In the matter of Kings Solutions Group Limited

LORD JUSTICE SNOWDEN :

INTRODUCTION AND BACKGROUND

The unfair prejudice jurisdiction

“994. (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.

996. (1) “If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.”

“A number of uncontroversial propositions can be derived from the authorities cited to this court:

i) For a petition to be well founded the acts or omissions of which the petitioner complains must consist of the conduct of the affairs of the company: Hawkes & Cuddy (No 2) [2007] EWHC 2999 at [202] per Lewison J;

ii) The conduct of those affairs must have caused prejudice to the interests of the petitioner as a shareholder: ibid;

iii) The prejudice so caused must be unfair: ibid;

iv) A minority shareholder cannot normally complain of conduct which is in accordance with the company's constitution unless he can establish a breach of the rules on which it is agreed that the affairs of the company should be conducted, or the use of those rules in a way which equity would regard as contrary to good faith: O’Neill v Phillips[1999] 1 WLR 1092 at 1099 A-B per Lord Hoffmann;

v) Although the term "legitimate expectation" has been used in connection with establishing equitable restraint on the exercise of constitutional power, that expression does not have "a life of its own", supplanting traditional equitable principles: ibid at 1102 B-F.

The Company

The Transaction in 2013

The Misrepresentation Claim

The Part 8 Claim

“(4) … unless and until the [Petitioners] are successful in seeking permission to appeal the Final Charging Orders, out of time, and thereafter are successful in overturning those Orders, and/or are successful in overturning the Order for Sale of the Shares on appeal, in my judgment, no challenge could be mounted on the basis that that they have been prejudiced by the making of the Charging Orders, or indeed the Order for Sale of the Shares. The only prejudice occasioned to the [Petitioners] is the fact that they are obliged to pay a considerable sum of money enshrined in the Costs Order made following the conclusion of the Original Proceedings.

…

(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 is/are overturned on appeal.

…

(10) For all the reasons set out in this Further Judgment, and in the exercise of my discretion in this regard, I do not consider that it is appropriate having regard to all the circumstances that it is a proper exercise of the Court's discretion to stay the Order for Sale pending the conclusion of the Section 994 Petition.

(11) I also agree with Leading Counsel for the [Part 8] 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 [Petitioners’] 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.”

Detailed assessment of costs

The Conspiracy Claim

The Petition and Points of Claim

“106. It is to be inferred from the facts set out below that, following the discontinuance of the Misrepresentation Action (and quite possibly much earlier), Primekings (and its directors Mr. Fisher and Mr. Stiefel) decided that they were going to:

a. Take steps to obtain the shares held by the King family for as small a cost as possible.

b. Deliberately exclude [Anthony] King and his parents from the business (both KSGL and KSSL), and take whatever steps were necessary to do that, whilst taking steps to ensure that [Anthony] King could not compete with the business.

c. As far as possible, deprive the Kings of the ability to vindicate their legal rights under the Articles, the Subscription Agreement and the general law, including by depriving them of funds.

107. The Kings contend that the pursuit of those goals (‘the Campaign’) by the Respondents amounted to and continues to amount to unfairly prejudicial conduct of the affairs of the Company because:

a. The pursuit of the Campaign is not in the best interests of the Company as a whole having regard to, inter alia, the need to act fairly as between members;

b. By pursuing the Campaign Mr. Stiefel, Mr. Zeidler and Mr. Fisher, as directors of the Company:

i. Are putting themselves in a position where their personal interests conflict with the interests of the Company, in breach of s.173 of the Companies Act 2006.

ii. Are not exercising powers for the purposes for which they were conferred, and instead are doing so for the improper purpose of the Campaign.

iii. Have done very significant damage to the business, by excluding Anthony King from the business, by spending Company money on matters which do not benefit the Company, and by damaging its credit rating and reputation.

c. The pursuit of the Campaign by the Respondents amounts to a concerted exercise by the majority to exclude the minority from participation in the management of the Company and to acquire the shares of the minority for an undervalue.

d. In any event the individual actions taken are themselves unfairly prejudicial conduct of the affairs of the Company as set out below.”

“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 … at interest rates of circa 9%.

b. The repeated failure to file accounts on time has damaged the credit rating of the company and its standing with lenders. As Anthony King reported to the board on 31 August 2016:

“The damage caused by not filing our accounts on time is unquantifiable, it has cost the business around £60,000 in professional fees alone, but how much it has cost us in lost business and opportunities we will never know. Never have so many eyes been on the business after the loss of the Co-op, both existing clients and potential clients. Co-op distribution have now also terminated their contract and it will cease in September effecting a further 16 staff, Pure Gym will now only pay our contract on a monthly basis as opposed to upfront 12 months billing and we believe they are looking at taking the CCTV monitoring in house and Kwik Fit have confirmed they would only like to extend their renewal on October 1^st by 3 months. Clearly people are very nervous”.

c. The concerted and unjustified efforts of the Respondents (via the Campaign) to damage the reputation of [Anthony] 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.”

The Judgment (in relevant parts)

“93. … the general proposition which I derive from Graham v Every[is] that the actions of a shareholder or even a third party may give rise to actionable unfair prejudice where they are combined with acts or omissions or other conduct on the part of the company.

94. However, in my judgment Graham v Everyalso stands for a second, and narrower, proposition. The real difference between the judgments of Arden LJ and Vos LJ (on the one hand) and McCombe LJ (on the other) was that the majority considered it necessary for the petitioner to plead (and then prove) the causal connection or link between the actions of the shareholder or third party and the conduct of the company’s affairs which led to the unfair prejudice: see, in particular, the last sentence of [41] (Arden LJ) and the second sentence of [81] (Vos LJ).

95. In Graham v Everythe Court accepted that it was arguable that there was such a causal link or connection because of the way in which the directors were remunerated. By failing to comply with the pre-emption provision the respondent obtained greater control over the company and was able to dictate the dividend policy and the remuneration which the petitioner was to receive.

96. Given the very wide-ranging allegations made in the Points of Claim, it seems to me that this is the real issue to which the present application gives rise. Have the Petitioners pleaded a clear link or causal connection between the actions of the Respondents and the conduct of the Company leading to the prejudice of which they complain? I also bear in mind that in Graham v Everythe Court of Appeal was (if necessary) prepared to give the petitioner time to make good the defects in his pleaded case and to give particulars of that connection.”

It is clear that the Judge regarded the two propositions to which he referred as cumulative – i.e. that proposition (2) acted to limit the potential width of proposition (1).

“126. However, in the present case the Petitioners also allege that this conduct formed part of the Campaign to deprive them of their shares, to exclude them from the business of the Company and to deprive them of their ability to vindicate their legal rights: see paragraph 106. No application has been made to strike out that paragraph nor indeed to strike out other allegations relating to the Campaign which clearly do involve the conduct of the Company’s affairs….

127. I turn therefore to the question which I posed in [96] (above). Have the Petitioners pleaded a clear link or causal connection between the actions pleaded in paragraphs 127 to 136 and the conduct of the Company leading to the prejudice of which they complain? Not without some hesitation, I have to come to the conclusion that the Petitioners have pleaded a sufficient link or connection. I say this for the following reasons:

i) One difficulty which I found with the Points of Claim is that no clear attempt has been made to distinguish between (i) conduct of the Company’s affairs, (ii) unfairness and (iii) prejudice. As the citation from Loveridge v Loveridge makes clear these are three separate questions. In the Points of Claim there is a tendency to run them together. See, for example, the last sentence of paragraph 136 where the obstruction of the exercise of the put option is described as “unfairly prejudicial conduct of the affairs of the Company”.

ii) Nevertheless, the Petitioners have alleged prejudice which they have suffered in their capacity as members of the Company. In paragraph 233 they plead that money which could have been spent on the Company’s operations has been squandered on the Campaign and legal expenses have led to increased borrowing. They also plead that the Campaign has damaged the Company’s reputation and that the pursuit of the Campaign has damaged its short term financial performance in ways that are prejudicial to them.

iii) In marked contrast to the narrow and more focussed allegations in Graham v Every, these complaints are both wide and sweeping. But in my judgment this should make no difference as a matter of pleading. I am satisfied that if these allegations are true, they would demonstrate a sufficient causal connection between the conduct of the Applicants in their personal capacity, their conduct of the affairs of the Company itself and the prejudice which the Petitioners claim to have suffered.

iv) Put another way, if the Petitioners prove at trial that the Applicants have mounted a campaign to use all of the means at their disposal (including their powers as directors, their rights as shareholders and their rights as judgment creditors) to force the Petitioners [to] sell their shares at an depressed value, this may justify relief under section 996. I say it may justify relief because the Petitioners will have to demonstrate that the specific conduct of the Company on which they rely was unfair.

v) I stress that all of these allegations are strongly contested by the [Appellants]. They deny that there was (or is) any Campaign or that it had (or has) the purpose alleged by the Petitioners. If they establish this at trial, then they will also satisfy the Court that any attempt to obstruct Anthony [King]’s exercise of the put option did not amount to conduct of the affairs of the Company. But that must be an issue for trial and cannot be determined on this application.”

The Judge cross-referred to and repeated such reasoning when refusing to strike out the other disputed allegations: see e.g. paragraph 129 of the Judgment.

“(i) Ms. Addy did not submit that the three judgments of Deputy Master Cousins were res judicata in these proceedings and in my judgment she was right not to do so. Those decisions did not give rise to a cause of action estoppel or an issue estoppel: see Virgin Atlantic v Zodiac Seatsat [17]. The Part 8 Claim was not a claim for unfair prejudice under Section 994 and the Deputy Master was not asked to decide any of the issues identified by Floyd LJ in Lovegrove.

(ii) However the issues which the Deputy Master had to decide and the arguments which were presented to him are almost identical to the issues in these proceedings. In particular, Anthony and leading counsel both argued that the Primekings Parties were using the Part 8 Claim for an improper purpose, namely, to stifle the Petitioners’ rights by forcing a sale at the very low valuation placed on them by Mr Eastaway. The Petitioners make identical allegations in Extract (14): see, in particular, paragraph 186. The Deputy Master rejected those arguments and held that there was no abuse of process or collateral advantage of stifling of the Petitioners’ rights.”

The reference to Extract (14) was a typographical mistake: it should have been to Extract (11).

“(iii) In my judgment, this attempt to re-litigate issues which have already been decided would normally be an abuse of process. However, in deciding this point I must adopt the two stage approach identified by Lord Bingham in Johnson v Gore Wood … and consider whether there are special circumstances which excuse such an abuse. Mr. Newman identified two special circumstances which, in my judgment, excuse the Petitioners’ attempt to re-litigate these issues.

(iv) First, the application which the Deputy Master had to determine was whether to stay the order for sale pending the determination of the Petition. He was shown the Petition and it was submitted to him that there was clear overlap between the issues which he had to decide and the issues in the Petition. Although he expressed the view that it “was challenging to understand” how the issues before him could be the subject of consideration in the Petition, he did not decide that issue and clearly accepted that it was for the Companies Court to decide: see paragraph 36(8) of his second judgment.

v) Indeed, it would in my judgment have come as some surprise to the Deputy Master and the parties if the effect of his judgment had been to prevent the Petitioners from pursuing the related allegations in the Petition. He was being asked to decide whether he should stay the Part 8 Claim not to decide those issues once and for all.

vi) Secondly, as Mr Newman pointed out, the Deputy Master did not hear oral evidence and cross-examination. In context, he was clearly entitled to take the view that the Primekings Parties were entitled to enforce their legal rights as judgment creditors with the benefit of the charging orders over the shares. In the present context, however, it will be crucial for the Petitioners to establish by cross-examination that the Applicants had the purpose pleaded in paragraph 106. As I have stated, if they are able to do so, this may justify relief under Section 996.”

“I am not prepared to strike out Extracts (7) to (14) [sic] for the following reasons:

(i) I accept Mr Newman’s submission that there is no general “proper forum principle”. I also accept his submission that the costs judge is highly unlikely to make findings which will assist the judge hearing the Petition to determine whether the detailed assessments formed part of the Campaign.

(ii) Moreover, it seems to me unlikely that it will add very significantly to the time and costs of the Petition if the Petitioners are permitted to take the allegations in Extracts (7) to (14) [sic] to trial.”

The Judge appears to have included Extracts (7) and (14) in this group even though he had also included them in the first group because they related to the obtaining of the Charging Orders and the amount of costs of the Part 8 Claim respectively. The inclusion of Extracts (11) and (12) (relating to the conduct of the Part 8 Claim and payment of the Interim Costs Order) appears to be an error.

“(iii) Nevertheless, at the end of this judgment I am left with a serious concern about the proliferation of claims brought by the Petitioners all arising out of their own decision to discontinue the Misrepresentation Claim in circumstances where they accept (and, indeed, affirmatively assert) that they will be unable to pay the costs if they lose.

(iv) I am also left with a serious concern that the allegations in the Points of Claim travel well outside the normal boundaries of an unfair prejudice petition and if it had not been for the “Campaign” allegation and the allegation of prejudice in paragraph 233 I would have struck them out.

(v) However, I have found that those allegations are arguable and I accept Mr Newman’s general proposition that in the absence of any finding of abuse or application for reverse summary judgment, I should permit them to go to trial. It seems to me that it would go well beyond the proactive case management of the kind considered in [Re Unisoft Group (No.3)[1994] 1 BCLC 609 and Re Coroin Ltd (No.2)[2014] BCC 14] to strike out allegations which may have a real prospect of success in the absence of any relevant abuse of process.”

The Arguments on the Appeal

THE APPEAL IN RELATION TO SECTION 994

The scope of statements of case in a petition under Section 994

“37. 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.

38. On its own, non-compliance with a pre-emption agreement for the sale of shares in the company would not be an act which amounts to the conduct of the company’s affairs since the events have nothing to do with the company save when the shares are registered in the names of the new holder, which is a purely ministerial act. An act done in the conduct of the shareholder’s personal affairs is not the conduct of the company’s affairs.

39. However, Mr. Stewart [counsel for Mr. Graham] puts the point more widely than this. And it is true to say that, if Mr Graham establishes his allegation about the terms of the heads of agreement, then, in so far as those terms set out how the company’s business is to be run, breach of those terms would fall within section 994(1).

40. In the normal way, pre-emption agreements fall outside section 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 non-compliant 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.”

“81. … 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: i.e. 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.

82. 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.

83. In a quasi-partnership, it is common for a group of partners to act in such a way as to reduce another partner’s shareholding in a variety of different ways. It would be surprising if such conduct, if proved, could not, at least in theory, be prayed in aid in seeking to establish under section 994(1)(a) of the Companies Act 2006 that the company’s affairs were being conducted in a manner that was unfairly prejudicial to the interests of the diluted member. After all, in such situations, the whole purpose of diluting the member inappropriately or unlawfully is to reduce his control of or influence in the quasi-partnership so that it will act more closely in accordance with the wishes of the majority, and in their interests. Moreover, the sub-section was amended to introduce the interests of “members generally” as well as the interests of “some part of [the] members”. That change underlined the fact that the unfair prejudice in question might depreciate the business of the company as a whole, not just some members’ interests.”

“68. One of the problems that, to my mind, has long beset litigation under section 994 of the 2006 Act and its predecessors, has been the tendency (to some extent to be found in this case) of engaging in satellite litigation by way of applications to strike out petitions on pre-conceived technicalities.

69. The words of the section, which my Lady has set out in her judgment, could not be more general. The purpose of the section was to provide a practical remedy for unfairly prejudicial conduct in the running of a company's business. It sought to remedy the undue technicality that had developed with regard to the operation of section 210 of the Companies Act 1948 and to develop the practical law relating to the break-up of quasi-partnership relations that came from the seminal judgment of Lord Wilberforce in Re Westbourne Galleries[1973] AC 360.

70. It seems to me that, inadequately pleaded as this petition is, in the various respects identified in my Lady's judgment, what is being alleged here is a systematic exclusion of Mr Graham from the management of this joint venture company. One of the elements of that alleged exclusion is said to have been the failure by three of the parties, and I include the first respondent in this, to adhere to the provisions of clause 5 of the Heads of Agreement. If that is correct, the failure to observe the requirements of that clause was an essential feature of the unfairly prejudicial conduct alleged in the petition overall. In my judgment it would be artificial to strike out this allegation on the basis that, looked at in isolation, it might not be an “act of the company”. It seems to me that fails to give due regard to the general words of section 994(1)(a) which speaks of the company's affairs being “conducted in a manner that is unfairly prejudicial…etc.”.”

“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). 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 Limited 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.”

See, to similar effect, the statements by Christopher Clarke LJ in Hague Plant v Hague[2014] EWCA Civ 1609 at [76] and [78], and by Cockerill J in her judgment in the Conspiracy Claim at paragraphs 148-150.

“The [words of section 459 of the Companies Act 1985] … are, on the face of them, extraordinarily wide and general. They allow, on the face of them, every sort and kind of conduct which has taken place over an almost unlimited – certainly upwards of 20 years – periods of time in the management of a company's business to be dug up and gone over. The words are, however, limited by the reference to ‘the company's affairs’ in respect of which the conduct must be alleged.

The section also enables a member to apply to the court on the ground that ‘any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial’. Again the words are wide and anything that the company does or fails to do can be relied upon. But wide as the category of acts may be it is necessary that the act or omission is done or left undone by the company itself or on its behalf….

The acts of the members themselves are not acts of the company nor are they part of the conduct of the affairs of the company and cannot found a petition under section 459.

Petitions under section 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.”

“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 [the petitioner].

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 [the petitioner] 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 … 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 [the company] which is unfairly prejudicial.”

“In section 459 Parliament has chosen fairness as the criterion by which the court must decide whether it has jurisdiction to grant relief. It is clear from the legislative history … that it chose this concept to free the court from technical considerations of legal right and to confer a wide power to do what appeared just and equitable. But this does not mean that the court can do whatever the individual judge happens to think fair. The concept of fairness must be applied judicially and the content which it is given by the courts must be based upon rational principles. As Warner J. said in In re J.E. Cade & Son Ltd[1992] BCLC 213, 227: “The court … has a very wide discretion, but it does not sit under a palm tree”.

Analysis of the disputed paragraphs of the Points of Claim

“the matters set out in V, VII and IX-XIV of these Points of Claim constitute unfairly prejudicial conduct of the affairs of the Company.”

That portmanteau style of pleading is inappropriate. It even includes, for example, the allegation to which I have referred in paragraph 36(ix) above, namely that the Petitioners paid the amount of the Interim Costs Order to the defendants to the Misrepresentation Claim (paragraph 195 of the Points of Claim). How that conduct by the Petitioners themselves in (finally) complying with an order of the court could constitute conduct of the affairs of the Company, or could have resulted in any such conduct, entirely escapes my understanding.

Obstruction of exercise of the Put Option (paragraphs 127 to 136 and 228b)

The Interim Costs Order and steps to obtain payment of it (paragraphs 96e, 104, 105 (part), 137-139, 168-171, 175-176 and 184-191)

Payment by the Petitioners of the Interim Costs Order (paragraph 195)

The costs of the Misrepresentation Claim and the Part 8 Claim

Conclusion

ABUSE OF PROCESS

The law

(a) A collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of the process of the court…

…

(c) If earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings.

(d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge in the earlier action if (i) it would be manifestly unfair to a party to the later proceedings that the same issues should be re-litigated or (ii) to permit such re-litigation would bring the administration of justice into disrepute.”

See also the recent reaffirmation of this approach by the Court of Appeal in Allsop v Banner Jones Limited[2021] EWCA Civ 7.

“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.”

Analysis

The Interim Costs Order

Pursuit of the Part 8 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.”

As I have observed, the instant case is not an example of Henderson v Henderson abuse of process, since (as the Judge himself had identified) the points now sought to be raised in the Petition as regards the pursuit of the Part 8 Claim had been raised before Deputy Master Cousins.

“… unless and until the Defendants are successful in seeking permission to appeal the Final Charging Orders, out of time, and thereafter are successful in overturning those Orders, and/or are successful in overturning the Order for Sale of the Shares on appeal, in my judgment, no challenge could be mounted on the basis that that they have been prejudiced by the making of the Charging Orders, or indeed the Order for Sale of the Shares. The only prejudice occasioned to the Defendants is the fact that they are obliged to pay a considerable sum of money enshrined in the [Interim] Costs Order made following the conclusion of the [Misrepresentation Claim].”

(my emphasis)

“… somewhat challenging to understand how the [Interim] Costs Order … can somehow be the subject matter of consideration during the course of the hearing of the Section 994 Petition, absent any appeal;”

and that,

“… 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 is/are overturned on appeal.”

The costs of the Misrepresentation Claim and the Part 8 Claim

135. … The central claim is in conspiracy. The Claim Form alleges that:

“The First to Ninth Defendants have unlawfully conspired to provide false and inflated cost information (including artificial costs budgets) to the Claimants and the Court with a view to causing damage to the Claimants by (a) improperly pressurising the Claimants and their legal team with improper threats of adverse costs (b) obtaining an improper payment on account of costs in favour of the Second to Fourth Defendants in the sum of £1.7m by misleading Marcus Smith J, which payment on account vastly exceeded the actual costs spent.”

136. It also alleges that the First to Tenth Defendants covered up this conspiracy by:

i) Providing false information to a costs draftsman and attempting to launder that false information by submitting it to a Master;

ii) Presenting a fraudulently inflated bill of costs to the Senior Courts Costs Office;

iii) Ensuring the Kings were not provided with any information about the costs fraud;

iv) "Deploying a cynical and determined strategy of delay and obfuscation aimed at ensuring that the Claimants are bankrupted by interim costs orders before key evidence of fraud emerges from third parties, in order to stifle this claim ";

v) Intimidating the Kings and their lawyers to prevent this claim being brought or decided on its facts.

137. Particulars of Claim were served on 19 March 2020. As will be discussed further below they allege a "Common Design" with three goals:

i) To pressure the Kings' legal team to discontinue the claim by misleading the Kings into believing they would face adverse costs more than Primekings knew they would incur, and using threatening conduct (the so-called "Discontinuance Goal");

ii) To enrich Primekings by falsely inflating costs that would be incurred to obtain the Kings' shares in KSGL at an undervalue (the so-called "Enrichment Goal"); and

iii) To cover up the above (the so-called "Cover-Up Goal").”

“On this issue the very clear answer at which I arrive is that there is nothing in the nature of a costs assessment which is unsuited to those determinations. On one level one can see this from the fact that certain of the costs issues which raise questions of fraud were originally taken by the Kings in their Points of Dispute for the detailed assessment – which it will be recalled were served on the same day as the Particulars of Claim in this action. On another level it is a plain matter of logic – the costs assessment process is there to determine what is the enforceable costs liability; it would be bizarre if it were to be said to be unsuited to determining issues which go to the heart of whether there is any costs liability at all, or which have a major impact on the amount owing.”

“287. Having had the decision of Master Whalan not to stay the assessment, the Kings took what was plainly a deliberate decision to remove those points from the Detailed Assessment; it appears that they did so in full knowledge that there was an argument that an estoppel would arise if they argued the points, and given that the point was raised squarely in the Reply to the Points of Dispute they were also alive to the abuse arguments which would arise if they did not. They chose to take that decision based on a desire to run the points in this litigation – the same desire which formed the basis of their arguments (rejected) before Master Whalan. Their reliance on Drukker was manifestly erroneous. Nor can there be any reliance on the supposed reservation of rights in this context. It was made quite clear to the Kings that this was not accepted.

288. There was time to decide the issues – 7 days had been set aside when the issues were live. The late abandonment of the issues will have led to a waste of court resources vis a vis other litigants. There was, as I have noted, nothing in the issues which was unsuitable for determination in the Detailed Assessment.

289. It follows that those aspects of the claim which put in issue the recoverability of Primekings' costs of the Misrepresentation Claim, or which take issue with their amount, are abusive and fall to be struck out.”

“There is no reason in principle why an event occurring after issue of the claim should not be relied upon to demonstrate that further pursuit of the claim is an abuse of process. It was for the costs judge to determine whether the costs claimed had been incurred and were reasonable. That included any issue of fraud. I do not read the costs judge as praising the [Petitioners] for deciding to bring their claims in a different forum. Nor did [Cockerill J]. Rather the point was that the applicants were right to drop them. Having chosen to abandon those claims in the costs proceedings, the [Petitioners] were not entitled to pursue them in this action.”

POSTSCRIPT

DISPOSAL

LORD JUSTICE NUGEE:

LORD JUSTICE GREEN:

APPENDIX: THE DISPUTED PARAGRAPHS OF THE POINTS OF CLAIM

Extract (4)

Conduct Relating to the B Shares and EBITDA

96e. The efforts of Primekings in the Part 8 proceedings (referred to below) to take the B Shares from the King family for £10,000 (in fact £0 at first) is further evidence of the lengths to which Primekings is prepared to go to deny the King family their lawful entitlements in respect of the B Shares.

Extract (5)

Trial and Discontinuance of Misrepresentation Claim

104. Primekings applied to the Court for a payment on account. In making that application Primekings made no mention of its actual costs and its submissions were made by reference only to its budgeted costs of £1.872m. It is to be inferred that the actual incurred costs of Primekings at that time were not or not significantly greater than that figure, alternatively that Primekings made a tactical decision not to assert a significantly higher costs number in order to avoid the risk that the higher costs figure would have an adverse impact on the Court's discretion .

105. On the basis of those submissions, [Marcus Smith J made an order for a payment on account of £1.7m (plus interest and costs) to Primekings ('the Payment on Account Debt').]

Extract (6)

June 2017 obstruction of exercise of put option

127. By letter dated 16 June 2017, Mr King gave notice that he was exercising his put option in relation to the AK Option Shares (which represented 50%) of his shares in the Company.

128. It was made clear by Mr King at the time (in an email to Teacher Stern dated 31 August 2017) that " The reason for exercising my 'put option' was to be able to pay down some of the debts that we owe to your client following our withdrawal of our case against them. "

129. The terms of the put option provided for the put option shares (if their value was not agreed) to be independently valued on a pro rata basis, with no minority discount. The put option shares amounted to 6.65% of the Company's ordinary shares.

130. Transfer of those shares at a properly assessed fair value pursuant to the put option would have immediately brought about a substantial reduction in the Payment on Account Debt, as was Mr King's intention.

131. However, it is to be inferred that Mr Stiefel and Mr Fisher were, pursuant to the Campaign, set on a course of obtaining all of the Kings' shares at a much lower value, this being their true motivation, not the reduction of the Payment on Account Debt. Indeed, a reduction at that time in amount of the Payment on Account Debt was tactically undesirable for Primekings, as that debt provided the only basis for enforcement action against the Kings which could be used to seize ownership of the King' shares.

132. Consequently, Primekings cynically obstructed the exercise of the put option, as described below.

133. Knowing that the King family were in a straitened financial situation (exacerbated by the fact that Primekings, Mr Fisher, Mr Stiefel and Mr Zeidler had ensured that the £70,000 due to Mr King under the Settlement Agreement was not paid to him), Primekings refused to agree the appointment of an independent valuer unless Mr King paid his share of the valuer's fees up front, rather than from the proceeds of sale.

134. It is the Kings' position that Primekings' refusal to cooperate in the exercise of the put option was a breach of contract because:

a. The stipulation in paragraph 5.3 of Schedule 5 to the Subscription Agreement that, " The fees of the appointed accountants shall be borne equally by the parties, who shall be jointly and severally liable for such fees " concerned the incidence of those fees, not the timing of payment. There would have been nothing unusual about the fees being paid once the work was done, which fees (in the case of Mr King) could have been paid from the proceeds of sale. Anthony King had made it clear that he was content to have his share of the fees paid from the proceeds of sale.

b. Obstructing the exercise of the put option in this way was contrary to clause 19.1 of the Subscription Agreement, because it prevented the provisions of the agreement from being given full force and effect according to its spirit and intention.

135. Further, whether or not it amounted to a breach of contract, Primekings' refusal to cooperate in the exercise of the put option provides powerful support for the inference of its true intentions, and those of Mr Fisher, Mr Stiefel and Mr Zeidler, as set out herein, because:

a. An independent valuer would have been unlikely to have required payment up front for his or her services, and if payment up front had been demanded, Primekings would have had no difficulty in making such payment.

b. As described below, Primekings subsequently instructed a valuer (Mr Eastaway) to value the Kings' shares applying assumptions that differed very substantially from the (very standard) assumptions required to be made under Schedule 5 of the Subscription Agreement.

c. Primekings positively relied, in the charging order proceedings described below, upon the absence of any payment by the Kings towards the Payment on Account Debt. In a witness statement dated 22 May 2018 placed before Deputy Master Cousins Ms Toomer asserted (at paragraph 15) that " the Defendants have not sought to sell their shares despite their position…".

d. The only plausible motivation for Primekings obstructing the exercise of the put option is as set out herein.

136. The obstruction of the exercise of the put option amounted, both in itself and as part of the Campaign, to unfairly prejudicial conduct of the affairs of the Company.

Extract (7)

June Charging orders

137. Having deliberately obstructed this attempt by Mr King (via exercise of the put option) to pay back a significant proportion of the Payment on Account Debt, Primekings then proceeded to obtain charge over assets of the Kings as security for the Payment on Account Debt. In particular in June 2017, Primekings, Mr Swain and Mr Fisher applied for charging orders in respect of:

a. Anthony King's 201 Ordinary Shares;

b. Anthony King's put option of shares exercisable pursuant to schedule 5 of the Subscription Agreement;

c. James Patrick King, Susan Mary King and Amanda Geraldine Crowther as Trustees of the Trust's 402 Ordinary Shares;

d. James Patrick King and Susan May King's 6 B Ordinary Shares.

e. 263 Bradford Road Idle BD10 8SQ, the home of Mr and Mrs King

f. 77 Moorhead Lane, Bradford BD18 4JN the home of Anthony King and Gillian King and their 6 children

g. 103-107 Bradford Road Menston, a commercial property owned by Anthony and Gillian King.

138. Interim charging orders were made on 22 June 2017. These were made final on 3 August 2017.

139. As set out below, Primekings and Mr Fisher subsequently launched an application for an order for sale in respect of the shares only (not the properties), with a view to obtaining an order that the charged shares be sold to them at the lowest possible valuation.

Extract (8)

Service of papers

168. On the morning of 3 September 2017, whilst leaving his property to go to church, Mr King was personally served with papers to appear in court on 11 October 2017 for an examination under CPR 71.

169. That personal service was unnecessary and was intended to intimidate the King family as part of the Campaign and to put pressure on him to accept the terms set out in the 13 June 2017 letter. Up to that point High Court papers had been served by email from Teacher Stern and hard copies by registered post.

170. That service was timed to increase the pressure on the King family in advance of a meeting which Primekings wished to have on 6 September 2017 at which (it is to be inferred) Primekings wanted the King family to agree to hand over their shares in the company in consideration of what was asserted to be a costs debt of £2.7m.

171. Anthony King offered to attend that meeting with his mother on behalf of the family as his father was ill. Primekings were not willing to give any indication as to the agenda for the meeting and following Anthony King's request for clarity around the meeting he received a response on 3 September 2017 stating " my clients are not prepared to negotiate by email or with you in isolation from your parents ". It is to be inferred that Primekings wanted to be able to exploit the presence of Anthony King's elderly parents, and considered that Anthony King would not be so easily intimidated. That strategy continues to be evident in the letter sent to James King by Eversheds detailed in section XII below.

Extract (9)

11 and 12 October 2017 questioning

175. On 11 and 12 October 2017 each of the King Family was questioned about their assets before a judge, pursuant to CPR 71, as part of the enforcement of the Payment on Account Debt. The application relating to that process (which must have been approved by Mr Fisher and/or Mr Stiefel), signed by a statement of truth, stated that "The total costs claim exceeds £3,000,000" .

176. That hearing was attended by Mr Fisher accompanied by two lawyers from Teacher Stern, a junior barrister and Paul Downes QC. After the questioning of Mr James King on 12 October 2017, Mr Downes told Anthony King and James King that if the Kings handed over all of the shares, and in addition assigned the claim against DWF to Primekings (a significant adverse change from the terms offered in the June 2017 letter), they would get to keep their houses and they might get £100k to rebuild their lives. That statement was made openly because James King had declined to speak on a without prejudice basis with Mr Downes. It reinforces the inference (which naturally arises from the circumstances described herein) that the pursuit of the enforcement proceedings was part of the Campaign to obtain the Kings' shares for less than their true value.

Extract (10)

Pressure exerted by threat of further costs in respect of the Misrepresentation Claim

182. Notwithstanding the obligation on Primekings to commence detailed assessment in respect of the costs of the Misrepresentation Action, its solicitors' request that the normal time period for submitting costs for assessment of 3 months be extended to the end of October 2017, and numerous intimations from its solicitors that it intended to do so, Primekings has still not started detailed assessment more than 19 months after the making of the order directing such costs to be assessed if not agreed.

183. It is to be inferred that Primekings has been unwilling to start detailed assessment even though the rules require it because Primekings believes that that the recoverable costs following any assessment process are likely to be no greater than the payment on account made of £1.7m. That inference is supported by (i) the fact that Primeking's costs were circa £1.4m in February 2017 and the budget for the costs to trial was £1.7m (ii) no greater figure was ever mentioned to Marcus Smith J (iii) Mr Stiefel's offer to accept the B Shares in satisfaction of the legal bill (iv) the inexplicably evasive conduct of Primekings when Mr King has made reasonable requests for details about the costs position. In such circumstances the threat of detailed assessment has been used as an improper pressure tactic in furtherance of the Campaign.

Extract (11)

Part 8 Claim aimed at expropriating shares at an undervalue

184. On 27 October 2017, a Part 8 Claim was issued by Primekings, Mr Swain and Mr Fisher, seeking an order for sale of the Kings' shares.

185. The Part 8 Claim:

a. Must have been in the course of being prepared when the Second Stiefel Threat was made.

b. Was accompanied by a first witness statement from Clare Toomer of Teacher Stern, exhibiting a valuation that had been obtained from Mr Eastaway valuing the King share in total at £164,000, and stating at paragraph 12 that "no payments have been made by any of the Defendants towards the judgment".

c. Sought an Order that the Kings' shares be purchased by Primekings for a price based on Mr Eastaway's valuation, subject to an updating exercise which (it is to be inferred) Primekings anticipated would decrease the price.

186. The Part 8 Claim was structured and pursued in a manner calculated to result in an expropriation of the Petitioners' shares on terms that were unfair to the Petitioners in at least the following respects, which it is to be inferred that the Respondents knew and intended for the reasons set out below:

a. The Part 8 Claim sought to bring about a sale at a price substantially lower than the price that would have been determined by the application of the valuation mechanism set out in the Subscription Agreement. This fact, and the Respondents' knowledge of it, is demonstrated by:

i. The difference between the assumptions that Mr Eastaway was instructed to make, and made, and the assumptions mandated by the Subscription Agreement; and

ii. The Respondents' obstruction of Anthony King's attempted exercise of the Put Option over his shares, which would have resulted in a sale of those shares to Primekings pursuant to the mechanism set out in the Subscription Agreement, and the acknowledgement made on their behalf by Counsel during the Part 8 proceedings that this may give rise to a damages claim by Anthony King for breach of contract.

b. The Part 8 Claim sought to force a sale by reference to a valuation date that was prejudicial to the Petitioners, and was known and intended by the Respondents to be prejudicial to the Petitioners and correspondingly advantageous to Primekings, because, as the Respondents were aware:

i. The valuation was made at a time and in a manner that maximised the adverse impact of the Respondents' unfairly prejudicial conduct of the affairs of the Company as described above. By way of example:

1. It included the impact of the damage to the group's credit rating caused by the late filing of accounts; Mr Eastaway's report expressly relied upon the fact (drawn from the 2017 CEO's report exhibited to Mr Eastaway's valuation) that "The business has a credit score of zero due to late filing of accounts which is causing issues with creditors and suppliers";

2. By adopting a net asset valuation approach (which was in any event unwarranted from a valuation perspective) Mr Eastaway's valuation directly reflected the adverse impact of the Respondents' expenditure of Company money on the pursuit of the Campaign, including in particular the costs of the Bribery Action.

ii. The adoption of a net asset value approach not only reflected, but locked in the effects of such conduct. Mr Eastaway's valuation contained no or no proper attempt to estimate the future profits of the Company, having regard to the plans which it is to be inferred that its management in fact had to generate such profits over whatever planning horizon(s) they were working to.

iii. The Respondents thereby sought to deprive the Petitioners of the ability to sell on the advantageous terms (which they had bargained for) in the future, for example pursuant to the "tag along" rights in the Articles giving the Petitioners the right to sell their shares at the same time, and on the same terms, as a sale by Primekings of its own stake.

c. The Part 8 Claim sought to force a sale at a lower price than would have resulted from a valuation following the principles applicable in the context of Section 994 proceedings. The present proceedings, seeking an order for sale, had been issued before the Part 8 Claim came on for hearing before Deputy Master Cousins. Rather than agreeing to a sale based on the principles applicable in Section 994proceedings, recognising, as they should have done, that there had been unfairly prejudicial conduct of the Company sufficient for a Section 994buy-out order to be made, the Respondents resisted a stay of the Part 8 Proceedings and vigorously pressed ahead seeking to obtain a sale at a lower value.

d. The instructions given to Mr Eastaway included the instruction to assume the sale of the Kings' shares would be in individual parcels, with minority discounts applied to each. (Leading Counsel for the Respondents subsequently to Deputy Master Cousins conceded that that particular assumption should not have been made and the valuation should be adjusted to remove its effect. It is to be inferred that the Respondents were content for that concession to be made because by the time it was made, the impact of all the other instructions given to Mr Eastaway was that the value attributed to the Company was so low that the discounting had limited impact.)

e. The instructions given to Mr Eastaway included the instruction to assume that the shares should be valued on the basis of a forced sale, as expressly contrasted with a "willing buyer/willing seller" basis. As at least Mr Stiefel and Mr Fisher would have known, as qualified accountants, the making of such an assumption was inconsistent with the standard accounting definitions of fair value. Mr Eastaway relied upon this assumption, among others, to explain the dramatic difference between his valuation of the Company and the valuation produced by Costas Constantinou of Smith & Williamson, the expert instructed by the Respondents in the context of the Misrepresentation Action. Mr Constaninou's valuation report was dated 10 February 2017, only 8 months earlier than Mr Eastaway's report. Mr Constantinou's opinion was that the value of the Company's voting shares as at 24 January 2017 was £10.3m, assuming that the Company would have sufficient distributable reserves to make the expected pay out of B ordinary shares.3 In the absence of any explanation having been provided by the Respondents as to why they considered it necessary to instruct a different valuer, rather than to instruct Mr Constantinou to update his valuation, it is to be inferred that there is no innocent explanation for doing so.

f. The instructions given to Mr Eastaway included an instruction that the shares be valued on the basis that no warranties would be given in connection with the transfer of the shares. As at least Mr Fisher and Mr Stiefel would have known, a normal valuation process would have involved the assumption that the terms of sale included the warranties that would normally be included in an arm's length transaction between a willing buyer and a willing seller.

g. The instructions given to Mr Eastaway included an instruction that the shares be valued on the assumption that the shareholding was subject (in the hands of the purchaser) to the obligations and rights of third parties set out in the Company's Articles. As the Respondents would have appreciated, that assumption bore no relation to the commercial and legal reality, which was that a purchaser of all of the Company's shares would not need to be concerned about such matters because (i) there would be no other shareholders following such a purchase, and in any event (ii) the purchaser could alter the Articles.

h. The instructions given to Mr Eastaway included the expression of opinion that there was no prospect of any payment being made to the holders of the B Shares. Mr Eastaway's report dated 16 October 2017 adopted that opinion, apparently without any proper process of analysis as its validity. The logic behind that assumption, namely that the Company would never make any distributable profits or have 'other monies' available, is plainly inapplicable to a company trading as a going concern. It is to be inferred from (among other things) the preparation of accounts on a going concern basis and the continued support of the Kirsh group for the business, that the Respondents in fact expected the Company to continue to trade as a going concern and believed that in due course it would generate distributable profits sufficient to redeem the B Shares in full and thereafter generate ongoing profits for the ordinary shareholders.

i. Mr Eastaway's attribution of a negligible value to the B Shares was also inconsistent with his attribution of some (albeit low) value to the ordinary shares, because Mr and Mrs King are entitled to be paid the whole of the at least £2,133,000 price of the B Shares before any profits become available for distribution to the holders of the ordinary shares.

187. As the Respondents knew and intended, the overall impact of the instructions given to Mr Eastaway was to produce a valuation which bore no resemblance to the commercial reality of the Petitioners' position, in which they have a 40% stake in a very substantial business, with tag along rights to ensure pro rata participation in any sale of the whole, together with the right to receive £2,133,000 in respect of the B Shares as and when the Company was lawfully able to pay it, and with rights under Section 994of the Companies Act to protect them against any unfairly prejudicial conduct by the majority.

188. At a hearing on 31 May 2018, Leading Counsel for the Respondents made the submission that " in effect, the order sought [by the Petitioners in the Part 8 Claim] is that the court stays execution so that they can benefit from the labour and efforts of those running the company over the years to come ". It is to be inferred that the inverse of that submission reflected the true motivation of the Respondents, namely, to prevent the Petitioners from participating in or receiving a fair price reflecting or even remotely approaching the true commercial value of Company, which included its potential to make future profits.

189. The Respondents' intention, by the pursuit of the Part 8 Claim, to bring about a result that was unfairly prejudicial to the Petitioners is to be inferred from all the circumstances set out herein, fortified in particular by the following facts and matters:

a. The Respondents' own previously expressed views about the value of the business and/or the Kings' shares. By way of example only:

i. Mr Stiefel stated on 17 May 2017 that " The chances of KSGL reaching £100m is good and there is no reason why it should not ".

ii. Around 6 April 2017, Mr Stiefel told Steve Evans (the former COO of KSSL) that Primekings would consider an offer of £20m for the Kings' 60% stake in the business.

iii. In October/November 2017 the Kings indicated a willingness to buy back the business at a premium which would have covered the Payment on Account Debt and debts owed to the Kirsh group. Teacher Stern stated that such a sale was 'of no interest' to their clients.

iv. The terms of transfer sought to be achieved by the charging order proceedings were much more disadvantageous to the Kings even than the already unfair terms proposed in the 13 June 2017 letter. That letter indicated that the Respondents appreciated that the Kings' shares were worth more than the Kings' liability in respect of the costs of the Misrepresentation Action.

b. The money Primekings has been willing to spend on a Campaign aimed at obtaining the shares, including on the Bribery Action, which greatly exceeded the value of the shares as asserted for the purposes of the Part 8 Claim by the Respondents.

c. The pressure for a result exerted by Primekings on their solicitors which led those solicitors to make an improper threat to report the Deputy Master in an email sent to the Court on 26 April 2018 without a copy being sent to the solicitors for the Kings.

d. The fact that the amount that would have been realised by the Respondents from the Part 8 Claim would not appreciably have reduced the Payment on Account Debt, and indeed the effect of the Part 8 Claim was likely to increase that debt, once legal costs had been taken into account.

190. The pursuit of thePart 8 Claim amounted, both in itself and as part of the Campaign, to unfairly prejudicial conduct of the affairs of the Company within the meaning of Section 994. It forms an integral and important part of a course of conduct, involving the direct exercise of powers held by the individual Respondents as directors of the Company and KSSL, and Primekings as the Company's majority shareholder, (as well as the exercise of rights held individually) that has been pursued with the objective of expelling the Kings from participation in the management of the Company and expropriating their shares for less than their fair value.

191. Further or alternatively, the fact and manner of the Respondents' pursuit of the Part 8 Claim is highly relevant to the existence and scope of the Campaign, the unfairness of other conduct pleaded herein amounting to conduct of the affairs of the Company, including the inferences to be drawn as to the intentions and objectives of the Respondents, and to the relief that it is appropriate to grant in respect of such conduct.

Extract (12)

Payment of the Payment on Account Debt

195. In October 2018, the Payment on Account Debt was repaid in full, thus bringing the Part 8 claim to an end. That payment came about when the Kings received a substantial payment from DWF's insurers relating to the services provided by DWF in connection with the Misrepresentation Action. Prior to that time the Kings were not in a position to pay off the Payment on Account Debt, as the Campaign had been effective in ensuring that they were not in a position to do so.

Extract (13)

Letter wrongly asserting more money owed

196. In a letter dated 30 October 2018 to Mr Anthony King, the Respondents (through their solicitors) asserted that:

a. " you and your parents continue to owe significant sums of money to our clients under the Costs Order ." That statement was plainly wrong as a matter of law – the Petitioners have no legal liability to pay unassessed costs.

b. " our client is entitled to updates in matters that affect its position as a judgment creditor and you should therefore be transparent and forthcoming about any significant changes in your financial position ." That statement was also plainly wrong as a matter of law, as Primekings was no longer a judgment creditor. In any event a judgment creditor has no such entitlement as a matter of law.

c. "our client has a fixed charge pursuant to the final charging order dated August 2017 ." That was plainly incorrect. The Payment on Account Debt had been paid in full and Primekings had agreed (as it had to) that the charge be discharged. On 16 October 2018 at 18.14 Teacher Stern had stated to RPC in correspondence, " We acknowledge receipt of £1105 and agree to the discharge of the charging orders ."

197. In the circumstances, the letter of 30 October 2018 amounted to harassment and it is to be inferred that it was sent on the instruction of the Respondents in order to add further unfair pressure on the King Family pursuant to the Campaign, and/or represented an unwarranted attempt to extract confidential information about the financial position of the Kings to which the Respondents had no entitlement.

Extract (14)

Costs of the Part 8 Claim

198. At the hearing on 17 October 2018, Primekings applied for an order for costs, and in the course of doing so placed two Costs Schedules before Deputy Master Cousins indicating that costs totalling £199,621.80 had been incurred. The covering letter stated: "Absent any proper explanation by your clients as to how, at the eleventh hour, they have been able to make (part) payment, it is our clients' position that their costs should be awarded on the indemnity basis, to be assessed if not agreed. On that basis, we will be seeking a payment on account in the sum of £120,000.".

199. On 21 December 2018 Teacher Stern wrote to RPC stating: " Our clients' costs schedules total £199,621.80 although we put you notice that actual billed costs are more significant. Those costs will of course be a matter for detailed assessment pursuant to paragraph 47 the Judgment. For the purposes of seeking to agree a payment on account, our clients propose that your clients pay £180,000 by 15 January 2019, with the balance to be assessed (if not agreed) ."

200. RPC immediately responded asking Teacher Stern to clarify (1) whether the bill that their clients would submit for Detailed Assessment would exceed the signed Costs Schedules of £199,621.80 that had been placed before Deputy Master Cousins, and if so (2) by how much, and (3) why such sum was not included in the Costs Schedules put before the court.

201. On 24 December 2018 Teacher Stern wrote asserting that there were approximately £130,000 of additional costs (exclusive of VAT and excluding work post receipt of Judgment) and asserting that Primekings statements of costs " were conservatively prepared in an effort to avoid further cost of dispute, expected on the basis of your client's claimed penury to be difficult to recover and on the basis of standard assessment. They are no longer applicable to the ordered indemnity basis assessment and we expect that a substantial additional part of our billed costs will be fully recoverable on the indemnity basis ." That was factually and legally wrong – the original statements had been prepared in the knowledge that the Respondents would be seeking the assessment of such costs on the indemnity basis and in circumstances where it was known that the Petitioners had been able (as explained above) to repay the Payment on Account Debt, and there was no legitimate reason for the Respondents to claim further costs that had not been included in the schedules.

202. It is to be inferred that the costs figures provided to Deputy Master Cousins represented the costs that the Respondents genuinely believed at the time to be properly recoverable on the indemnity basis (and which they believed could be relied upon without risking adversely influencing the Deputy Master's discretion as to the costs order to be made). Consequently, the assertion of an additional entitlement to costs represented an improper attempt to exert pressure on the Petitioners, in furtherance of the Campaign. That inference is strengthened by the fact that (i) this is not the first occasion on which the Respondents have asserted that they have incurred properly recoverable costs which exceed schedules relied on at hearings (they did the same thing in relation to the costs of the Misrepresentation Action), and they have a track record (in relation to the costs of the Misrepresentation Action, as described above) of being unwilling to subject such costs to detailed assessment, or substantiate them in any meaningful way.

203. The exertion of pressure in that way demonstrates that the Campaign, funded by the Company, is still in full flow notwithstanding the initiation of these proceedings and the repayment of the Payment on Account Debt. Actions taken which are calculated or likely to reduce the ability of the Kings to seek an effective remedy from the Court

Additional disputed paragraph

228. …

b. The Respondents prevented Mr King from exercising his put option in June 2017 as set out above.