“7.1 The first trial shall determine all issues save for the valuation of the shareholding in the Fourth and Fifth Respondents. For the avoidance of doubt the issues to be determined at the first trial shall include all questions relevant to the basis on which any such valuation is to be conducted.”
“there was a dispute between members of the family which led to it splitting into two “camps”
“The Company trades in recycled ferrous (steel) and non-ferrous (copper, aluminium, lead, nickel, brass, bronze, stainless steel and catalytic converters) metals, including recycled aluminium (including aluminium profiles), electronic waste (WEEE) and cable (lead, jelly and copper). The Company process [sic] all of the aforementioned recovered materials on site, converting them into high quality granulated products such as PVC and copper granules.”
“The context for the requirement of the work was that the Bank was becoming concerned regarding the cash position of the Companies and ultimately their debt servicing capacity. Key drivers for this were a significant (over 50%) fall in turnover in the five years to31 October 2015 , the loss of key customers, an alleged fraud to the value of c£1 million by a former employee, and deteriorating metal commodity prices.”
“to consider the ongoing viability of the Companies and the options available to the Directors and the Bank. The scope of this work was as follows: • assess the Companies' current financial position, short term cash flow forecast and ongoing viability • conduct a high-level contingency planning exercise; and • update the estimated outcome statements previously shared with the Bank” • assess the Companies' current financial position, short term cash flow forecast and ongoing viability • conduct a high-level contingency planning exercise; and • update the estimated outcome statements previously shared with the Bank”
“the Group is insolvent on the cash flow basis with no prospect of trading out of or reversing the position. The Directors should be mindful of their position in this regard and seek independent advice as appropriate.”
“• The Directors must therefore take proactive steps to manage the current situation for the benefit of all creditors, which given the financial position of the Group is their primary responsibility • In terms of options available, given the current financial position we are of the view that there is insufficient time or desire from Remet to execute a going concern sale. However, the Director should pursue this in short order to bring matters to a conclusion • Assuming Remet do not wish to or cannot execute, then we recommend the following steps: • The Directors should engage [GT] to undertake an AMA process, as set out on page 24 with the conclusion of the process by the end of May 2020 • The Directors and/or Shareholders should work with [GT] to identify potentially interested parties who may wish to acquire the business and assets, either on a solvent or insolvent basis • All parties should plan for an administration appointment in early June 2020, followed either by a pre-pack sale or a planned managed wind down, the viability of which should be considered as a contingency option during the AMA phase.” • The Directors should engage [GT] to undertake an AMA process, as set out on page 24 with the conclusion of the process by the end of May 2020 • The Directors and/or Shareholders should work with [GT] to identify potentially interested parties who may wish to acquire the business and assets, either on a solvent or insolvent basis • All parties should plan for an administration appointment in early June 2020, followed either by a pre-pack sale or a planned managed wind down, the viability of which should be considered as a contingency option during the AMA phase.”
“6.3 The administrators have pursued and achieved the objective of achieving a better result for the Companies' creditors as a whole than would be likely if the Companies were wound up. We concluded that the best way of achieving the objective of the administrations was to implement the sale of the Companies' business and assets via a pre-packaged sale…”
“(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.”
“Universal Recycling Company”
“ [630] 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 at 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 a member as such, without any financial consequences, may amount to prejudice falling within the section. [631] Where the acts complained of have no adverse financial consequence, it may be more difficult to establish relevant prejudice. This may particularly be the case where the acts or omissions are breaches of duty owed to the company rather than to shareholders individually. If it is said that the directors or some of them had been in breach of duty to the company but no loss to the company has resulted, the company would not have a claim against those directors. It may therefore be difficult for a shareholder to show that nonetheless as a member he has suffered prejudice….”
“ [11] Shares in an insolvent company in liquidation are clearly valueless unless the value of any claims which the company has against the respondents to the petition will eliminate the deficiency and produce a surplus for members.Section 994 of the Companies Act 2006 requires the petitioner to show that the respondent’s wrongful acts have caused him prejudice in his capacity as a member. If the company is insolvent, that means that – in general – the petitioner must show that his shares would have had a value but for the wrongdoing of the respondents. [12] There is a qualification to this requirement: the courts take a wide view of prejudice suffered by a shareholder. Where, for instance, the shares are worthless but the petitioner has suffered prejudice in some capacity connected with his shareholding, such as that of a lender under a loan made as part of the same investment as the acquisition of shares, unfair prejudice proceedings may be brought (Gamlestaden Fastigheter AB v Balti Partners Ltd[2007] UKPC 26 ,[2008] 1 BCLC 468 ).”
“where there is disagreement between petitioners and respondents as to whether a particular managerial decision was, as a matter of commercial judgment, the right one to make, or as to whether a particular proposal relating to the conduct of the company's business is commercially sound. In my view, it is not for the court to resolve such disagreements on a petition under s 459. Not only is a judge ill qualified to do so, but there can be no unfairness to the petitioners in those in control of the company's affairs taking a different view from theirs on such matters.”
“The evidence of the family witnesses mainly addressed the informal agreements and understandings which it was alleged had been made concerning the disputed properties and chattels. Taking into account the inevitable fallibility of the witnesses in recalling past events, particularly events which took place many years ago, the motives of the witnesses in giving evidence concerning matters in which they had a direct financial interest, their ingrained sense of what they and other family members are entitled to and their strong personal feelings towards the other family members, I came to the conclusion that I should treat the evidence of the family witnesses with considerable caution. As noted by Robert Goff LJ in Armagas Ltd v Mundogas SA[1985] 1 Lloyd's Rep 1 , 57: “It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, references to the witness' motives and to the overall probabilities can be of very great assistance to a judge in ascertaining the truth.” “It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, references to the witness' motives and to the overall probabilities can be of very great assistance to a judge in ascertaining the truth.”
“[39] There is now a considerable body of authority setting out the lessons of experience and of science in relation to the judicial determination of facts. Recent first instance authorities include Gestmin SGPS SA v Credit Suisse (UK) Ltd[2013] EWHC 3650 (Comm) (Leggatt J, as he then was) and two decisions of Mostyn J: Lachaux v Lachaux[2017] EWHC 385 (Fam) [2017] 4 WLR 57 and Carmarthenshire County Council v Y[2017] EWFC 36 [2017] 4 WLR 136 . Key aspects of this learning were distilled by Stewart J in Kimathi v Foreign and Commonwealth Office[2018] EWHC 2066 (QB) at [96]: “i) Gestmin: (1) We believe memories to be more faithful than they are. Two common errors are to suppose (1) that the stronger and more vivid the recollection, the more likely it is to be accurate; (2) the more confident another person is in their recollection, the more likely it is to be accurate. (2) Memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is even true of “flash bulb” memories (a misleading term), i.e. memories of experiencing or learning of a particularly shocking or traumatic event. (3) Events can come to be recalled as memories which did not happen at all or which happened to somebody else. (4) The process of civil litigation itself subjects the memories of witnesses to powerful biases. (5) Considerable interference with memory is introduced in civil litigation by the procedure of preparing for trial. Statements are often taken a long time after relevant events and drafted by a lawyer who is conscious of the significance for the issues in the case of what the witness does or does not say. (6) The best approach from a judge is to base factual findings on inferences drawn from documentary evidence and known or probable facts. “This does not mean that oral testimony serves no useful purpose… But its value lies largely… 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”. ii) Lachaux: (7) Mostyn J cited extensively from Gestmin and referred to two passages in earlier authorities.45 I extract from those citations, and from Mostyn J’s judgment, the following:- (8) “Witnesses, especially those who are emotional, who think they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason, a witness, however honest, rarely persuades a judge that his present recollection is preferable to that which was taken down in writing immediately after the incident occurred. Therefore, contemporary documents are always of the utmost importance…” (9) “…I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective fact proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities…” (10) Mostyn J said of the latter quotation, “these wise words are surely of general application and are not confined to fraud cases… it is certainly often difficult to tell whether a witness is telling the truth and I agree with the view of Bingham J that the demeanour of a witness is not a reliable pointer to his or her honesty. iii) Carmarthenshire County Council: (11) The general rule is that oral evidence given under cross-examination is the gold standard because it reflects the long-established common law consensus that the best way of assessing the reliability of evidence is by confronting the witness. However, oral evidence under cross-examination is far from the be all and end all of forensic proof. Referring to paragraph 22 of Gestmin, Mostyn J said: “…this approach applies equally to all fact-finding exercises, especially where the facts in issue are in the distant past. This approach does not dilute the importance that the law places on cross-examination as a vital component of due process, but it does place it in its correct context. 45 The dissenting speech of Lord Pearce in Onassis and Calogeropoulos v Vergottis[1968] 2 Lloyd’s Rep 403 , 431; Robert Goff LJ in Armagas Ltd v Mundogas SA[1985] 1 Lloyd’s Rep 1 , 57.” [40] This is not all new thinking, as the dates of the cases cited in the footnote make clear. Armagas v Mundogas, otherwise known as The Ocean Frost, has been routinely cited over the past 35 years. Lord Bingham’s paper on “The Judge as Juror” (Chapter 1 of The Business of Judging) is also familiar to many. Of the five methods of appraising a witness’s evidence, he identified the primary method as analysing the consistency of the evidence with what is agreed or clearly shown by other evidence to have occurred. The witness’s demeanour was listed last, and least of all. [41] A recent illustration of these principles at work is the decision of the High Court of Australia in Pell v The Queen [2020] HCA 12. That was a criminal case in which, exceptionally, on appeal from a jury trial, the Supreme Court of Victoria viewed video recordings of the evidence given at trial, as well as reading transcripts and visiting the Cathedral where the offences were said to have been committed. Having done so, the Supreme Court assessed the complainant’s credibility. As the High Court put it at [47], “their Honours' subjective assessment, that A was a compellingly truthful witness, drove their analysis of the consistency and cogency of his evidence …”
"I question whether the respect given to our findings of fact based on the demeanour of the witnesses is always deserved. I doubt my own ability, and sometimes that of other judges, to discern from a witness's demeanour, or the tone of his voice, whether he is telling the truth. He speaks hesitantly. Is that the mark of a cautious man, whose statements are for that reason to be respected, or is he taking time to fabricate? Is the emphatic witness putting on an act to deceive me, or is he speaking from the fullness of his heart, knowing that he is right? Is he likely to be more truthful if he looks me straight in the face than if he casts his eyes on the ground perhaps from shyness or a natural timidity? For my part I rely on these considerations as little as I can help." "
"Psychologists and other students of human communication have investigated many aspects of deceptive behavior and its detection. As part of this investigation, they have attempted to determine experimentally whether ordinary people can effectively use nonverbal indicia to determine whether another person is lying. In effect, social scientists have tested the legal premise concerning demeanor as a scientific hypothesis. With impressive consistency, the experimental results indicate that this legal premise is erroneous. According to the empirical evidence, ordinary people cannot make effective use of demeanor in deciding whether to believe a witness. On the contrary, there is some evidence that the observation of demeanor diminishes rather than enhances the accuracy of credibility judgments."
“1.3 Witnesses of fact and those assisting them to provide a trial witness statement should understand that when assessing witness evidence the approach of the court is that human memory: (1) is not a simple mental record of a witnessed event that is fixed at the time of the experience and fades over time, but (2) is a fluid and malleable state of perception concerning an individual’s past experiences, and therefore (3) is vulnerable to being altered by a range of influences, such that the individual may or may not be conscious of the alteration.” (1) is not a simple mental record of a witnessed event that is fixed at the time of the experience and fades over time, but (2) is a fluid and malleable state of perception concerning an individual’s past experiences, and therefore (3) is vulnerable to being altered by a range of influences, such that the individual may or may not be conscious of the alteration.”
“They have come off record under the pretext of demanding money on account, but it has nothing to do with that. Clarion have acted for us in many cases, and they have always been paid and Ansons have been acting since 2016 and there has never been any issue over fees.”
“13….It is a matter entirely of their own volition because of the tight court timetable and they cited the scale and burden of the task required for compliance with the deadlines for witness statements. They had not broached this subject in the two months they have been acting and this development came as a surprise and shock to me and my father and Grandfather. 14. As with Ansons, I feel the tight deadlines and complexity of the case is too much for Clarion at this late stage. The witness statements and the requirement to complete a certificate of compliance may also have played a major part in their reluctance to help in the witness statements stage and make any extension application if necessary.”
“Body of Witness Statement 18.1 The witness statement must, if practicable, be in the intended witness’s own words and must in any event be drafted in their own language, the statement should be expressed in the first person and should also state— (1) the full name of the witness, (2) his place of residence or, if he is making the statement in his professional, business or other occupational capacity, the address at which he works, the position he holds and the name of his firm or employer, (3) his occupation, or if he has none, his description, (4) the fact that he is a party to the proceedings or is the employee of such a party if it be the case; and (5) the process by which it has been prepared, for example, face-to-face, over the telephone, and/or through an interpreter. 18.2 A witness statement must indicate— (1) which of the statements in it are made from the witness’s own knowledge and which are matters of information or belief, and (2) the source for any matters of information or belief.”
“The reliability of the Affidavit could not be tested by cross-examination and I accept the defendants’ submission that her account of the background was partial and her description of the circumstances in which the Edlington Wood properties were acquired was incomplete and inaccurate in material respects.”
“I agreed to the relevant amounts being removed from London Wiper and being treated as dividends paid to myself and Charles. I understand that Charles also agreed to this at the relevant time. In the circumstances, it appears that the factual background was manipulated by Johnny in order to create a convenient set of reasons to dismiss Lisa from the business.”
“Lisa worked as the bookkeeper for the family business and gave evidence as to, amongst other things, the funding of the purchase price and renovation works at Wood House. Her recollection on a number of matters (such as her adamant assertions that her mother 5 invariably signed guarantees given on behalf of the family companies and that David had been a director of the family company J.L.D. Metals Ltd) was shown to be inconsistent with the contemporaneous documents and overall I did not regard her testimony as entirely reliable.”
“It was submitted on behalf of the defendants in closing that David’s participation in the proceedings stemmed from his dependence on Lisa for provision from Nora’s estate. Whether or not this was true (and it was not put to him in cross-examination), I did not regard him as a neutral observer given his obvious antipathy towards John.”
“I don't care anymore about if we have nothing because I will fuck the job up, if you don't play ball”
“9. I drafted my own witness statement from my own memory and using my fi les and contemporaneous notes. To start, from memory, I made a note/outline of what I wanted to cover in my witness statement; I also made a note of the documents that Smith Craven had prepared historically. I then got out one of the files and reviewed my notes on the file to remind myself how the management accounts etc had been prepared and what specific documents were called as each client is slightly different in what their documents are called and what they provide. The Hughes' always provided a very detailed pack of documents for the preparation of their management accounts. 10. I also looked at two reports that I had been involved in collecting financial information for back in 2015; there were two reports regarding potential / alleged financial misappropriation by Lisa, one regarding the company and one regarding 'mum and dad' i.e. Charles and Nora. 11. When I had finished my statement one of my colleagues read through it to proofread it for spelling mistakes and grammatical errors. 12. I then emailed my finished signed statement to James Hughes. James then emailed me back asking if I could insert paragraph numbers into my statement which I did; I resigned the statement and emailed it back to James.”
“[11] Charles is now aged 91 and frail. In view of his age, poor eyesight and hearing difficulties certain accommodations were made in order to facilitate his giving of oral evidence. Charles stated in cross examination that he did not recall having agreed, read, or signed his witness statement around six weeks previously and he answered many questions by stating that he could not remember, did not know, or provided no response to the question asked, including where these questions directed at matters discussed within his own witness statement. My impression was nevertheless that Charles was able to follow the questions put to him. [12] Charles has a close relationship with John and was plainly keen to support John’s claim. He confirmed the truth of John’s witness statement and, in cross-examination, volunteered supportive evidence about material matters which, if accurate, I would have expected to have been included in his and John’s witness statements. Overall, I consider that I should not rely on Charles’s uncorroborated evidence.”
“He was unable to explain satisfactorily some inherently implausible features of the alleged arrangement with Nora and Charles to which I refer later in the judgment.”
“ iii) verifying the transactions and accountancy treatment of the transactions which form the subject of this dispute.”
“2.1 Immediately following our appointment we conducted an investigation into the business to establish whether it was feasible to allow the company to trade for a limited period. We decided that it would be possible to trade the business profitably and thereby achieve a sale of the business as a going concern, which would ensure maximum possible realisations. We also discovered that the majority of the company’s finished goods stock had been removed from the company’s premises during the morning prior to our appointment. However, following extensive negotiations and injunctive proceedings, the entire stock that had been removed was returned and subsequently realised at trade prices.”
“He was stealing from that company back then, he would pay cash and do false weighbridge tickets. That’s why Prontex failed and why I left.”
“This meeting was held in the presence of the Directors; John Hughes and Lisa Pickering, Barclays Bank and Smith Craven. It was acknowledged that the company had been less successful in terms of profitability during the last financial year and performance against previous years was poor. Given the discussions that took place and the financial evidence presented at that meeting, It was agreed that the dividends would be minimized, in order to maintain the stability of London Wiper. All parties present in that meeting, agreed that reduced dividends along with other measures, would undoubtedly assist the sustainability of the company. The serious cashflow issues experienced recently by the company, resulted in the need to increase the bank borrowing from Barclays Bank plc. The implications of this being that John Hughes, had to give a personal guarantee to the bank of£600,000 , before the additional financial support was extended to the company.”
“In relation to Lisa Pickering's resignation from the Companies, she was suspended on6th November 2015 following receipt of the Accountants' Report. Charles and John Hughes visited Nora Hughes to discuss the position that day and explained the position to her. Her response was: "Lisa has to go". A Meeting was held at Smith Craven on 10th December and Minutes of that Meeting are Enclosure 9. Lisa Pickering subsequently sent in a letter of resignation and request for P45 which are Enclosure 10.”
“this allegation [regarding the cash sales] has never been raised before - neither at the time of the Petitioner's dismissal from the companies for unlawfully removing funds from the companies (the cotemporaneous notes of the meeting with John, Lisa and SmithCraven accountants make no reference to these issues), in the course of pre-action correspondence, in the course of the parallel proceedings or at all.”
“Lisa Pickering Lisa offered to remortgage her house and put everything right.”
“Repayment John advised that recently when all this started to come to light, Lisa offered John£80,000 which Lisa denies. John & James confirmed, that if Lisa were to repay Charles and Nora in full and offer some repayment back to London Wiper Company, In view of the hardship the company was experience whilst Lisa was drawing heavily from it, then they would repay£120,000 , as a contribution in respect of their drawings documented in schedule 2.”
“Employment Charles Pickering was discussed and whether his job and role within the company was secure. Lisa wanted to come back to work within the company for a few days a week, but not be Involved in the finances. She said she would no longer sign company cheques if she returned to work. Charles agreed with John that Lisa was not to return to the business. When questioned by Nora If this was his final word on the subject, he replied yes.”
“Proceedings It was shared that the Bank had questioned whether criminal proceedings and the repayment of funds from their overdraft was appropriate. Kelvin asked Lisa why she had paid the funds from London Wiper into Charles and Nora Hughes'~ account and then withdrawn the amounts plus additional capital. Lisa explained that her intention was to drawn from her parents and then catch up with the company payments. Lisa was also asked why the money was taken at a time when London Wiper Company Ltd was struggling financially and why neither John or Charles were not aware of the transactions. Lisa suggested it was taken at that time because of her Illness and because of the building work that needed completing.”
“Conclusion The action to be taken is as follows: • Lisa to make a formal offer of repayment to both her parents and to London Wiper Company Limited with a date for this practice to commence. • Lisa Pickering is to be removed as a Director from the following companies: Portbond Ltd, Caprina Ltd and Caprina Trading Ltd. • The formal acknowledgement of Lisa Pickering having been removed as a Director of London Wiper Company Limited following a period of suspension.”
“The meeting had been arranged to enable Lisa to provide an update in relation to her offer to repay the monies taken, as agreed in the meeting held on the 10th of December 2015. It materialised very early on, that this was not Lisa's agenda for the meeting. Instead the main purpose from her perspective was in fact to provide Kelvin & Paul with further details of funds in which John Hughes had benefited…. Lisa's focus was clearly to demonstrate (with written evidence) that John had also had funds from the business relating to his personal expenditure. The suggestion being that if John had had this capital, it was also acceptable for her to do the same. Kelvin reiterated the fact that what each individual had taken from the business was irrelevant really, the point of all this focus was what had been knowingly deducted and this was the fundamental difference in the Directors Loan Accounts and payroll: Everybody knew what John Hughes had had, whereas nobody was aware of all the drawings Lisa Pickering was making. This point was repeated several times during the meeting. Lisa however, continually claimed that both Mum and Dad and John did know. Kelvin highlighted the fact that they knew of some items of expenditure; the kitchen and the high court divorce settlement but nothing else. …. Kelvin raised the matter of repayment of monies: Lisa advised that a mortgage would be applied for on the property that her son Charlie lives in, once the building work had been finalised and signed off. Lisa currently owns this property, but she agreed that she would sign it over to Charlie and he would then apply for a mortgage to raise some capital. Lisa also advised that she was also pursuing a Medical Insurance claim and would see if money could be released early. She accepted that this may take some time as the Insurers need to see further medical evidence.”
“ He was clearly upset by all that has gone one, in particular the fact that Lisa had not held her hands up to the unauthorised withdrawals. Had she done so, Charlie advised that he would have worked with her to provide a solution to It all. He stated he had always told her to tell the truth and that he could help If she told the truth, but If she chose not to, then he wouldn't do anything to help.”
“£687,456.45 (per summary in report dated10 December 2015 ) ( 84,000.00) less agreed monies ( 36,452.64) per Lisa exclude Barclaycard (John’s had this and not repaid) ( 1,500.00) Also JVN Architecture – Per Lisa related to Charles Pickering (29,5000.00) Lisa disputes the Wath cash-says she paid£6,500 privately only) ______________ 535.21.81 per Lisa as agreed monies owed (413,707.12) says John has had this (previously provided by Lissa). Lisa tried to deduct this from what she owes.”
“It is no defence to try and compare your situation to any drawings made by your rother John [ ]. Your brother’s drawings were made with the knowledge of the Company’s board and with its approval.”
“It is my Clients view that the business is struggling financially at present. Turnover has diminished massively over recent years. She considers that she is being used as a scapegoat and that this recovery is being "sold" to lenders as an asset of the business which it patently is not and was never intended to be by the Board who were responsible for the decisions at the time they were made.”
“ I have seen your letter dated14th April 2016 to Anson Solicitors, with the inclusion :- "I understand that the former accountant David Butler has a note of this business and a file note to support including making a call to John Hughes to make him aware." For personal reasons I have no wish to be involved in these family matters.” "I understand that the former accountant David Butler has a note of this business and a file note to support including making a call to John Hughes to make him aware." matters.”
“The revised Returns for Mr C A Hughes having been submitted on28 April 2016 reflect the legal action being taken against Lisa Pickering. The Accounts now reflect the monies drawn by Lisa as a Debtor in the accounts and therefore, the Tax Return being amended for the reversal of Dividends taken in previous years and effecting the 2015 Personal Tax Returns. The original Tax Return discussed in January 2016 showed a liability due to HMRC in January 2016 of£40,919.77 and in July 2016 of£39,006.59 . The amended Return now shows a nil liability for January 2016 and a reduced liability in July 2016 of£15,371.91 . This will, after being submitted to HMRC also generate a refund of£3 2,011.50. All to reflect the overpayment of tax as a result of the Dividends being overstated due to monies drawn by Lisa. ….. I look forward to meeting you again on Monday 6 June at 10am to discuss your Tax Return but also to discuss Lisa's thoughts and her cash offer which will hopefully open the way to negotiations and avoid this process going further and eventually to Court.”
“It is apparent from the history of the companies that the Hughes family has become accustomed to dealing with matters informally and without due regard to, for example, due process. For the avoidance of doubt, to the extent that our client may have permitted your clients to deal with company matters informally, the same is hereby withdrawn. Our client requires each company's affairs to be conducted in accordance with all relevant statutory requirements and the articles of association of each.”
“As to Nora, no such. desire had been formed and no steps were taken to exclude her - she had no involvement in the day to day operation of the Claimants. In regard to Lisa, it is admitted that a desire to exclude Lisa from the Claimants had arisen - · that desire arose as a consequence of the discovery of her misappropriation of funds from the Claimants. The Claimants note that the Defendant fails to plead to any alternative motive or reason for a desire to exclude Nora and Lisa from the Claimants arising. Indeed, the contrary was true - the businesses were operating successfully and the roles of the various family members were established and settled - save for the unlawful removal of funds by Lisa, there was nothing that would have led to a desire to remove either her or Nora from the Claimants.”
“16. John Hughes caused the dismissal of Lisa Pickering from her employment by the Company and the removal from her directorships of the companies because: (i) he did not want her to continue to have access to the financial information relating to the companies because he wanted to prevent her divulging the same to her mother to stop her knowing how he and his father were acting in breach of the directors' duties and duty to account as set out in paragraph 6 above; and (ii) he was acting out of personal animosity towards Lisa Pickering; and (iii) so that he could appoint his son James Hughes as a director of both companies in her place to promote the interests of his side of the family (ie himself and his son) at the expense of his sister and her side of the family (ie herself and her son, Charlie Pickering).” (i) he did not want her to continue to have access to the financial information relating to the companies because he wanted to prevent her divulging the same to her mother to stop her knowing how he and his father were acting in breach of the directors' duties and duty to account as set out in paragraph 6 above; and (ii) he was acting out of personal animosity towards Lisa Pickering; and (iii) so that he could appoint his son James Hughes as a director of both companies in her place to promote the interests of his side of the family (ie himself and his son) at the expense of his sister and her side of the family (ie herself and her son, Charlie Pickering).”
“I think the other issue is that whilst you are a relative of John and James, you are still an employee, and that the family ties are muddying the water somewhat.”
“I do not know specifically why the margin was higher in that year, there are likely to have been a number of factors that impacted this. For example, in his Witness Statement John Hughes has referred to an increase in profitability post 2015 arising from a short term contract with BT. I am unable to verify whether that is correct, or, assuming it is correct, the effect this may have had on gross margins.”
“27. The First to Third Respondents have in breach of their directors’ duties used the Subsidiary’s monies (including since August 2016 those borrowed from the bank at commercial rates as set out in paragraph 28 below) to fund their individual extravagant lifestyles including causing the Subsidiary to pay monies under the pretence that they are legitimate and necessary expenses of the Subsidiary when they are not. At this stage and pending disclosure the best particulars that the Petitioner can give are: (i) Sums spent by the Subsidiary on personal expenses and liabilities of the First to Third Respondents in breach of their directors’ duties set out in Schedule 1; and (ii) Sums spent by the Subsidiary on the personal hobbies of the First to Third Respondents including horseracing and show jumping in breach of their directors’ duties set out in Schedule 2; (iii) Sums spent on providing John Hughes with more than one luxury car at a time.”
“ 2.3 Horses A schedule of the expenses relating to horses and stabling paid out to M. Cooper, appears as schedule 7. We have been advised that Charles Hughes owns 6 horses, James Hughes owns 4 and there are 3 racehorses owned by the company (London Wiper Company Ltd Trading as Universal Recycling Company). A total of 13 horses are therefore looked after and stabled by M. Cooper. The costs relating to these animals have been apportioned appropriately. The costs relating to James Hughes's 4 horses total£16,627.69 during the period evaluated, this amount subsequently appears as part of John Hughes's overall drawings/expenditure in schedule 2.”
“ 7.6 Equestrian Surfaces, Arenas & Gallops: All the Equestrian products were born out of the passion for horses and riding, of one of the Senior Leadership Team and the Company's commitment to reducing the amount of waste sent to waste treatments sites, namely landfills. By using their strong connections in the industry, they discovered that previously discarded waste from the jelly cable plant could actually be used as artificial ground for horses at arenas. Mixed with wax it becomes a product which is outstanding for such purposes and superior to anything else on the market. Through the recycling of both jelly filled and dry scrap cables, the equestrian department provide plastic granules for the equestrian surface industry. These surfaces are designed to help prevent freezing in cold weather and are suitable to mix with sand for application in both indoor and outdoor arenas and gallops. These granules are of the PVC variety and are known as PVC granules, although the Company also supply the petroleum jelly polythene type, which are known by a patented name of Vasa Track. Vasa Track is a petroleum jelly covered polythene riding surface produced from jelly filled cables through a water separation granulation plant. These are used to create a springy and stable surface when mixed with sand. It creates excellent stability due tothe petroleum jelly in the polythene and is used in many arenas, gallops and all weather race tracks throughout the UK, Europe and the rest of the world.”
“ Also included on the directors' statement of affairs was a tax debtor with a book value of£117,915 in relation to the overdrawn directors' loan accounts. This is likely to be irrecoverable but will depend on the outcome of the directors' loan account recoveries.”
“David Hughes commented business could be worth more than£12M . He said machinery written down and valued at nil despite having value….. MDR [solicitor at Ansons] asked if they would be prepared to purchase it for£6M . David Hughes said he was looking at it on the basis it went bump first and then he would buy it after it was wound up following the court case. MDR suggested that he should not be involved in the negotiations if that was his position.”
“Your client told my client in stark terms that Portbond Ltd “ has no money”
“I explained to Lisa that for a real bid to come with proof of funds etc, I insist that Lisa puts a proper figure on her shares in Portbond with no package, no bolt ons etc, this was hard at 1st to obtain, but eventually after sometime Lisa agreed to£6 m for her shares in Portbond, but said how long would it take etc to get paid for them. I quite rightly stated that in order for a bid to be tabled, I needed to get this figure you had provided of£6 m and now go back to the investors and go from there when they have chance to view all of the documents etc. I said it could take 3-6 months (David now present) and said “we can’t wait that long, you haven’t gotten investor and you’re just delaying things” he then went on to say “put them in court and wind the Fokker (business) up, and I’ll buy it back”
“group loss for the end of year accounting period due to many issues and ongoing issues. Working capital, Bricks, market decline in ferrous and nonferrous and export limitations of the main contributor among other things. Also, there has been ongoing works to please the local environment agency and the residential site next door plus consultants in this field which is ongoing to keep things smooth.”
“Factors leading to this report Trading performance • The trading performance of Universal Recycling has been below budget throughout FY19 • The recycling industry as a whole has suffered a downturn, with Management citing Brexit related uncertainty (with less material available to process) and a decline in the price of non-ferrous metals over the last twelve months • The ill health of the shareholder and director John Hughes has also adversely impacted performance • The aforementioned shareholder dispute has also commanded much of Management’s time, and had an impact on the level of trading achieved in the year Cash constraints and banking facilities • The underperformance of Universal Recycling has led to an increased reliance on the overdraft facility • The invoice finance facility has also encountered two issues: £454,000 of debtor receipts were not paid into the trust account (although the position has since been rectified); and A number of customers of Universal Recycling are also suppliers, resulting in contras being applied • The Bank wishes to exit its relationship with Universal Recycling, and has asked the Company to explore options that would allow all amounts owed to the Bank to be settled by31 January 2020 • A potential sale of the trade and assets of the business is currently being explored by Management.”
“Management believes the Sims offer will be significantly higher than from Remet, as Universal would be an attractive bolt on acquisition for Sims providing additional machinery, production capacity and licences (both environmental and working hours). As well as removing Universal as one of its main competitors from the market. Accordingly Management believes it would pay a premium for such an opportunity Management advises it considers Sims to be a credible potential purchaser.”
“impressed by the set-up at the site and the knowledge and experience of the management. We can see synergies with our existing business and believe that it has the potential to be a good strategic fit. We have now had the opportunity to make a proposal to the Group Executive for the potential acquisition of the business. Unfortunately at this time, due to uncertainties in the market, the Group is unwilling to support an offer for the business. Whilst this may change at some point it is unlikely to do so in the near future.”
“Given the impact on the financial position of the Companies of a continued deterioration in trading and the Covid-19 restrictions, Grant Thornton was then further engaged on30 March 2020 to consider the ongoing viability of the Companies and the options available to the Directors and the Bank. The scope of this work was as follows: assess the Companies’ current financial position, short term cash flow forecast and ongoing viability conduct a high-level contingency planning exercise; and update the estimated outcome statements previously shared with the Bank.” assess the Companies’ current financial position, short term cash flow forecast and ongoing viability conduct a high-level contingency planning exercise; and update the estimated outcome statements previously shared with the Bank.”
“The Group is unable to meet its liabilities as and when they fall due and is technically cash flow insolvent. Given recent (pre Covid-19) trading, it is unlikely that it will be able to trade out of this once restrictions are lifted. We estimate that assets are sufficient to repay the Bank in full, even on a break-up basis, albeit this is heavily dependent on achieving asset valuations”
“Recommendations for the Group • The Directors must therefore take proactive steps to manage the current situation for the benefit of all creditors, which given the financial position of the Group is their primary responsibility • In terms of options available, given the current financial position we are of the view that there is insufficient time or desire from Remet to execute a going concern sale. However, the Directors should pursue this in short order to bring matters to a conclusion • Assuming Remet do not wish to or cannot execute, then we recommend the following steps: • The Directors should engage Grant Thornton to undertake an AMA process, as set out on page 24 with a conclusion of the process by the end of May 2020 • The Directors and/or Shareholders should work with Grant Thornton to identify potentially interested parties who may wish to acquire the business and assets either on a solvent or insolvent basis • All parties should plan for an administration appointment in early June 2020, followed either by a pre-pack sale or a planned managed wind down, the viability of which should be considered as a contingency option during the AMA phase” • The Directors should engage Grant Thornton to undertake an AMA process, as set out on page 24 with a conclusion of the process by the end of May 2020 • The Directors and/or Shareholders should work with Grant Thornton to identify potentially interested parties who may wish to acquire the business and assets either on a solvent or insolvent basis • All parties should plan for an administration appointment in early June 2020, followed either by a pre-pack sale or a planned managed wind down, the viability of which should be considered as a contingency option during the AMA phase”
“Following the issuing of our report in May 2020, the Directors concluded that the optimal solution for the stakeholders would be to pursue a sale of the Companies on an accelerated basis, be that on a share sale or business and asset sale basis. Grant Thornton was subsequently engaged by the Directors on3 June 2020 to commence an accelerated sale process (AMA) for LWC. This work included: sale preparation including the writing of a teaser document, information memorandum, process letter and set up of a data room for interested parties identification of interested parties through discussions with management regarding possible trade buyers, a review of our own internal database to identify possible equity investors and publicly available information regarding recent transactions in the sector introduction to potentially interested parties and support to the Companies in dealing with any information requests and progressing them; and sale negotiations and project management to the completion of a sale.” sale preparation including the writing of a teaser document, information memorandum, process letter and set up of a data room for interested parties identification of interested parties through discussions with management regarding possible trade buyers, a review of our own internal database to identify possible equity investors and publicly available information regarding recent transactions in the sector introduction to potentially interested parties and support to the Companies in dealing with any information requests and progressing them; and sale negotiations and project management to the completion of a sale.”
“[GT’s] initial strategy was to support the Companies to achieve a solvent share sale. However, as we progressed, it became increasingly apparent that there was limited appetite for a share sale. There was, however, some level of interest in a sale of the business and assets of the Companies.”
“Whilst the offer is proceedable, it would result in cessation of operations at the site, a shortfall to unsecured creditors and no return to shareholders.”
“On30 July 2020 we received an offer from a trade party for the business and assets of the Companies. Acceptance of this offer by the Directors would have resulted in the insolvency of the Companies, with the sale being completed by way of a pre-pack administration, and cessation of trade from the site, with the loss of all jobs. On5 August 2020 we received an offer from The Remet Company Limited whereby a connected entity, the Purchaser, would repay the Bank lending in full in exchange for assignment of the Bank’s charges. This would be a solvent transaction that would enable the Companies to continue to trade. Following discussions with various stakeholders the Directors opted to pursue The Remet Company Limited’s offer and reject the offer from the trade party.”
“…towards the end of August 2020, following a period of initial financial due diligence, a revised offer for the business and assets was received from the Purchaser. The Directors subsequently concluded that given the level and structure of the offer from the Purchaser, and current financial position of the Companies, there was now no likelihood of a solvent solution. The Directors therefore engaged Grant Thornton on2 September 2020 to assist them in taking steps to place both of the Companies in administration. The scope of this work included the completion of the AMA process and supporting the Directors in considering whether or not a pre-pack sale could be achieved upon appointment of administrators and whether this would be the optimal solution for creditors.”
“ Conclusion and recommendation • Having conducted an extensive AMA process, with the business and assets having been presented to the market for the past 12 weeks, and having explored a pre-packaged administration with both EMR and Remet, we are of the view that the interest of creditors as a whole is best served by effecting a pre-packaged administration to Remet for£6.4 million day one cash (with£1.0 million being allocated, dealt with and distributed via a receiver over the charged trading land) • Whilst we note that this will deliver a gross proceeds level lower than that which the professional agents believe may be achievable, when one factors in the types of assets (particularly those of an industrial nature), the volume of assets (there will be multiple buyers from multiple sources required), and critically the holding costs and professional time required to effect the break-up; the net funds available to the unsecured creditors are£30,000 different between the pre-pack and closure case • Given the execution risks involved in delivering the break-up basis, as shown within EOS 4, the pre-pack option is therefore supported and recommended by the administrators elect.”
“Having driven the Companies into the ground, [the relevant Respondents] responded to the Petition by engineering a pre-pack sale of the Companies’ business and assets to a new company of which 45% of the shares are held by John and none by Lisa…This amounts to a comprehensive stripping of the Companies' value in favour of John and at the expense of Lisa….”
“where insolvent liquidation or administration is inevitable, the interests of the members cease to bear any weight, and the rule consequently requires the company’s interests to be treated as equivalent to the interests of its creditors as a whole.”
“This agreement between RPL and John Hughes had the result of John Hughes acquiring 45% of the authorised and issued share capital of RPL, and thereby a 45% interest in the assets disposed of by you under the pre-pack, a matter nowhere referred to in your report to the creditors of9 October 2020 or subsequent reports.”. (2) The first and fourth of the questions then posed were as follows:, the overarching request being to “please explain: “1. When you first learned about the transaction or intended transaction between John Hughes and RPL of7 October 2020 ; …..” (3) The response of Addleshaw Goddard by letter dated8 September 2021 included the following: “1. We are not sure what you mean by "transaction" as two transactions are set out in your narrative under this heading. If you mean the sale of certain items to Remet Processing Ltd (RPL), the Administrator was aware that John Hughes intended to sell certain of his property to RPL at or shortly after the time the Companies' assets were sold to RPL by the administrators. This was a third party sale which did not involve the Companies' assets and so was not under the control of the administrators. The [Disputed] strip did not form part of the Companies' assets and was not sold by the administrators. If you mean the transaction whereby John Hughes became a shareholder in RPL, our client learned of it in your letter of 30 July.”
“The administrator should provide creditors with sufficient information ("the SIP 16 statement") such that a reasonable and informed third party would conclude that the pre-packaged sale was appropriate and that the administrator has acted with due regard for the creditors’ interests. In a connected party transaction the level of detail may need to be greater.”
“Information disclosure requirements in the SIP 16 statement “The administrator should include a statement explaining the statutory purpose pursued, confirming that the transaction enables the statutory purpose to be achieved and that the outcome achieved was the best available outcome for creditors as a whole in all the circumstances. The following information should be included in the administrator’s explanation of a prepackaged sale, as far as the administrator is aware after making appropriate enquiries: …. The transaction The date of the transaction. Purchaser and related parties - The identity of the purchaser. - Any connection between the purchaser and the directors, shareholders or secured creditors of the company or their associates. - The names of any directors, or former directors (or their associates), of the company who are involved in the management, financing, or ownership of the purchasing entity, or of any other entity into which any of the assets are transferred.”
“all those involved valued the assets far in excess of the valuation figures recorded by the professional valuers, they would no doubt have insisted on: (a) transparency as to valuation and as to the true identity of the bidder; (b) a new or revised process of tender. Further on the assumption that the RPL bid was still advanced, they would in all likelihood, have achieved a higher price and a solvent sale. It follows that part of the Petitioner’s case is that as well as unfairly prejudicing her, this was a fraud on creditors.”
“various items of plant and machinery, at least half of which were included on the Companies’ fixed assets register and therefore belonged to the Companies rather than to him personally (G/215/1455).”
“10. Evidence of ownership of the plant and machinery referred to in the Schedule to the Subscription Agreement entered into between John Hughes and [Remet Processing] dated7 October 2020 ”
“In the event of a closure the Joint Administrators would be required to account to John Hughes for the assets claimed to be owned personally by him, valued at£362,500 .”
“(a) all the motor vehicles and trailers listed in Part 2 of Schedule 2; (b) all the motor vehicles and trailers in Parts 3 and 4 of Schedule 2, to the extent such motor vehicles and trailers are not already referred to in Part 2 of Schedule 2; and (c) any and all other motor vehicles and trailers relating to the Business which are in the ownership of the Seller on the Transfer Date and which are not listed in Part 2 of Schedule 2, where each such motor vehicle and trailer has a value of£10,000 or less.”
“Part 1 The Plant (See attached list) Part 2 The Vehicles (See attached list) Part 3 Portbond - List of Fixed Assets (See attached list) Part4 London Wiper Company Limited - List of Fixed Assets (See attached list)”
“Excluded Assets means the property rights and assets of or used by the Seller which are not expressly sold pursuant to this Agreement including but not limited to those set out in clause 8 (Excluded Assets)”
“NEW HEAVY GRANULATION LINE Holm-Wilfrey Wet Table, Serial Number: 190352, Year of Man: 2019”
“Following discussions with the Directors, we established that stock levels had been run down to ostensibly nil as working capital restrictions had caused acquisitions of new stock to cease. Stock on site has primarily been processed over recent months. Stock value was therefore considered negligible and we therefore did not seek a formal valuation of this asset.”
“The administrators monitored stock over time and saw the stock levels materially reduce in line with decreased trading. Accordingly, our client has no evidence that the stock position was anything other than minimal at the time of the administrators' appointment.”
“Joe, would you be able to touch base with gt and see I it ok to deliver cables next week but retain title, as we have some deliveries planned.”
“Our instructions are that a further quantity of stock belonging to the Companies, upon the instruction of John and/or James Hughes, was transferred to the premises of Caprina Trading Limited approximately one week prior to your appointment. Caprina Trading Limited is another family company in which our client has a 50% interest and from which she has been excluded by John Hughes”
“Stock owned by LWC RPL requires further information from your client regarding the quantity of stock that she states was removed from the Kilnhurst Site a week prior to the completion of agreements and which was moved to the premises of Caprina Trading Limited, which your client has a 50% interest. We are instructed that, when our client negotiated the deal with the Administrative Receivers Irwin Mitchell LLP tended to refer to the Administrators as “administrative receivers”