikes out a statement of case it may make any consequential order it considers appropriate.”

“If it will be open to the claimant's counsel to cross examine the bank's witnesses about the Wyatt Proceedings, it may be asked whether it matters whether the claimant's case about those proceedings is set out in the pleadings in this action. In my judgment it does. Statements of case should be as concise as the nature of the case allows and should plead only material facts, that is to say those which are necessary to formulate a cause of action or defence, not background facts or evidence: Tchenguiz v Grant Thornton LLP [2015] EWHC 405 (Comm), [2015] 1 All ER (Comm) 961 . It is wrong in principle to plead matters which do not support or relate to any of the remedies sought and to plead immaterial matters with a view to obtaining more extensive disclosure than might otherwise be ordered: Charter UK Ltd v Nationwide Building Society [2009] EWHC 1002 (TCC) at (the second) [15]. To do so is likely to complicate or confuse the fair conduct of proceedings.”

“A claimant who discontinues a claim needs the permission of the court to make another claim against the same defendant if— (a) he discontinued the claim after the defendant filed a defence; and (b) the other claim arises out of facts which are the same or substantially the same as those relating to the discontinued claim.”

“Counsel for Friends Provident submitted, and I accept, that the principles identified by the maxims nemo debet bis vexari pro una et eadem causa (no-one should be vexed twice in respect of one and the same cause) and interest reipublicae ut sit finis litium (it is in the public interest that there be an end to litigation) should inform the court’s approach to CPR 38.7. In my judgment it follows that there is an analogy between the principles to be applied to an application under r. 38.7 and those applied by the courts under CPR r. 3.4(2)(b) with respect to Henderson v Henderson abuse of process. The main difference I perceive is that under r. 38.7 the onus lies upon the applicant to show that it should be given permission to bring the new claim, whereas under r.3.4(2)(b) the onus lies upon the defendant to show that the new claim is an abuse of process. ”

“… it seems to me that the rule leaves it to the court to decide whether to grant or refuse permission having regard, as I have said, to the public interest in finality. It is true that the Notes to the current edition of the White Book use the phrase ‘exceptional circumstances’ as characteristic of the sort of explanation likely to be required in an application for permission under Pt 38.7, but it is dangerous in my view to erect that as a test imposed by the rules, not least because of its inherent uncertainty. To that limited extent the judge may have mis-described the ambit of the court’s discretion to give such permission. The real question for the judge was whether, having abandoned the de facto directorship claim in the light of Jean Angela’s Defence (in which the other defendants precisely concurred) a sufficient explanation was offered for its re-introduction to overcome the court’s natural disinclination to permit a party to re-introduce a claim which it had after careful consideration decided to abandon.”

“A new claim does not arise out of the same or substantially the same facts as the original claim if it puts the defendant in the position of being obliged to investigate facts and obtain evidence well beyond the ambit of the facts that the defendant could reasonably be assumed to have investigated for the purpose of defending the original claim.” “A new claim does not arise out of the same or substantially the same facts as the original claim if it puts the defendant in the position of being obliged to investigate facts and obtain evidence well beyond the ambit of the facts that the defendant could reasonably be assumed to have investigated for the purpose of defending the original claim.”

“The liquidator says that for the original claim, based on misfeasance and breach of director's duty, it would have been necessary to prove the payment and receipt, and also that the directors of the company misappropriated the company's assets in making the payment, but not that the recipient was a creditor. However, for the new claim the liquidator would need to show not only the payment and receipt of the money, and that the recipient was a creditor but also that there was an intention to prefer that creditor. The respondents say that the original claim at inception actually included a preference claim (albeit for different sums that that now claimed) against the first and second respondents as recipients, but this was later changed to a misfeasance claim against the same respondents as directors. The focus of the claimant changed but the underlying facts and consequence were the same. In my judgment, the substance and the reality is that where the respondents as directors pay themselves as creditors the liquidator has a choice of courses of action. He could have chosen the route of a preference claim. He did choose that route in respect of two other payments. Then he dropped it. Instead, in the original claim at trial he pursued the respondents for misfeasance as directors. That was the liquidator's choice. I do bear in mind the need in a preference claim to show an intention to prefer the creditor. But that is a minor point in the present context, and may well be inferred from the primary facts proved. On the whole, in my judgment the second claim arises out of substantially the same facts as the first.”

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

“50. It is therefore clear that the principle exemplified by the decision in Henderson v Henderson is properly to be treated as part of the rules of res judicata; hence the formulation of the summary of the relevant rules in para 22 of the judgment of Lord Sumption JSC, set out above. It was accepted at the hearing by the first and second respondents that there could be no question here of any issue estoppel because the first claim had been discontinued. Yet they argued that the principle in Henderson v Henderson could nevertheless apply. But, since there was no decision on the first occasion and the Henderson v Henderson principle is part of the rules of res judicata, I struggle to see how the principle is relevant. 51. On the other hand, where the claim does not progress so far as to be decided, but is instead discontinued, there are the rules in CPR Pt 38. The relevant rule, which I have already set out and discussed, is rule 38.7. This deals with the situation where, if there had been a decision on the first claim, there could have been an argument, if a second claim were brought, that some aspect of res judicata should apply, whether it was because of cause of action estoppel, issue estoppel, or the Henderson v Henderson principle. Rule 38.7 provides that in circumstances where the claim is to be brought against the same defendant as before and based on the same or substantially the same facts, there is a requirement to obtain the permission of the court before bringing the fresh claim. As it seems to me, that is sufficient protection for defendants facing a second bite at the cherry. It enables the court to intervene and prevent injustice, in exactly the same way as the court may do in the case of res judicata.”

“It was submitted to us on behalf of Virgin that recent case law has re-categorised the principle in Henderson v Henderson 3 Hare 100 so as to treat it as being concerned with abuse of process and to take it out of the domain of res judicata altogether. In these circumstances, it is said, the basis on which Lord Keith qualified the absolute character of res judicata in Arnold v National Westminster Bank by reference to that principle is no longer available, and his conclusions can no longer be said to represent the law.”

“It was clearly not the view of Lord Millett in Johnson v GoreWood that because the principle in Henderson v Henderson was concerned with abuse of process it could not also be part of the law of res judicata. Nor is there anything to support that idea in the speech of Lord Bingham. The focus in Johnson v Gore-Wood was inevitably on abuse of process because the parties to the two actions were different, and neither issue estoppel nor cause of action estoppel could therefore run…..Res judicata and abuse of process are juridically very different. Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the court's procedural powers. In my view, they are distinct although overlapping legal principles with the common underlying purpose of limiting abusive and duplicative litigation. That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where the conduct is not abusive. As Lord Keith put it in Arnold v National Westminster Bank plc [1991] 2 AC 93, 110G, “estoppel per rem judicatam, whether cause of action estoppel or issue estoppel, is essentially concerned with preventing abuse of process”.”