Fisher v Cadman & Ors

These proceedings involve an application for relief under ss. 459 and 461 of the Companies Act 1985 (“the 1985 Act”), or in the alternative for an order to wind up Cadman Developments Limited (“CDL”) on the just and equitable ground under s. 122(1)(g) of the Insolvency Act 1986.

At the hearing before me, the Petitioner, Mrs Fisher, was represented by Mr Davenport of Counsel. Mr Cedric Cadman and Mr Rodney Cadman appeared as litigants in person, representing themselves and CDL.

The background to the dispute is a sad breakdown in family relationships. Mrs Fisher is the older sister of Cedric Cadman and Rodney Cadman. They are all now in their sixties. It was clear at the hearing before me that there have been episodes in the past between them that have generated a good deal of ill-feeling and upset. Fortunately, I have not found it necessary for this judgment to resolve all the points of dispute between them which have affected their relations with each other. I have concentrated on those matters which appear to me to be relevant for the fair resolution of these proceedings. I would like to record that all of Mrs Fisher, Cedric Cadman and Rodney Cadman conducted themselves during the hearing with dignity and restraint, notwithstanding that at times matters were raised which were clearly upsetting for them.

CDL was set up by their father, James Cadman, in 1961 as the vehicle for his building and property development business (it was originally called Ernest S. Ireson Ltd, and changed its name in 1971). At about the same time as CDL was formed, James Cadman moved from the West Midlands to Stamford in Lincolnshire, which is the main place where the business of CDL was carried on. Mrs Fisher remained with her family living in the West Midlands. Cedric and Rodney Cadman moved with their father and established themselves in Lincolnshire. They both worked with their father in CDL’s business. Certainly after the move to Lincolnshire, Mrs Fisher had no role in the business.

In 1969, Cedric and Rodney Cadman set up another building and property development company of their own, Cadman Homes Ltd (“CHL”). Their father, James, made a small investment in this company, and their fathers-in-law made more substantial investments in it. Mrs Fisher’s evidence in relation to this, which I accept, was that James Cadman was unhappy about this development, since it would involve a diversion of at least some of Cedric and Rodney Cadman’s energies from the affairs of CDL. However, Cedric and Rodney continued to work in the business of CDL as well as in the business of CHL. The two companies entered into transactions with each other over the years.

Cedric and Rodney Cadman were the sole directors of CHL at all material times. They were also directors of CDL at all material times. James Cadman and his wife, Edith, were also directors of CDL until their respective deaths. James Cadman died on 18 January 1994. Edith Cadman died on 7 August 1997.

Until his death, James Cadman was the majority shareholder in CDL and maintained a firm grip on the company. Cedric and Rodney Cadman also held shares in the company. In 1983 James Cadman transferred 200 shares in CDL to Mrs Fisher as a gift. After James Cadman’s death, his shares devolved upon his children (377 shares each) and his wife (1,875 shares). After Edith Cadman died, her shares were divided equally between the children (625 shares each).

As at the date of the petition (February 2002) and to date, Mrs Fisher owned 1,002 shares (33.3% of CDL), Cedric Cadman owned 999 shares (33.29%) and Rodney Cadman owned 986 shares (32.8%). The remaining few shares (21 in total) had been transferred to others, the spouses and children of Cedric and Rodney Cadman.

These shareholdings may be contrasted with those in CHL: Cedric Cadman 9,263 shares (which, together with an additional 4,221 shares held by his wife and children, amounted to 44.9% of the company); Rodney Cadman 9,463 shares (which, together with an additional 3,081 shares held by his wife, amounted to 41.8% of the company); and Mrs Fisher 1,114 shares (which she inherited from Edith Cadman on her death, amounting to 3.7% of the company). (The remaining 2,858 shares in CHL, 9.5% of the company, are owned by a Mrs P. Culley). It can be seen that Mrs Fisher’s interest in CDL is very much more substantial than her interest in CHL.

James Cadman’s sons, in effect, worked for him within CDL’s business, and also pursued their own business interests with CHL. It appears that there were a number of successful building and housing developments for CDL over the years. At the same time, the company acquired a portfolio of properties which were held by it for a long period without being developed. At the time of James Cadman’s death, the portfolio of such properties comprised:

56 St Martins, Stamford. This was acquired by CDL in about 1972. In the end, it was sold in 2002 with completion of the sale in early 2003. It was sold for £295,000 together with a sum of £5,000 for an associated right of way.

6 Conduit Road, Stamford.

A plot of land at Empingham Road, Stamford.

A single garage at King’s Road, Stamford. From at least the early 1990s onwards, this was the only property in CDL’s portfolio which was let. It brought in a small sum of a few hundred pounds each year. The letting was to the same person throughout.

Access road to site at Ketton, near Stamford. This is a road leading to an estate of houses previously developed by CDL. Cedric and Rodney Cadman’s evidence, which I accept, was that there were rights of way for the estate over this road, and that it has for practical purposes no value.

50 The Crescent, Hagley. This is a property acquired in the West Midlands, close to where Mrs Fisher lived. James Cadman and his wife would use it to stay in sometimes, in effect as a holiday home. No works of improvement or maintenance were done to it over many years.

4 Church Lane, Stamford. This was acquired by CDL in about 1972, and like 56 St Martins it was sold in 2002 with completion in early 2003. It was sold for £167,500.

The Memorandum of Association of CDL included the following objects:

CDL’s Articles of Association were adapted from those set out in Table A to the Companies Act 1948 (“Table A”). The provisions in CDL’s Articles which are of particular relevance for the present proceedings are as follows:

Article 47 of Table A: “The company shall in each year hold a general meeting as its annual general meeting in addition to any other meetings in that year, and shall specify the meeting as such in the notices calling it; and not more than fifteen months shall elapse between the date of one annual general meeting of the company and that of the next. … The annual general meeting shall be held at such time and in such place as the directors shall appoint.” This provision reflects the general legal requirement for the holding of an AGM now contained in s. 366 of the 1985 Act.

Article 58 of Table A: “At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is (before or after the declaration of the result of the show of hands) demanded – … (c) by any member of members present in person or by proxy and representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting …”.

Article 67 of Table A: “On a poll votes may be given either personally or by proxy.” The entitlement of a member to appoint a proxy to attend and vote at a meeting of the company, and (in the case of a private company such as CDL) also to speak at the meeting, is also confirmed by s. 372(1) and (3) of the 1985 Act.

Article 68 of Table A: “The instrument appointing a proxy shall be in writing under the hand of the appointer or of his attorney duly authorised in writing …. A proxy need not be a member of the company.”

Article 69 of Table A: “The instrument appointing a proxy … shall be deposited at the registered office of the company … not less than 48 hours before the time for holding the meeting or adjourned meeting, at which the person named in the instrument proposes to vote, or, in the case of a poll, not less than 24 hours before the taking of the poll, and in default the instrument shall not be treated as valid.”

Article 70 of Table A: “An instrument appointing a proxy shall be in the following form or a form as near thereto as circumstances admit” [there is then set out a prescribed form].

Article 76 of Table A: “The remuneration of the directors shall from time to time be determined by the company in general meeting. Such remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company.”

Article 84 of Table A: “(1) A director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the company shall declare the nature of his interest at a meeting of the directors in accordance with section 199 of the Act [see now, s. 317 of the 1985 Act]. (2) A director shall not vote in respect of any contract or arrangement in which he is interested, and if he shall do so his vote shall not be counted, nor shall he be counted in the quorum present at the meeting, but neither of these prohibitions shall apply to- … (d) any contract or arrangement with any other company in which he is interested only as an officer of the company or as holder of shares or other securities; and these prohibitions may at any time be suspended or relaxed to any extent, and either generally or in respect of any particular contract, arrangement or transaction, by the company in general meeting.”

Article 86 of Table A: “The directors shall cause minutes to be made in books provided for the purpose - … (b) of the names of the directors present at each meeting of the directors and of any committee of the directors; (c) of all resolutions and proceedings at all meetings of the company, and of the directors, and of committees of directors …”.

Article 123 of Table A: “The directors shall cause proper books of account to be kept with respect to:- (a) all sums of money received and expended by the company and the matters in respect of which the receipt and expenditure takes place; … and (c) the assets and liabilities of the company. Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the company’s affairs and to explain its transactions.”

Article 125 of Table A: “The directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the company or any of them shall be open to the inspection of members not being directors, and no member (not being a director) shall have any right of inspecting any account or book or document of the company except as conferred by statute or authorised by the directors or by the company in general meeting.”

Article 126 of Table A: “The directors shall from time to time, in accordance with [the 1985 Act], cause to be prepared and to be laid before the company in general meeting such profit and loss accounts, balance sheets, group accounts (if any) and reports as are referred to in those sections”. The relevant sections of the 1985 Act relating to accounts are s. 226(1) and (2) (duty of the directors to prepare for each financial year of the company a balance sheet, which shall give a true and fair view of the state of affairs of the company at the end of the financial year, and a profit and loss account, which shall give a true and fair view of the profit or loss of the company for the financial year) and s. 234(1) (duty of the directors to prepare a report for each financial year containing a fair review of the development of the business of the company during the financial year and of its position at the end of it). It is the obligation of the directors of a company to lay before the company in general meeting the company’s annual accounts and the directors’ report and the auditors’ report on those accounts: s. 241 of the 1985 Act. The period allowed for the laying and delivering of such accounts and reports is, for a private company, 10 months after the end of the relevant accounting reference period: s. 244(1) of the 1985 Act.

Article 8 of CDL’s Articles: “(A) Subject as in these Articles provided, any share may be transferred to any member of the Company, and any share may be transferred by a member of the Company to his or her father or mother, or to his or her wife or husband, and any share of a deceased member may be transferred to the widow or widower or any other such relative as aforesaid of such deceased member or may be transferred to or placed in the names of his or her executors or trustees …. (B) A share shall not be transferred otherwise than as provided in paragraph (A) of this Article unless it first be offered to the members at a fair value to be fixed by the Company’s Auditors. Any member desiring to sell a share (hereinafter referred to as a ‘retiring member’) shall give notice thereof in writing to the Company (hereinafter referred to as a ‘sale notice’) constituting the Company as agent for the purpose of such sale. No sale notice shall be withdrawn without the Directors’ sanction. The Directors shall offer any share comprised in a sale notice to the existing members. … If within twenty-eight days after the sale notice has been given the Directors shall not find a purchasing member for the share and give notice accordingly … the retiring member may at any time within six months after the sale notice was given … sell such share to any person and at any price.”

Section 459(1) of the 1985 Act provides:

Section 461 of the 1985 Act provides that, if the court is satisfied that a petition under Part XVII of the 1985 Act is well founded, it has a wide discretion as to the relief to be granted.

Mr Davenport, for Mrs Fisher, made it clear that her complaints about the running of CDL on which she relied in support of the petition for relief were confined to the period commencing at the start of 1996. He grouped the complaints under six heads:

Failure to hold AGMs for CDL, in breach of the Articles and s. 366 of the 1985 Act;

The introduction into CDL’s accounts by Cedric and Rodney Cadman of provisions relating to remuneration for themselves as directors, which Mr Davenport criticises as inexplicable and excessive;

The alleged failure of Cedric and Rodney Cadman to provide substantive explanations in correspondence with the Petitioner and her lawyers for the figures relating to directors’ remuneration;

The change between the draft accounts for CDL for the year ending 5 April 1996 and the final signed accounts for that year, relating to provision in respect of a debt said to be due from CDL to CHL;

The inactivity of CDL, and its failure to develop the portfolio of properties referred to above; and

The alleged state of deadlock said to have arisen between Cedric and Rodney Cadman, such that they were said to have been incapable of managing the affairs of the company.

Mr Davenport made it clear that Mrs Fisher’s primary claim for relief was under ss. 459 and 461 of the 1985 Act, for an order that Cedric and Rodney Cadman (alternatively, CDL itself) purchase her shares in CDL at a valuation to be set by a valuer appointed by the court, upon the basis of certain assumptions to be made, depending upon the findings of the court on the facts. In particular, Mrs Fisher claims that she should be bought out of the company on terms which do not involve any discount for the fact that she is a minority shareholder. Mrs Fisher’s alternative claim, for the winding up of CDL, was presented as very much a fallback position.

Cedric and Rodney Cadman deny that they have behaved in any way which could amount to unfair prejudice of their sister’s interests as shareholder in CDL. Their position is that, if she wishes to sell her shares in CDL, she is bound to do so by activating the share sale provision in Article 8 of CDL’s Articles of Association. The valuation of her shares under that provision, should they be prepared to buy them, would presumably involve a discount to take account of the fact that Mrs Fisher has only a minority holding. If they chose not to buy them, and Mrs Fisher could find another purchaser from outside the company, the sale price would again presumably reflect the fact that her shareholding is a minority shareholding in the company. Cedric and Rodney Cadman also contend that there is no good basis on which CDL should be wound up, and emphasised that it would be detrimental to everyone’s interests for it to be wound up and, in effect, compelled to sell its properties at a time not of their choosing.

I will turn to deal with the complaints under each of the headings set out in paragraph 15 above, after reviewing the salient facts, as I find them, and the relevant principles of law to be applied.

As explained above, Cedric and Rodney Cadman have at all material times been directors of CDL and have been involved in its management. Up until their father’s death in 1994, they were subordinate to him in the company and its business. James Cadman had a philosophy of carrying on CDL’s business which involved minimising the company’s expenditure as much as could possibly be achieved, and even to the point of not paying contractors so that the company acquired a poor reputation as a business associate and found it difficult to find contractors willing to do work for it. It appears that the question of remuneration for Cedric and Rodney Cadman, as directors, was dealt with on the same basis. Cedric Cadman, in his evidence, said that his father applied the same principles to his sons. In my judgment, this forms part of the relevant background to the actions which Cedric and Rodney Cadman took in 1997, after their mother died.

In her evidence, Mrs Fisher said that on her father’s death she expected that she would take an active part in the running of CDL, because prior to his death he had talked about making her a director of the company. I find that James Cadman did raise with Mrs Fisher over the years, in very general and unspecific terms, the possibility that she might become a director of CDL. However, whenever it was raised with Cedric and Rodney Cadman, they were opposed to the idea. James Cadman did not push for his daughter to be brought into the management of the company, and there was never any mutual understanding between Mrs Fisher and any other member of the family that she should be involved in the management of the company.

The affairs of CDL were run with considerable informality while James Cadman was alive. This is unsurprising, in view of its nature as a small family company. Formal AGMs were not held.

A series of sets of accounts for CDL were included in the evidence before the court. Unfortunately, they were not in every case complete, and this has meant that it is with some difficulty that one traces through precisely what was happening in the company over a period of several years, so far as appears from those parts of the accounts which are available to the court. Also, the other documentation available to the court relating to the relevant period under review for the purposes of these proceedings was by no means complete. The findings of fact which I make in this judgment are based upon a combination of such documentary material as was made available to me, the evidence given by the witnesses and my assessment of the inherent probabilities in relation to various matters.

The accounts of CDL for the year ended 5 April 1993 were the first set of accounts in evidence. They were signed by Edith Cadman on behalf of the directors on 1 June 1994 (that is, after James Cadman’s death, and at a time when Edith, Cedric and Rodney Cadman were the directors). The accounts recorded the duty of the directors to prepare financial statements for the year which gave a true and fair view of the state of affairs of the company and of the profit or loss of the company for the year. The accounts showed a small amount (£414) of rental income received (in relation to the garage at King’s Road) and operating profit of £74,412 for the year, on disposal of tangible fixed assets. A revaluation of the land and buildings held by the company had been performed by the directors, giving a substantial uplift of £55,729. The creditors of the company were shown as £47,459, made up of loans from shareholders (£35,659), corporation tax and trade creditors. There was no provision made in relation to any emoluments for the directors. The accounts showed a substantial sum (£105,378) of cash at bank and in hand. Notes to various of the sets of accounts indicate that it was agreed that no interest was payable in relation to loans from shareholders.

A provision in the sum of £10,000 was made in the accounts “for costs to be incurred on completed site”, but there was no note explaining what that related to. In his evidence, Cedric Cadman said that this included a sum of £9,236 owed by CDL to CHL for work done by CHL on a CDL site at College Close, Great Casterton in the early 1970s, and I accept this. A letter dated 31 October 1994 from Jackson & Grimes, who were at that stage the accountants for CDL, reported in relation to this sum that the invoice had been issued in 1984/85 for £13,000, that £3,200 of this sum was paid in May 1985 and in 1985/86 there were items to the value of £564 in the purchase ledger for CDL, leaving the balance carried forward of £9,236. It should be noted that in neither the accounts for 1993 nor this letter was there any suggestion that there was agreement that interest should run on this sum; on the contrary, the inference is that it was treated in the same way as the shareholders’ loans, and that the arrangement was that no interest should be payable in relation to the sum due from CDL to CHL. It is odd that the sum should have been left outstanding and unpaid for such a long period. The true underlying position is not clear. In the accounts for CHL for the year ended 31 December 1993, the figure for its debtors was said to include an amount of £9335 due from CDL “which is in dispute”. My best assessment from the evidence as a whole is that it was a matter of some dispute between James Cadman and his sons whether the sum of £9,236 referred to in the letter from Jackson & Grimes really was a sum which should be paid by CDL to CHL, and that as a compromise solution the understanding was that the sum of £9,236 should remain as a provision in the accounts (ie in effect as a continuing acknowledgment on the part of CDL that that sum was owing) but without its being paid immediately and without any provision for interest to accumulate in respect of it.

The accounts for 1993 are significant, in my judgment, together with CDL’s accounts up to 1996, as showing in particular (i) that there was an agreement or understanding as between company and directors that the directors should not be paid emoluments in respect of their management of CDL’s business, at any rate so far as it related to the ordinary course of their management of the portfolio of properties set out above which was held at the time; and (ii) that (aside from the small income from the letting of the garage) the portfolio of properties was being held simply with a view to appreciation in their capital value, without significant sums being spent to develop them and without their being let out. This had been the position in relation to these properties for many years while James Cadman was alive, and Mrs Fisher was well aware that this was the case. There is no evidence that she had made any protest at this state of affairs until the events much later, to which I refer below.

After James Cadman’s death, his wife Edith inherited his shares in CDL and CHL. She wished to divest herself of her shares in CDL to her children. There was some discussion between Mrs Fisher and Cedric and Rodney Cadman as to how things should be ordered for the future, but they could not come to an agreement. On Edith’s behalf, the family’s solicitors, Messrs Daltons, wrote to her children in July 1995 with a proposal that her shares in CDL should be divided equally between the three children, and that each of them would be appointed a director of the company. However, Cedric and Rodney Cadman would not agree to this package, so the proposal was not taken forward. It was again clear that there was no understanding or arrangement that Mrs Fisher should have any part in the management of CDL’s business. On the other hand, Edith wished them all to benefit equally from the family shareholding in the company.

At about the same time, perhaps slightly after this, another proposal was put to Mrs Fisher at a meeting involving her brothers and a solicitor from Messrs Daltons. According to this proposal, an adjustment could be made to Edith Cadman’s will to leave Mrs Fisher a larger sum of money, but no shares in CDL, and in return for Mrs Fisher giving up her existing shareholding in CDL to her brothers. Mrs Fisher did not agree to this, since she felt that her father had intended her to hold and benefit from the shares he had given her during his life.

So far as the business of the company was concerned, things continued much as before in the period immediately following James Cadman’s death (although there was in fact an AGM held on 8 August 1994, with some summary manuscript minutes taken by Edith Cadman). In March 1994, Cedric and Rodney Cadman arranged for a valuation of 56 St. Martin’s and the property at 4 Church Lane by Savills. It is clear from Savills’ report that the properties were in a dilapidated state, that considerable renovation would be required, and that the property market at the time was at a low ebb although beginning to show signs of improvement. Savills suggested that 4 Church Lane might be sold to finance renovation of 56 St Martin’s. Savills estimated the value of 56 St Martin’s, if renovated (the cost of which was a matter of uncertainty), as in the region of £185,000, and if unrenovated at £75,000 to £85,000; the figures for 4 Church Lane were in the region of £75,000 if renovated, and £35,000 to £40,000 if unrenovated. Savills canvassed the possibility of selling 4 Church Lane in order to generate funds to renovate 56 St. Martin’s.

Cedric and Rodney Cadman decided that the best course was not to spend money on renovation, and to retain the properties in what could be a rising market. I accept Cedric’s and Rodney’s evidence that they would from time to time have discussions with estate agents, surveyors and architects about the properties in the portfolio. I find that they kept the position and possibilities in relation to the properties under general review throughout the period from before 1994 until the present, and organised a limited amount of work to smarten up the appearance of, but not renovating, the properties at 56 St Martins and 4 Church Lane (although I do not think that they devoted any very significant portion of their time to these activities). It was in their own self interest to make as much money from the properties as they could. They were themselves very experienced businessmen in the field of building and property development, and had their own firm views as to the commercial possibilities available to them and of the likely cost of renovating the old and dilapidated properties in the portfolio. They clearly regarded estimates they were given from time to time by others as to the values of the properties and the costs likely to be incurred in renovating them with a good deal of scepticism. I find that this was an attitude which, whilst certainly cautious, was not irresponsible or illegitimate on their part. They had their own experience on which to draw when weighing up the views of others. These are matters to which I will return in the context of consideration of Mrs Fisher’s complaint about alleged mismanagement of CDL’s business.

CDL’s accounts for 1994 and 1995 show a pattern of activity much the same as those for 1993. It does not seem to me that the accounts continued to reflect a sum of £9,236 due to CHL, since the sums for Creditors in these accounts are mainly made up of shareholders’ loans (although these accounts are difficult to follow, since the copy of the 1995 accounts available to the court was missing some of the pages of notes which formed part of them; however, the notes to the draft accounts for 1996 to which I refer below, under the heading “Creditors”, would suggest that such a sum was not included in 1995, and the signed accounts for 1996 showed that no sum had been included in the accounts for 1995 in respect of a claim by CHL). No provision was made in the 1994 and 1995 accounts in respect of directors’ emoluments, again reflecting the understanding between the company and its directors that there was not to be any remuneration for the directors for the limited activities they carried out in managing (ie deciding whether to renovate, sell or hold) CDL’s property portfolio.

However, a decision was made to hold an AGM in 1996. This may have reflected the fact that a degree of dissension had arisen as to how the company should be held and managed for the future. For the first time, by letter dated 29 February 1996, Mrs Fisher wrote to the company to ask for an official agenda for the proposed AGM. In her letter, she complained that she had not been informed about the AGM for the previous year and asked for an explanation. She referred to the changes in the management of the company, and asked for a full audit and report for the year ended 5 April 1996. She asked to be sent a copy of the Articles of Association, and she asked for: (i) an explanation of the property valuations of about £96,500 in the 1995 accounts, “bearing in mind the Hagley bungalow has a value of at least £75,000”; (ii) an explanation of the directors’ intentions regarding the future development and/or sale of the various properties; (iii) a breakdown of the figure in the 1995 Accounts for “loans from shareholders”; and (iv) a breakdown of CDL’s Tangible Fixed Assets. This letter was only produced at the hearing, and it is unclear from the evidence what response was made to it. It is significant, as showing for the first time an active interest by Mrs Fisher in what was being done within the company and with its assets. It was a reminder to Cedric and Rodney Cadman that they could not overlook Mrs Fisher’s rights as a member of the company.

On 22 March 1996, Cedric Cadman sent Mrs Fisher a formal agenda for a forthcoming AGM. But no AGM date was actually set and no meeting was held. Mrs Fisher complained about this in a letter to CDL’s accountants, Jackson & Grimes, dated 9 April 1997, calling it “a deplorable situation”. The accountants replied by letter dated 10 April 1997, stating that the draft accounts for 1996 were with the directors, pointing out that the responsibility for calling shareholders’ meetings lay with the directors, and stating that the accountants had drawn the directors’ attention to the comments made in Mrs Fisher’s letter. I find that they did draw those comments to the attention of Cedric and Rodney Cadman.

It appears that in mid 1997 Mrs Fisher continued to press CDL and the accountants for a set of audited accounts. At some point, probably in about July 1997 (ie while Edith Cadman was still living) a set of draft accounts for CDL for the year ending 5 April 1996 was distributed, including to Mrs Fisher. These were not signed by the directors or the auditors. The draft accounts showed a pattern of activity much the same as for 1994 and 1995. No provision for directors’ remuneration was shown. The draft accounts did not reflect any sum due from CDL to CHL.

Edith Cadman died on 7 August 1997. In her will, she left all her shares in CDL to her three children in equal shares. She also left her shares in CHL to them in equal shares. There then ensued what proved to be a bitter dispute between Mrs Fisher and her brothers (in particular, Cedric) in relation to the handling of probate in respect of the will. They were all appointed executors of their mother’s will, but Mrs Fisher felt uneasy because she considered she had not been given full information about her mother’s assets by Cedric and therefore declined to proceed as an executor. Cedric and Rodney, for their part, felt that she was being difficult and unreasonable in so declining. The dispute culminated in a difficult hearing before the probate judge in Ipswich in November 1999, which had the result that all three were removed as executors and Cedric and Rodney alone were appointed as administrators of their mother’s will. They were then able to complete the transfer of her shares and the distribution of her estate between the children. They successfully negotiated with the Inland Revenue about the tax treatment of their mother’s shares in CDL, much to the mutual financial benefit of all three children. In the context of this negotiation, they persisted and achieved a successful outcome despite contrary advice received from lawyers, which contributed to their general scepticism about lawyers and the value of the expensive advice they provide.

The circumstances surrounding the probate in relation to their mother’s will greatly exacerbated the tensions, suspicion and upset which had already begun to affect relations between Mrs Fisher and Cedric and, to an increasing extent, between Mrs Fisher and Rodney as well. Cedric and Rodney Cadman suggested to me that Mrs Fisher’s grievances against them really dated from this time, and in particular from when she struck up a relationship with her current solicitors by visiting their offices immediately after the hearing in Ipswich. Relations between Mrs Fisher and her brothers certainly reached a new low point at this time, from which they did not recover. However, Mrs Fisher had already indicated to her brothers before these events that she was unhappy at the way CDL was being run by them and at the lack of information about its affairs available to her.

So far as Mrs Fisher’s knowledge about CDL’s affairs was concerned, the next significant event was the issue of CDL’s signed 1996 accounts, which contained major changes from the draft 1996 accounts which had previously been sent to her. These accounts were drawn up in January 1998, after Edith Cadman’s death. They were signed by Cedric Cadman on behalf of the directors (now, just Cedric and Rodney Cadman) on 30 January 1998. It is unclear when they were sent to Mrs Fisher. The two main changes from the draft accounts which are relevant to the present action were (i) a new entry for a claim by CHL, at £70,000 (there had been no similar figure for 1995, so this sum was treated as part of the substantial operating loss of CDL for the year ended 5 April 1996; there had been no equivalent figure in the draft 1996 accounts) and (ii) an increased entry for staff costs of £52,735 (the figure shown for 1995 was £3,158; the equivalent figure in the draft 1996 accounts had been £2,735). There was also an increased entry of £22,495 for other operating charges plus a new provision for property expenses of £12,900 (the figure for 1995 corresponding to these two entries had been £3,885; the equivalent figure in the draft 1996 accounts had been £3,765).

The effect of the changes was to produce a large operating loss for the year of £155,556 (equivalent figure for 1995: £3,293; equivalent figure in the draft 1996 accounts: £2,552), in respect of a company with a tiny rental income from the garage and a small interest income from cash deposited with the bank. The changes also produced a major reduction in the figure for shareholders’ funds, down to £21,092 (equivalent figure for 1995: £165,498; equivalent figure in the draft 1996 accounts: £174,096).

The inclusion of a new entry for a sum due to CHL related to the work done many years before by CHL for CDL in relation to a site at College Close, Great Casterton, referred to above. By letter dated 24 October 1997, Cedric Cadman asked Barclays Bank to tell him what a sum of £11,000 borrowed on overdraft would have inflated to if it remained owing until 31 December 1997, with interest being accumulated. The bank replied on 24 November 1997 giving a figure of £130,508.27. Cedric and Rodney Cadman considered this figure, and their evidence was that they decided that it would be fair to charge CDL £70,000 in respect of what had been treated as an outstanding debt of £9,236 for many years (and which had apparently not figured at all in CDL’s accounts since those for 1993).

They held a directors’ meeting for CDL on 11 December 1997, in relation to which, for the first time, minutes were drawn up of decisions with respect to the conduct of the business of CDL. Item 1 in the minutes stated: “After receipt of a letter from Cadman Homes Limited it was agreed that a provision of £70,000 be made within the 1995/96 annual accounts to cover the costs plus interest incurred by Cadman Homes Limited relating to late payment for work at No. 12 College Close Gt Casterton and at Galletly Drive Bourne less all payments made on account so far.” The letter from CHL referred to was in fact a letter dated 14 December 1997 from the directors of CHL (ie Cedric and Rodney Cadman), signed by Cedric on behalf of both of them, to “The Directors” of CDL (ie themselves). The letter said: “We write to inform you that we feel that it is now time that this very long overdue matter concerning the payment for work and financing relating to Plot 12 College Close Gt Casterton be cleared up once and for all by the provision of the sum calculated by Barclays Bank plc, less sums paid on account being made within the 1995/96 annual accounts of your company. If this is now done we will not necessarily demand payment either in full or part or charge further interest on the outstanding sum due.”

I find that there had been some work done by CHL for CDL in relation to College Close in about 1973, in respect of which CDL (acting by James Cadman) had grudgingly agreed to pay money, and that in 1984 and 1985 the account had been treated as a live account by CHL issuing an invoice for £13,000 and CDL paying £3,200 in May 1985. The understanding between CDL and CHL was that no interest would accrue on the outstanding amount between them (which still stood at £9,236 in 1994). In that respect, it was treated in the same way as shareholder loan accounts with CDL.

In my judgment, Cedric and Rodney Cadman had had a strong sense over many years that CHL was entitled to be paid the outstanding sum for work done by CHL for CDL, and that they regarded the position as open to them after their mother’s death to do what they thought justice required as between CHL and CDL, including providing for the first time for a substantial element of interest notionally accumulated over many years. However, in doing that, I find that they paid no proper regard to the interests of Mrs Fisher or other shareholders in CDL apart from themselves. In their evidence, they maintained that at the time the provision was made in respect of the debt to CHL, Mrs Fisher would benefit from payment of the sum by CDL, since she was also about to become a shareholder in CHL, by inheritance of some shares in it from her mother. But in taking this view, they clearly did not pay any regard to the fact that Mrs Fisher was about one third owner of CDL, but would own only a very small percentage of the shares in CHL.

I also find that they acted in a manner which conflicted with the terms of the arrangement between CDL and CHL which had been arrived at when their father was alive and had been accepted by them at all times up until the death of their mother, namely that the long outstanding sum due from CDL to CHL should not carry interest. Again, in acting in this way it seems to me that they disregarded the interests of CDL in order to promote the interests of CHL, contrary to what had previously been agreed.

In deciding to make the provision they did in relation to CHL in the 1996 accounts signed in 1998, Cedric and Rodney Cadman did not take legal advice. Although there had been a genuine debt owed by CDL to CHL, it had been a long time since it had been acknowledged by CDL in any formal way. But in my view, the technical position was probably that the debt had not become statute barred. I find that there had probably been a repeated and sufficient acknowledgment of the debt each year by way of its inclusion in provisions made in CDL’s accounts down to those for 1993. The last occasion on which the debt had been acknowledged by CDL in this way was by its incorporation in a provision figure in the 1993 accounts signed on 1 June 1994. That was less than six years before the signing of the 1996 accounts on 30 January 1998. On this basis, although the debt was very old, it had not become statute barred under the terms of the Limitation Act 1980 (in particular, ss. 5 and 29(5) and (7)). So, although there was no on-going business relationship between CDL and CHL which could have allowed Cedric and Rodney Cadman to conclude that it was in the interests of CDL to waive reliance on the statutory time bar, had such a time bar arisen, they were entitled in their capacity as directors of CHL to press CDL for repayment of the outstanding sum of £9,236, but no more. Again, I find that they simply had no proper regard to the interests of CDL or its shareholders in deciding to insert provision in respect of this debt once again into CDL’s accounts at a greatly increased amount, and then in arranging for successive payments by CDL to CHL out of the provision made in the following years, and well in excess of the sum of £9.236 which was actually due. By 5 April 2003 (the last date for which accounts were in evidence), the outstanding balance of the £70,000 had been reduced to £38,549; that is to say, Cedric and Rodney had arranged for CDL to pay £31,451 to CHL.

Turning to the new figures for staff costs and other operating charges which appeared in the final 1996 accounts, the accounts made it clear that the figure of £52,735 for staff costs represented provision for directors’ emoluments (the figure for 1995 had been £3,158, in 1992 and 1993 it had been nil and there has been no suggestion in the evidence that any or any significant sum for directors emoluments was included in the accounts for 1994) and other operating charges included £10,000 allowance for use of directors’ cars for this and earlier years (the figure for 1995 had been nil) and £2,000 allowance for use of directors’ homes for this and earlier years (the figure for 1995 had been nil).

I find that Cedric and Rodney Cadman had long had a sense that they had been treated harshly by their father, by not being paid remuneration for their day to day running of CDL. In my judgment, they felt inhibited about doing anything about that while their father and mother were alive, but once their mother died they decided that an opportune moment had come to rectify what they regarded as an injustice from the past. They therefore re-cast the draft 1996 accounts to include these provisions for payments to themselves. In doing so, I find that they acted without any regard for the interests of CDL as a company or of their sister, as a major shareholder in the company. I also find that they acted inconsistently with the agreements they had made with CDL and their father and mother to provide their services in managing CDL’s property portfolio without remuneration (at least, in the ordinary course: it is unclear what the provision of £3,158 for directors’ emoluments in 1995 was in respect of, but I think it likely that it represented some special arrangement agreed with Edith Cadman perhaps to reflect some exceptional services by one or other of the brothers in arranging for limited tidying up work to be carried out at the properties) and without allowance for use of their cars or homes. I find that the basic nature of the arrangements agreed between the brothers and CDL when their parents were alive was that they would benefit sufficiently in respect of their efforts when the property assets of the company were realised.

Cedric and Rodney Cadman in their evidence emphasised that the provision for directors’ emoluments had remained a provision, and that they had not actually yet paid themselves money out of CDL in relation to this provision. However, they also made it clear, both by making the provisions in the first place and in their evidence, that they intended at some suitable opportunity to arrange for the relevant approving resolutions to be passed at a shareholders’ meeting and that they would eventually actually be paid the sums shown by CDL. Indeed, it emerged that one main reason why they decided not to hold an AGM for CDL in 2000 was because they wanted to avoid what was likely to be an upsetting confrontation with Mrs Fisher when they sought to outvote her when voting to approve the making of these prospective payments to themselves.

I also find that the sums which Cedric and Rodney Cadman wrote into these provisions for themselves were excessive and unreasonable by reference to the amount of work which they actually did in respect of CDL’s property portfolio in any year. In my judgment, even had there been an arrangement that they should be paid reasonable sums for their work in relation to CDL’s affairs, the reasonable value of such work as they performed (keeping an eye on the market value of the properties, occasional discussions with estate agents, surveyors and architects and so on) would have been of the order of about £2,000 to £3,000 a year each. In this regard, it is of significance that for the year ended 5 April 2003, which was the year in which there was the greatest degree of activity by Cedric and Rodney in relation to the portfolio, when they succeeded in selling two of the properties, they themselves included charges of only £6,000 for directors’ emoluments for the year in CDL’s accounts. None of the sums for directors’ emoluments shown in the accounts of CDL was ever determined or agreed by the company in general meeting, as required by Article 76 of Table A.

Although the changes between the draft 1996 accounts and the final 1996 accounts were very striking, and called seriously in question the way in which Cedric and Rodney Cadman were running CDL now that their mother had died, the reaction of Mrs Fisher appears to have been muted. Two further sets of accounts, for 1997 and 1998, were issued which reflected the figures written into the final 1996 accounts, but without any particular evidence of protest from Mrs Fisher. This absence of protest is perhaps not entirely surprising. Mrs Fisher is not trained or experienced in the reading of accounts, and she had only very limited knowledge about what was actually going on in CDL’s business.

The 1997 and 1998 accounts showed sums of money being paid by CDL to CHL in relation to the £70,000 provision entered in the final 1996 accounts. They also showed further provisions for directors’ fees (£15,000 for 1997, £16,000 for 1998, although in the 1999 accounts the figure for directors’ emoluments for 1998 was given as £17,602). Again, I find that these provisions were contrary to the original longstanding arrangements between CDL and Cedric and Rodney Cadman, and were in any event excessive provision in respect of the work which they had actually done for CDL.

In March 2000, Cedric Cadman sent Mrs Fisher a copy of CDL’s 1999 accounts and, it seems, indicated that an AGM would be held. The accounts again reflected the major entries included in the final 1996 accounts. They also showed a figure for directors’ emoluments for 1999 of £17,992. Again, I find that this provision was contrary to the original longstanding arrangements between CDL and Cedric and Rodney, and was in any event excessive provision in respect of the work which they had actually done for CDL.

At this stage, relations between Mrs Fisher and her brothers had come under severe strain because of their arguments about the handling of the probate of their mother’s will, and the tense hearing at the court in Ipswich in November 1999. Mrs Fisher now did seek the advice of an accountant. On 10 April 2000, she wrote a letter to Cedric questioning figures in the accounts of £194,381 for Creditors and of £21,519 administrative expenses on a turnover of £502 and asking for explanations. Mrs Fisher said that she wished to attend the AGM with her professional advisers, and asked that at the AGM all books and records of CDL and all deeds of properties owned by the company should be available for inspection at the meeting. Cedric had asked her where she was prepared to attend the AGM, and she responded that “with you and Rodney coming over this way [to the West Midlands] quite frequently it would be helpful if it could be this end, but I will await your official notice.”

By letter dated 12 April 2000, Cedric Cadman replied to Mrs Fisher. He said that her letter had been passed to Rodney Cadman, as Company Secretary, for his attention. However, Cedric wrote, “At the present time I am finding Rodney to be very difficult and uncooperative, so I doubt that you will get any reply or information”. Cedric said that the figures for creditors and administration expenses would be explained at the AGM, but was doubtful whether the deeds and books would be available. He said that he expected that Rodney would arrange the AGM in Stamford, but asked whether she had any suggestions where it could be held in the West Midlands, and if so to let Rodney know.

Notwithstanding Cedric’s assurance that explanations would be given at an AGM, time passed without an AGM actually being convened. Mrs Fisher was both worried by the figures shown in the 1999 accounts and by the continuing absence of explanation for them. So eventually, she instructed her solicitors, Watkins Stewart & Ross, to write a letter to Cedric and Rodney setting out in some detail her concerns about the conduct of CDL’s business and chasing for explanations about the figures in the accounts. The letter indicated that Mrs Fisher’s concerns related, first, to the administration of the company and the directors’ refusal to supply information about its affairs to her and, second, to the deteriorating financial position of the company as shown in the 1999 accounts. As to the deteriorating financial position, the letter drew attention to the net assets shown in the 1993 accounts before James Cadman’s death of £183,103, which had changed to net liabilities of £28,459 in the 1999 accounts, and asked for an explanation. The letter asked for explanations relating to the provisions made in 1996 and thereafter in respect of the claim by CHL, for the differences between the draft and final versions of the 1996 accounts and for the administrative expenses for CDL of over £20,000 in 1998 and 1999 in relation to turnover of £502 and £499 respectively. The letter threatened proceedings if full and proper answers were not given. In my judgment, in the circumstances in which Mrs Fisher found herself at this stage, these requests for explanations were reasonable.

On 22 August 2000, Cedric Cadman replied to this letter direct to Mrs Fisher, indicating that he declined to enter into correspondence with her solicitors. He said that he found some of their queries to be offensive. I do not consider that this comment was justified. In his letter, Cedric said that all matters relating to the affairs of CDL had been approved by the accountants. However, whilst the accountants signed audit reports on CDL’s accounts each year, they must obviously have been heavily dependent on explanations given to them by Cedric and Rodney Cadman. Cedric claimed that Mrs Fisher’s shareholding had not been prejudiced. He said that he was unable to explain in detail the creditors figure, but had asked the accountants to do so (as it transpired, no explanation from the accountants was forthcoming); that the administrative expenses for 1998 and 1999 each contained provision for directors’ fees of £16,000, with the remainder being made up of general overheads; he complained that Mrs Fisher had requested that the AGM be held in the West Midlands and that he had asked Mrs Fisher to name a venue for the AGM in the West Midlands but that she had not responded; he said that the books of the company could be inspected at Moore Stephens, who were its accountants at this stage; he denied that he had withheld information in his letter of 12 April 2000; and he said that the figure for “Net Assets of £28,459” (a slip for net liabilities of that amount in 1999) “is due to various matters that have been dealt with after advice so that a true and realistic position is shown in the accounts”, which was not informative. He wrote: “The transactions between Cadman Homes Ltd & Cadman Developments Ltd were to finalise longstanding matters once and for all that had to be sorted out again in order that the true and realistic position be shown by the accounts, again after advice was taken. This can be justified.” He thus signally failed to set out precisely how he and Rodney had decided to include the sum of £70,000 as due to CHL in the final 1996 accounts. He also wrote, “May I remind you that I have worked virtually without income since before Father & Mother died so do not get the idea that things are easy.”

For his part, Rodney Cadman replied to Mrs Fisher’s solicitors by letter dated 23 August 2000, also saying that he considered that their letter was very offensive and that the allegations made in it were denied. He did not offer any additional explanations in that letter, but wrote directly to his sister by letter dated 24 August 2000. In this letter, he told Mrs Fisher that any matters arising from the profit and loss account for 1999 could be dealt with at CDL’s AGM; that questions relating to the figures for creditors and administrative expenses in the accounts could also be answered at the AGM; that a formal notice of an AGM would be issued within the next 14 days if she did not respond to Cedric’s previous request that she identify a venue in the West Midlands; that the company’s accounts could be inspected and discussed at the AGM, but not its books and records nor the deeds of its properties; and that other matters raised in her solicitors’ letter relating to CDL’s assets, transactions with CHL, administrative expenses, creditors and previous accounts could also be dealt with at the AGM.

These letters from Cedric and Rodney Cadman were, unsurprisingly, not regarded by Mrs Fisher and her advisers as providing the full or adequate explanations about CDL’s affairs which had been asked for. Accordingly, by letter dated 11 September 2000 from Mrs Fisher’s solicitors, her requests for information and explanations and access to CDL’s books and records were repeated.

That letter appears to have crossed with a formal notice issued by Rodney Cadman for CDL, also dated 11 September 2000, to hold an AGM on 16 October 2000 at its registered office, 49 Casterton Road, Stamford (also called “Oakdene”), which had been the home of James and Edith Cadman, and was now unoccupied. The notice contained a note, as it was required to do, saying that a member entitled to attend and vote at the AGM would be entitled to appoint a proxy to attend and vote on their behalf.

On 13 September 2000, Cedric Cadman replied to Mrs Fisher’s solicitors’ letter. He said she should arrange to inspect the deeds for CDL’s properties at the offices of Daltons, its solicitors, and its books at the offices of the company accountants. He suggested that she was wasting her money on solicitors’ fees, and that court action would make no difference. He again failed to provide any additional information in answer to the substantive queries which had been raised on Mrs Fisher’s behalf.

Watkins Stewart & Ross responded to the notice calling the AGM by pressing Cedric and Rodney Cadman again for answers to the queries in their letter of 11 September 2000 and by asking for their consent to Mrs Fisher attending the AGM with her accountant, and if they did not reply or withheld their consent indicating that Mrs Fisher would have to appoint her accountant as her proxy. The copy of this letter in evidence is marked “draft”, but it probably was sent and received. No reply or consent was forthcoming, so on 16 October 2000 Mrs Fisher signed a special form of proxy, nominating her accountant John Buckley as her proxy (and giving his address), “or failing him the duly appointed Chairman of the Meeting” (with no address designated), and sent it to CDL.

When the proxy form was received, however, Rodney Cadman, with the agreement of Cedric, wrote back to Mrs Fisher enclosing a formal notice to postpone the AGM “until further notice”. In his covering letter, Rodney stated: “Before we can set the date of another meeting of the AGM we wish to know the identity of your ‘proxy’ Mr John Buckley, his profession and his employer. We are also taking professional advice regarding the ‘Special Form of Proxy’ enclosed with your letter. Until we have received the information from you and the professional advice we are seeking, we are unable to set a date for another meeting.” In a letter of the same date, Cedric Cadman said that as a joint owner of “Oakdene” he wished to have full details of the identity of the proxy before allowing him entry to a private house. Rodney, with his letter, also returned the special form of proxy to Mrs Fisher, on the ground that it was “not completed correctly”. In his evidence, Rodney explained that this was because no address had been designated for the alternative proxy, “the duly appointed Chairman of the Meeting.” In addition, Cedric Cadman and Rodney Cadman, in their evidence, said that they were at this stage concerned not to hold an AGM, since the AGM would have been the occasion for them to vote as shareholders in favour of the remuneration for themselves as directors which had already been provided for by them in the accounts, so that the monies represented by those provisions could be paid out to them, and they were concerned to avoid a dispute with Mrs Fisher over this. There was also a suggestion that the AGM could not go ahead, because of anxiety that there might be consequences in terms of Council Tax liability in relation to “Oakdene”.

In my judgment, none of the reasons given by Cedric and Rodney Cadman for not proceeding with the AGM at this stage was valid. It was reasonably clear, from what had been said on behalf of Mrs Fisher previously, that Mr Buckley was her accountant, and that could easily have been checked without the need to postpone the holding of the AGM. In any event, Mrs Fisher had the right to attend the meeting by proxy, and there was no indication at all that Mr Buckley might be unsuitable to attend at what was a currently unoccupied residence for the meeting. There was no defect in the way in which Mrs Fisher’s form of proxy had been completed: it was not necessary to stipulate an address for the alternative proxy, who would simply be the duly appointed Chairman of the meeting if Mr Buckley could not attend. Their suggestion that they wished to avoid an AGM so as not to vote as shareholders for payment of remuneration to themselves could not justify putting it off, in particular because they had, by making the provisions in the accounts, already made their intentions in that regard very plain to Mrs Fisher. The reference to problems with Council Tax in relation to “Oakdene” had not prevented Cedric and Rodney Cadman from summoning the AGM at “Oakdene” in the first place, and in any event did not prevent an AGM being held promptly at some other location.

Further, against all these matters, and quite apart from the general importance of AGMs as a means for shareholders to be informed about and comment on the affairs of their company, Cedric and Rodney Cadman had already themselves indicated that the AGM would be the forum in which explanations would be given in response to the detailed questions about the business of CDL and its accounts which had been raised by Mrs Fisher. They did not suggest any alternative forum for responding to these matters. The AGM was postponed indefinitely, and was in fact never held.

In the light of all this, I consider that the inference to be drawn is that at this stage Cedric and Rodney Cadman were acting in a way deliberately calculated to frustrate Mrs Fisher’s reasonable efforts to obtain information about the affairs of CDL and explanations for entries in its accounts which could not readily be understood from a simple reading of the accounts themselves.

Cedric Cadman followed up his letter of 18 October 2000 with another letter to Mrs Fisher the next day, in which he indicated his opinion that she was wasting her money on solicitors and accountants, and complained that she seemed to have set her mind on being somewhat difficult. In my judgment, this complaint was not justified. Cedric Cadman also asked whether Mrs Fisher wanted to destroy the company, and whether she might wish to dispose of her interest. In that regard, he referred to an offer made to her by Daltons (by which he appears to have meant the suggestion while Edith Cadman was still alive that Mrs Fisher should give up her shares in CDL in return for some adjustment in the inheritance position when her mother died). As became clear when Mrs Fisher did later seek to explore with her brothers the possibility of their buying out her interest in the company, their intention was always that any such arrangement could only be on the terms set out in the Articles of Association, by implication with a substantial discount to reflect her minority position, and would in any event be subject to their willingness to fund such an acquisition at a price of their choosing. There was never an offer on their part to provide Mrs Fisher with full answers to all the queries she had raised with them about CDL, and which she would have needed in order to be able to evaluate any proposal. In my judgment, none of the suggestions made by Cedric and Rodney Cadman that Mrs Fisher should negotiate a deal with them was ever sufficiently concrete to warrant a different approach on her part, other than eventually to commence legal proceedings, and none of them was put in detailed specific terms nor under circumstances of provision of information and so on which would have made it unreasonable for Mrs Fisher to have declined to follow up what they were proposing (in contrast to the form of offer by the controllers of a company contemplated by Lord Hoffmann in his speech in O’Neill v Phillips [1999] 1 WLR 1092).

Cedric Cadman also sent Mrs Fisher another letter dated 19 October 2000, suggesting that if she or Mr Buckley would agree to exonerate Cedric and CDL from any claims or actions by the local authority (presumably, in relation to the issue of Council Tax), he (Cedric) would then reconsider his position in relation to the holding of the AGM at “Oakdene”. In my judgment, it was not reasonable for Cedric Cadman to demand such an indemnity as, in effect, the price for holding the AGM in respect of CDL. Further, the fact that he now suggested that this was the only impediment to proceeding with the AGM at “Oakdene” itself supports my conclusion that the other reasons previously put forward were not genuine or serious reasons, but were part of a deliberate strategy of obstruction against Mrs Fisher.

Mrs Fisher replied to Cedric by letter dated 5 November 2000, protesting at the terms of his first letter of 19 October and pointing out that she was entitled to send her accountant to the AGM as a proxy. She asked him what he meant by her disposing of her interest, and indicated that that might represent a possible solution.

Cedric Cadman replied by two letters, dated 7 and 8 November 2000 respectively. He maintained that he had already provided answers to all her questions, and he did not elaborate upon whether there was any real possibility of Mrs Fisher being bought out of the company or on what terms. In my judgment, Cedric Cadman’s response was not reasonable. He plainly had not provided answers to all the questions which had, perfectly fairly, been raised with him by Mrs Fisher. He and Rodney Cadman had arranged to postpone indefinitely the AGM, which they had previously held out as the prospective forum for the provision of answers to Mrs Fisher’s questions. The absence of any detailed or constructive proposal in relation to buying out Mrs Fisher’s interest in CDL indicated that no serious suggestion to that effect was really being put forward by him. Instead, he said that Mrs Fisher had refused to cooperate in any way, and indicated that the onus was on her to indicate what the solution should be.

Those letters crossed with a letter dated 8 November 2000 from Mrs Fisher’s solicitors to Cedric Cadman, copied to Rodney Cadman, again pressing for answers to the questions previously set out in their letters of 16 August and 11 September 2000, and requiring a full independent valuation of the shares in CDL on a particular basis (including re-payment of directors’ fees drawn by the directors from 1996) and payment of Mrs Fisher’s legal costs by Cedric and Rodney Cadman personally. This was written as a letter before action, and proceedings were threatened if there was no full and detailed response to the letter.

On 15 and 16 November 2000, Cedric Cadman wrote two further letters to Mrs Fisher. He sought to dissuade her from commencing proceedings. In the first of the letters, he said that he thought a meeting between just Mrs Fisher, Rodney Cadman and himself might achieve something; but in the second letter he stated: “I do not have sufficient personal money to afford to pay legal costs as I do not have any income and there is no way I could afford to personally purchase your shares even if I wished to do so which I do not.” So it was very unclear what he was suggesting a meeting excluding Mrs Fisher’s professional advisers would achieve. That, in effect, remained Cedric Cadman’s position in relation to any possibility of his contributing to buying out Mrs Fisher’s interest in CDL. In the first letter, he wrote: “Father and Mother must be turning in their graves knowing that you are trying to cash in on the shares they left to you and worked so hard for. They surely intended we should all pull together and make the company work and achieve something not just sit back and expect someone else to turn them into cash free of charge …”. He also enclosed with the second letter some information about valuations put on properties held by CDL by the District Valuer as at the date of Edith Cadman’s death in August 1997, prepared in relation to the inheritance tax calculation. This information did not represent an adequate response to Watkins Stewart & Ross’s letter of 8 November.

By letter dated 24 November 2000 to Mrs Fisher, Cedric and Rodney Cadman gave their considered response to Watkins Stewart & Ross’s letter of 8 November. They denied that Mrs Fisher was a minority shareholder (this on the basis that she was the largest single shareholder in CDL, although obviously she was in a minority as compared to the two brothers acting together) and that she had been prejudiced in any way. They denied that she was entitled to any relief. They stated that “Full, frank and honest answers have been provided to questions posed in your solicitors’ letter dated 11^th September 2000”. Since that letter had repeated detailed questions asked previously, which had never received adequate answers, this was not a reasonable position for Cedric and Rodney to adopt. They rejected the idea of an independent valuation of CDL. The said that they were not prepared to consider repayment of directors’ fees “that have allegedly been drawn” (in their evidence, it emerged that they regarded it as significant that the directors’ emoluments shown in the accounts were provisions, and that the monies had not actually been withdrawn by them at this stage, which explains their use of the word “allegedly” in this letter; but there was never any suggestion but that they would actually withdraw these monies at some suitable time in the future). They indicated that they did not propose to arrange for Mrs Fisher’s interest in CDL to be bought out. They sought, unfairly, to place the blame for the absence of an AGM on Mrs Fisher. They also included this statement: “We, the Directors, wish to put on record that it was not Mother or Father’s intention that any one shareholder should attempt to turn their inherited shares into cash at the expense of the other shareholders, or the Company. A sensible course of action would be for the three main shareholders to meet and try to achieve a proper working relationship to help the Companies succeed for the benefit of all the shareholders before it is too late.” Again, this was not a suggestion which offered any reasonable prospect of a satisfactory way forward in the circumstances.

At about this time, Mrs Fisher approached Daltons, who held the deeds of the properties owned by CDL, in order to inspect those deeds. Daltons refused to allow her to do so, since Cedric and Rodney Cadman had given instructions that Mrs Fisher should not be permitted to copy the deeds in any way, and Daltons were not prepared to incur the expense of making arrangements to supervise Mrs Fisher in their offices. I can see no good reason why Mrs Fisher should not have been allowed to make copies of the deeds she inspected. This again appears to me to have been part of a deliberate campaign by Cedric and Rodney Cadman to deny to Mrs Fisher information about the company which she was seeking.

There is then a substantial gap in the correspondence. Although Cedric and Rodney would not provide the information Mrs Fisher sought, it is likely that Mrs Fisher was deterred from taking matters further by the likely cost of court proceedings and still hoped for some more satisfactory way forward with her brothers. However, no proposal was forthcoming, so Mrs Fisher’s solicitors were instructed to write another letter before action, dated 18 May 2001, threatening the commencement of proceedings in relation to the matters complained of in the Petition if no satisfactory reply was forthcoming.

This letter did lead to correspondence with Cedric and Rodney Cadman in which, in letters dated 26 May 2001 and (responding to a further letter from Mrs Fisher’s solicitors dated 23 July 2001 protesting at the inadequacy of the information provided) 2 August 2001, they still denied any wrongdoing or prejudice to Mrs Fisher, but gave slightly fuller explanations in respect of matters raised by Mrs Fisher’s solicitors. In particular, in relation to the figures in the accounts for directors’ emoluments they said (letter of 26 May) “The figures are mainly provisions for remuneration. No service agreements exist. The directors have performed all and every duty necessary from typing to accounts but this would be difficult to detail” and (letter of 2 August) “The level of directors remuneration has not yet been decided. The directors manage the company as and how they think fit and as stated it cannot be detailed. No hourly rate has been invented. The directors have not authorised their own remuneration but made provisions for such remuneration. The Directors are entitled to be remunerated. … No directors remuneration has been paid out for many years, the figures you refer to are provisions and not paid out.” In relation to the debt shown in CDL’s accounts as due to CHL, they said (letter of 26 May) that it was “For work carried out during about 1973/4 which remained unpaid for many years. It has been partly paid and a provision remains so to show the true state of affairs. It was agreed to be a Just and Equitable settlement” and (letter of 2 August) that they did “not need to justify payments it was a Board decision”, that “only part of [the sum of £70,000] has so far been paid to” CHL, that they did not agree that the debt had been time-barred “which would only apply where the parties disagreed which is not the case” and that they as directors considered the payments and provision to be just and equitable “without any doubt whatsoever”.

Also in these letters, Cedric and Rodney Cadman offered an explanation why there had been no AGMs, attributing it to disagreement between the directors and unwillingness on the part of Rodney to adopt the AGM agenda proposed by the accountants: “without a casting vote there was no way forward”. This was one of the foundations for Mrs Fisher’s allegation of deadlock in the management of the affairs of the company, which is addressed below.

In addition in the letters, Cedric and Rodney replied to the charge made by Mrs Fisher’s solicitors that they had without justification failed to put the assets of CDL to profitable use. They pointed out that CDL had ceased to trade many years previously while under their father’s control, following the 1974 recession, and had continued in that position since then mainly due to being unable to get work done, possibly due to its adverse reputation among builders and craftsmen stemming from the way in which they had been treated by James Cadman. They said that the properties owned by CDL had not been in a fit state to let for many years, and that renovation in order to let them would not be viable. In other words, their assessment was that the cost of putting the properties into a lettable state would exceed the income likely to be gained thereby. They said that attempts had been made to sell the properties, but without success, so it had been decided to wait while prices rose.

There was reference in this correspondence to a proposal for a meeting to discuss a possible negotiated settlement, but it came to nothing. The proposal being canvassed by Cedric and Rodney Cadman, through CDL’s accountants, appeared simply to involve the possible appointment of Mrs Fisher as an additional director of the company. Mrs Fisher’s solicitors, in their letter of 23 July 2001, pointed out that this proposal did not involve an offer of redress for events which had occurred in the past, and would have left Mrs Fisher still as a minority shareholder and subject to being outvoted by her brothers in the future. They said that the proposal was not acceptable or workable. Thereafter, there was no significant further offer by Cedric and Rodney Cadman of any negotiated solution in relation to the matters about which Mrs Fisher was complaining.

For their part, Cedric and Rodney Cadman said in a further letter of response to Watkins Stewart & Ross, dated 3 August 2001, that Mrs Fisher’s desire to force them to purchase her shareholding in CDL was unacceptable, since they did not have any wish or financial ability to increase their shareholdings and complaining that she was trying to ignore the sales procedure in the Articles of Association, which they insisted should be complied with. This has since remained the brothers’ position in relation to any question of the purchase of Mrs Fisher’s shares.

Rodney Cadman also made a separate response to Watkins Stewart & Ross regarding their letter of 18 May, in a letter dated 4 June 2001. He complained that he felt they were unfairly insinuating that he had behaved dishonestly, which he denied. He also gave an account of why the AGM had been postponed and not reconvened, in effect blaming Mrs Fisher for not supplying full details of her proxy, as had been demanded by Cedric.

Once again, a period of time elapsed after this correspondence. But in the end Mrs Fisher decided to issue the Petition. That was done in June 2002. In the period after this, Cedric and Rodney Cadman tried to arrange a meeting with Mrs Fisher to discuss withdrawal of the Petition, but they made no proposal of a solution which would meet the concerns already raised by her or which would involve her in being bought out of the company other than through operation of the procedure in the Articles of Association. Mrs Fisher, for her part, put proposals to her brothers for them to buy out her interest in order to avoid a trial, but which were unacceptable to them.

Meanwhile, Cedric and Rodney Cadman had been looking into whether it would be worthwhile to carry out renovation work on the property at 50, The Crescent, Hagley. But, after investigation, they considered that the costs of doing so would be high and the value which would be added to the property would be uncertain, so they proposed trying to sell it as it was. By letter dated 23 July 2002, Cedric asked Mrs Fisher for her views. He provided her with no information about the valuations obtained or about the estimated costs of the work. She replied, not unreasonably, that without such information she was unable to give a view about what should be done with the property. In the event, Cedric and Rodney decided not to do work to the property. It remains unsold.

They did succeed in selling the properties at 56 St Martins and 4 Church Lane for sizeable sums in 2002, with the sales being completed in 2003. Notwithstanding the work done by Cedric and Rodney to check on the values of these properties, arrange for them to be marketed, and then to carry through their sales, CDL’s accounts for 2001 and 2002 showed no charges made in respect of directors’ emoluments. In my judgment, this represented a reversion by them to the true underlying position, according to which it had always been understood that the work directors did in relation to the properties held for so many years by CDL would not be remunerated by way of directors’ emoluments, but that they would in due course benefit from any sales in their capacity as shareholders. The accounts for 2003 showed a charge for directors’ emoluments of £6,000. In my judgment, this again represented a departure by Cedric and Rodney from the position which had been agreed when their parents were alive.

I now turn to consider the relevant principles of law which apply in this area, before addressing the specific complaints pressed by Mrs Fisher at trial.

A typical type of case in which there may be found scope for the application of s. 459 is in the context of a company regarded as what is often referred to as a “quasi-partnership”, although the availability of relief under that provision is not confined to such cases. In In re Bird Precision Bellows Ltd [1984] Ch 419, an early case on the predecessor of s. 459 (s. 75 of the Companies Act 1980), Nourse J gave guidance at pp. 429G-430C as to the type of case in which it might be appropriate for the court to exercise its powers under the provision by reference to the speech of Lord Wilberforce in a case concerning the statutory provision for winding up a company on the just and equitable ground, Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, at 379B-G. Lord Wilberforce said:

It is clear that Lord Wilberforce was not intending to set out an exhaustive list of factors by reference to which one might conclude that the members in a company had become subject to equitable considerations between themselves in the exercise of their rights as members; see also In re Bird Precision Bellows Ltd per Nourse J at p. 430C. It is also clear that the term, “quasi-partnership”, is only intended as a useful shorthand label, which should not in itself govern the answer to be given to the underlying question, whether the circumstances surrounding the conduct of the affairs of a particular company are such as to give rise to equitable constraints upon the behaviour of other members going beyond the strict rights and obligations set out in the Companies Act and the articles of association: see per Lord Wilberforce in Westbourne Galleries at pp. 379G-380B and per Nourse J in In re Bird Precision Bellows Ltd at pp. 429G-430A.

The analysis under s. 459 of what conduct will qualify as unfair conduct of a company’s affairs by reference to the kind of general equitable considerations identified by Lord Wilberforce in Westbourne Galleries has been endorsed since the decision of Nourse J in In re Bird Precision Bellows Ltd. His decision went on appeal, and his approach was upheld: [1986] Ch 658. To similar effect is the speech of Lord Hoffmann, with which the other members of the House of Lords agreed, in O’Neill v Phillips [1999] 1 WLR 1092, 1098D-1102B. In particular, at 1098H-1099A, he said:

The test of unfairness is an objective one (see eg R.A. Noble & Sons (Clothing) Ltd [1983] BCLC 273, 290e-291f, citing Re Bovey Hotel Ventures Ltd, 31 July 1981, unrep.): would a reasonable bystander observing the consequences of the conduct of those persons who have de facto control of a company regard that conduct as having unfairly prejudiced the petitioner’s interests? Lord Hoffmann provided guidance in O’Neill as to matters which might give rise to equitable considerations such as could justify an order under s. 459 for the majority to buy out the minority’s interest in a company at pp. 1101E-1102B, by reference to situations in which the exercise of a power would be contrary to what had been agreed between the parties or where there is an event which puts an end to the basis upon which the parties entered into association with each other, making it unfair that one shareholder should insist upon the continuance of the association.

It is clear from the evidence that Cedric and Rodney Cadman were in control of CDL and regularly acted together to promote their mutual interests, and that Mrs Fisher was for all practical purposes a minority shareholder in the company.

As appears from the authorities I have referred to, conduct of the de facto controllers of a company may qualify as unfairly prejudicial to the interests of a member for the purposes of s. 459 if it involves (i) a breach of the agreement between the members contained in the Articles of Association or (ii) a violation of such other, wider equitable constraints as may have arisen to bind the controllers.

As to the second of these possibilities, I consider that the relationship between Mrs Fisher and Cedric and Rodney Cadman was one in which equitable considerations going beyond the simple terms of CDL’s Articles of Association applied as constraints upon the way in which Cedric and Rodney could behave in relation to the company and Mrs Fisher. It was a relationship to which the label “quasi-partnership”, as used in the authorities, may be applied, albeit it did not share all the features typical of a true partnership-type relationship as identified in Westbourne Galleries and In re Bird Precision Bellows Ltd. There was no agreement that Mrs Fisher should have a role in the management of the company. She did not herself provide capital for the company, but was given or inherited her shareholding in it from her parents. But the company had started life as a clear quasi-partnership involving James, Edith, Cedric and Rodney Cadman, and it was effectively continued on the same basis after first James’s then Edith’s deaths, as a small family company in which the family relationship would be important alongside the relationship defined in the Articles of Association. Its affairs were dealt with on a very informal basis throughout, indicating a common understanding on all sides that the Articles of Association did not represent the complete and exhaustive statement of how the relationship between the members and the members and management should be conducted. Further, Cedric Cadman, in his letters to Mrs Fisher of 15 November 2000 and 24 November 2000, made express appeal to their common family ties in trying to sort out the problems which had arisen within the company. In addition, CDL’s Articles of Association contained restrictions upon the ability of any member to dispose of their shares.

As to the first of the possibilities referred to in paragraph 88 above (breach of the Articles of Association), it is my view that, in considering whether the conduct of the controllers amounts to conduct unfairly prejudicial to the interests of a member, it is also relevant to take into account any agreement, understanding or clearly established pattern of acquiescence on the part of that member which may have led the controllers to act or continue to act in a particular way, even if their action may have involved a departure from a strict adherence to the terms of the Articles. In such a case, in the light of their common understanding as to what conduct will be regarded as acceptable between themselves despite the terms of the Articles of Association, it would not be correct to characterise the action of the controllers as unfair within the context of the whole relationship between them and the member. In my view, this is a corollary of the approach to the test of unfairness adopted in the authorities to which I have referred above, whereby the agreement between the members as set out in the Articles of Association may be subject to equitable considerations and obligations arising out of the particular circumstances of their relationship overall. There is no good reason why such equitable considerations should not qualify, as well as add to, the expectations about how the controllers of the company ought to behave to be derived from a simple reading of the Articles of Association.

Anderson v Hogg 2000 SLT 634, a decision of the Outer House of the Court of Session (Lord Reed) on s. 459, provides an example of this approach being applied. In that case, there was a finding that the petitioner had acquiesced in a departure by the controller of the company from strict adherence to the articles (see p. 639D-K). Lord Reed held (p. 640B-D) that the parties:

This principle is of relevance in the present case, in light of the fact that for very many years Mrs Fisher acquiesced in a situation in which CDL’s affairs were conducted with extreme informality, and with considerable departures from the Articles of Association. So, for example, for many years no AGM was held, and she made no complaint about that until 1996.

However, I consider that there is a limit to the operation of this principle. The position is akin to that in which a party to a contract may waive insistence upon a contractual term, but then at a later date wishes to revive reliance upon the term. If the relevant contract has not been amended, and if it is not inequitable to do so, the party may usually give reasonable notice to the other party to the contract to revive the term and his entitlement to rely upon it against that other: see eg Panoutsos v Raymond Hadley Corpn. Of New York [1917] 2 KB 473.

This was the situation which arose in this case in relation to the holding of AGMs by CDL. Despite Mrs Fisher’s acquiescence in the absence of the holding of AGMs for the company for many years, from 1996 she did once again seek to revive reliance upon her entitlement under the Articles of Association to the holding of an AGM for CDL each year. In my judgment, she was entitled to do so, and in the period after 1996 it became relevant once again for an assessment of the fairness or otherwise of the conduct of Cedric and Rodney Cadman for it to be judged, in part, by reference to the relevant provisions of the Articles of Association of CDL governing the holding of AGMs. I am reinforced in this conclusion by the fact that the Articles had never been (and, in view of the mandatory provisions of the 1985 Act, never could be) amended so as to remove Mrs Fisher’s rights in this regard, and also by the facts that her shareholding in the company had greatly increased after her mother’s death (such that it was all the more reasonable for her to insist upon recognition of her rights under the Articles), that Cedric and Rodney had themselves promised that information which she reasonably sought about the affairs of the company would be provided at an AGM to be convened by them and that Cedric and Rodney were themselves prepared, as relations soured between them and Mrs Fisher, to insist upon a strict adherence to the terms of the Articles so far as any question of purchase of Mrs Fisher’s shares was concerned.

Many types of conduct may qualify as unfairly prejudicial to the interests of a member. Relevant examples for the present case would in my judgment include a controller’s use of his voting power as a shareholder to procure or ratify the payment of unjustifiably high remuneration by the company to himself (Anderson v Hogg at 640K-L); any use by a controller of his powers over the company’s affairs to procure the removal of economic value from the company to another entity controlled by the controller without good cause; a failure on the part of a controller to provide information about the affairs of a company to which the member is entitled in circumstances where that can be said on objective grounds so to disable the member from knowing what is going on in the company or what action to take to protect his interests in relation to the company as to undermine in a serious and unfair way the basis of the continuing relationship between them in the company (such that the member could with justification say that the controller is using his legal powers to maintain the association in circumstances to which the member did not agree: cf O’Neill v Phillips at pp. 1101H-1102A); and, in some cases, mismanagement of the company’s affairs by the controllers resulting in financial loss. An example of this last type of case is provided by Re Macro (Ipswich) Ltd [1994] 2 BCLC 354, upon which Mr Davenport relied. However, it is important to observe that the principle to be applied in such a case is that the mismanagement relied upon for the purposes of a claim under s. 459 must be serious, and that the court will be astute not to “second guess” legitimate management decisions taken upon reasonable grounds at the time, albeit as events transpired they may not have been the best decisions in the interests of the company: see pp. 404i-406d per Arden J.

I now turn to apply these principles in the light of the specific complaints made by Mrs Fisher in these proceedings.

In my judgment, from at least the end of 1996 the failure of Cedric and Rodney Cadman to arrange for regular AGMs to be held for CDL was a serious dereliction of their duties in relation to Mrs Fisher. From the point in time in 2000 when they had indicated that her reasonable factual queries about the conduct of CDL’s business which lay behind the accounts which had been provided to her would be answered at an AGM to be convened by them, but then postponed the holding of that AGM indefinitely and without good reason, and without providing answers to her queries by any other means, I consider that their conduct was unfairly prejudicial to the interests of Mrs Fisher for the purposes of s. 459, as a failure to provide information to which she was entitled and in accordance with the standard identified in paragraph 95 above. Therefore, I find that Mrs Fisher has made out this ground of complaint.

I find that the understanding or arrangement under which Cedric and Rodney Cadman acted as directors of CDL and managed its portfolio of properties was one under which – at any rate in so far as the portfolio was being held simply for the purposes of sale in due course, and was not being extensively redeveloped by CDL itself – they were not to receive remuneration for the limited services which they carried out for the company. I therefore find that their decision to award themselves remuneration by way of provision from 1997 and the finalisation of the 1996 accounts onwards, and with a view to approving payment of such monies to themselves using their votes at some future general meeting, was in breach of a relevant agreement or understanding giving rise to equitable constraints upon what they could in fairness do in exercise of their powers within the company in this respect. They also acted in breach of the terms of the Articles, by not arranging for the approval of this remuneration for themselves at any general meeting of the company. In particular, I find it was unfair in relation to Mrs Fisher for them to seek to award themselves remuneration in 1998, when finalising CDL’s 1996 accounts after their mother’s death, for the years prior to that, where the agreement or understanding with the company and their parents was that they should not be paid such remuneration. In addition, I find that, quite apart from these points, the amounts of remuneration which the brothers were prepared to award themselves were more than could have been justified on any reasonable basis, having regard to the limited services which they actually performed for the company.

For all these reasons, I find that Mrs Fisher has made out this ground of complaint as well.

This complaint is closely related to that relating to the failure to hold AGMs, under heading (1) above. The essence of both complaints is that Mrs Fisher was denied any reasonable means of informing herself about what had happened in relation to the company’s affairs regarding what, on the face of it, looked like a questionable and insufficiently explained departure from previous practice which would involve significant payments out of CDL’s funds without any obviously good reason. In my judgment, in the circumstances of this case, this aspect of Mrs Fisher’s complaint is also made out.

In my view, when they arranged for this provision to be made in CDL’s accounts for 1996, and then arranged for a large part of the £70,000 sum actually to be paid by CDL to CHL, Cedric and Rodney Cadman paid insufficient regard to the interests of the other shareholders in CDL. It was not fair or acceptable for them to regard the shareholders in CDL, including Mrs Fisher, as having an equal interest in CHL such that payments to CHL should be regarded as being of equal benefit to her as a shareholder in CHL as they were a detriment to her as a shareholder in CDL. Her shareholding in CHL was very small, while her shareholding in CDL was substantial. The transfer of economic value from CDL to CHL was therefore prejudicial to Mrs Fisher’s interests. It was unfairly prejudicial, because the provision for the sum of £70,000 and the payments actually made greatly exceeded the amount of £9,236 which could properly be regarded as due and owing to CHL.

I therefore hold that Mrs Fisher has also made out this ground of complaint.

For a very long period, Mrs Fisher knew about the company’s inactivity in relation to the development of its properties and made no complaint about it. However, from 2000 she did begin to complain. So, from that time on, I consider that it could not be said on behalf of Cedric and Rodney Cadman that Mrs Fisher could not fairly seek to rely upon this ground of complaint against them under s. 459, if she could establish that the inactivity was the result of serious mismanagement by them of the affairs of CDL.

For this part of the case, Mr Davenport sought to rely upon the decision of Arden J in Re Macro (Ipswich) Ltd. That was a case where unfairly prejudicial conduct was established on the basis of, inter alia, serious mismanagement consisting of a failure to manage a property portfolio sufficiently actively to generate rental returns and profit through sales. However, it was a case in which the Judge’s findings of mismanagement were based upon detailed consideration of evidence about the properties in question and expert evidence adduced by the claimants to establish that decisions had been taken which were outside the ambit of what could be regarded as reasonable decisions in the light of the circumstances presented to the management at the time. By contrast, in the present case, the evidence of Cedric and Rodney Cadman, which I accept, was that all the properties were at least by 1996 in a state of serious disrepair and could not, in that condition, have been let (apart from the garage, which was let for most of the period). This was not surprising, since the properties had been held by CDL for very many years under James Cadman with nothing being done to them. There was no expert evidence in this case to suggest that Cedric and Rodney had acted imprudently or mishandled the property portfolio. They had continued a policy which originated with their father. I find that Cedric and Rodney did keep under review whether at any stage it would have been commercially advantageous for CDL to expend the uncertain and significant sums necessary to put any of the properties into a good state of repair, and then to sell or let them. I find that their decision not to do so, but simply to hold on to the properties in the hope of realising significant capital appreciation upon a sale at some point (and without expending large sums of money without any certain return which would justify the expenditure), was within the band of reasonable decisions available to them to take as managers of the company. It did not qualify as mismanagement for the purposes of the test set out in Re Macro (Ipswich) Ltd to which I have referred above.

Accordingly, I do not find that Mrs Fisher has made out this ground of complaint under s. 459.

Although the basis for this allegation was, reasonably enough, things said in letters written by the brothers in 2000 and afterwards, on the evidence presented in court I am satisfied that there was in reality no deadlock between the brothers, such that the affairs of CDL could not be effectively managed by them. On the contrary, in their dealings with Mrs Fisher they demonstrated to a considerable degree a willingness to co-operate and present a common front. Similarly, they had no significant difficulty in agreeing about the various entries to be made in the accounts, or in agreeing about the best way in which CDL’s property portfolio should be managed.

Accordingly, I do not find that Mrs Fisher has made out this ground of complaint under s. 459.

I have found that Mrs Fisher has made out a number of her grounds of complaint and has shown that the conduct of Cedric and Rodney Cadman has been unfairly prejudicial to her interest in CDL. I also conclude that this unfair prejudice has made it no longer tolerable for her to be required to retain her interest in the company or be obliged to sell it only upon the terms set out in the articles of association (see In re Bird Precision Precision Bellows Ltd [1984] Ch 419, 430D-G). Therefore, Mrs Fisher is in principle entitled to an order requiring that her interest in CDL be bought out. By agreement between the parties, the precise terms of any order which now falls to be made is to be addressed on another occasion, after the parties have had an opportunity to digest this judgment.