Corran v Butters & Ors

Introduction & Summary

This judgment follows the trial of the issues of liability (as specified in the case management order made by District Judge Khan on 10 June 2016) in relation to the unfair prejudice petition presented by the petitioner, Mr Colm Corran, on 15 March 2016. Mr Corran seeks relief as a result of the manner in which he says that the affairs of the third respondent, Energy Express Limited [“Energy Express”], have been conducted by the first and second respondents, Simon Butters and Mark Butters [“the Butters brothers”].

I heard evidence over 8 days from the witnesses of fact (there were no expert witnesses) and was referred to the relevant documentary evidence, which was contained within 41 lever arch files. Having received written closings and heard oral closings I adjourned to produce this judgment. The draft was produced on 31 July 2017. I received a list of typographical errors which were agreed as between counsel. On 11 August Mr Pipe produced a list of more substantive amendments. It was agreed, given professional and holiday commitments, that Mr Maynard-Connor would have until 8 September to respond and I could then address them as necessary prior to the date for the substantive handing down listed for 14 September. On 8 September Mr Maynard-Connor notified me that he was no longer instructed and on 13 September 2017 notice was filed that Mr Corran was acting in person. I have considered Mr Pipe’s proposed amendments in accordance with the relevant guidance given in English v Emery (Practice Note) [2002] EWCA Civ 605. I have made no substantive changes to the draft judgment.

I have had the benefit of a full transcript of the evidence. I confirm that I have attempted to take all such material which is in my view relevant into account when determining the issues which are in my view relevant. I have however sought to keep this judgment reasonably concise and to avoid over-loading and over-lengthening it with reference to what I consider to be non-essential facts and issues. In that way I have, I hope, been able to expedite the time taken to produce this judgment. I am extremely grateful to both counsel for their skilful and helpful presentation of their respective cases and to the solicitors for the efficient preparation of their respective cases. Despite the occasional falling-out the parties’ legal representatives co-operated to ensure that the trial proceeded smoothly and the trial timetable was maintained.

As to the other parties, the fourth respondent, Greendealexpress Limited [“Greendealexpress”], is the wholly owned subsidiary of Energy Express. Mr Corran makes complaint as to the way in which he says that its affairs have been conducted by the Butters brothers through Energy Express. The fifth respondent, Haus Living Limited [“Haus”], is a company of which Mark Butters is the sole registered shareholder and director. It was joined as a party because there was a potential dispute or confusion as regards the ownership of Haus, which was whether Mark Butters holds the share on trust for Greendealexpress – in which case its affairs and value might be relevant as regards this Petition - or on trust for Mr Corran and the Butters brothers and, possibly, for the Butters brothers’ sister, Claire Butters.

In accordance with established practice in unfair prejudice petitions Energy Express, Greendealexpress and Haus were joined to ensure that they are bound by the result of the case but have not taken any active part in the proceedings or been represented at trial.

In relation to Haus, in the Amended Petition at [26] Mr Corran sought a declaration as to the beneficial ownership of the share held by Mark Butters on the pleaded basis that it was held on trust for Mr Corran, the Butters brothers and Claire Butters as to 25% each. This was admitted in the Amended Points of Defence [“APOD”], although in the re-amended version for which permission was given at trial this was replaced by an admission that it was held on trust for Mr Corran and the Butters brothers as to one third each. Neither party sought to resile from their pleaded positions at trial or in closing submissions.

It follows that the parties are agreed, at least on the statements of case and in their positions as advanced at trial, that Mark Butters holds that share on trust not for Greendealexpress but for Mr Corran and the Butters brothers together with, says Mr Corran but not the Butters brothers, Claire Butters as well. However it became apparent in cross-examination that Mark Butters still appears to think that he holds the share on trust for Greendealexpress which, being wholly owned by Energy Express, means that it is ultimately held for the benefit of Mr Corran and the Butters brothers. This appears to be the basis on which it has been asserted on various occasions that Haus is a wholly owned subsidiary of Greendealexpress and also the basis on which certain accounting treatments have been adopted by the accountants when producing the accounts for those two companies. In contrast, Mr Corran’s case and evidence is that it was agreed from the outset that Haus was to be a joint venture between himself, the Butters brothers and Claire Butters.

However since, as I say, no-one is positively contending that Mark Butters holds his share in Haus on trust for Greendealexpress it does not seem to me that it is open to me to make such a finding even if I was otherwise inclined to do so. That is particularly the case in circumstances where Haus, Greendealexpress and Energy Express are all parties to this action and where none of them nor any of their directors or shareholders of any of those companies – who are also all parties to this litigation - advance a case to that effect.

As to the second question, the amendment was made in consequence of a letter written to the court by Claire Butters during the trial in which she disclaimed any claim to have any interest in Haus. This assertion has not been accepted as such by Mr Corran. His position is that: (a) as is common ground, she was originally going to be involved in the business to be conducted by Haus and to have an equal 25% interest in the business; (b) he was not party to any agreement under which she divested herself of that interest nor has he been made aware of her having done so; (c) he does not agree with her stated reason for divesting herself of her interest as set out in her letter.

As to this it is important that I do not become embroiled in issues which are not part of this litigation. As I have already said no-one is contending that Haus is owned directly or indirectly by Greendealexpress or by Energy Express. Mr Corran does not and cannot make any complaint in these proceedings – which on his pleaded case concern the affairs of Energy Express and Greendealexpress alone - about the conduct of the affairs of Haus by the Butters brothers. Matters relating to Haus figure in this case only in the context of that part of the petition which complains of benefits said to have been wrongfully conferred upon the Butters brothers and their businesses, including Haus. It follows that I am not directly concerned in this case with the ownership of Haus or with the activities of Haus other than in that limited context.

In the circumstances all that I need do is to record in a recital to the order made following this trial that Mr Corran and the Butters brothers are agreed that neither Greendealexpress nor Energy Express have any beneficial interest in the sole issued share in Haus which is held by Mark Butters. I do not need to, nor should I, determine who does have an interest in that shareholding or on what basis. In particular I do not need to nor should I determine whether or not Claire Butters has any claim to any such interest, nor do I need to nor should I make any findings as to the remainder of the content of her letter which is not before me as evidence of its contents in any event and which I disregard.

In summary, my decision is as follows:

The witnesses

I begin my referring in summary to the witnesses and my overall view of the credibility of each witness. The two principal witnesses were Mr Corran and Mark Butters. Although Simon Butters was also an important witness, who substantially supported the evidence of his brother, it is clear that he had significantly less direct involvement in the business than did Mark Butters.

Having heard Mr Corran cross-examined forcefully and skilfully over an extended period I am satisfied that he is an unreliable witness. I do not consider him to be deliberately dishonest, either in relation to certain substantive issues where he was cross-examined on the basis that he had acted dishonestly or in relation to his evidence before me, but I do consider him to be an opportunist businessman who has operated his business and financial affairs to suit him and without much regard either to legal obligations or to business scruples where it did not suit him to do so. This was very clearly evidenced in my view by his conduct in relation to his bankruptcy and (as I find) his failure to disclose his continuing status as an undischarged bankrupt to the Butters brothers as soon as he became aware of it. I also consider that he gave his evidence in a similarly opportunistic nature. Thus there were any number of occasions when, being confronted with difficult evidence, for example as to why he had given a false address to the Official Receiver or why he had chosen to incorporate companies in his wife’s name shortly before his exclusion, he sought to explain his conduct by saying that it was done at the behest of the Butters brothers, when I am satisfied that this was patently not the case. He also reacted very badly to being excluded from Energy Express and Greendealexpress by the Butters brothers and has convinced himself that he is the innocent party in every respect and the Butters brothers are the villains in every respect. He was simply unable to accept that his belated disclosure of his continuing bankruptcy and his failure to obtain a discharge or annulment of his bankruptcy within a reasonable time might reasonably have justified the Butters brothers in taking the view that he was no longer someone who they could sensibly allow to continue to participate in the management of Energy Express or Greendealexpress, let alone join in with in any new ventures. In his proposed corrections Mr Pipe suggested that I should find that Mr Corran was deliberately dishonest both in his substantive dealings with the Butters brothers and in his evidence, but I stand by my assessment of Mr Corran as already set out above. This was an impermissible attempt to re-argue the case. In case any amplification of my reasons is required, whilst I accept that the distinction between acting dishonestly and acting opportunistically and between giving untrue evidence in an opportunistic manner and giving evidence dishonestly is not an easy one to draw, I do not believe either that Mr Corran acted in a consciously dishonest manner in his dealings with the Butters brothers or that he repeatedly told deliberate and conscious lies when giving evidence.

Mr Corran’s wife, Ms McDonnell, gave evidence which was of limited relevance. I accept her as an honest witness, although I do not accept her evidence uncritically, not least since it was obvious that she clearly supports her husband in this litigation. The same is true of Mr Gunning, who came across as honest and reliable. I also received in evidence a witness statement from a former business partner of Mr Corran, a Mr Hadfield, which was not challenged.

Mr Simms was employed by Greendealexpress as an in-house company accountant from early 2014 to late 2015 and was called by Mr Corran to support his claim in a number of respects. His evidence was subjected to sustained attack in cross-examination. He was also the subject of detailed attack in the defendants’ witness evidence both as to his honesty and his capability. For the purposes of this case all that I need to say is that I found him to be essentially an unreliable witness because of the errors and exaggerations in his witness evidence and his prevarications in his oral evidence and also because of his willingness to purport to give evidence in his witness statement which went far beyond his knowledge or expertise. I am satisfied that he has sided with Mr Corran in this case and that his evidence is skewed as a result. I am also satisfied that he did not perform his duties as in-house accountant as carefully and diligently as would have been expected. I accept as it were in mitigation that he was asked to take on too much responsibility without proper supervision and also that he had personal problems and illness.

Mark Butters and Simon Butters are honest witnesses. They are also in my view on balance more reliable witnesses in comparative terms than either Mr Corran or Mr Simms. If I had no other reliable evidence or material to guide me I would tend to prefer their uncorroborated evidence where it conflicts with that of Mr Corran and Mr Simms. However I do not accept their evidence as being completely reliable in every significant respects. I find that their approach of treating Greendealexpress and Energy Express as effectively their personal property to do with as they pleased, coupled with their antagonism towards Mr Corran and Mr Simms and their determination to win this litigation, has led them to give evidence which is unreliable. In particular their attempt to downgrade Mr Corran and Mr Gunning to the status of mere employees was hopelessly inconsistent with the contemporaneous documents and other unchallenged evidence and led me to doubt their ability or willingness to give non-partisan evidence. They were clearly rather more prepared to take a risk in relation to their continued involvement with Mr Corran, even once they knew he was an undischarged bankrupt, than their evidence might at first have indicated. They cannot also completely avoid responsibility for a number of careless errors in completing important documentation.

Mrs Rose and Mrs Scaife are both employees of Greendealexpress who provided witness statements and gave evidence and who I regard as plainly honest and largely reliable. There were some errors in their evidence, which I regard as the kind of errors which anyone involved in business administration might make, particularly when taking over responsibility for the financial affairs of companies which had, as I have said, been treated in some respects as the personal property of the Butters brothers and had also been left in a state of some disarray by Mr Simms. I also consider that they were placed in the rather difficult situation of having to provide witness statements and give oral evidence knowing that the Butters brothers, as in effect their employers, were relying upon them to support their case. In particular I consider that Mrs Scaife did allow herself to be more critical of Mr Corran and Mr Simms in her witness statement in particular than she would have done had she been under no such pressure. I also consider that Mrs Rose was placed in a difficult situation when asked why certain invoices from Greendealexpress to Unicom has been created but not issued and I do not fully accept her evidence as to how or why that situation arose.

Finally, Mr Jones and Mrs Spence gave evidence as, respectively, ad hoc property consultant to the Butters brothers and accountant with the firm which produced audited accounts for the companies. They were plainly honest and reliable and I accept their evidence as such, although Mrs Spence was hampered a little by the absence of her own files when answering questions of detail.

Outline history

Although I refer to this as an outline history it is of necessity somewhat detailed given the nature and complexity of the issues involved. I have nonetheless attempted to strip out superfluous detail. Although I will resolve some of the more contentious disputed factual issues later in this judgment under the appropriate sections, where I state matters of fact in this section which are to greater or lesser extent in dispute between the parties I do so on the basis of my assessment of the witnesses and their evidence as summarised above, my analysis of the contemporaneous documents and my view of the inherent probabilities, adopting the approach to oral evidence in commercial litigation as summarised by the then Vice-Chancellor, Norris J., in Hague Plant Hire Ltd v Hague [2016] EWHC 2663 (Ch) at [18] to which I was referred by Mr Pipe, who also appeared in that case.

Greendealexpress was incorporated by the Butters brothers in September 2012 with a view to taking advantage of the business opportunities offered by the Green Deal scheme. I should begin by saying something by way of summary about the Green Deal scheme and how it operated in practice so far as this case is concerned, without which it would be impossible to understand the issues in the case. In her witness statement Mrs Scaife referred to the relevant legislative and contractual structure, comprising the relevant provisions of the Energy Act 2011 [“Energy Act”], the Green Deal Framework (Disclosure, Acknowledgment, Redress etc) Regulations 2012 [“Regulations”] and the Green Deal Arrangements Agreement [“Green Deal Agreement”] made on 1 October 2012 between the electricity suppliers, authorised providers and finance parties specified in the agreement. She explained her understanding of the effect of the Energy Act, the Regulations and the Green Deal Agreement in her witness statement without referring to the detail of those documents. Neither counsel attempted such an exercise in opening or closing submissions. Accordingly, whilst I have looked at these documents I have not thought it either necessary or appropriate to attempt that exercise unaided and I therefore acknowledge that my summary may contain material inaccuracies, although there is no reason to think them material to the issues in the case. In general terms it appears that the Energy Act regulates at a high level how the Scheme is to operate, with the detail appearing in the Regulations and the further detail as to how the contractual arrangements operate as between the various participants in the Scheme in the Green Deal Agreement. I note in [18] and consider in §7 below some particular provisions relevant to the continuing obligations of Greendealexpress as a Green Deal provider.

The Green Deal scheme was a government backed scheme introduced to provide loan funding for house-owners to finance specified energy efficient home improvements. This scheme was different from other similar schemes which involved outright payments or grants. In outline, the government provided low cost finance through a not-for-profit company known as the Green Deal Finance Company. Authorised Green Deal providers were able to access these funds and make loans to house-owners. The unique feature of these loans was that repayment was made over a long period, typically 20 years, through being added to or incorporated within invoices raised on the current house occupier for electricity supplied by the relevant utilities provider – in other words the loan attached to the house rather than to the initial borrower. As a commercial lender the Green Deal provider required authorisation from the Financial Conduct Authority [“FCA”]. There was a considerable initial investment in terms of time and money required to become an authorised Green Deal provider.

In order to qualify for the Green Deal scheme an initial survey as to the qualifying works or “measures” had to be obtained from an authorised Green Deal assessor, who would produce a report (known as a Green Deal plan). The works had to be undertaken by an authorised Green Deal installer. It was possible for a Green Deal provider to provide what was in effect a one-stop service by procuring the Green Deal assessor and the Green Deal installer to undertake the works under separate contracts with the house-owner. Alternatively the Green Deal provider might be involved simply to access the finance once the Green Deal plan had already been obtained and the Green Deal installer already selected.

Under the business model adopted by Greendealexpress it became an authorised Green Deal provider operating both as a one-stop service in some cases, where it introduced the Green Deal assessor and the Green Deal installer to provide their respective services, and as a pure finance provider in other cases. In each case however the only payment it received was a “slice” of the loan value, being a minimum of £350 or 10% of the loan value whichever was the greater. (In the vast majority of cases the loan value did not exceed £350.) From this payment Greendealexpress had to finance its own costs, which included the costs of administering the loan over its lifetime (specifically providing annual reports and liaising each time the occupant changed utilities provider) as well as dealing with any complaints, including complaints about the works. The Green Deal installer would have a responsibility to the customer for the measures it had installed and was required by Greendealexpress to provide a time-limited warranty direct to the customer. It was also encouraged by Greendealexpress to provide an insurance backed guarantee [“IBG”] which would provide cover to the customer in the event of its insolvency. The Green Deal provider also had a responsibility imposed by the relevant legislation to the customer for the measures which had been provided by the installer and it was also required to provide an IBG which would cover its obligations in the event of its insolvency. The Green Deal provider was also required to submit an annual report to the relevant government department providing information about all Green Deal plans entered into and any complaints received.

Being a Green Deal provider was thus a relatively intensively regulated business model. In order to be successful a Green Deal provider needed to close off a sufficient volume of loans to cover its operating costs. As will be seen, before the incoming government suddenly and without prior warning withdrew funding for the Green Deal scheme in July 2015, Greendealexpress had not achieved anywhere near sufficient volumes to generate significant profits. However, it was Mark Butters’ evidence in his witness statement at [51], supported by Mrs Scaife in her evidence, that before July 2015 Greendealexpress had begun to trade successfully and had become one of the top three UK Green Deal scheme providers by volume. Mrs Scaife told me that it had begun to close off a significant number of loans in the months before the scheme was discontinued and, in her view, was just about to turn the corner at that point. I accept the broad thrust of her evidence that things were looking up at that point.

Nonetheless, whatever the position might have been had the government not pulled the plug, once the Green Deal scheme was discontinued Greendealexpress was unable to offer new loans and apart from run-off business was unable to generate any new income. That remains the position to this day, although I have been told that more recently a privately financed replacement for the Green Deal Finance Company has entered the market, so that the Butters brothers hope and expect that Greendealexpress may also be able to re-enter the market in the near future. As matters currently stand however this remains but an aspiration. In contrast to all this Mr Corran’s evidence was that the Green Deal scheme as devised and implemented simply could not be operated profitably and was not being operated profitably whilst he was with the company. He was also rather dismissive about the prospects of the scheme being successfully resurrected via a new private finance provider. It should however be said that he did not have the same detailed involvement in or knowledge of the Green Deal scheme as did Mrs Scaife, nor the same ongoing interest as Mark Butters, and where necessary I prefer their evidence on this aspect of the case.

The Butters brothers were already successful property owners in the Hull area. They operated what is best described as a loose partnership agreement between themselves, relating in particular to the ownership and letting of student accommodation and the ownership and letting of a substantial and impressive grade 1 listed building, known as the Hall, Beverley which was let to various tenants as commercial accommodation. As well as the commercial accommodation there was also a flat on the second floor of the Hall. As well as the Butters brothers their parents and their sister Claire Butters were also involved to a greater or lesser extent in these property and business interests. It appears that the family are and always have been close knit personally and in business. It is clear that Mark Butters and Simon Butters in particular have a good relationship and work closely together in relation to a number of different projects. Although the Hall was held in the joint names of the Butters brothers it appears to have been run through the medium of some form of joint venture or partnership between them (and Claire Butters, so it appears) known as the Brantingham Group. As regards the student accommodation it appears that some of the properties were owned by each brother individually, whereas others were owned jointly, and others may also have been owned by Claire Butters or the parents, but all were run through the medium of another joint venture or informal partnership known as Unicom Property. There is also a limited company known as Express Capital Limited which is owned by the Butters brothers and Claire Butters and where the Butters brothers are both directors, and a further company known as Tradepark Limited is similarly owned and directed.

Mr Corran and Mr Gunning were longstanding friends, both living in the Manchester area, who were also interested in entering the Green Deal scheme market. Mr Corran had started off his career after a degree in business administration as a sales representative for a bank, during which time he had filed for bankruptcy (as to which much more later) due to financial problems. Subsequently he had become involved in a reasonably successful debt management company known as “Debt in Control”. Having left that business he undertook other work whilst looking for another business opportunity, which came his way when he and Mr Gunning agreed to set up in business together undertaking Green Deal assessment work. Although they duly established a company to undertake Green Deal assessor work, they were always more interested in breaking into the Green Deal provider market, which is where they perceived the real money could be made, but were deterred by the cost and time involved in obtaining the necessary authorisations. Thus they were interested in finding business partners who had either already obtained the necessary authorisations or who had the funds and willingness to do so.

Thus it was that in April 2013 the Butters brothers met with Mr Corran and Mr Gunning with a view to discussing working together in relation to the Green Deal scheme. Although the Butters brothers claimed that they were only looking for managers to run Greendealexpress rather than business partners it is clear from what was agreed from the outset (see the “heads of terms” produced by Mr Corran and Mr Gunning on 7 April 2013 and sent on with evident approval by Mark Butters to Mr Brown, a retired solicitor who the Butters brothers used from time to time as a legal consultant) that the relationship was always intended to proceed on the basis of a joint venture. The initial agreement was that all four should make an initial investment of £10,000, with Mr Corran and Mr Gunning becoming equal shareholders in Greendealexpress in return for the Butters brothers becoming equal shareholders in the Green Deal assessor business established by Mr Corran and Mr Gunning. As regards Greendealexpress the plan was that the initial investment would be used to finance the process of obtaining the necessary accreditations with a view to it setting up as a Green Deal provider.

Since the agreement between them was reduced to writing, in the form of a shareholders agreement produced by Mr Brown, which all agreed they had signed and were bound by, regardless of the extent to which they had read and understood the whole of its contents, that agreement is clearly the starting point of the analysis. In summary the shareholders agreement dated 14 May 2013 provided as follows:

It may be said that the shareholders agreement was not as clear or as comprehensive as it might have been had it been produced with the benefit of formal legal advice. Nonetheless, it is readily apparent from the terms of the shareholders agreement that all four parties were to have a full management role as directors, participating in regular meetings of directors, and that all four were to be employed by the company on what would, at least after the trading period, be the same equal salary. No dividend was to be paid for the first 2 years, the implication being that after 2 years dividend would be payable if it was agreed or determined by a majority that it was appropriate to do so. Although the Butters brothers would have ultimate control of the company and although it was specifically provided that the shareholders agreement was not to constitute a partnership, it is apparent that the relationship as envisaged between them was far from the Butters brothers’ depiction of it as essentially that of employer (the company, controlled by the Butters brothers) and employees (Mr Corran and Mr Gunning).

It was also agreed that Mr Corran and Mr Gunning would be based in Hull during the working week. At that stage the Butters brothers had modest office accommodation, used principally by Unicom, which they were prepared to make available for use by Greendealexpress’ existing two employees as well as by Mr Corran and Mr Gunning. The Butters brothers also made available to Mr Corran and Mr Gunning rooms in one of their student properties in Hull.

Mr Corran, Mr Gunning and Mark Butters were all involved in the process of obtaining the requisite authorisations and in setting up and marketing the Green Deal provider side of the business, with Simon Butters taking a more detached role.

It did not take very long before the first three also discovered and took steps to exploit a market which developed in connection with the Energy Company Obligation [“ECO”]. ECO was a scheme under which large energy suppliers such as British Gas were given targets to deliver energy efficient home improvement measures, particularly focussed on low-income and other specified households. As well as undertaking these measures themselves the energy suppliers were also able to “purchase” measures installed by authorised Green Deal providers through an online market in carbon credits. What the three discovered was that it was possible to enter into contracts to supply the energy suppliers with a specified number of measures at a specified price and then to enter into contracts to purchase those measures at a lesser price, thereby earning what could be a very considerable a profit.

The ECO side of the business very quickly became an immensely profitable element of the business, with Greendealexpress securing contracts with British Gas [“BG”] of approx. £42M (in November 2013), with Npower of approx. £12M and with SFE and EDF of approx. £7M. In the first 15 months of trading (to 30 June 2014) turnover was approx. £49M, gross profit approx. £35.5M, profit before tax approx. £12M and profit after tax approx. £9.5M. As at 30 June 2014 there was cash at the bank of approx. £6M and net current assets of approx. £1.5M. By the end of 2013 the company had 11 employees increasing to 23 employees a few months later. In short, Greendealexpress did amazingly well within a very short period of time, where that success was entirely due to the ECO side of the business.

Not surprisingly, given this level of profitable trading, it was soon agreed that the four could start receiving payments both earlier and far more substantial than was envisaged by the shareholders agreement. Thus in September 2013 each received £5,000, in October 2013 each received a further £5,000 plus repayment of their £10,000 loans, in November 2013 each received a further £5,000, and in December 2013 each received the first of a number of very substantial payments made on account of dividend in the sum of £105,000. In just 3 months in early 2014 each received payments totalling almost £1.9M. It is common ground that all of these payments were treated as dividend both in the Sage accounting system and in the management and subsequent approved and audited accounts. The audited accounts for the p/e 30 June 2014 record total dividend of almost £8M being distributed and also make it clear that no directors remuneration was payable in that year [TB29/5/300]. Substantial dividend payments continued to be made until June 2014 according to the Appendix to the Amended Petition. It is apparent therefore that these substantial dividend payments entirely superseded the original “no dividend for 2 years” policy in the shareholders agreement. There is however a dispute as to whether the decision to pay dividend also entirely superseded the agreement that each of the four should be entitled to receive £5,000 pcm so long as they remained employed as managers or directors and the cash was available, on the basis that such obligation was entirely subsumed within the agreement to pay dividend as and when agreed, or whether it merely suspended those payments so long as payments on account of dividend were still being made. There is also a dispute as to whether or not the four were employed under contracts of employment or not. I shall address and determine both arguments in §8 below.

It is common ground that neither Mr Corran nor Mr Gunning were ever formally appointed directors of Greendealexpress. However it is not suggested by the Butters brothers and nor is there any evidence to the effect that this was the result of any conscious decision that they should not become directors. Indeed Mr Gunning was given the title of sales director and Mr Corran was given the title of operations director. Insofar as the Butters brothers appeared to suggest that these were self-styled titles it is quite clear that there was never any objection from them to these titles being used. I am satisfied on the evidence that their formal appointment as directors was simply overlooked. It is common ground that the provision of the shareholders agreement which required regular directors meetings was effectively implemented in that each Monday morning there was a management meeting attended by all four parties (although Simon Butters sometimes attended by telephone) at which all of the strategic business decisions were taken. Although Mark Butters suggested in his witness statement at [13] that it was “well understood that I was the ultimate decision maker and others deferred to me in that regard” he accepted in cross-examination [TS5/115] that Mr Corran and Mr Gunning were all involved in “most of the significant decisions that the company made”, which as I have said were made at the weekly management meetings. I am satisfied that in fact the company was operated on the basis that all four parties expected that each would have the same input and that decisions would be taken at the weekly management meetings. Of course all four would have known that if the Butters brothers took the same view their view would ultimately prevail, given Mark Butters’ casting vote and their majority shareholding, but I simply do not accept the Butters brothers’ case that Mr Gunning and Mr Corran were never regarded as anything other than senior managers with no expectation of continued participation in the business other than at the discretion of the Butters brothers.

As to their status, it is common ground that no contracts of employment or statement of terms and conditions of employment were ever drawn up for any of the four parties. It is also common ground that none of them were included in the payroll system, so that all payments made to them were made gross of PAYE and NI. It is also common ground that no monthly statements were produced identifying the basis on which such payments were made.

The company expanded. In around February 2014 Mr Simms was employed as an in-house accountant, and Mrs Scaife was employed as a joint sales manager in relation to the Green Deal scheme side of the business and to undertake other managerial functions under the control of Mr Corran as operations manager. By this time the company had 23 employees and had recently moved in early November 2013 from Unicom’s offices into offices at the Hall. Mr Corran and Mr Gunning had also moved from the student accommodation into the flat at the Hall. There is a significant dispute between the parties as to the circumstances in which and the terms upon which Greendealexpress came to move into the Hall, which I shall address in §9 below.

It is common ground that in order to obtain the carbon credit supply contracts to service the ECO trades Greendealexpress had to offer 7 day payment terms to the suppliers, which created a cash flow issue pending receipt of payment from the energy suppliers. In order to address this it was agreed that Simon Butters should make a loan facility of up to £3M available to Greendealexpress which was to be secured by way of debenture, that security being entered into in January 2014. The loan facility is referred to in the accounts for the p/e 30 June 2014 [TB29/5/303] as bearing interest at a substantial (3% pcm) rate, which perhaps explains why interest of £260,100 was paid over that period. It also records that by the end of the period only £125,128 remained outstanding, which reflects an assessment of the costs charged to Greendealexpress by Brantingham for fitting-out works said to have been undertaken at its expense, which is also a matter of dispute which I address in §9 below. There is an issue as to whether the loan ought in any event to have been paid off and the debenture ought to have been cancelled by this time, which I address in §11 below. However it is worth noting that there is no suggestion or evidence that Mr Corran or Mr Gunning complained about the terms of the loan from Simon Butters and nor is any complaint made about the terms of that loan in the Petition.

By June 2014 there were problems looming on the horizon. The energy suppliers had become all too aware of the considerable profits being made by Greendealexpress on the ECO trades and were seeking to exert pressure on it to reduce the price they were paying for the measures. Whilst the four men were determined to resist this commercial pressure the energy suppliers had a weapon up their sleeve, which was to delay payment by raising disputes as to what was payable. In particular, the energy suppliers argued that if all of the requisite supporting information to establish that the works were qualifying measures had not been provided they were under no obligation to make payment. Moreover, since certain measures would only qualify if they were undertaken to properties within specified postcodes or within a specified distance from those postcodes, it was open to the energy suppliers to refuse to pay for measures undertaken to properties which they contended were non-qualifying because they were outside the specified distance. These objections were raised not only in relation to payment claims going forwards but were also raised by way of set-off by reference to claims which had already been paid for but which the energy suppliers contended had been paid by mistake. In some cases allegations of fraud were made at a later stage.

The contracts with the energy suppliers were due to terminate by the end of 2014, so that the parties were all too aware that the extremely high profits which Greendealexpress had been generating were unlikely to be sustainable into the following year, either if the contracts were not renewed or if they were only renewed on less commercially favourable terms. Moreover, the four were concerned that if substantial claims were successfully made then not only would the existing cash reserves of Greendealexpress be put at risk but also there was the potential in the event of its insolvency for challenges to be made to the dividends already distributed.

It is common ground that a meeting was arranged with the Hull branch of the insolvency practitioners Begbies Traynor in June 2014. There is no contemporaneous note of the meeting, but a subsequent email from Begbies refers to the parties doubting that BG would make the final payments due under their contract with Greendealexpress and envisaging an insolvency process by the end of the year. However nothing concrete happened as a result of this meeting. It is clear that the Butters brothers in particular were somewhat sceptical as to the motives behind insolvency practitioners recommending insolvency procedures. By mid-August 2014 the Butters brothers were seeking advice both from the solicitors Rollits and the accountants Finnies as to ways and means of ensuring that the substantial profits made by Greendealexpress could be made safe from any potential claim in the event of insolvency. As Mark Butters said in his email to Rollits of 15 August 2014 [TB4/223] one such option was to hive up the profits to a new holding company, whereas another was to place Greendealexpress into members’ voluntary liquidation “if we are unable to secure any more contracts for Greendealexpress in the next couple of months”. Following full and detailed advice from Rollits it is clear that the decision was taken to proceed with the holding company option and Rollits were duly instructed to put this into effect. In the meantime no further payment of any kind were made by Greendealexpress, whether classed as dividend or as management charges or salary, to any of the parties from June 2014 until after the 2014 re-organisation to which I shall refer shortly.

By late summer 2014 certain problems with Mr Gunning had come to a head. He had become increasingly unhappy at having to be away from home all week, particularly following the birth of his daughter. He was drinking heavily during the week and the effect of this upon his work and his behaviour on one occasion at Beverley races had led to concerns being expressed. It is common ground that following a meeting on 28 July 2014 he left the office and never returned. There is a debate as to whether he left voluntarily or in consequence of a disciplinary process being invoked against him. I have no doubt that he left voluntarily. I also have no doubt that the only reason for the subsequent discussions in relation to the invocation of a disciplinary process was because the Butters brothers in particular were concerned to ensure that they could invoke the provisions of the shareholders agreement so as to force him to transfer his shareholding in Greendealexpress to the other three for what would have been nil consideration. I am also satisfied that the principal reason for this was not because of some vindictive or money-grabbing desire to see him left with nothing but because the decision had already been taken to incorporate the new corporate structure and the Butters brothers were keen not to allow this to be complicated, frustrated or delayed by having to deal with Mr Gunning as an absentee shareholder. In the end, after some negotiation, Mr Gunning agreed to accept £100,000 for his shareholding and departed the company.

The new corporate structure, which took effect on 23 September 2014, the day after the transfer of Mr Gunning’s shares in Greendealexpress, and which I refer to as the 2014 re-organisation, involved Energy Express becoming the holding company of Greendealexpress and Mr Corran and the Butters brothers acquiring a shareholding in Energy Express as to 32.45% and 67.55% respectively. Simon Butters, who was not originally a director, became a director alongside Mark Butters, whereas Mr Corran did not.

It appears that although Rollits provided a fee estimate for the production of a shareholders’ agreement and went so far as to produce a checklist and a draft agreement they were not instructed to proceed further. Although there is no direct evidence as to why this was I am satisfied from the evidence that as well as to save money the Butters brothers were aware that it might lead to division and dissension if the new terms proved contentious as between them on the one hand and Mr Corran on the other. I accept that at that stage the relationship between the three remaining men was broadly speaking a good one, and that to adopt the traditional shorthand they reposed a certain degree of trust and confidence in each other. However, this should not be overstated. It does appear that Mark Butters and Mr Corran worked well together and were friendly, although not as close as Mr Corran now claims. The relationship between Mr Corran and Simon Butters was more distant but still good. However, there is contemporaneous evidence by way of file note [TB9/624] that on 9 September Simon Butters spoke to Rollits by telephone and which records that he was not happy with Mr Corran receiving one third of the Energy Express shareholding and that he asked about “getting Colm’s shares from him if he left the Company”. Furthermore, whilst as I say below I reject the allegations of misconduct made against Mr Corran, I do accept that there was some concern about Mr Corran as well as Mr Gunning in terms of his out-of-hours drinking and its impact on his work. In my view the relationship at this stage was still essentially a business relationship, where Mr Corran and the Butters brothers considered that they were able to work together to make money, as they had to a spectacular degree with ECO, and were keen to carry on doing so.

It is Mr Corran’s case and evidence that it was “orally agreed and understood between us that we would operate the business in the same way as we had successfully run Greendealexpress for the past year, namely that we would all be involved in the management and running of the company and equally involved in and consulted about the business and affairs of both companies”. It is the Butters brothers’ case that although there was no express agreement it was understood that their dealings in connection with Energy Express would continue on the same basis as their dealings with Greendealexpress. It had been the Butters brothers’ case that the Greendealexpress shareholders agreement would also continue to apply, but following an amendment to the Points of Defence that is no longer their pleaded case nor was it advanced as a case at trial.

It is common ground between the parties that following the Energy Express re-organisation nothing really changed in the sense that the three men continued as before with their existing roles and the existing weekly management meetings. However the three men began to receive regular monthly payments of £5,000 from Greendealexpress from September 2014, when no such payments had been made since June 2014. There is an issue as to the basis on which they were made. In the Sage accounting system Mr Simms described one such payment to the three men as “Nov 2014 salary” but did not describe the earlier or later payments in similar terms (so that for example the first payment to Mr Corran was simply referred to as “Colm – Sept 2014”) and there is no basis in my view for thinking that the November entries reflected some agreement to the effect that these payments were to be treated as “salary”. It would appear from Greendealexpress’ accounts for the y/e 30 June 2015 that they were treated as “management charges” [TB29/9/333], which is consistent with the way in which they were described in Sage from August 2015 onwards [TB2/380P]. It is clear that they were not treated as dividend, since the accounts for that year show only the £5M dividend paid to Energy Express. It is the Butters brothers’ case that the £5,000 was paid as management charges, as they had been before the 2014 re-organisation, the only difference being that before the 2014 re-organisation they had been treated as dividend for accounting purposes only. It is Mr Corran’s case that there was no entitlement to receive management charges so that either these payments had to be made as dividend as before or not at all.

It is common ground that an important reason for the Energy Express re-organisation was to enable £5M of the funds sitting in Greendealexpress to be hived up into Energy Express and this was accomplished by an interim dividend of £5M being paid by Greendealexpress to Energy Express on 23 September 2014. By this means the surplus in Greendealexpress was protected against any substantial claim from BG or any other energy supplier, subject of course to Greendealexpress avoiding insolvency and thus preventing any liquidator from taking steps to challenge the dividend as against Energy Express.

I also accept that another important reason for the Energy Express re-organisation was to enable the business to expand into other areas, if necessary unaffected by the failure or insolvency of Greendealexpress, if that is what happened as a result of the termination of the ECO contracts and any successful clawback claims by the energy suppliers. Earlier in the year a new company, Haus, then known as Easy Homebuyers Limited, was incorporated by Mark Butters with a view to forming the corporate vehicle for a joint venture then intended to involve Mr Corran, the Butters brothers and Claire Butters under which distressed properties would be bought up cheaply and sold on for profit. Subsequently it was discussed and agreed that Haus should become the vehicle for an on-line bathroom supplies business between the same participants, although that did not proceed for reasons I shall consider subsequently. Later, in mid October 2014, a number of companies all bearing the name Intenco were incorporated as subsidiaries of Energy Express with a view to undertaking Green Deal scheme work, with one company undertaking assessment work, one company undertaking installation work and one company operating as a provider. According to Mrs Scaife [TS8/167] the idea was that the Intenco provider company would focus on larger commercial work for local authorities and the like whilst Greendealexpress would remain focussed on individual homeowners. By this stage there was a new variant on the Green Deal scheme in place known as the Green Deal Home Improvement Fund scheme, which had been introduced in June 2014, under which qualifying property owners could apply for and obtain grants to undertake energy efficient home improvement works.

Mr Corran and the Butters brothers were also considering entering into a series of joint ventures with solar panel installation companies and involving the financing and installation of solar panels on properties [“the solar JVs”].

Whilst at the time the Butters brothers were plainly willing to enter into the Energy Express re-organisation with Mr Corran and to consider entering into other new ventures with him, it is now their case that they were as concerned as to his behaviour and performance as they were with that of Mr Gunning. Indeed they contend that a disciplinary meeting held in August 2014 involved Mr Corran as much as it did Mr Gunning and that his behaviour in terms of drinking and its impact on his work and his conduct at the Beverley races was just as concerning as was that of Mr Gunning. They contend that matters did not improve even after Mr Gunning had left the business. In contrast whilst Mr Corran accepts that he used to go out drinking with Mr Gunning when they were both working and living in Hull during the week, he says that apart from one occasion this never impacted on his work and there was never any basis for any complaint as to his behaviour at the Beverley races.

I am satisfied that the allegation that Mr Corran’s subsequent exclusion was in some way justified by reference to his misconduct is unjustified. There is no evidential foundation for the allegation in any of the contemporaneous documentation. Although I am prepared to accept that Mr Corran as well as Mr Gunning would have drunk too much on some evenings whilst living in Hull during the week apart from one or two isolated occasions it did not affect his performance at work. Whilst he may well have been inebriated at Beverley races and whilst his behaviour may well have been affected as a result it is plain that the serious complaints made against Mr Gunning by Mrs Scaife at the time were never directed against him as well. There was never any question of the Butters brothers seeking advice from Rollits as regards his behaviour, in contrast to the copious references to advice being sought and given in relation to Mr Gunning. Indeed he was regarded as part of the triumvirate involved in discussions about what to do with Mr Gunning. There is no hint in the documents of there being any concerns about his behaviour after Mr Gunning left the business. That was still the case in November 2013 onwards, when there were detailed discussions with Rollits about the impact of his status as an undischarged bankrupt and subsequently his removal. Finally there is no allegation of misconduct made in the termination letter, which was drafted by Rollits, or even in the subsequent correspondence until a full year later in February 2016. It is clear that a conscious decision was taken in February 2015 not to seek to invoke misconduct as a reason for termination. The subsequent decision to raise it as a defence in these proceedings is in my view quite unjustified and has been added as a makeweight to seek to buttress the Butters brothers’ defence of this Petition.

The same is true as regards the allegation that either he was personally at fault or that he was at fault in his supervision of the ECO team in respect of the performance of the ECO contracts, in particular the submission of the supporting documentation which was relied upon by BG and others to dispute their liability to make payment and/or to claim substantial repayments. Again there is no hint of this as a complaint at the time. There is no particularity as to what it is said that he did or did not do which justifies blame being laid at his door. It is apparent in my judgment that the ECO team must have been working under pressure in order to meet its contractual obligations and must have been heavily reliant on the quality of the information and documentation provided by their installers. Mr Gunning supported Mr Corran in saying that insofar as there was fault in terms of submitting non-qualifying applications it was the fault of the data available to them which did not allow them accurately to identify which houses on which streets did fall inside the boundaries and which did not. I accept that evidence.

However, the chronology as regards Mr Corran’s discovery of his status as an undischarged bankrupt and his disclosure of that fact to the Butters brothers requires some more detailed consideration.

I have already referred at [21] above to the fact that Mr Corran had previously been made bankrupt. The bankruptcy order was made on his own petition on 28 June 2001. The debts comprised monies borrowed from various financial lenders and from his father and Mrs McDonnell. After he was made bankrupt in September 2001 he left the family home where he was then living and moved to Hong Kong where his parents were then living. His evidence was that his relationship with Mrs McDonnell had broken up and he was in a fragile mental state. He claimed that he wrote to the Official Receiver [“OR”] as his trustee-in-bankruptcy notifying them of his move. If so, that would demonstrate a knowledge of his obligation to keep the OR informed of changes to his address as well as changes to his income and assets. The OR had no record of receiving any such correspondence and, having heard Mr Corran cross-examined on the point, I am satisfied that he never sent any such letter. His explanation as to why he apparently gave this letter to his father to keep but somehow it found its way into storage at his brother’s house in Belfast is, frankly, incredible and he is unable to provide any sensible explanation as to why, if he knew he had to do this, he did not notify the OR of his new address when he returned to the UK some 6 months later and moved in with Mrs McDonnell at her new house. Not only did he not notify the OR of his new address but he also did not notify the OR of the fact that he had resumed his employment with the bank as a sales representative. He did not notify the OR of his pay rises or bonuses in the subsequent years. He claimed that information provided by the OR re-assured him that it would be acceptable simply to use the extra funds to pay off his debt to his father. That is an incredible assertion in my view; as Mr Pipe submitted it is inconceivable that the OR would sanction a preferential payment to a member of the bankrupt’s family. In my judgment the true position is that Mr Corran took the view that since he would automatically obtain a discharge from bankruptcy after 3 years his best course was to lie low and say and do nothing which might lead the OR to take any interest in him or in his affairs.

Unfortunately for him the OR was unimpressed with his conduct and applied for and on 7 June 2002 obtained a court order suspending his discharge until he complied with his bankruptcy obligations. I accept that Mr Corran knew nothing of this order until September 2014, in circumstances to which I shall refer, since the application and order would have been sent to his previous address and not forwarded to him. He claimed that around the time he became involved in Debt in Control he asked a solicitor friend of a friend to do a bankruptcy search which did not show him as being bankrupt. Whilst initially surprising, there is some support for this because it does appear that on one later search undertaken in 2014 his bankruptcy was not shown, so that I accept his evidence that this also happened earlier. As Mr Maynard-Connor submitted, it is unlikely that he would have become a director of Debt in Control had he been aware he was still bankrupt and thus committing a criminal offence in so doing.

I am satisfied that he became aware of his status as an undischarged bankrupt in September 2014. At that time the sale of the shareholding in Debt in Control was about to complete, with Mr Corran in line to receive a consideration of some £500,000, but on 17 September 2014 a spanner was thrown into the works when the buyer’s solicitor performed a bankruptcy search and discovered that Mr Corran was an undischarged bankrupt. Mr Corran was informed of this by his former business partner and fellow shareholder Mr Hadfield. On his evidence Mr Corran was flabbergasted and mortified that he was placing the entire transaction at risk and, having discussed it with Mrs McDonnell that night, agreed to inform Mark Butters the following day, after he had spoken to the OR. He says that having spoken to the OR, and having been advised that it was not a mistake but that he could apply to have the order lifted and the bankruptcy annulled, he told Mark Butters that same day. He said that as well as telling Mark Butters he told Mr Gunning and Mr Simms. He was supported by them in this evidence. He said that he told Mark Butters that he was going to pay off the creditors and bankruptcy costs and to do so as a priority. He said that having heard this Mark Butters appeared re-assured and nothing more was said about it.

He said that the sale of the shares in Debt in Control completed on the basis that his share of the consideration was retained by the buyer’s solicitors until the position as regards his bankruptcy was resolved. It is apparent from the OR’s records that he gave his previous student accommodation address as his correspondence address even though he had not lived there for almost a year. He claimed that he did not want to give his home address because he knew that it would distress Mrs McDonnell to receive such correspondence and that he did not want to give the Hall address because he was told by Mark Butters not do so as the flat did not have fire regulations approval to be used for accommodation purposes. However I am unable to accept this explanation since: (a) on his evidence Mrs McDonnell was already fully aware of his discovery that he was still an undischarged bankrupt, so it is difficult to see why correspondence from the OR sent to their home address would cause her any further distress; (b) he had never previously mentioned being told by Mark Butters not to give the Hall address and has produced no evidence to support his case that occupation of the flat is not authorised; (c) he has failed to explain why he gave an address where he knew that he had not lived for almost a year and where there was no guarantee that any correspondence would reach him, even though he did – I accept – ask for correspondence to be emailed to him as well. I am afraid that I conclude that his decision to give a non-traceable address to the OR is entirely consistent with his opportunistic approach to life generally and, more importantly for present purposes, his desire to avoid having correspondence from the OR sent to the Hall.

In cross-examination [TS2/152] Mr Corran also claimed, for the first time, that at this time he had a telephone conversation with a representative of the OR, with Mark Butters listening in on loudspeaker, in which he was told that whilst he could not be a director of a company whilst an undischarged bankrupt he could still be involved in business. It was not entirely clear from his evidence whether he was saying that he was told that he could be a shareholder but nothing else or that he could also be involved in some further way in business above and beyond being a shareholder. I have no doubt that there was no such conversation, at least prior to the date on which Mark Butters accepts he was notified by Mr Corran of his bankruptcy. If there had been such a conversation it would have been so significant that it is inconceivable that Mr Corran would not have referred to it in his witness statement. It is possible that there was a conversation along these lines later on, in early November 2014, either in Mark Butters’ presence or - more probably - subsequently reported by Mr Corran to Mark Butters. That would be consistent with the file note made by Rollits of their meeting with the Butters brothers on 13 November 2014 (see below) which refers to Mr Corran having potentially committed an offence “in not telling the OR about the shares” and, as Mr Maynard-Connor put to Mark Butters in cross-examination [TS6/66], the inference must be that before the meeting with Rollits the Butters brothers must have become aware that Mr Corran had not told the OR of his shareholding in Energy Express.

Mr Corran also claimed that whilst travelling down to London for a meeting with BG with Mr Simms and Mark Butters the latter asked him for an update as to his bankruptcy. He was supported by Mr Simms in this account, although Mr Simms was unable to date the visit from his own knowledge. Again I do not accept that any such conversation happened on this trip. It is possible that it happened on a later trip. There is no contemporaneous reference to this conversation having taken place on this occasion. Mr Corran also claimed that whilst visiting China in October 2014 with the Butters brothers there was a discussion about a claim being made against Greendealexpress by GB Energy, in the course of which his desire to contest the claim was overruled by the Butters brothers who decided to settle the case because they were concerned that his status as an undischarged bankrupt could prejudice their case. However his evidence about this is inconsistent with the undisputed evidence that an offer to settle this case had already been made on behalf of Greendealexpress in early September 2014 at a time before anyone knew of Mr Corran’s bankruptcy and there is no contemporaneous documentation to support it, for example in the file of the solicitors who were dealing with this case at the time, and I do not accept it.

As I have said, the Butters brothers’ case and evidence is that it was not until late October or early November 2014 (their evidence has, I accept, changed on this point) that Mr Corran first informed them of the fact that he was an undischarged bankrupt. Mark Butters’ evidence is that this revelation came out of the blue and that Mr Corran said that he had only just found out about it and it was a mistake which he would soon sort out. Mark Butters’ evidence is that he told Mr Corran to keep him informed and that he told his brother about the conversation but that he was not overly worried until he began to conduct some internet research as to the consequences of being an undischarged bankrupt. He says that as a result he decided to obtain legal advice and on 11 November 2014 emailed Rollits, attaching a copy of an insolvency search recording the bankruptcy order and the suspension of discharge order, saying: “I only became aware of this a few days ago. Need to discuss in the morning if possible.” Mr Maynard-Connor submits that by the time that this had been received and discussed with Rollits the Butters brothers must have realised that this was not just a “mistake”. Whilst I agree that by this stage the Butters brothers must have realised that it was not a mistake in the sense that Mr Corran was indeed an undischarged bankrupt, it does not necessarily mean that the circumstances in which the suspension of discharge order had been made were still not being explained to them by Mr Corran as a mistake; indeed that is in substance what he said in his subsequent application to the court.

The following day Mr Corran emailed Mark Butters a copy of the suspension of discharge order and the day after, on 13 November, the Butters brothers met with Rollits. It is clear from the file note that the Butters brothers were given advice as to the legal consequences of Mr Corran acting as a director or being involved in the management of a company whilst an undischarged bankrupt, including the risk that they might become personally liable for the debts of the company if they allowed him to carry on doing so once they knew the true position. It is also clear from the file note that they were concerned about this risk in the context of the claim by then being intimated against Greendealexpress by BG, which it was feared might be as high as £12M. It was agreed that Rollits would write to Mr Corran in order to protect the position of Greendealexpress and the Butters brothers. It is clear from a Rollits internal email [TB13/57] produced after the meeting that the Butters brothers’ priority was to put in place “defensive measures to prevent liabilities occurring” as opposed to “proactive measures in terms of Mr Corran’s shareholding and employment status” – it was recorded that they “don’t want to sack Mr Corran now but want to reserve their position”.

There was also some discussion at that meeting about putting Greendealexpress into administration but Rollits warned against the potential adverse consequences of doing so as regards any potential claim against Energy Express for the return of the £5M dividend. It appears that the Butters brothers heeded this warning, because although in November they and Mr Corran met with another firm of insolvency practitioners in Manchester their position was that they were not willing to consider winding up Greendealexpress whilst the claims by the energy suppliers were still pending.

On 14 November Rollits wrote to Mr Corran, copying the letter to Mark Butters, recording that the Butters brothers had been “extremely surprised recently to learn from you that you are an undischarged bankrupt” and requesting him to desist from using the title of operations director and from seeking to bind the company other than with the specific prior authority of the Butters brothers, saying that the weekly Monday meetings were not to be treated as board meetings. They explained that a review was being undertaken and, in that context, asked Mr Corran to provide a full explanation including “the date of knowledge by you of such suspension”. It is not entirely clear why this question was asked. The date of Mr Corran’s knowledge of such suspension was not directly relevant to the date of the Butters brothers’ knowledge that Mr Corran was a bankrupt, although I accept that it may have been thought important to know insofar as it was potentially relevant to: (a) support the Butters brothers’ account as to when they knew; (b) consider whether there was a basis to take action against Mr Corran.

The day previously Mr Corran had issued an application seeking a discharge of his bankruptcy on the basis that he had notified the OR of his move to Hong Kong and it was not his fault that the OR had failed to correspond with him subsequently. On 24 November he responded to Rollits confirming that he did “not act in the promotion formation and/or management of Greendealexpress but will continue to be an employee of the company” and saying that he first became aware of the bankruptcy suspension on 18 September 2014. He did not challenge Rollits’ assertion that the Butters brothers had only “recently” become aware of his status as an undischarged bankrupt. He claimed that this letter had been drafted with input from the Butters brothers, although they dispute this and there is no evidence from Rollits’ file that they had provided a draft for the Butters brothers to give to Mr Corran and I do not accept his claim.

It is true, as Mr Maynard-Connor submits, that there was no response from Rollits on behalf of the Butters brothers to query why Mr Corran had not informed them of his status as an undischarged bankrupt in September once he became aware of it. In cross-examination the Butters brothers denied that their attention had been drawn to this part of the response. In their favour the email from Rollits to them attaching the response [TB13/75] does not draw attention to that point, whereas it does draw attention to the final paragraph of Mr Corran’s letter in which he refers to his intention to pursue the bankruptcy discharge application without using solicitors, which Rollits clearly viewed as a bad idea. Rollits’ short response to Mr Corran, sent the same day [TB13/78] and copied to the Butters brothers, did not refer to what he had said about when he had become aware of his continued bankruptcy, referring only to the final paragraph of his response and recommending that he should use lawyers. I am satisfied that this was the focus of attention going forwards; at that stage the Butters brothers were more interested in the problem being resolved than seeking to take action against Mr Corran.

Following on from Rollits’ letter Mr Corran’s Greendealexpress email address was amended so that it no longer referred to him as operations director. However it is common ground that nothing else changed, in that the regular Monday morning meetings continued including Mr Corran and decisions were made at those meetings as before.

By this time the last ECO contracts with BG and SSE had come to an end and no new ECO contracts had been obtained. This clearly had a drastic impact on the turnover and profitability of the business. The only remaining business which Greendealexpress was conducting was the Green Deal scheme business which, as Mrs Scaife confirmed in her evidence, had not really taken off by that time. They were trialling the Green Deal Home Improvement Fund business but that was still some way from being ready to roll out. Mr Simms said in his witness statement that the ending of these contacts had a dramatic impact on turnover, with monthly turnover dropping from £3.5M to £50,000.

It had been clear for some time in the light of the coming to an end of the ECO business that action was needed to cut costs and a number of staff were made redundant at around this time, between 8 and 10 according to Mark Butters.

It also meant that Mr Corran had very little to do, since he had never had much involvement in the Green Deal scheme side of the business, which was being managed perfectly well by Mrs Scaife. It was clear that if the business was to survive it would need to find new areas of business and this is what Mr Corran was engaged in at this time, continuing to seek out new ECO contracts and also pursuing the new business opportunities in relation to Haus, Intenco and the solar JVs.

As regards Haus, in late October 2014 it had been agreed between Mr Corran, the Butters brothers and Claire Butters that they should proceed with the Haus online bathroom sale business by making an application for a substantial regional growth fund loan to finance the provision of a warehouse from which to undertake the business. As part of this application it was necessary for each investor to provide £450,000 (in return for an allotment of shares in Haus) in order to meet the loan criteria and, since Mr Corran did not have access to such funds, it was agreed that Mark Butters would advance him the requisite funds which would be and were paid direct to Haus. This was formalised in a loan agreement made on 30 October 2014.

It was also necessary for the applicants to sign a formal loan application to be submitted to the regional growth fund. In cross-examination it was put to Mr Corran that he had signed the loan application in circumstances where he knew full well that the negative answer to the question “have any directors / shareholders been the subject of bankruptcy proceedings?” was untrue. He denied that he knew that the application contained this statement, saying that he simply signed when and where asked without reading the application in full. In that respect Mr Maynard-Connor was able to demonstrate that Simon Butters and Mark Butters had also signed the application at a time when it included a negative answer to the further question “has any company of which the directors / shareholders have been a director or company secretary at a time during the shareholder’s involvement or within one year of ceasing to be involved been put into liquidation or wound up” when the evidence showed that Simon Butters had been a director and Mark Butters had also been the company secretary of two such companies. They also protested that they had not appreciated that the application contained this statement and hence had not signed it knowing it to be untrue.

It is common ground that in late November / early December 2014 the decision was taken not to proceed further with the Haus online retail bathroom project. There is some dispute about why this was. The Butters brothers’ case and evidence is that once they knew that the regional growth fund loan application could not be proceeded with due to Mr Corran’s bankruptcy the project was dead in the water. They also say that Claire Butters wanted no more to do with Mr Corran once she knew the position. Mr Corran’s case and evidence is that whilst the inability to proceed with the loan application was a factor it was not the only reason, since funding could have been obtained from other sources, and an equally significant reason was an adverse report from a business consultant. The only relevance of this to the present case is that in order to give effect to this decision the share allotment needed to be cancelled as did the loan agreement between Mark Butters and Mr Corran. Rollits prepared and Mr Corran executed a short deed which acknowledged that the loan was “void ab initio” as a result of Mr Corran’s failure to make Mark Butters aware of his bankruptcy “in negotiations and discussions relating to the proposed loan”. Mr Corran asserts that he signed this deed without realising precisely what he was agreeing to on the faith of Mark Butters’ representation that it was a formality. Mark Butters disputes that he said this, saying that he left it with Mr Corran to read and on his return Mr Corran confirmed that he had read and signed it, making the point that it is a short document comprising only 4 sentences which could easily have been read in less than a minute.

The first hearing of Mr Corran’s application to discharge his bankruptcy was scheduled to take place on 6 January 2015 but was adjourned to 4 February to allow the OR to respond. It is clear that by this stage the view of the Butters brothers was changing and on 6 January they met with Rollits to discuss “terminating [Mr Corran’s] employment”. The file note records that Rollits advised that Mr Corran might respond by bringing an unfair prejudice petition which a court might accept as reflecting the reality of there being a quasi-partnership relationship between them. It is likely in my view that this explains why the Butters brothers took no active steps after this meeting to terminate Mr Corran’s involvement. Outwardly they were still conducting themselves vis-à-vis Mr Corran largely as if nothing had changed. In particular they were still proceeding with the potential solar JVs so that, for example, Rollits were instructed to and did produce a draft joint venture agreement on 5 February. This is noteworthy in that the proposal was that Mr Corran should not be made a director of the JV company and that his shareholding would be held by one of the Butters brothers as his nominee. This shows, I accept, a willingness by the Butters brothers to pursue proposals to continue working together with Mr Corran even at this stage and even though they were aware of the risks of being in business with him as an undischarged bankrupt. It also shows a willingness to engage in subterfuge to do so whilst minimising any risk to themselves. It should however also be noted that at the point in time, when Rollits were instructed to and did produce this draft, the Butters brothers were not aware of the result of the court hearing on 4 February 2015 at which they had been assured by Mr Corran his bankruptcy would be discharged.

However at the hearing on 4 February the District Judge declined to discharge the bankruptcy forthwith although he did lift the suspension with the result that Mr Corran would obtain his discharge 12 months later on 4 February 2016. It appears that he also indicated to Mr Corran that if he was able to contact and reach settlement with all of his creditors it would be possible for him to obtain an annulment. Mr Corran reported all this to Rollits by email sent on 5 February, suggesting that that he should be able to resolve everything and obtain his annulment within a further 3 months. Rollits emailed the Butters brothers the same day saying that in their view he was probably being “a bit optimistic in [that] aspiration”. As events transpired that view was correct because Mr Corran did not in fact obtain an annulment and his discharge occurred in February 2016. It is his case and evidence that this was simply because he was unable to locate and hence pay off his creditors due, he claimed, to the time delay. However, there is no evidence of his making any attempts to do so and his evidence is a little surprising in that, apart from Mrs McDonnell and his father, the other named creditors in his bankruptcy [TB11/206] were all financial institutions who one would have thought would have kept records, and there is no evidence that he even began by paying off Mrs McDonnell or his father.

It is the Butters brothers’ position that this was really the last straw and they decided to take steps to terminate what they considered to be his status as an employed manager. That is consistent with Rollits’ internal email of 12 February [TB13/94A] which records that in relation to the “new deal” (which is obviously a reference to the solar JVs) Mark Butters was getting “cold feet whilst Colm remains undischarged” and that his view was that “the ongoing situation and risk is not viable”. It is also consistent with Rollits’ file note of a meeting with the Butters brothers on 13 February [TB13/96-97] which refers to things “coming to a head” as a result of Mr Corran’s continued keenness to proceed with the solar JVs and the Butters brothers’ unwillingness to do so. It is clear that at this meeting it was decided that the Butters brothers were going to “terminate Colm’s employment”. Mark Butters agreed in cross-examination [TS6/107] that if Mr Corran had been able to obtain his discharge on 4 February he would probably have continued working with him.

Mr Corran and the Butters brothers met on 16 February 2015. There is a dispute as to what happened. Mr Corran says that whilst there was general disappointment as the outcome of the court hearing as regards his discharge from bankruptcy nonetheless he was told that although the Butters brothers needed to be seen to be distancing themselves from him this would only be a temporary measure until the bankruptcy could be discharged or annulled and in practice they would still continue working together with the existing and proposed new ventures. The Butters brothers dispute this and say that they told him that his employment was terminated with immediate effect, although Mark Butters did accept that he may have tried to soften the blow by intimating that they might be able to work together on other ventures in the future.

On 18 February Mark Butters emailed Mr Corran attaching a letter which had been drafted by Rollits and which read as follows:

It was the Butters brothers’ evidence that the reason given was not the real reason, which was his bankruptcy, his dishonesty in not informing them of his bankruptcy earlier and his misconduct, and that the more anodyne reason given was purely to avoid embarrassment. I have already referred to the alleged misconduct. It is plain in my judgment that the Butters brothers must have taken the considered decision not to seek to rely on his bankruptcy as grounds for justified dismissal. It is also plain from the Rollits file that they had been advised that if they were going to terminate Mr Corran’s employment – and I accept they were proceeding on the basis that he was an employee – they should do so before 2 years had elapsed so as to prevent Mr Corran from bringing a claim for unfair dismissal. In the circumstances I accept that there was nothing to be gained from their perspective in seeking to assert a dismissal on a potentially fair basis.

In support of his case that this letter was also simply a distancing device which did not reflect the reality Mr Corran relies on two particular matters. The first is a series of emails dated 17 and 18 February in which Mr Corran was set up with a new email account which would allow him access to his existing Greendealexpress email account. Mr Corran says that it is apparent that Mark Butters was aware of and agreed to this, which supports his case that it was effectively “business as normal” despite the termination letter. Mark Butters however says that all that happened was that Mr Corran had asked to have a separate email account set up to help him going forwards and that he was happy to allow Greendealexpress’ IT consultants to do this as a favour but without any prior agreement that this was to allow Mr Corran to continue operating “under the radar”. In support of this he points out that within a few days he had instructed the IT consultants to ensure that all emails sent to Mr Corran’s Greendealexpress email account were forwarded to him instead, so that Mr Corran no longer had any access to them. The second matter relied upon by Mr Corran is his attendance at the Rugby League World Cup Challenge Final on 22 February, which Mr Corran asserts he attended at the Butters brothers’ request and with their approval in order to pursue the solar JV proposal, whereas the Butters brothers say he had been invited and attended personally with no prior request or approval from them.

There was also an interesting piece of evidence which was that on 17 February Mr Simms arranged for four companies bearing the “Solar Renewables” name to be incorporated with Mrs McDonnell as sole director and shareholder of each. Mrs McDonnell accepted that she had little if any involvement in this other than to agree to sign the requisite forms as asked by Mr Corran. Mr Corran and Mr Simms accepted that Mr Simms had acted on Mr Corran’s instructions in doing this. Mr Simms accepted that it would have been a breach of his duty to Greendealexpress as his employer to become involved in setting up what he accepted he knew would be potentially competing companies. Whether that is so as a matter of law may be open to argument but it is significant in my view that – unlike Mr Corran and Mrs McDonnell – he did not suggest that he had been told that Mark Butters had asked Mr Corran to set up these companies. I reject as utterly implausible this suggestion, which only emerged for the first time in their oral evidence. It would make no sense at all for Mark Butters to want Mr Corran to incorporate companies in which the Butters brothers would have no control other than through Mrs McDonnell or Mr Corran. The obvious conclusion I draw is that it was done by Mr Simms at Mr Corran’s request precisely because Mr Corran was in no doubt that his employment had been terminated the previous day and that he wanted to set up companies through which he might carry out the solar JV business without the Butters brothers knowing and without anyone knowing of his control of those companies, which would of course at that time have been illegal. Whilst Mr Corran protested that it would have been madness to ask his fellow employee to do this, I am satisfied that by this time the friendship between Mr Corran and Mr Simms was sufficiently close for Mr Corran to be able to rely on him. For all I know there may have been some understanding that if the business took off Mr Simms would transfer to Mr Corran’s business.

For what it is worth, I do not accept Mr Corran’s evidence that it was always understood that the ostensible termination of his employment was simply a device. I accept Mark Butters’ evidence that his involvement in relation to the new email address does not demonstrate that he was aware of and agreed to Mr Corran continuing to have effective access to the Greendealexpress email going forwards or that this was a distancing device. From the evidence it was Mr Corran who was giving the instructions as to what he wanted to achieve in relation to the new email address and it did not take long before Mark Butters instructed that all email correspondence addressed to Mr Corran’s Greendealexpress email account should be forwarded to him and Mr Simms and not to Mr Corran. I also do not accept that the evidence in relation to the attendance at the rugby game indicates that the Butters brothers were still keen to progress the solar JVs with Mr Corran. It was clearly something which had already been arranged as between Mr Corran and his contact and the most that can be said was that the Butters brothers did not specifically forbid Mr Corran either from attending (which they could not have done anyway) or from holding himself out as still connected in any way with them (which they could not have policed anyway). I am prepared to accept that the Butters brothers were not seeking to be confrontational so that it is possible that Mr Corran genuinely believed that he was getting “mixed messages”; however there is a clear difference between that and his being told in no uncertain terms that behind the scenes things would just continue as previously. The internal Rollits email of 16 February 2015 [TB13/97A] clearly records a decision, only recently taken, that the Butters brothers “will not be proceeding with the solar JV. They think that the risks (especially given that Colm is an undischarged bankrupt) are too great”. That email is plainly inconsistent with the Butters brothers continuing to proceed in business with Mr Corran on the basis of some overt distancing device to protect themselves.

In reality however nothing very much turns on whether or not the exclusion on 16 February was a genuine exclusion, because it is common ground that within a couple of weeks Mr Corran knew full well that he had been genuinely excluded. Thus on 27 February Mark Butters wrote a further letter to Mr Corran stating:

Mr Corran responded as follows:

Mark Butters’ response was:

Mr Corran’s case and evidence is that it was only in early March, when the Butters brothers began to ignore his emails and telephone calls, that he realised that this was no longer a distancing device and that final confirmation came when he attended the Hall on 9 March and discovered that the locks and security keypad number had been changed so as to bar his access. It is, I accept, difficult to justify this conduct by the Butters brothers, particularly as this was said to be a scheduled meeting of shareholders. However, there is no positive case or evidence to the effect that there have been other occasions where the Butters brothers have not acted in accordance with the requirements of the relevant legislation and articles as regards the holding or conduct of shareholders’ meetings.

Mr Corran makes the point that at this stage there were still very substantial funds within Energy Express and Greendealexpress, being approximately £6.6M, more specifically as follows:

There followed a series of increasingly acrimonious emails sent by Mr Corran. It is unnecessary to refer to them in any detail, although two, both dated 27 March 2015 and both copied to the Butters brothers, are material to this case because:

I have already referred above at [19] to the fact that Greendealexpress continued to operate the Green Deal provider business until July 2015 when the Government withdrew funding to the Green Deal Finance Company. The effect on Greendealexpress was that after July 2015 it was unable to offer new loans, although it could continue to process loans which had already been approved. Unsurprisingly the withdrawal of the funding led to an immediate contraction in the need for staff with the result that further redundancies were made. Going forwards only six staff remained, including Mr Simms, Mrs Scaife, Mrs Rose and Mr Sherer, as well as the Butters brothers as directors.

The conduct of Greendealexpress after July 2015 is the subject of specific areas of criticism in the Amended Petition and I will consider the details in relation to each allegation in the relevant section. By way of summary however it is worthwhile to note the following events post Mr Corran’s exclusion.

Following Mr Corran’s exclusion he received no further payments from Greendealexpress whereas the Butters brothers continued to receive £5,000 pcm by way of payment for services rendered. The Butters brothers also received £32,000 each in April 2015 by way of pension contribution. No dividends have been declared or paid by Greendealexpress or Energy Express since Mr Corran’s exclusion, although it is not said that any formal request or demand has been made by Mr Corran in his capacity as shareholder of Energy Express for the Butters brothers as directors to consider declaring a dividend.

On 12 June 2015 a formal lease was executed in relation to the Hall, the parties to which were the Butters brothers trading as the Brantingham Group as landlord, Greendealexpress as tenant and Energy Express as guarantor, for a term of 5 years from 15 November 2014 at a rent of £140,000 pa. This is one of the specific matters of criticism which I address in §9 below.

In early November 2015 Mr Simms gave notice to leave his employment with Greendealexpress. The evidence of Mark Butters and Mrs Scaife, which I accept and which is consistent with that of Ms Spence, is that before this happened Mr Simms had been suffering from stress and that Mark Butters had taken the decision to transfer the accounts work back to the accountants who had previously prepared the accounts, Finnies. It appears that Mr Simms developed pneumonia and did not in fact work his notice period. It is the Butters brothers’ case that at that point it was discovered that the financial affairs of the companies were in a state of chaos and, eventually, it was agreed that the underlying accounting information would have to be reconstituted by Mrs Scaife and Mrs Rose working with Mrs Spence and others at Finnies in order for the account for the y/e 30 June 2015 to be produced. It is the Butters brothers’ case that this took a very considerable amount of time and effort and incurred significant expense and also that this explains why the accounts of Greendealexpress and Energy Express for that period were only produced in draft at a much later stage and only produced in signed-off form as part of the following year’s accounts in March 2017. It is also the Butters brothers’ case that insofar as invoices for inter-company or other connected transactions were not generated contemporaneously or insofar as payments for such transactions were not made contemporaneously that is entirely the fault of Mr Simms, whose responsibility it was to ensure that these matters were attended to. In his evidence and in that of Mrs Scaife a number of allegations of incompetence and worse are made against Mr Simms.

These matters are all disputed. So far as directly relevant to this case Mr Corran contends and relies upon Mr Simms’ evidence to the effect that he was positively instructed by the Butters brothers not to invoice for or to procure payment of inter-company or other connected transactions. That is of course something I need to decide. Mr Corran is also suspicious of the decision to instruct Finnies to reconstitute the accounts, considering that this represented an opportunity for the Butters brothers to produce accounts post litigation which support their case. However Mr Corran has not obtained permission to rely upon accountancy evidence to seek to establish that the y/e June 2015 or y/e June 2016 accounts prepared by Finnies are unreliable. Nor has he adduced evidence to such effect, other than in the most general terms from Mr Simms. Not surprisingly in the circumstances, Mr Maynard-Connor was unable to put a positive case to that effect to Mrs Spence as the representative of Finnies called to give evidence to that effect. Accordingly I proceed, as I consider I must, on the basis that the accounts are accurate and reliable save only where the subject of specific challenge which was accepted or made out.

I do not, however, need to make findings on the specific allegations of incompetence or worse levied at Mr Simms in the witness statements of Mark Butters and Mrs Scaife. The allegations are not directly concerned with the matters raised in the Amended Petition. The credibility of Mr Simms, whilst a live issue, is not of such critical importance that it would have been justified or proportionate to devote a considerable amount of time to investigating these detailed allegations both in cross-examination of Mr Simms and in cross-examination of Mrs Scaife. It would not have been possible to have completed the evidence within the 8 days allowed if that had been done. Both counsel agreed that in such circumstances neither needed to cross-examine the other’s witnesses in relation to those collateral matters. I am satisfied that neither party has been unfairly prejudiced in this case as a result. I have been able to make an assessment of the reliability of Mr Simms’ evidence without the need to investigate those matters.

In November 2015 there was a further round of redundancies, leaving only Mrs Scaife and one other remaining in employment. In December they transferred from Greendealexpress’ employment to that of Energy Express. The current position is that there are only two remaining employees, Mrs Scaife and Mrs Rose. The former is employed full time and the latter part time. Both act exclusively in an administrative role, dealing with the run-off issues in relation to the 1,521 Green Deal loans which were entered into by Greendealexpress over its trading history. In cross-examination of Mrs Scaife Mr Maynard-Connor queried why it was necessary to employ two staff to deal with what were effectively a limited number of issues relating to a relatively modest number of loans. I must confess that having heard Mrs Scaife answer the questions put to her I accept that submission and am satisfied – for what it is worth - that at least one reason why Mrs Scaife in particular has been kept on full time is to provide support to the defence of this case.

In December 2015 the dispute between Greendealexpress and BG was settled on terms whereby Greendealexpress agreed to pay BG £1.68M in full and final settlement of all claims and counterclaims.

Mr Corran instructed solicitors who first wrote to Rollits on 15 January 2016, expressing their concern as to the Butters brothers’ conduct in relation to Greendealexpress and Energy Express and seeking further information, in particular filed and management accounts and board minutes. The response from Rollits was to say that no such accounts (beyond those for the y/e 30 June 204) or minutes were available. Further correspondence ensued which it is unnecessary to record and the instant proceedings were commenced in March 2016.

In February 2016 Mrs Rose was instructed to produce an invoice relating to payments made by Greendealexpress for Haus which was backdated to 1 April 2015. In April 2016 and again later that year a number of further invoices were produced by Mrs Rose, many of which were also backdated and which, in broad terms, involved Greendealexpress invoicing Haus, Express and Tradepark for monies which the Butters brothers accept were due and payable by those associated companies to Greendealexpress. These are the invoices which Mr Corran says were only produced as a result of his pre-action correspondence and this litigation and otherwise would not have been produced because the Butters brothers had no intention of requiring their associated companies to pay these monies. The Butters brothers say that they were only produced late because of the problems caused by Mr Simms’ failure to deal with the financial affairs of the business in a competent and expeditious manner and which were backdated on the advice of the VAT consultants who they engaged to assist them in resolving the issues which they faced, including a VAT investigation. Mrs Rose’s evidence [T5/53] was that these invoices were produced as part of the reconciliation process which started in January 2016 and took around 6 to 7 months. I shall address these issues further in §8 below.

The accounts for Energy Express and Greendealexpress for the y/e 30 June 2015 were produced by Finnies in draft form on a date which has not been identified. It appears that they have never been formally approved in that form. The accounts for the y/e 30 June 2016 were also produced by Finnies and were approved in March 2017. As expected the y/e 30 June 2016 accounts also include the previous year accounts as comparators and it is clear that the figures for the previous year have altered somewhat (although not significantly) from the previous draft version.

The former (as appearing from the latter accounts) revealed the following:

The latter revealed the following:

The bank accounts as at January 2017 were as follows:

As Mr Corran observed in his witness statement, the reduction since March 2015 was of the order of £3.8M. However, as Mr Pipe riposted in opening submissions, the matters in issue in this case are delimited by the pleaded cases – subject of course to any application to amend and to the court taking a realistic view in relation to allegations which are pleaded in substance even if not in precise detail. I agree with Mr Pipe that on the state of the pleadings and indeed on the evidence before me and it is not possible Mr Corran to advance or make out a case, particularly without detailed analysis by accountancy evidence or otherwise, to the effect that this reduction in the bank accounts by itself establishes or supports his case on unfair prejudice.

That concludes my account of the history, and I now turn to the relevant legal principles.

Relevant legal principles

I begin by referring to the legal principles applicable to a claim under s.994 Companies Act 2006 [“CA 2006”] as relevant to this case. They were set out in some detail at [62-77] of Mr Maynard-Connor’s opening argument, and Mr Pipe did not disagree in any material respect. In short, what Mr Corran must establish is that:

As to (a), it is clear that Mr Corran is entitled to complain about the way in which Greendealexpress as a subsidiary of Energy Express has been operated: see Re Citybranch Group Ltd, Gross v Rackind [2005] 1 WLR 3505. It is also clear that it is not necessary to show a course of conduct or that it is continuing as at the date of the petition, although the extent to which the conduct is isolated or historic are matters to be taken into account.

As to (b), it must be Mr Corran’s interests as a shareholder or his interests connected with his shareholding which have been unfairly prejudiced. It need not be strictly confined to damage to the value of his shareholding, and need not be shown to have adverse financial consequences upon him: per David Richards J. in Coroin Limited [2012] EWHC 2343 (Ch) at [630].

As to (c) and (d), it is necessary to establish both that the conduct has caused Mr Corran substantial prejudice and that the conduct is, objectively considered, unfair. Conduct can be unfairly prejudicial even though that was not the intention. Conduct can also be prejudicial without being unfair or unfair without being prejudicial.

Further as to (c) and (d), useful guidance is to be found in the analysis of Patten LJ in Grace v Biagioli [2005] EWCA Civ 1222 where he said this:

“61.

From Lord Hoffmann's speech [in O’Neill v Phillips [1999] 1 WLR 1092] one can deduce the following principles:

(1)

The concept of unfairness, although objective in its focus, is not to be considered in a vacuum. An assessment that conduct is unfair has to be made against the legal background of the corporate structure under consideration. This will usually take the form of the articles of association and any collateral agreements between shareholders which identify their rights and obligations as members of the company. Both are subject to established equitable principles which may moderate the exercise of strict legal rights when insistence on the enforcement of such rights would be unconscionable;

(2)

It follows that it will not ordinarily be unfair for the affairs of a company to be conducted in accordance with the provisions of its articles or any other relevant and legally enforceable agreement, unless it would be inequitable for those agreements to be enforced in the particular circumstances under consideration. Unfairness may, to use Lord Hoffmann's words, "consist in a breach of the rules or in using rules in a manner which equity would regard as contrary to good faith": see p.1099A; the conduct need not therefore be unlawful, but it must be inequitable;

(3)

Although it is impossible to provide an exhaustive definition of the circumstances in which the application of equitable principles would render it unjust for a party to insist on his strict legal rights, those principles are to be applied according to settled and established equitable rules and not by reference to some indefinite notion of fairness;

(4)

To be unfair, the conduct complained of need not be such as would have justified the making of a winding-up order on just and equitable grounds as formerly required under s.210 of the Companies Act 1948;

(5)

A useful test is always to ask whether the exercise of the power or rights in question would involve a breach of an agreement or understanding between the parties which it would be unfair to allow a member to ignore. Such agreements do not have to be contractually binding in order to found the equity;

(6)

It is not enough merely to show that the relationship between the parties has irretrievably broken down. There is no right of unilateral withdrawal for a shareholder when trust and confidence between shareholders no longer exist. It is, however, different if that breakdown in relations then causes the majority to exclude the petitioner from the management of the company or otherwise to cause him prejudice in his capacity as a shareholder.”

Mr Maynard-Connor also reminded me that in O’Neill v Phillips Lord Hoffman also said [p.101G] that it was not necessary for any promises made, by words or conduct, to be independently enforceable as a matter of contract.

In this case there has been extensive debate as to whether or not the relationship between Mr Corran and the Butters brothers amounted to a “quasi-partnership”. In that regard I refer to and gratefully adopt the approach of Mann J in Brett v Migration Solutions Holdings Limited [2016] EWHC 523 (Ch) at [193(i)]:

“A lot of the jurisprudence refers to the applicability of the jurisdiction where there is a “quasi-partnership”. A certain amount of effort in this case has gone into establishing whether the facts of this case fall within that description or not. I do not propose to spend much time in considering that particular pigeon-holing exercise because the existence of a “quasi-partnership” is not determinative of the question of whether equitable constraints on the exercise of legal rights apply.”

The reason for this is 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.

One point which arises in this case is the impact of a pre-emption provision in a shareholders agreement or similar on a claim under s.994 CA 2006. This was considered by Hildyard J in In Re LCM Wealth Management Ltd [2013] EWHC 3957 (Ch). He held – see the summary by Robert Hollington QC: Shareholders Rights 8^th (2017) edition at [7-196] - that there was no jurisdiction under s.994 to displace the operation of the terms of pre-emption provisions even where the price payable under them was nominal and it was a quasi-partnership: that was the contract made between the parties which applied upon it being shown that the departing shareholder was a “bad leaver” and there were no grounds for intervention by equity on the basis that the bargain was unconscionable. However, (a) the provisions should be strictly interpreted, and (b) they had to be exercised in good faith and not for unworthy purposes.

Hildyard J held as follows (as relevant to this case):

“45.

In my view, neither equity nor the jurisdiction under section 994 sweeps away contractual arrangements; at most, the exercise of contractual rights is subjected to equitable restraint if it would be unconscionable, or unfairly prejudicial. If the exercise of the legal right would not be unconscionable, the consequences of its exercise must be permitted to follow.

46.

Furthermore, in the particular circumstances of the case, I am not persuaded that there is anything inconsistent between the understandings invoked by Mr Collingwood and the provisions of the contractual documentation: Mr Moxon’s real complaint (so it seems to me) is not so much as to the provisions but as to the harshness of their effect.

…

52.

More particularly, the provisions for removal of a director and the deemed transfer of his shares at a price depending on the circumstances of his removal, do not seem to me to be offensive to the nature of the Company as a small body corporate based on personal relationships, nor indeed inconsistent with the understandings which Mr Moxon asserts. That is especially so where, as in this case, there has been provision made and satisfied for distributions of distributable profit in each year, so that it is not a situation where the deemed transferor loses all the intermediate benefit of his participation.

53.

I have not been persuaded that Mr Moxon was entitled, or even can reasonably have expected to be entitled, to remain in executive office even if in good faith found guilty of gross misconduct; and I am not persuaded either that there was any intention or understanding (whether express or implicit) that the contractually agreed consequences should not follow.

54.

I do not see the need to determine whether or not there was a “quasi-partnership”. The label is apt to be misused, and I doubt it is apposite in this case, given the choice of a body corporate ab initio, the commercial nature of the investments by Mr Cook and Mr Kulesza and the preference shareholders, and the careful, bespoke documentation as to the relevant relationships. But in any event, as indicated above, in my judgment, the provisions I have adumbrated are not inconsistent with partnership, provided they are invoked in good faith (which is expressly required by the Shareholders’ Agreement as previously stated): see Kelly v Denman [unreported 15 May 1986 Ch D, Rimer J].

55.

Put shortly, in my judgment, there is no overriding reason not to give effect to the arrangements, including those for dismissal and removal of a director and the sale of his shares, comprised in the agreements (to the extent valid in law), albeit they should be strictly interpreted, exercised in good faith and not permitted to be used “for unworthy purposes” (on account of the abuse which may be made of them, and of concern of the court to see that powers of expulsion are not used for improper purposes) Blisset v Daniel (1853) 10 Hare, 493.”

Another point which arises in this case is the impact of the “clean hands” principle in relation to misconduct on the part of the petitioner. Hollington (see above) summarises the position as follows:

I also refer to and gratefully adopt what Morgan J said in Interactive Technology Corporation Limited v Ferster [2016] EWHC 2898 (Ch) at [318]:

“It is established that wrongdoing on the part of a petitioner seeking relief under section 994 can be relevant in two ways. The first way is that the petitioner's wrongdoing may make the prejudicial conduct of the respondent not unfair. The second way is that the petitioner's wrongdoing may justify the court in refusing to grant relief to the petitioner or may influence the choice of any relief which is granted. These propositions are established by Re London School of Electronics Ltd [1986] Ch 211 at 222 B-C, Richardson v Blackmore [2006] BCC 276 and Grace v Biagioli [2006] BCC 85.”

As to relief, the court has an extremely discretion under s.996 to do what is fair and equitable in the circumstances, although the remedy should be proportionate to the unfair prejudice found.

It is common ground that the duties imposed by CA 2006 applied to the Butters brothers in their capacities as directors of Greendealexpress and Energy Express.

As pleaded in the Amended Petition at [51], they are duties:

“51.1.To act in accordance with the Companies’ respective Articles (as provided by s.171(a) of the Companies Act 2006 (“the Act”));

51.2.

To exercise their powers for proper purposes (as provided by s.171(b) of the Act);

51.3.

To exercise their powers in good faith to promote the success of the Companies for the benefit of their respective members, including having regard to the likely consequences of any decision in the long term, the need to foster the Companies’ business relationships with suppliers, customers and others and the need to act fairly as between members (as provided by s.172 of the Act);

51.4.

To exercise their independent judgment (as provided by s.173 of the Act);

51.5.

To act with reasonable care and skill (as provided by s.174 of the Act); and

51.6.

To avoid situations in which they had, or could have, a direct or indirect interest that conflicted, or might conflict, with the interests of the Companies (as provided by s.175 of the Act).”

In closing submissions Mr Maynard-Connor referred me to the decision of Mr John Randall QC, sitting as a deputy High Court judge, in HLC Environmental Projects Ltd [2013] EWHC 2876 (Ch) to the effect that whilst the duty under s.172 is a subjective one, nonetheless if there is no evidence of actual consideration of the best interests of the company the test becomes an objective one, namely whether an intelligent and honest director could in all the circumstances have reasonably believed that the transaction was for the benefit of the company: see [91-92], citing earlier authority for these propositions.

The effect of s.11 of the Company Directors Disqualification Act 1986 [“CDDA 1986”] as relevant to this case is that it is an offence for a person to act as director of a company or directly or indirectly to take part in or be concerned in the promotion, formation or management of a company, without the leave of the court, at a time when the person is an undischarged bankrupt.

In his opening submissions Mr Maynard-Connor correctly observed at [80] that the expression 'management' is not defined by CDDA 1986, but that the courts have confirmed that the term refers to 'the central direction’ of a company's affairs and that a distinction should be made the between managing certain aspects of a company's activities, such as production, sales, trading and the like, and the central management of the affairs of the company – see e.g. R v Campbell [1984] BCLC 83 CA. He also correctly observed at [81] that the statutory prohibitions stipulated by s.11 CDDA 1986 do not invalidate the actions of an undischarged bankrupt acting as a director – see s.161 CA 2006, nor do they render unenforceable the actions of the company on grounds of illegality - see Hill v Secretary of State for the Environment, Food and Rural Affairs [2006] 1 BCC 260.

The effect of s.15 CDDA 1986 as relevant to this case is to impose personal responsibility on a person for all the relevant debts of a company if (a) at any time in contravention of section 11 he is involved in the management of the company, or (b) as a person who is a director of a company he acts or is willing to act on instructions given by a person whom he knows at that time to be an undischarged bankrupt. The relevant debts of a company are (a) in relation to a person personally responsible under (a) such debts and other liabilities of the company as are incurred at a time when that person was involved in the management of the company, and (b) in relation to a person personally responsible under (b) such debts and other liabilities of the company as are incurred at a time when that person was acting or was willing to act on instructions given as mentioned in that paragraph. There is a statutory presumption in relation to (b) that if the director has at any time acted on instructions given by a person whom he knew at that time to be an undischarged bankrupt he is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by that person.

The effect of s.307 of the Insolvency Act 1986 as relevant to this case is that the trustee in bankruptcy may by notice in writing claim for the bankrupt's estate any property which has been acquired by the bankrupt since the commencement of the bankruptcy, but not in relation to any property which is acquired by the bankrupt after his discharge, and upon service of that notice the property shall vest in the trustee as part of the bankrupt's estate and his title has relation back to the time at which the property was acquired by the bankrupt.

Given the Butters brothers’ pleaded case, the legal principles regarding misrepresentation, non-disclosure, mistake and illegality are, or may be, in play. At this stage it is unnecessary to do more than refer briefly to some salient points made by the parties.

As regards misrepresentation, non-disclosure and mistake, Mr Maynard-Connor in opening submissions submitted at [83] that:

As regards illegality, Mr Maynard-Connor in opening submissions submitted at [¶82] that (a) the party alleging the illegality of the contract bears the burden of proving that fact; (b) the effects of public policy differ considerably depending upon the circumstances, but following the decision of the Supreme Court in Patel v Mirza [2016] 1 WLR. 399, two questions must now be asked:

A quasi-partnership?

I use this expression as a convenient shorthand for the enquiry in question notwithstanding that, as I have said, it is only a convenient label and does not avoid the need for a proper evaluation of the actual relationship between the parties. This section is of necessity somewhat lengthy since in my assessment it goes to the heart of the case. For convenience I have sub-divided into the following sub-sections.

The initial relationship and the relationship following the 2014 re-organisation

It is clear that from the outset the parties envisaged that their relationship would be governed by the shareholders agreement. This agreement entitled Mr Corran and Mr Gunning to be employed as managers and to be appointed as directors, receiving a salary (and after two years participating in any dividend) being actively involved in the management of the company. Whilst ultimate control would rest with the Butters brothers both because of their (modest) majority shareholding and because of Mark Butters’ position as chairman with the casting vote, the plain intention was that otherwise the relationship should be one of equality. There was a provision as to share disposition which made clear that in all, or at least the majority, of circumstances anyone departing the company within 2 years would receive nothing other than repayment of their loan, whereas after 2 years they would be entitled to the fair value of their shareholding if the remaining shareholders chose to exercise their option to acquire it failing which they would be free to sell the shareholding on the open market. There was the express obligation on all parties in clause 14(b) to give effect to the spirit and intent of the shareholders agreement which is akin, as the heading of the clause indicated, to an obligation of good faith. It was clear however that it was not a partnership in any formal sense, even though the parties regarded themselves as partners in an informal sense, as indeed Mark Butters described them in a draft email he was proposing to send to Mr Gunning in August 2014 [TB14/70].

There is no evidence as to any specific agreement or understanding in relation to the operation of the company outside of the shareholders agreement. There was no pre-existing relationship at all between the four parties let alone one which involved mutual trust or confidence as between them. I have no doubt that the four parties would, like any other people going into business together, have hoped that the business would be a successful one and that the relationship between them would be a good one. However, it is also clear that the Butters brothers wanted, and Mr Corran and Mr Gunning accepted, that they should have ultimate control of the company, with the consequence that if push came to shove the Butters brothers would be able to exclude the others from the company within the first two years and paying no more than the outstanding loan balance as the price. Thus to that extent Mr Corran and Mr Gunning were taking a calculated risk that the Butters brothers would want to carry on in business with them after the 2 year initial period. Mr Gunning accepted in cross-examination [TS3/129] they were aware that the shareholders agreement was “slightly more in the Butters brothers’ favour” – although in fact it was rather more than “slightly” in their favour - but they were “okay with it”. In my view, the terms of the shareholders agreement reflected the economic reality, which was that in order to enter the Green Deal provider market Mr Corran and Mr Gunning needed the Butters brothers more than the Butters brothers needed them.

Nonetheless I accept that given the express terms of the agreement, including clause 14(b), this was one of those relationships where “equitable considerations [may] make it unfair for those conducting the affairs of the company to rely on their strict legal powers … in using the rules in a manner which equity would regard as contrary to good faith” (to apply the words used by Lord Hoffman in O’Neill v Phillips at p.1099A). To that extent it was a quasi-partnership from the outset.

I also accept that prior to the 2014 re-organisation and following Mr Gunning’s departure the remaining parties are in my view to be taken to have agreed that the shareholders agreement remained in place save that: (a) even though Mr Corran had not been formally appointed a director he was entitled to be involved in the management of the company as someone who was in all but name a director; (b) due to the astounding success of the company the “no dividend” rule had been scrapped, so that there was no bar to the payment of further dividend in such circumstances; (c) in the absence of a decision to make the parties formal employees the relationship between the parties and the company under which the parties were entitled to receive £5,000 pcm was a contract for the provision of services rather than a contact of employment.

I also accept that since May 2013 a relationship of trust and confidence had developed between Mr Corran and the Butters brothers. The extent of this relationship of trust and confidence should not however be over-stated. No-one could sensibly have that believed that this developing relationship obliged them to subordinate their rights under the shareholders agreement or their own commercial interests to the interests of the other parties. That this was so was amply demonstrated by the treatment of Mr Gunning, where the terms of the shareholders agreement were deployed against him to ensure that he departed and transferred his shares for what was in reality a very modest amount. I am satisfied that Mr Corran knew and accepted that, going forwards, he remained a minority shareholder who was vulnerable, in the absence of a formal shareholders agreement, to being outvoted and ultimately excluded by the Butters brothers if in their view the circumstances justified it.

Importantly, as Mr Pipe submitted, the terms of the shareholders agreement and the mutual understanding of the parties involved all four parties being required to perform their obligations as set out in the shareholders agreement as it had developed in practice. Thus it was not open to Mr Corran simply to decide that he did not want to undertake the duties of operational director / manager or to insist on remaining in the business but undertaking a more limited role. Likewise it was not for Mr Corran to decide that he did not want to be involved in the central management of the company by attending and participating in the weekly Monday meetings. He was obliged to do so unless or until he was no longer a party to the shareholders agreement.

As I have said neither party contended that the shareholders agreement continued to govern the relationship between the parties post re-organisation. That is plainly correct in my view because that agreement could not have been intended, in the absence of express agreement or modification, to apply to the new relationship under which there were 3 remaining shareholders operating in a different parent / subsidiary company structure. Whilst I do not accept Mr Corran’s evidence that there was an express oral agreement to the effect that he would continue to work as a manager and to participate in the conduct, affairs and business of Energy Express and Greendealexpress under the re-organised structure, since there is no evidence of any discussion or agreement to this effect, I do accept – as indeed the Butters brothers agree – that it was the mutual understanding that the relationship should continue in the same way as it had before save for such differences as were necessitated by the new corporate structure. It follows, I am satisfied, that there was a common understanding that Mr Corran would continue to operate as a director in all but name and to participate in the management of the companies.

I am also satisfied that there was an implicit common understanding that Mr Corran was entitled to receive the same monthly payments as the Butters brothers for so long as he provided his services to the companies and unless and until either he resigned or they were entitled to take a legitimate and justified decision to terminate that continuing relationship as a result of conduct on his part which justified that termination.

The arguments based on misrepresentation; non-disclosure; mistake; illegality

The Butters brothers have pleaded that in 2013 Mr Corran implicitly represented that he was not an undischarged bankrupt and that they relied on this misrepresentation in bringing him into Greendealexpress. They allege that it would have been illegal for Greendealexpress to have been operated as a quasi-partnership given Mr Corran’s status as an undischarged bankrupt and the restriction that imposed on him. They contend that he was under a duty of good faith to disclose his status as an undischarged bankrupt at the time and he was in breach of that duty. They contend that any quasi-partnership is invalidated as a result of unilateral or mutual mistake that he was not an undischarged bankrupt. They contend that it would be inequitable to grant Mr Corran belief based upon a quasi-partnership relationship in such circumstances.

All of these arguments have to be considered in the context that I am quite satisfied that there is no question of Mr Corran being aware prior to September 2014 that he was an undischarged bankrupt. Despite strenuous cross-examination by Mr Pipe as to what Mr Corran ought to have known about his obligations and restrictions as a bankrupt the fact is, in my judgment, that he did not actually know that his discharge had been suspended precisely because he had received no communication from the OR and had made no attempt to contact the OR. Nor do I accept that he recklessly turned a deliberate blind eye to what he suspected may have been the position. As I have said I am satisfied that he probably did make some enquiry before becoming involved in Debt in Control and was informed that he was not recorded as a bankrupt. It may be that some other people in his position would have undertaken a search on the Insolvency Service website or contacted the OR and would have found out the true position. However, I am satisfied that he did not and that he carried on his personal and business life, including becoming a shareholder and director in Debt in Control and becoming a shareholder in and agreeing to become a director of Greendealexpress, in the confident belief that he had obtained his release from bankruptcy by passage of time and thus had nothing more to worry about. Thus, I am satisfied that he was not in any way guilty of a deliberate, reckless or even negligent non-disclosure at the time he entered into the shareholders agreement.

In any event, I am far from convinced that the circumstances of his entry into the shareholders agreement were such as to impose on him an obligation of disclosure, equivalent to that imposed on an incoming partner. Although Mr Pipe submitted that since Mr Corran was asserting that there was a quasi-partnership with a relationship of mutual trust and confidence it followed that there must have been a duty to disclose, in my view that wrongly conflates two separate issues. The first is whether in the context of a s.994 unfair prejudice claim the law imposes an obligation not to act in a manner contrary to good faith. The second is whether in the context of entering into a commercial relationship such as the shareholders agreement there is an antecedent obligation to make disclosure even where no specific question is asked. I do not accept that a positive answer to the former justifies a positive answer to the latter.

Mr Pipe relied upon the decision of the Court of Appeal in Conlon v Simms [2006] EWCA Civ 1749. The law is discussed in Chitty on Contracts 32^nd edition at 7-178 and 7-179, where – as relevant - it is said as follows:

The decision cited from in 7-179 is that of Briggs J in Ross River Ltd v Cambridge City FC [2007] EWHC 2115 (Ch), which was considered and applied in the other case referred to in the footnote, Banwaitt v Dewji [2013] EWHC (QB), where Jack J said this at [72]:

“[Counsel for the claimant] submitted that the relationship between Dr Dewji and Mr Banwaitt was such that Dr Dewji owed Mr Banwaitt a duty of disclosure like that owed in a contract uberrimae fidei. He referred me to Chitty on Contracts, 31st edition, paragraphs 6-170,171 and to the judgment of Briggs J in Ross River Ltd v Cambridge City Football Club Ltd [2008] 1 All E R 1004 commencing at paragraphs 196 and 197. [Counsel for the defendant] did not accept that a duty of disclosure arose in the facts here, but neither did he dispute it. I accept that a duty of disclosure arose because Dr Dewji was the orchestrator of the venture, was inviting Mr Banwaitt to join and persuading him to do so, and he knew that Mr Banwaitt was totally reliant on him ....”

Whilst every case is fact specific, that case is a good illustration of the type of relationship in which a duty to disclose may arise, whereas in my judgment the facts of this case do not justify the implication of such a duty.

Moreover, and equally fundamentally, I am not satisfied that this is a fruitful enquiry in any event. It is common ground that the shareholders agreement in relation to Greendealexpress was superseded by the 2014 re-organisation. It follows that there is no basis for seeking some finding that the shareholders agreement may now be avoided for initial non-disclosure. In any event Mr Corran is not relying upon the shareholders agreement in order to make good his claim. He is relying on the actual relationship between the parties, including the shareholders agreement as part of the background, in the context of a s.994 unfair prejudice claim so as to establish that the law imposes an obligation not to act in a manner contrary to good faith. It would be irrelevant to his strict legal rights to argue that if he had made disclosure of his bankruptcy the Butters brothers would not – as I accept – have entered into any business relationship with him involving him becoming a shareholder, director or senior manager. It is, I accept, relevant to the question as to whether or not relief should be given by reference to the application of “clean hands” considerations. However, it is wrong to over-complicate this question by seeking to elevate the alleged non-disclosure into a separate legal defence.

Similar considerations apply to the defence founded on implied misrepresentation. There is no allegation of express misrepresentation. It is clear based on my findings that there can be no question of a fraudulent or negligent misrepresentation. I am far from convinced that by indicating a willingness to enter into a relationship such as the shareholders agreement Mr Corran made an implied representation that he was able to undertake the obligations expected of him under that agreement without breach of the criminal law. That would be effectively to impose a strict duty of disclosure in relation to questions which are not asked or in relation to statements which were not made in relation to matters of which Mr Corran was not aware. Finally, in order to succeed on this argument the Butters brothers would also have needed to overcome the “no representation” acknowledgement in clause 14(d) of the shareholders agreement. If I had needed to decide I would not have been satisfied that this defence had been made out. Again, however, it seems to me to be strictly irrelevant whether or not this does amount to a defence at law, as opposed to grounds for defending the petition on “clean hands” considerations.

As regards mistake or illegality, I am also satisfied that the case founded on these arguments cannot succeed either. I do not regard this as a case where the whole bargain is invalidated due to a fundamental mistake as to Mr Corran’s status as an undischarged bankrupt or where the fact that Mr Corran’s appointment as director or involvement in the central management of the company would involve him in the commission of an offence means that the entire bargain is void for illegality. It is trite law that findings that a contract is void for mistake or for illegality are not lightly made. The following points are material in my view:

Moreover, and for the same reasons as before, I am not entirely convinced as to the legal consequences of such an argument succeeding other than by reference to the “clean hands” principle.

The Butters brothers have advanced similar arguments in relation to Mr Corran’s alleged failure to notify them of his bankruptcy prior to the 2014 re-organisation. They have also advanced a further specific allegation to the effect that, had Mr Corran notified them of his bankruptcy at that time, they would not have entered into the 2014 re-organisation and instead would have invoked the compulsory share transfer provision in clause 8(d)(i) of the shareholders agreement on the basis of his bankruptcy. Before I address these arguments it is important that I determine the crucial question as to whether Mr Corran notified the Butters brothers of his bankruptcy in September 2014 as he contends or in November 2014 as they contend.

Did Mr Corran notify the Butters brothers of his bankruptcy in September or in November 2014?

Having considered all of the evidence and the competing submissions I am satisfied for the following reasons that Mr Corran did fail to notify them before the 23 September 2014 when the re-organisation completed and that he did not notify them until sometime in early November 2014.

I accept that there is evidence, some apparently strong, in support of Mr Corran’s case. Thus I accept Mrs McDonnell’s evidence that he had a lengthy discussion with her on 17 September 2014 in which she repeatedly urged him to tell the Butters brothers and that he told her that that he would do so the next day after he had spoken to the OR. However this does not prove that he did in fact tell them at that time.

I also accept that when in November 2014 Mr Corran was asked by Rollits to provide an explanation and he said that he had become aware of his bankruptcy in September 2014 and that there was no response from Rollits asking him why he had not told the Butters brothers until November. I accept that this provides contemporaneous support for Mr Corran’s case. However, after giving the matter careful consideration, I accept the Butters brothers’ explanation that neither the relevant part of the letter from Rollits nor this part of Mr Corran’s response was specifically drawn to their attention in the emails from Rollits enclosing the letter and the response and that they did not otherwise appreciate the significance of that statement, so that their failure to challenge this at the time does not lead to the conclusion that it was because they knew full well that he had in fact already told them in September. It is worth noting that: (a) what they and Rollits were clearly focussing on at the time was ensuring that Mr Corran obtain his discharge or annulment as soon as possible and protecting the Butters brothers in the meantime, whereas the question as to whether the Butters brothers had a claim or remedy against Mr Corran was left on the back burner; (b) what Mr Corran said in his reply may not have stood out as much as it would have done had he also said in his reply that he had told Mark Butters about this bankruptcy in September 2014 as well - a failure to respond to that statement at that time would have been more significant in my view; (c) there is no evidence that this part of his letter was ever specifically drawn to the Butters brothers’ attention or discussed by them with Rollits.

Although in closing submissions Mr Maynard-Connor came close to submitting that this may have been a deliberate ploy, as Mr Pipe submitted that would have required Machiavellian foresight on the part of Rollits as well as the Butters brothers, and it is far more likely that there would have been an file note or email to the effect that so long as the Butters brothers were clear that they had not been made aware of his bankruptcy until November 2014 there was no risk to themselves of being held criminally or civilly liable before that date. Instead, it can be seen from the file note made by Rollits at the meeting on 13 February 2015 that they were advising the Butters brothers - in relation to their risk of personal liability for Greendealexpress’ debts - that they should have a defence on the basis that they had taken steps to make sure that Mr Corran had no involvement in the management or running of the company within two weeks of finding out that he was an undischarged bankrupt. This advice makes no sense unless Rollits believed at the time that this was the case.

It also appears to be the case that Mr Corran told Mr Gunning and Mr Simms in September about the bankruptcy. That is not challenged by the Butters brothers. It is not surprising, given what I am satisfied was a close relationship between Mr Corran and Mr Gunning and Mr Simms respectively, that he did tell them at the time. That does not however in my view lead to the conclusion that he would also have told the Butters brothers. I am satisfied that the relationship between Mr Corran and the Butters brothers was more of a business relationship.

Mr Corran claims, supported by Mr Simms, that it was discussed on a train journey down to London on 25 September 2014. I am unable to place much weight on the uncorroborated evidence of either in this respect as in others and I prefer the evidence of the Butters brothers that Mr Corran’s bankruptcy was simply not discussed during this journey. Furthermore, there is no independent evidence to corroborate the evidence of Mr Corran that his bankruptcy was discussed during a business trip to China in October 2014 and again I prefer the Butters brothers evidence on this point particularly since – as I observed above – his evidence about this is inconsistent with the fact that a settlement offer had already been made.

I also accept that in his later email of 20 March 2015 Mr Corran asserted that he had told the Butters brothers of his bankruptcy on 23 September 2014. That also has weight, although given that by this time the relationship between Mr Corran and the Butters brothers had already come to an end in acrimonious circumstances I do not consider that I can treat this as the equivalent of a reliable contemporaneous document.

Whilst I accept that some at least of these points have strength and that together they have a cumulative weight, in my view that cumulative weight is strongly outweighed by the force of the following points which, in my view, are strongly conclusive against Mr Corran.

First, it is plain from the contemporaneous correspondence that when Mark Butters did tell Rollits about Mr Corran’s bankruptcy in November 2014 he clearly told them in his email that he had only recently found this out. There would have been no reason at all for Mark Butters to tell a lie to his solicitors if in fact he had known about it for around 2 months. This is a significant counter-balance to what Mr Corran wrote in his email of 24 November 2014.

Second, when Rollits wrote to Mr Corran in November 2014 they said that the Butters brothers had only recently become aware of his bankruptcy and Mr Corran did not challenge that assertion in his reply. He claimed in cross-examination [TS2/64] that he did not do so because he was “embarrassed” and “would have done anything to maintain the relationship”, but that is in my view an inadequate explanation if, on his case, he knew that what was being said was seriously misleading. This is in my view somewhat of a stronger point against Mr Corran than is the Butters brothers’ failure to challenge his email of 24 November 2014, because he accepts that he say and appreciated the inconsistency between his recollection and the statement made by Rollits.

Mr Corran’s advisers were obviously alert to the fact that these two documents are powerful contemporaneous documents which strongly support the Butters brothers’ case. Mindful of this there was an attempt to suggest in cross-examination and in submissions that they were the beginning of an elaborate paper trail to disguise the fact that the Butters brothers already knew of Mr Corran’s bankruptcy before the 2014 re-organisation. However if this was the case it involved the Butters brothers misleading their own solicitors as well as everyone else. Since Mark Butters began his correspondence with Rollits by telling them that he had only recently found out about Mr Corran’s bankruptcy the logical inference, if this was the first document in the false paper trial, is that he had already become aware of the risk of personal liability and had already decided to lay the false paper trail before even asking his own solicitors for advice – a scenario which I reject as wholly implausible.

The only alternative explanation is that Rollits were complicit in creating a false paper trail, not just externally but in solicitor – client correspondence to guard against the eventuality that it would out into the open. This would be a most serious allegation, which is entirely unsupported by evidence and, indeed, is inconsistent with the file note of 13 February 2015 to which I refer above. Not surprisingly in the circumstances, it is not a case which has been advanced on behalf of Mr Corran.

Third, and most significant of all in my judgment by reference to the inherent probabilities, it is inconceivable in my view that if Mark Butters had been told by Mr Corran of his bankruptcy in September 2014, before the 2014 re-organisation had completed, he would not have immediately informed Simon Butters and they would not have immediately consulted Rollits for advice before proceeding with the re-organisation. It is plain from how they reacted in November 2014 when they did consult Rollits that they were genuinely concerned about the implications of this discovery upon their position. There is no conceivable reason to think that they would simply have waited for two months before asking for advice if they had been told in September 2014. I have already referred above to the evidence that Simon Butters in particular was not completely enamoured with Mr Corran having an equal one third interest in Energy Express. It is extremely unlikely that if Simon Butters had been informed within a couple of weeks of this conversation that Mr Corran was an undischarged bankrupt he would not have asked for advice from Rollits about using this to his advantage as regards the shareholding under the proposed re-organisation. It is also noteworthy that there was a telephone conference call involving Mr Corran, the Butters brothers and Rollits on 23 September [TB13/42] at which there was a discussion about matters relevant to the imminent re-organisation where nothing was said about Mr Corran having recently discovered that he was still an undischarged bankrupt. It seems to me to be inconceivable that the potential impact of this recent discovery upon the re-organisation would not have been raised at that meeting had Mr Corran made Mark Butters aware of it only a matter of days previously. No good reason has been advanced as to why the Butters brothers should have taken the view that they did not even need to raise this with their own solicitors at the time.

Fourth, when in December 2014, following the decision not to proceed with the Haus online bathroom sales project, Mark Butters presented Mr Corran with the draft deed produced by Rollits confirming that the loan from Mark Butters to Mr Corran was being rescinded due to his failure to tell them about the bankruptcy at the time, Mr Corran was willing to sign the deed even though – on his case – he would have known it was not true at the time he signed it. Mr Corran has sought to suggest that he was misled by Mark Butters into signing it by his assurance that it was a mere formality “to dot the i’s and cross the t’s” as he put it. In my judgment this argument is not credible. Why should Mark Butters have asked Rollits to produce a document for Mr Corran to sign which he knew, and which he knew Mr Corran would know, was manifestly untrue? His motivation in doing so has never been explained other than as the continuation of the Machiavellian plot to create a false paper-trail, a suggestion which I reject as far-fetched and implausible. It also fails to explain why Mr Corran should have signed something which he knew was plainly untrue even if, on his case, he trusted Mark Butters at that time.

This was one of a number of occasions where his explanation for doing what he was asked to by Mark Butters was that he trusted him “like he was my brother”. I am prepared to accept that they had developed a good close working relationship by this time but I am unable to accept that the level of trust and confidence between the two was as great as Mr Corran claimed; in my view this was another example of Mr Corran exaggerating to explain conduct which otherwise was inexplicable. In my view the simpler explanation, which is that the document was produced and signed by Mr Corran because it reflected the true position, is to be preferred.

The cumulative impact of these considerations satisfies me on the balance of probabilities that Mr Corran did not inform the Butters brothers of his bankruptcy until early November 2014.

For completeness I should record that there was also some fierce debate about the loan application made by Haus (referred to above). Having heard the evidence I am satisfied that neither Mr Corran nor the Butters brothers signed the loan application in the conscious knowledge that it contained untrue statements, either in relation to Mr Corran’s bankruptcy or in relation to Simon Butters’ role as a director and Mark Butters’ role as a company secretary of two company which had been wound up. I am satisfied that the details were completed without their input and at a time when they were all busy on other matters. I am satisfied that they signed them without reading them as carefully as they ought to have done. I am not satisfied that any of them would consciously have risked the loan being made under a false declaration and then being rescinded if the falsity was discovered let alone risked committing a criminal offence of obtaining a pecuniary advantage by deception. There is no reason to think or evidence to suggest that Mr Corran was any more involved in the preparation of the detail of the loan application than was Mark Butters.

Also out of completeness I should record that I reach the same conclusions in relation to: (a) the application for a consumer credit licence in relation to Debt in Control which made no reference to his bankruptcy; (b) the Butters brothers’ application for FCA authorisation in relation to Intenco, which made no reference either to Mr Corran or to Simon Butters’ directorship of the two companies which had become insolvent. As regards the former once the original was produced it became clear both that Mr Corran had not completed the application and that there was no need for him to declare his bankruptcy if – as I accept he believed – he was not bankrupt at the time. As regards the latter it is clear that the completion of the application form, which was a lengthy and detailed process, involved a number of people including the Butters brothers, Mr Corran, Mr Simms, Mrs Scaife and an employee known as Nick Haskins, and it is simply not possible to state with confidence who if anyone completed the relevant parts of the form and on the basis of what information and knowledge. All that I can safely conclude based on Mrs Scaife’s evidence [TS8/170] is that Mr Corran was initially included as part of the application and then his details were removed. Insofar as it matters I doubt that Mr Simms would have removed the information (if that is what he did, according to Mrs Scaife) without reference to Mr Corran or to the Butters brothers or without instructions from one or the other, or that either Mr Corran alone or the Butters brothers would have instructed him to remove Mr Corran’s details without the knowledge and consent of the other. Therefore in the end it seems to me that this point is of no real relevance to the issues in this case, save insofar as it shows that at this stage all were willing to proceed together with proposed new joint ventures – as with the solar JVs – on the basis that Mr Corran was kept out of the way whilst still as undischarged bankrupt.

I am satisfied that it is more likely than not that Mr Corran decided not to tell the Butters brothers initially because he believed that he could resolve the problem speedily and without involving them and, hence, without prejudicing his position in relation to the companies, the Butters brothers and the new ventures, a decision consistent with my view of him as an opportunist character. By September 2014 he was aware of the terms of the shareholders agreement in relation to acquiring shares for effectively nil consideration, because of the discussions around doing that very thing in relation to Mr Gunning, and I am satisfied that this was one reason for not immediately informing the Butters brothers.

Although I accept that there is no obvious trigger event which explains why he chose to inform the Butters brothers in November 2014, there are a number of reasons why he may have decided to do so at that point. The first is that he needed to explain why he was unable to use the sale proceeds of his shareholding in Debt in Control to fund his investment into Haus, which itself explains why he had to borrow the money from Mark Butters in November. The second is that by November 2014 the particular danger that the Butters brothers would exercise the compulsory share acquisition clause had passed since the shareholding had been transferred to Energy Express and there was no equivalent shareholders agreement in place in relation to that shareholding. The third is that by November 2014 he knew that he would be unable to resolve matters without making a formal application to the court in order to obtain his discharge and he decided that it was too risky to delay any further in informing the Butters brothers. This is consistent with his giving the Hall as his address in his application to the court, which is the first time he had done so in his dealings with the OR. In this respect it is entirely plausible that he had to tell the Butters brothers at that time because, as Mr Corran said in cross-examination when asked about this [TS4/142-3], he had to give the Hall as his address in the application since correspondence sent to the old Hull address he had previously given had been returned to the OR marked not delivered. It is of note that at that time he was asking the OR to send him a copy of the file relating to him but they were declining to do by email or to the previous Hull address to which he had already told them paper correspondence should not be sent. It may also be that this is why he chose to answer Rollits question as to when he became aware of his continued bankruptcy accurately, by saying that it was in September 2014. By this stage he may have realised that he could not risk telling an outright lie when if matters proceeded further and the Butters brothers saw the court proceedings that lie might be discovered.

Whatever the explanation for his conduct, and I accept that all of these reasons may be subject to some legitimate criticism, I am satisfied that he did not in fact inform the Butters brothers until November 2014 and that once the Butters brothers became aware of the true position they quickly realised the position was potentially serious, sought legal advice, and took at least some steps to protect themselves against the potential risks of continuing to allow Mr Corran to be involved in the management of the companies whilst allowing Mr Corran an opportunity to resolve matters in the meantime.

The implications of my finding that Mr Corran did not inform the Butters brothers until November 2014 of his bankruptcy

It is evident that the Butters brothers’ case on the merits is stronger that it would have been, given that I have found that Mr Corran knew of his bankruptcy but chose not to disclose that fact to the Butters brothers before entering into the 2014 re-organisation. However the arguments founded on misrepresentation, non-disclosure, mistake and illegality in relation to the 2014 re-organisation has a fundamental difficulty in my view, which is as follows.

On the case advanced both by Mr Corran and the Butters brothers there was no separate shareholders agreement applicable to the new relationship. The Butters brothers chose to enter into this new relationship without the benefit of a formal shareholders agreement and, thus, without the legal safeguards which no doubt would have been included had they taken up Rollits’ proposals to undertake that step. There is no contractual relationship akin to a shareholders agreement which Mr Corran is seeking to enforce in this case which could be the subject of a formal legal defence of misrepresentation, non-disclosure, mistake and/or illegality. Mr Corran is simply advancing a case that the relationship between himself and the Butters brothers in relation to Energy Express was a “quasi-partnership” relationship which grounds his claim for relief under s.994. There is no case pleaded or advanced by the Butters brothers to the effect that the allotment and issue of shares in Energy Express and/or the transfer of shares in Greendealexpress to Energy Express should be the subject of formal legal relief arising from findings of misrepresentation, non-disclosure, mistake and/or illegality.

It follows in my view that these arguments are relevant only to the application of the defence based on the “cleans hands” principle.

In case however I have misunderstood the argument, I also consider that even if these legal principles were strictly relevant they would still fail for essentially the same reasons as given above. There is no case pleaded on express misrepresentation and I am satisfied that there was no duty to disclose or implied representation. (I accept that the relationship between the three men was closer by September 2014 than it was in May 2013, but it was still not a relationship so akin to partnership where in my judgment Mr Corran was obliged to disclose his bankruptcy.) Essentially the same objections in relation to both illegality and mistake apply.

I do accept however that it is important to consider what would have happened had Mr Corran informed the Butters brothers on 18 September 2014 as to the position, as he clearly ought to have done. This is relevant because it is pleaded by the Butters brothers at [47A(4)] of the APOD that if Mr Corran had notified them of his bankruptcy at the time they would not have entered into the 2014 re-organisation and instead would have “demanded and caused him to transfer his shares in Greendealexpress to them pursuant to clause 8 of the shareholders agreement”. Thus it is said that they could and would have obtained his shareholding in Greendealexpress for nil consideration.

I begin by saying that I am satisfied that in such a scenario the Butters brothers would clearly have asked Rollits for advice as to their options, as they did in November 2014. The first option, which is that contended for by the Butters brothers, would have been to sever the relationship forthwith, which could have been achieved by activating the share purchase provision in clause 8 of the shareholders agreement which would have led to Mr Corran’s complete exclusion from the company as shareholder with no financial entitlement on his part. It would also in my view have entitled them to terminate his position as manager as well, since the obligations owed by the Butters brothers to Mr Corran – including therefore any obligation to ensure that he continued to be employed by the company as a manager – would come to an end on his ceasing to be a shareholder (clause 10).

The circumstances capable of triggering the pre-emption provisions of clause 8 were to be found in the definition of “sale eventuality”, the drafting of which, in some respects, left something to be desired. Although “death”, “bankruptcy” and “the wish to effect a voluntary sale” are clear enough, there may be scope for argument as to what is meant by “vacating employment with the Company for whatever reason”. Is it limited to cases where it is the outgoing party who voluntarily vacates his employment, or does it include cases where his employment is vacated by the remaining parties? If so, does it extend to all such cases, including those where the dismissal in fact transpires to be wrongful as well as to those where it is justified?

Happily, there is no need for me to spend too long on that question. That is because on the hypothesis I am now considering it is plain that Mr Corran’s bankruptcy would trigger the clause. Whilst I can see that an enterprising lawyer might attempt to argue that “bankruptcy” in this context means a supervening bankruptcy occurring after the date of entry into the shareholders agreement I cannot see any realistic basis for such a restricted interpretation.

For completeness I should consider the argument based on vacating employment with the Company for whatever reason. Whilst from a grammatical perspective it might make more sense to talk of an employee vacating his employment as opposed to his employment being “vacated” by his employer, again I cannot see any realistic basis for such a restricted interpretation. As to the possible difference between an unfair and a fair termination, although there is an initial attraction in limiting the scope to terminations which are fair, on closer analysis there is no basis for adopting such a restricted interpretation. The words “for whatever reason” make clear that it is the “vacation” of the employment as opposed to the reason behind it which is what triggers the obligation. The key distinction is here is between the consequences of a sale eventuality within the initial 2 year period (where nothing beyond any outstanding loan balance is payable by the other parties) and a sale outside the initial 2 year period (where the remaining parties must pay what is effectively a fair value).

In Holt v Faulks [2001] B.C.C. 50 Kim Lewison QC (as he then was, sitting as a deputy judge of the Chancery Division) held that a clause which provided for a compulsory transfer of shares in certain circumstances, including if any member who was a director ceased to be a director for any reason whatsoever or if any member employed by the company ceased to be so employed for any reason whatsoever, covered both lawful and unlawful termination of the appointment of an executive director. He observed that a similar argument received “short shrift” in Re XYZ Ltd (1986) 2 BCC 99 in which Hoffmann J described a similar submission as not seriously arguable. He held that the words ‘for whatever reason’ cover both lawful and unlawful termination of the employment of an executive director.

Furthermore, as Hildyard J in the LCM Wealth Management Ltd case made clear, the apparent harshness of such a clause is tempered – at least in the context of s.994 cases - by the requirement that such a provision be exercised in good faith and not for unworthy purposes.

Although Mr Corran might also have sought to argue that since he was never formally employed this part of the clause had no application to him anyway, in my judgment it could not sensibly have been argued that this part of the clause should have no application just because the parties had chosen to structure the relationship as a contract for services as opposed to a contract for service.

Returning to the options available to the Butters brothers at this stage in this hypothetical scenario, the second option would have been to defer an immediate decision, by putting the 2014 re-organisation on hold to allow Mr Corran the opportunity to resolve the problem, as he would have said – as he in fact said in November 2014 - he would be able to do in a short time. The third option would have been to complete the 2014 re-organisation either unchanged or on the basis of a formal shareholders agreement which would have made clear that Mr Corran had no right to be involved in the management of the companies whilst he was a bankrupt and was liable to have his shareholding compulsorily acquired at nil value if he was unable to obtain his discharge or annulment within a specified period.

In my judgment the overwhelming likelihood is that in September 2014 the Butters brothers would have chosen the second option. That is consistent with what they effectively did in November 2014 when Mr Corran did disclose his bankruptcy; they allowed him time to resolve the problem. At that time in September 2014 they would not have wanted to invoke option one forthwith, and thus lose Mr Corran both in relation to the existing business and to the further business opportunities which they were discussing, if the problem was indeed a short term problem which could be resolved without delay and without doing long term harm to the business. Equally however they would not have wanted to commit to a new relationship with an undischarged bankrupt in circumstances where there were potentially personal and reputational risks to themselves and where the OR had the right to claim Mr Corran’s Energy Express shareholding as after-acquired property.

It was said by Mr Corran that the Butters brothers would still have proceeded with the 2014 re-organisation because in fact they were prepared to go into the solar JVs with him in 2015 knowing he was still an undischarged bankrupt. The difficulty with that argument is that whilst it is true that the Butters brothers were prepared to consider entering into the solar JVs on that basis they never in fact committed to it prior to the parting of the ways with Mr Corran. Indeed I am satisfied that it was his continued status as an undischarged bankrupt which eventually led to their deciding not to proceed with that new venture with him. Considering something is different to actually doing it.

It was also said by Mr Corran that they would have gone ahead because they were desperate to move the £5M sitting in Greendealexpress’ bank account into Energy Express. Whilst I recognise the commercial desire to achieve this transfer I am unconvinced they would have let this override their natural caution but, even if I am wrong about that, I am quite satisfied that it would have been on terms which would have given the same rights as under the shareholders agreement in the event that Mr Corran was unable to obtain his discharge or annulment within a short time frame.

The next question therefore is whether or not the Butters brothers would have elected to invoke option one in February 2015, once it had become apparent that Mr Corran had been unable to obtain a swift discharge or annulment, on the basis that the existing shareholders agreement continued to apply to the continuing relationship. In my judgment the overwhelming likelihood is that they would have done. It was his failure to obtain his discharge or annulment after 3 months which is what prompted the Butters brothers into taking the action which they did, hence it is nothing to the point in my judgment that they did not do so three months earlier. If they were prepared in fact as at February 2015 to terminate his status as manager and to terminate his right to continued payment it is difficult to conceive of any reason why they would not also have been prepared to invoke the share transfer clause at no expense to them and, thereby, free themselves completely of any obligations to Mr Corran going forwards. Although Mr Corran might object that they did not seek to do so in February 2015 the short answer to that is because by that stage the shareholders agreement no longer governed the relationship between the three as shareholders in Energy Express, as appears was recognised by Rollits – see the file note of 13 February 2015 referred to above where Rollits “confirmed that they could not get Colm’s shares back off him if he was dismissed”.

It follows that the Butters brothers can successfully argue that but for Mr Corran’s failure to notify them of his bankruptcy in September 2014, they could and would have invoked clause 8 of the shareholders agreement and obtained his shareholding in Greendealexpress for nil consideration. They could also in such circumstances legitimately have terminated his position as manager on that basis alone, as I have already noted. I shall defer to §12 below the consequences of this conclusion, including consideration of the question, following the approach of Hildyard J in the LCM Wealth Management case, as to whether or not the Butters brothers would have been acting in bad faith or for unworthy motives in invoking clause 8 in such circumstances.

Wrongful exclusion?

I have set out in some detail in §3 above the factual circumstances leading up to and concerning the termination of Mr Corran’s position as manager in February 2015.

I am satisfied that the Butters brothers were fully entitled to terminate Mr Corran’s position as operations director / manager in February 2015. It is plain from the evidence and, indeed, it is Mr Corran’s positive case that the role which it had been agreed he should perform and which he did perform was a central management role so far as both Energy Express and Greendealexpress were concerned. If he had been allowed to continue to perform that central management role he would have been continuing to commit a criminal offence, the Butters brothers would have been at risk of committing an accessory criminal liability and both he and the Butters brothers would have been imposed with personal liability for the debts of the company from that date onwards, regardless of whether they were already personally liable for debts incurred before that date. To argue that the Butters brothers could realistically or properly have done anything other than to exclude him from that central management role flies in the face of reality in my judgment.

Again in my view it is nothing to the point that the Butters brothers were undoubtedly prepared to allow him to continue to undertake his company management role from becoming aware of his status as an undischarged bankrupt in November 2014 down to 16 February 2015, since: (a) I accept their evidence that over this period they were acting reasonably, at least as far as Mr Corran was concerned, in giving him an opportunity to obtain his discharge from bankruptcy; (b) there is no basis for contending that, having given him this period of grace, they were somehow estopped from adopting a different approach post 4 February 2015 once it had become clear that his previous confidence in obtaining a swift discharge had been completely misplaced. It is clear that by February 2015 they had lost patience with Mr Corran and, reasonably in the circumstances, were no longer prepared to give him further time and further opportunity to resolve these problems which were entirely of his own making, in circumstances where he had failed to come clean about his bankruptcy in September 2014 at a critical point in the relationship between the three of them and in the affairs of the companies.

It was suggested on Mr Corran’s behalf that there was no justification for his being completely excluded on a permanent basis from any role whatsoever in the companies. It was suggested that he could have been retained in a lesser role of manager, whilst relinquishing responsibility for his central management role, until such time as his bankruptcy was discharged or annulled.

I do not accept this submission. His role was a key company management role. By February 2015 Mrs Scaife was already in place as manager below him, dealing with administrative matters as well as running the Green Deal scheme. The administrative role was being filled by Mrs Scaife perfectly satisfactorily. Mr Corran had never had any significant role or involvement in the Green Deal schemes. He had no continuing role as regards the ECO contracts by February 2015, since the existing contracts had come to an end and no new ones had been obtained. Apart from the operational management role he had undertaken from the outset – which as he was undertaking it was plainly a central management role - there was nothing else of significance for him to do other than seeking out and following up new business opportunities, whether they were further ECO contracts, the opportunities in relation to the Intenco companies or the solar JVs. The Butters brothers could not be criticised for concluding that Mr Corran could not be allowed to continue to seek out new business opportunities and follow up new business opportunities on behalf of the companies. That is because he would have been unable, without contravention of s.11 CDDA 1986 and/or without risk of personal liability under s.15 CDDA 1986 both on his part and that of the Butters brothers, to put himself forward as a director of the companies or as someone occupying a central management role in the companies. It is difficult to see how he could have undertaken this important new business development role if he had to describe himself as purely – and temporarily – only occupying an operational or a sales role without director or senior manager status. On any view it cannot sensibly be argued that it was somehow unfair or unreasonable, let alone a derogation from the agreed relationship between them, for the Butters brothers not to offer him an artificially created lesser role for some unknown period of up to 12 months. This was a critical time for the business, which either had to make a success of the Green Deal scheme or find alternative business opportunities, and the Butters brothers were not obliged to “carry” Mr Corran at this critical time due to problems of his own making, especially where he had failed to come clean when he should have done.

As to the argument that his exclusion should have been only a temporary exclusion, either until his discharge took effect after 12 months or he had obtained an earlier annulment by paying off his creditors in full, the difficulty for Mr Corran is that it cannot be said in my view that the Butters brothers were acting unfairly in forming the view that since he had already had 3 months to obtain his discharge or annulment and had failed to do so there was no reasonable expectation that he would do so in any lesser period than the 12 months set by the court. Nothing he said could have given them any grounds for optimism that he would do so. The legal advice they received at the time indicated that he would be unlikely to do so. There is no sensible basis for suggesting that the Butters brothers were acting in any way unfairly or prejudicially towards Mr Corran in deciding that they could not continue the existing business relationship with him in these circumstances.

It is also relevant that at no time did Mr Corran suggest this as an option. He could have volunteered in February 2015 to stand down for 3 months in order to obtain his annulment, on the basis that he would resign voluntarily if he did not obtain an annulment within that time, but did not do so. In fact his response to the termination on 16 February was to set about setting up competing companies.

In the circumstances, I am satisfied that Mr Corran has no basis for complaint about his permanent exclusion from the management of the companies in February 2015.

Failure to wind up the companies?

The pleaded case is that as a result of the loss of the ECO contracts in October 2014 Greendealexpress become loss-making and that the position worsened further after the withdrawal of government funding for the Green Deal Finance Company in July 2015. It is said, in the context of the various meetings which took place with the insolvency professionals, that the Butters brothers ought to have pursued a winding up of Energy Express and Greendealexpress which would have resulted in a substantial payment to Mr Corran as a shareholder. It is said that instead of this the Butters brothers preferred their own personal interests in acting in the ways complained of in §§8-11 below.

Although Mr Corran places reliance on meetings with the insolvency professionals in support of his case, I am satisfied that he is unable to do so. It is apparent from what I have already said above in the outline history that there is no evidence that the meeting in June 2014 was arranged due to a concern that at that stage Greendealexpress was insolvent. I am satisfied that the concern raised at that time was that if the energy suppliers refused to pay sums due under the ECO contracts in the future Greendealexpress might become insolvent. I note that at this time it appears to have been the common view of all concerned that the BG claims were without foundation and that BG were simply trying to delay or avoid payment, so that the only obvious reason why Greendealexpress might need to consider insolvency would be if BG managed to do so and thereby placed unmanageable strain on Greendealexpress’ cashflow. By September 2014 Greendealexpress had instructed solicitors who were actively preparing to pursue a claim against BG by way of the speedy adjudication process applicable to construction contracts. There is no evidence that the insolvency professional concerned advised the parties that Greendealexpress was insolvent at that point or that steps should be taken to trigger some formal insolvency process.

Moreover it is common ground that by August 2014 the Butters brothers were discussing a members’ voluntary liquidation with Rollits, with a view to removing the retained profits from Greendealexpress, which of course necessitated them being able - as directors of that company - to verify its solvency. There was clearly no concern on their part as to its solvency at that time and it was also clear that a members’ voluntary liquidation was simply one option being discussed with the other option – involving hiving monies up to a holding company – being that which was eventually chosen. There is no basis whatsoever in my judgment to criticise that decision or to complain that it was unfairly prejudicial to Mr Corran not to put Greendealexpress into members’ voluntary liquidation at that time.

Mr Corran made further reference to another meeting with another insolvency practice known as Harrisons in Manchester in November 2014 and claimed in his witness statement at [152] that “given the downturn in business the overwhelming advice was to wind up the Companies, but Mark and Simon were firmly against this”. However Mr Corran did not give any detail as to what advice was given by Harrisons at this meeting or on what basis and there is no documentary evidence of what was said. In cross-examination Mr Corran said that he told the Butters brothers to wind the company up but that they out-voted him. Mr Simms was unable to give any clear evidence about these meetings or what advice may or may not have been given and it emerged in cross-examination [TS4/67-8] that apart from the first meeting in June 2014 he was not present at any of the other meetings other than being called in to provide information as and when required to do so.

I also note that a file note produced by Rollits of the meeting on 13 November 2014 records that the Butters brothers had been advised that “if they put the company into administration HMRC would take 40p in the £ and BG could “sing” for their claim”. I am satisfied that this must be a reference to the advice given by Harrisons, since there is no evidence as to any other meeting in late October or early November 2014. It is clear that Rollits advised the Butters brothers to be very cautious about doing this. Instead they suggested that the Butters brothers should resolve the BG claim first and then decide what to do.

In the circumstances, I accept and prefer that contemporaneous note to the evidence of Mr Corran and do not accept that clear advice was given by Harrisons to the effect that the companies were insolvent and should be wound up. I am also unable to accept that Mr Corran was pressing for the companies to be wound up. That would have been inconsistent with his clear desire at the time to carry on in business with the Butters brothers in the existing and new ventures, in circumstances where it appears all concerned, including himself, considered it necessary to maintain Greendealexpress in existence as an authorised Green Deal provider for that purpose.

I am satisfied that, having listened to what Harrisons had to say, the Butters brothers sought legal advice and there can be no possible criticism of them in my view for not following that advice not to rush into an insolvency procedure at that stage and to seek to resolve the BG claim before making any decision.

Mr Corran contends however that by July 2015, when the government pulled out of the Green Deal scheme, the position was so dire that Greendealexpress was actually insolvent and that the Butters brothers should have appreciated this and implemented an insolvency procedure at that point.

Mark Butters addressed this in his witness statement at [51]. He said that he and Simon Butters had considered whether it was possible to wind up Greendealexpress after the government withdrew funding in July 2015 but decided not to do so. His explanation was that since Greendealexpress was solvent at that time it could not have been the subject of an insolvency process. He said that a members’ voluntary liquidation would not have been appropriate given the continuing obligations to which Greendealexpress was, and still is, subject under the Green Deal regime. He said, supported by Mrs Scaife in her witness statement at [32], that the possibility of applying to the Secretary of State for consent to withdraw from authorised Green Deal provider status was considered but rejected as unlikely to succeed.

To explain, the position is that Part 3 of the Regulations requires an authorised Green Deal provider to apply to and obtain the consent of the Secretary of State to withdraw from its authorised Green Deal provider status. Mrs Scaife said at [32] that after the events of July 2015 Mark Butters had asked her to make enquiries as to the likelihood that the Secretary of State might give consent and that the result of her enquiries revealed that it was highly unlikely that consent would be forthcoming. I accept this evidence.

It is also clear, as both Mark Butters and Mrs Scaife said, that the Regulations impose considerable ongoing obligations upon Green Deal providers. They are obliged to provide guarantees both as regards the functioning of the Green Deal works and as regards any damage due to the works (reg. 35 and Schedule 3). These are 25 year guarantees as regards wall insulation, 5 year guarantees as regards other works and 25 years and 10 years respectively as regards damage due to the works (paragraphs 2 – 3 Schedule 3) . The Secretary of State has power to impose financial penalties on a Green Deal provider in the event of breach (reg. 67). Green Deal providers are obliged to comply with the code of practice in force from time to time (reg. 24). The code of practice imposes very considerable requirements on Green Deal providers, including an obligation to maintain appropriate insurance cover for its guarantee liabilities.

In the circumstances, I accept Mark Butters’ evidence at [51] that a decision to maintain Greendealexpress in existence so that it was able to honour its contractual and regulatory obligations, in circumstances where it would have been difficult if not impossible to be released from its authorised status, cannot credibly be said to be acting contrary to the interests of the company let alone in a way which was unfairly prejudicial to a minority shareholder in the position of Mr Corran.

With a view to seeking to address this point, in his witness statement at [104] Mr Simms drew attention to the fact that in Greendealexpress’ accounts for the y/e 30 June 2016 a provision for liabilities was made in the sum of £628,771. His view appeared to be that if this was a realistic provision then it would be perfectly possible, given the financial position of the companies, to put an equivalent amount into some form of trust account so as to allow the companies to be wound up. He accepted in cross-examination that this was only speculation on his part. Whilst Mr Maynard-Connor’s position appeared to be that it would be possible to create some form of trust account to enable a company such as Greendealexpress to be wound up, his difficulty is that this was never part of a pleaded case supported by detailed evidence from an expert accountant or other appropriately qualified person. Nor, not surprisingly in the circumstances, was Mr Maynard-Connor in a position to put this as a positive case either to the Butters brothers or to Ms Spence. It was never suggested at the time by Mr Corran or anyone else at the time. In all the circumstances, there is a complete absence of evidence to show that it was something which both could and should have been considered and implemented at the time. Accordingly, I reject any suggestion that it was contrary to the interests of the company let alone unfairly prejudicial of the Butters brothers not to do so.

As regards the financial position of Greendealexpress in July 2015, in cross-examination of Mark Butters Mr Maynard-Connor referred to the draft Greendealexpress accounts for the y/e 30 June 2015 which revealed a net current deficiency of approx. £1.25M. He submitted that this demonstrated that the company was balance sheet insolvent and also had liquidity problems and, accordingly, that the Butters brothers ought to have put the company into some form of insolvency process. I do not accept this submission which, in my view, ignores a number of points.

The first point is that Greendealexpress had still generated a reasonable pre-tax profit of over £2M before tax in that year, as shown in the adjusted accounts at [TB29/14/3890]. That on any view does not demonstrate insolvency on a going concern basis.

The second point is that any allegation that the Butters brothers ought to have realised at that time that Greendealexpress was insolvent would have to be established on the basis of the material then available to them, which would have been the management accounts for that period. The management accounts in question have not been said to demonstrate insolvency. Mark Butters said in cross-examination [TS5/164] that the management accounts at that time showed that Greendealexpress was making money. The management accounts which were produced by Mr Simms appear to show [TB29/7/308] that Greendealexpress had a positive cash position as at 30 June 2015.

The third point is that, as Mark Butters said in cross-examination and again in re-examination [TS7/104], even if Greendealexpress had a net deficiency following the loss of the ECO contracts the reality was that it was always able to obtain funding from Energy Express as its holding company if it needed funds, so that there was no question of it being unable to pay its debts as they fell due. There has been no suggestion, nor could there realistically be one, that it would have been contrary to the interests of Energy Express let alone unfairly prejudicial to Mr Corran for the Butters brothers to cause Energy Express to provide this support if needed.

In cross-examination of Mark Butters Mr Maynard-Connor also drew his attention to the reference in a company report dating from January 2016 [TB10/825] to there being a County Court Judgment [CCJ] of £38,420 against Greendealexpress dating from June 2015. However as to that I accept Mark Butters’ evidence [TS7/32] that this was simply a case of a claim which had been settled but a judgment was entered by mistake and subsequently removed. I note that there is no supporting evidence of endemic cash flow problems or a series of unsatisfied judgments or the like.

In cross-examination of Mark Butters his attention was also drawn to the y/e 30 June 2016 accounts which revealed a further dramatic drop in turnover from over £12M to under £500,000 and a further dramatic drop in pre-tax profits from over £2M to approx. £180,000.

However there is no pleaded allegation to the effect that the Butters brothers ought to have placed Greendealexpress into liquidation at this point. The accounts for y/e 30 June 2016 were not produced on a final basis until March 2017. There is no evidence as to what, if anything, any management accounts which may have been available in June 2016 might have showed. In any event Greendealexpress was still trading at a profit at that time and was still able to be supported by Energy Express.

Moreover there is no evidence that putting Greendealexpress into liquidation, whether in July 2015 or at any later date, would have resulted in there being a recovery for Energy Express as its shareholder. There is no conceivable basis for a suggestion that Energy Express ought to have been put into liquidation, whether in July 2015 or at any later date.

Finally, I accept the Butters brothers’ argument that they reasonably did not want to take the risk of insolvency, whether of Greendealexpress or Energy Express, at a time when the BG claim was still extant. I am satisfied that this was a significant factor in their thinking in deciding not to pursue an insolvency route. Indeed Mr Corran positively asserts that the reason given by the Butters brothers for not winding up Greendealexpress was their concerns in relation to the BG claim.

Mr Corran appears to consider that BG’s claims were spurious and were deployed by BG purely as a device to avoid paying Greendealexpress’ entirely legitimate claims. I have already referred in the outline history to the settlement which was achieved in December 2015 of the BG claims. Mr Corran complains in his witness statement that there was no basis for any settlement more favourable to BG than one involving the withdrawal of all claims and counterclaims with no money changing hands. He also complains that in his view the primary motivation for the settlement with BG was to ensure that there was no risk of personal liability for any claim being imposed upon the Butters brothers rather than as a result of a dispassionate analysis of the risks.

His first complaint is not an allegation which is pleaded or supported by detailed analysis. Thus there is no positive case advanced to establish that it was a settlement which was completely contrary to any rational assessment of the merits or, for that matter, contrary to the tenor of the legal advice received at the time. Not surprisingly in the circumstances it was not suggested to the Butters brothers in cross-examination that the decision to settle at that level was contrary to their duties as directors. I do not consider that I am in any position at all to reach a conclusion that the fact or terms of the settlement raise matters for criticism of the Butters brothers.

Indeed, I would go further and say that it is difficult to criticise the settlement when it is clear that BG was not prepared to accept earlier offer of £1.25M, when it is safe to assume that there was bound to have been a significant litigation risk and when there were legitimate risks, not just to Energy Express but to the Butters brothers and to Mr Corran as well, if a settlement was not achieved and BG obtained a substantial judgment against Greendealexpress. There were two particular legitimate concerns in my view. The first was that if BG established a significant claim against Greendealexpress, whether before or after it went insolvent, there was a real risk that the insolvency office-holder might seek to recover the £5M dividend paid to Energy Express, whether from Energy Express itself or, potentially, against the Butters brothers as the directors (and Mr Corran as a shadow director) responsible for authorising the dividend. The second was that in the event of Greendealexpress’ insolvency BG might seek to hold the Butters brothers personally liable for the claim on the basis of their allowing Mr Corran as someone who they knew to be an undischarged bankrupt to be involved in the management of Greendealexpress. It may be observed that BG would have had an even stronger case against Mr Corran in that regard under s.15 CDDA 1986. In those circumstances I fail to see how the Butters brothers, by taking into account these considerations, breached their duties to Energy Express, let alone acted in a way which was unfairly prejudicial to Energy Express.

In the circumstances, I do not consider that these criticisms of the Butters brothers have any substance.

Wrongful payment of management charges and pension to the Butters brothers instead of dividend?

Mr Corran complains about the continued payment of the £5,000 pcm by Greendealexpress to the Butters brothers after his exclusion. His pleaded case is that until the 2014 re-organisation all payments were made and treated in the accounts as being made as dividend as opposed to management charges and that neither during nor after the 2014 re-organisation was there any agreement entitling any of the three parties to be paid management charges as opposed to dividend. His case is that the Butters brothers simply decided to pay themselves what they describe as management charges after his exclusion so as to avoid having to treat the payments as dividend as previously, since he would have been entitled to receive dividend as well.

Mr Corran’s initial difficulty is that despite what he now says he was quite happy to be paid £5,000 pcm by Greendealexpress by way of management charges after the 2014 re-organisation until his role was terminated in February 2015. Whatever else is clear, it is clear that at the time there was no express agreement that these payments should be treated as being dividend payable by Energy Express; the contemporaneous Sage entries show that this was not the case. It is also clear that under the initial agreement as contained in the shareholders agreement all four parties should receive £5,000 pcm from the dates specified in the agreement for providing services as managers and/or directors, albeit that it was envisaged at that point that this should be under contracts of employment. Whilst I accept that notwithstanding the shareholders agreement the parties proceeded not on the basis of there being contracts of employment but on the basis of there being contracts for services with remuneration being paid as dividend, I do not consider that this affects the essential point, which is that it was always agreed that those parties who provided services to the company, whether as directors or as managers, should be entitled to receive £5,000 pcm for doing so on a continuing basis.

I am satisfied that there was no agreement or understanding to the effect that the agreement to pay £5,000 pcm as a payment for services rendered was somehow brought to an end once payments on account of dividend began to be made. I am satisfied that the Butters brothers are correct when they say that the regular £5,000 payments were simply paused and effectively subsumed within the dividend payments whilst the ECO contracts were producing such handsome returns. I am satisfied that the parties never really gave this particular matter any real thought. They were happy to receive these substantial payments on account of dividend and worked on the basis that things would be formalised by the company accountants in due course when the relevant accounts were being prepared. What is significant in my view is that in the first 3 months of 2014, even though substantial payments on account of dividend had already been made, the regular £5,000 payments were still being made. This indicates that there was no express agreement at this stage that the monthly £5,000 payments should cease. Moreover from September 2014 onwards, at a time when no further substantial payments on account of dividend were being made, the regular £5,000 payments began to be made again, even after a lull from June to September 2014. I am satisfied that these continuing payments reflect the continuation of the underlying agreement that each party continuing to act as director / manager should receive that regular monthly payment for the provision of these services and the question as to whether that should be classed as a payment for services or a payment of dividend was a matter which could be left for determination subsequently on the basis of what was most financially advantageous from a taxation point of view.

In cross-examination Mark Butters was referred [TS7/9-10] to an email which Mr Corran wrote on 6 May 2015 in which he referred to a meeting with Mark Butters the day before at which he had been provided with the management accounts for the previous month. In that email he referred to the accounts showing a profit after taking into account “the rent of the building and yours and Simon’s drawings”. Although the email did not, as Mark Butters claimed, record an agreement on Mr Corran’s part that the Butters brothers should continue to receive their £5,000 management charge, equally there is no hint of his objecting to their doing so.

It follows that I am satisfied that the Butters brothers cannot be criticised as having acted in an unfairly prejudicial manner by continuing to make payments to themselves of £5,000 pcm by way of management charges even after the termination of Mr Corran’s management role. They were entitled to do so because they were still performing their role, whereas Mr Corran was not. They were not obliged to continue making payments of £5,000 pcm by way of dividend to Mr Corran as well as to themselves from February 2015 onwards. Whilst I would have reached a different conclusion had I found that Mr Corran had been unfairly excluded from his role as manager and, hence, unfairly lost his continuing entitlement to receive these payments in the same way as the Butters brothers, on the actual findings which I have made this does not arise since he was fairly excluded. This is not a case where the controlling shareholders have decided to substantially increase the remuneration taken by them from the company once the minority shareholder had been removed. Mr Simms was simply wrong when he said at [84] of his witness statement that it was after Mr Corran’s departure that he was told by the Butters brothers that they would no longer be taking dividend and instead would be taking management charges to avoid paying Mr Corran anything. It is obvious from the Sage accounts from September 2014 which he produced that he knew full well that these payments were not being treated as payments of dividend.

Whilst it might be questioned from an economic view why these monthly payments continued to be made even after July 2015, given the lack of new business and the impact of that on turnover and profitability, this is not the way in which the case has been pleaded and advanced. That is not surprising, since it is clear that the initial agreement was that each of the parties should receive the same monthly £5,000 payment, regardless of the actual contribution each was making in terms of time and effort and subject only to there being enough in the bank account to do so. Thus it is not realistically open to Mr Corran to claim that it was unfairly prejudicial for those payments to continue being made at the same level despite the decline in company turnover and profitability. His complaint is that these payments should have been made as dividend or not at all but, for the reasons I have given, I reject that complaint.

For completeness, I should note that Mr Pipe put it to Mr Simms in cross-examination that such payments could only have been made as management charges anyway since Greendealexpress could not have paid dividend to Mr Corran and the Butters brothers after the 2014 re-organisation, given that they were no longer shareholders of that company. However Mr Simms had an answer to that, which is that it would have been perfectly legitimate and straightforward to regularise this at year end by treating the payments as dividend from Energy Express with an inter-company transaction being generated as between Energy Express and Greendealexpress. That seemed to me to be a good answer, so that if that had been the only objection I would not have been persuaded by that.

Mr Corran also complains about payments of pension contributions of £32,000 each made by Greendealexpress to the Butters brothers in April 2015. It is common ground that there was an agreement reached in the previous year for a SIPP to be set up into which Greendealexpress would pay £50,000 for each party. It is common ground that this was done and the payments made in April 2014 (save that Mr Gunning decided he did not want to set up a SIPP on that basis and so received £50,000 cash instead.) The real issue between the parties is whether or not, when agreement was reached for payment of pension contribution in relation to the 2013-2014 tax year as set out above, it was also agreed that pension contributions should be made annually from then on as part of the remuneration package of each party without the need for further discussion or agreement. The Butters brothers say that it was, whereas Mr Corran says that it was agreed that a decision should be taken each year on the basis of the financial circumstances of the company at the time.

I prefer Mr Corran’s evidence on this point. It is quite clear in my view that it was agreed that these payments should be made as pension contributions instead of dividend purely for reasons of tax-efficiency. It follows in my judgment that it is inherently unlikely that there was any clear agreement or understanding that these pension payments would continue to be paid in following years even if the performance of the business was not sufficient to justify further payments of dividend and even if there was no agreement that they should be paid as pension contributions. In short, I am not satisfied that the original shareholders agreement was varied so as to entitle each party providing services to Greendealexpress to receive a maximum pension contribution into his SIPP each year, in addition to the £5,000 pcm agreed remuneration, on an ongoing basis regardless of the performance of the company.

The point was put in a slightly different way in cross-examination of Mark Butters [TS6/143-44] when he was asked and eventually admitted that there had never been a positive agreement that the remaining shareholders could continue to procure the company to make further pension contributions even after one of their number had been excluded from management. In order to justify further payments in such circumstances it would in my view have been necessary either to obtain the agreement of all of the shareholders or to follow the proper corporate procedure for the payment of such benefits to be sanctioned. Neither happened. In the email of 6 May 2015 to which I have referred above Mr Corran also asked “please can you explain Employers Pensions of £64,000”. That tends to support his evidence that he had not previously agreed these as regular annual payments and the Butters brothers have not referred to or relied upon any response to that request let alone any agreement by Mr Corran to these payments being made.

In such circumstances Mr Corran would in my view have been entitled to object unless a similar payment was made to him or unless the payments were made to all three as dividend. Thus in my judgment the position as regards further pension contributions is in a different category to the position as regards further payment of management charges which I have found it had been agreed from the outset could be paid to those who continued to provide services to the company.

For completeness, I should say that I did not regard it as a significant against the Butters brothers that there was no payment in the following 2014-2015 tax year. It is true that the relevant bank statement shows that the payment was debited to the bank account early in the following tax year on 17 April 2015 [TB27/284]. However there is no contemporaneous documentary evidence to cast doubt on the Butters brothers’ case that this was just an oversight. It would make no sense even on Mr Corran’s case for no payment to be made in that financial year but for a substantial payment to be made early in the next financial year.

Finally, I record that the Butters brothers explained, and I accept, that the only reason why the payment was reduced to £32,000 was because the pension limit had decreased from £50,000 to £40,000 in the relevant tax year and because there was also some uncertainty as to whether that was calculated on a gross or net basic rate tax basis.

It follows that I am satisfied that the payment of pension contributions totalling £64,000 in April 2015 was unfairly prejudicial to Mr Corran. Otherwise I do not accept Mr Corran’s case under this head.

I should record at this point that there is no pleaded case that the Butters brothers have acted in breach of their duties and/or have acted in a way which is unfairly prejudicial to Mr Corran in declining to sanction payment of dividend, either by Greendealexpress or by Energy Express, regardless of the propriety of the payment of the management charges and pension contributions referred to above. The pleaded case is very firmly that it is the payment of management charges and pensions contributions without agreement in order to avoid having to make similar payments of dividend to Mr Corran which is the unfairly prejudicial conduct complained of.

When the question was put to Mark Butters at the end of cross-examination [TS7/41] and again in re-examination [TS7/42-43] as to why no dividend had been paid when, as was put to him, the accounts of 30 June 2016 showed Energy Express as having a healthy surplus of over £3M shareholders’ funds, his answer was that: (a) there was never any policy of declaring dividends from Energy Express; (b) he wanted to ensure that the business was stable and all risks in relation to actual or threatened claims from energy suppliers, from HMRC and relating to the Green Deal provider business were sorted out before he looked at declaring any further dividends. He also made what appeared to me to be a valid point that until the 2016 accounts had been produced and approved in March 2017 it would not have been appropriate even to consider paying any dividend.

As regards the legal principles to be applied, it is well-established that:

In the circumstances of this case, even if it was open to me on the pleaded case to entertain the complaint I am not satisfied on the evidence before me that the Butters brothers have acted in an unfairly prejudicial way towards Mr Corran by not recommending payment of dividend at any relevant time prior to the issue of these proceedings in March 2016. At all relevant times the Butters brothers were in my judgment simply not in a position where they could properly do so. They did not, on my findings, couple a decision not to pay dividend with a policy of payment to themselves of excessive remuneration.

I should however make clear that nothing said in this judgment in relation to any claim based on a failure to declare dividend prior to the issue of these proceedings should be taken as in any way expressing any opinion on any future claim which Mr Corran might otherwise be able to make in relation to any failure to declare dividend after the production of the 2016 accounts or subsequently. Indeed I can see how it could be argued that since the healthy surplus of over £3M shareholders’ funds in the accounts as at 30 June 2016 effectively represent the profit earned by Greendealexpress on the ECO dealings and transferred to Energy Express under the 2014 re-organisation then it might be said to be unfairly prejudicial to Mr Corran not to pay him his share of that profit as dividend once the BG claim (and any other claims by major suppliers) had been concluded and the accounts had been produced. However, since this is not a case which has been pleaded or argued, for obvious reasons I am not in any position to reach a concluded view on that point and do not do so.

Wrongful lease of the Hall?

The pleaded case is that the decision to enter into the formal 5 year lease in relation to the Hall in June 2015 at £140,000 pa was wrongful in that: (i) the existing lease was an informal lease at only £100,000 pa; (ii) there was no justification for entering into a formal longer lease at an increased rental in June 2015. There is a further complaint that the insofar as parts of the leased premises have been sub-let they have not been properly accounted for. There is a final complaint that the Butters brothers have allowed Greendealexpress to accept liability for c.£125,000 of repair and redecoration works. This final complaint is associated with the complaint in relation to the debenture (as to which see §11 below).

In short, the Butters brothers’ response to these allegations is that: (i) it was agreed between all parties in late 2013 that Greendealexpress should take a 5 year lease of the part of the Hall at a reasonable rent of £100,000 in year 1, rising to £140,000 in years 2-5, so that the formal lease, entered into in June 2015 at a time before the Green Deal scheme loans were abruptly ceased by the government a month later without prior warning, was perfectly justified; (ii) there has been no failure to account for rental received on sub-letting, which itself was undertaken as a reasonable response to the changed conditions post July 2015; (iii) it was also agreed in or around December 2013 that Greendealexpress should pay for the repair and redecoration works which were carried out for their benefit.

Thus the first and most important issue is whether or not it was agreed that Greendealexpress should take a 5 year lease of a part of the Hall at the terms contended for.

It is common ground that in October 2013 an existing lease to a company known as Arvato had come to an end, leaving a number of office rooms on the ground and first floor available. It is also common ground – or if not I am quite satisfied - that by that time Greendealexpress was doing extremely well and had expanded to 11 employees with further expansion likely assuming continued success, so that the existing accommodation shared with Unicom was not sufficient and more space was required. Although Mr Gunning and Mr Corran may have grumbled a little I am satisfied that they agreed that it made sense for Greendealexpress to take over the premises previously occupied by Arvato. I accept that the perception at the time was that the company was doing extremely well – “absolutely flying” to quote Mr Corran in cross-examination. Also, whatever Mr Corran may have said in cross-examination, I am satisfied that they were both influenced by the “carrot” of being offered the use of the flat at the Hall instead of the student accommodation in Hull.

However Mr Corran’s case and evidence is that what was agreed was that the rent would be £100,000 pa, that the Butters brothers as the landlord would pay for the necessary refurbishments and that no term was agreed beyond a year on the basis that it would be a flexible arrangement.

Mr Corran’s case receives support from an email from Mark Butters to the letting agents dated 12 October 2013, which refers to a lease having been agreed with Greendealexpress as from 4 November 2013 at £100,000 pa. As regards the term it says “lease length will need to be flexible but will be at least 12 months and hopefully much longer”. There is no reference to the rent increasing to £140,000 pa over the balance of a 5 year terms. The email records that the landlords would be undertaking improvements, but makes no reference to this being financed by Greendealexpress. It records that a simple lease in-house would be produced to “cover legals”.

It is apparent in my view that this email is inconsistent with the Butters brothers’ case as pleaded and as clarified and as made explicit in Mark Butters’ witness statement, which is that the terms they contended for had been agreed before Greendealexpress moved into the Hall. I appreciate that the email was written some weeks before Greendealexpress moved in and that every last detail had not been agreed at that stage but, nonetheless, the fact that this email was written in those terms and that there was no subsequent email explaining that further terms had been agreed is damning in my view. That is particularly so when after some prompting Mark Butters asked Mr Brown on 26 October to draft a simple lease before 4 November with no indication that the terms as set out in the earlier email and as copied to him had changed.

I have no doubt that it was to overcome this problem that in examination in chief Mark Butters’ evidence shifted – after some prompting by Mr Pipe - so that he said [TS5/59] that the terms had not been finally agreed until after Greendealexpress had moved in. The difficulty with that evidence was that subsequent emails showed that as late as December 2013 emails were still passing between Simon Butters and Mr Brown in which there were discussions about saving stamp duty and from which it was apparent that no firm agreement for a 5 year lease had been reached nor was any mention made of an increased rent or an agreement to pay refurbishment costs. Indeed the correspondence ends on 18 December without agreement as to the precise terms but with one option explored being a one year lease to one company followed by another lease to another company.

When this chain of correspondence was put to Mark Butters his yet further revised account was that the terms must have been agreed in late December 2013 after the end of that email correspondence. I am afraid that I regard this evidence at worst as wholly opportunistic to fit with the correspondence or at best hopelessly confused. Indeed, at one point in his cross-examination [TS5/179] Mark Butters reverted back to his original evidence to say that “it was always understood to be long-term for 5 years” and in his re-examination [TS7/73] he said that before the move “a 5 year team was discussed” when that is, as I say, inconsistent with the contemporaneous correspondence. Although he subsequently reverted to his earlier evidence later in re-examination, his assertion that a clear agreement was reached in December 2013 for a 5 year lease at £140,000 pa is not recorded in any way in any contemporaneous documents.

Simon Butters’ account was equally inconsistent and confused on this point. In his witness statement he said that he agreed with Mark Butters’ witness statement about this. In examination in chief he said that he agreed with the revised explanation given by Mark Butters in court, although in itself that was not a model of clarity. In cross-examination [TS8/14-15] he said that the 5 year term was discussed around moving in but not formalised (by which he clarified he meant agreed or finalised) until December, but he also said that it was agreed orally at Unicom’s office premises, which would place the agreement as being before the move in early November 2013. At one point he seemed to say [TS8/22] that the 5 year duration had been agreed before he was emailing Mr Brown in relation to a possible 3 year or a possible 5 year lease, which makes no sense at all, particularly since the email chain ends with a proposal for there to be a series of one year lettings to different companies to avoid stamp duty and a further proposal for separate 3 year leases of separate floors.

If, as the Butters brothers contend, this was agreed in late December 2013 there is no explanation offered as to why they did not email Mr Brown at the time to ask him to put this into effect in the most financially efficient manner, given the previous correspondence with him.

The Butters brothers’ case and evidence was also inconsistent in that they had until cross-examination asserted that the reason for the rent being agreed to rise to £140,000 was that this was the rent payable under the existing Arvato leases and Simon Butters was unwilling to reduce the rent below that. However: (a) that evidence was inconsistent with the fact that the rent was agreed at £100,000 for the first year at least; (b) the Arvato leases, which were only belatedly disclosed by the defendants on day 6 of the trial, showed that the existing rent payable under those leases was only approx. £110,000 pa and not £140,000. Whilst the Butters brothers attempted to argue around this by asserting that the £140,000 represented the rent per ft² payable under the Arvato leases as applied to the area taken by Greendealexpress which included the second floor flat which did not form part of the Arvato lease, that was not the explanation previously given and, moreover, there was no evidence to the effect that the rent per ft² achievable for the flat – whether previously agreed with Arvato who had, so Mark Butters said in cross-examination [TS6/15], previously taken a short term lease of the flat - was the same as that payable for the office space.

I also note that the audited accounts for the p/e 30 June 2014 refer in note 8 (related party disclosures) [29/5/303] to Greendealexpress having “made use of premises owned by Brantingham Group” during the period, rather than having entered into an agreement for a 5 year lease. Furthermore, no reference is made in the notes to there being a continuing liability to pay rent at £140,000 pa.

An argument advanced by the Butters brothers is that Mr Corran and Mr Gunning agreed in late 2013 to a 5 year lease because it would give Greendealexpress greater stability going forwards. However as at late 2013 the position was not as settled as it may have been later. The company had only begun to make substantial profits on ECO and the Green Deal provider business had not yet borne fruit. In the context of a commercial arms-length relationship that argument might have had more force but here I am considering a much more informal relationship where it suited the Butters brothers as landlords to have a tenant to replace Arvato, even if on informal terms, and it also suited Greendealexpress to have a base from which to expand but also on informal terms if it transpired that it did not need the space and if a better prospective tenant came along.

Having regard to these matters I am satisfied that the only terms which were agreed at this stage were those terms referred to by Mr Corran, namely a one year lease at £100,000 pa.

Mr Corran did however under cross-examination concede that in October 2014 he agreed to a further year’s lease at an increased rental of £140,000. This explanation makes sense from a commercial perspective because at this stage, although the ECO contracts were coming to an end, the Green Deal scheme work was still continuing and the anticipation was that new ventures such as Intenco, Haus and the solar JVs would come on stream. It is common ground that the year’s rent was paid up in advance. It is clear that no attempt to conceal the invoice or the payment from Mr Corran was made by the Butters brothers. In his email of 10 March 2015 Mr Corran referred to the rent in terms which showed that he clearly understood that it had been paid in advance for the period to October 2015 at £140,000, without challenging that the rent was properly payable in that amount for that period.

The question arises whether or not at that stage there was also an agreement whereby it was agreed that a 5 year lease should be granted. There is evidence to support such a finding. Thus:

As against those points it must be acknowledged that this is not the case which has been advanced or given in evidence by the Butters brothers. I also note that on 27 March 2015 Mr Corran emailed Mrs Scaife, copying in the Butters brothers, to say that “there is no lease in place between Greendealexpress and [the Butters brothers] for the Hall, so it is commercial suicide to continue to pay £14,000 per month for an office that holds 10 staff”. However to say that “there is no lease in place” is not the same as saying that there had been no agreement for a 5 year lease.

As Mr Pipe submitted in closing, the difficulty with Mr Corran’s case that no 5 year lease was ever agreed is that: (a) his reliability generally is poor; (b) having vehemently denied that a £140,000 rent was ever agreed he then admitted in cross-examination that subsequently in autumn 2014 it was agreed; (c) his evidence as to what was agreed as to length was not particularly clear and his reference to a “flexible” term was clearly taken from the earlier email rather than his own recollection of a specific agreement; (d) it is entirely understandable that by autumn 2014, notwithstanding the concern about the ECO contracts, the cash reserves of the companies and the expectations of continued profitable trading in the existing and new ventures would have justified taking on a 5 year lease at £140,000 pa as part of what was being referred to as a “Green Hub” at the Hall; (e) the Butters brothers would have been entitled to say to Mr Corran that there was no justification after the first year informal lease had lapsed for not putting matters on a more formal footing and there was no real basis for Mr Corran to object; (f) Mark Butters’ reference in the 10 March 2015 email, 3 months before the formal lease was entered into, is consistent with Mark Butters believing at the time that there was such an agreement in place.

On the balance of probabilities I conclude that there was an agreement reached between all three shareholders in autumn 2014 that the existing position should be formalised and that a formal lease for 5 years at £140,000 should be entered into. It seems to me that this is far more plausible than Mr Corran’s case, even if it is not precisely the case which the Butters brothers advanced or supported in evidence.

As regards the liability for the improvement works, Mr Corran did not accept that he also subsequently agreed to Greendealexpress paying the cost of the initial upgrades. On balance however I am satisfied that he did. I accept Mark Butters’ evidence [TS5/173] that the scope of the works increased once the true state of the premises as left by the previous tenant was appreciated and once it was also appreciated that works would be needed to be done to the flat to allow Mr Corran and Mr Gunning to live there during the week. I also accept that in the context of the extremely successful state of the business in 2014 this would have been perceived as a very modest amount to pay to provide the company with decent office accommodation and Mr Corran and Mr Gunning with decent living accommodation. The invoice [TB2B/G(b)/50] was produced in October 2014, but back-dated to January 2014. It was based on a valuation undertaken by Mr Jones, to whom it was copied as well, and was sent to Mr Simms. Given my previous findings it is distinctly possible that the agreement that Greendealexpress should pay for these works was also made in autumn 2014 at the same time as I have found that the 5 year lease was agreed and the invoice was produced.

This all happened at a time when Mr Corran was still very much involved in the management of the business. I am satisfied that the invoice would not have been produced without his knowledge and approval, especially since at the time he was sharing a room with and enjoyed a close relationship with Mr Simms. In the circumstances I am satisfied that he cannot now challenge the decision for Greendealexpress to accept liability for the reasonable cost of these works as part of the decision to formalise the lease to a 5 year lease.

However Mr Maynard-Connor had two further objections in relation to the lease as executed in June 2015.

The first was that since the agreement for the lease, being oral, was unenforceable as a matter of law, the Butters brothers were not obliged to procure the execution of the lease when they did in June 2015, in different circumstances to those existing earlier in the relationship. He submitted that in such circumstances the Butters brothers as directors were obliged to decide afresh whether or not to execute a formal lease by reference to the circumstances as they then existed. He submitted that by this stage after the end of ECO there was no need or justification for the reduced business, employing around only 10 staff and undertaking what was – on his case – the unprofitable Green Deal provider business at a much reduced turnover, to take on this commitment. He points to the strong objection made by Mr Corran in his email of 27 March 2015. He submits that since there is no evidence that the Butters brothers gave fresh consideration to this in June 2015 they cannot justify the decision on their subjective view (see the HLC Environmental case referred to above) and, on an application of the objective test, there was no justification for entering into the new lease.

In response to this submission Mr Pipe submitted that since all of the shareholders had agreed to the new lease being entered into there was no need or basis for there to be a reconsideration of the same question in June 2015.

I am prepared to accept that it was necessary for the Butters brothers to reconsider the matter afresh in June 2015, not least once Mr Corran had written to say that he objected to the Hall to continue being used in the current circumstances. However I am satisfied that on an objective analysis the decision was one which was reasonably made in the best interests of the company. In June 2015 the Butters brothers were unaware that the government was going to close down the Green Deal scheme the following month. I accept that they believed, based on recent turnover, that the Green Deal scheme had a viable future. There was still a significant business and a significant number of staff. Although the new ventures expected in late 2014 had not materialised they were still being pursued, at least as regards Intenco. They would also have needed to consider the alternatives. At that stage the only basis of occupation was under some informal arrangement with no security of tenure from year to year. If no commitment was to be made on the basis that the companies did not need or did not want the existing accommodation it would be necessary for significant directorial and managerial time to be taken in locating alternative smaller premises. In my judgment it was perfectly reasonable for the Butters brothers to decide that the preferable course was to continue with the existing arrangement and formalise it as had previously been discussed and agreed. That decision was not affected simply because in the meantime Mr Corran had been excluded from the management of the companies.

Mr Maynard-Connor’s second objection is that although the lease is between the Butters brothers as landlord and Greendealexpress as tenant Energy Express is also made a party to it as guarantor. His submission was that, since the Butters brothers do not contend that there was ever any prior agreement involving Mr Corran whereby it was agreed that Energy Express should guarantee Greendealexpress’ liabilities under the lease, it cannot be said that there was any justification for including that as a term of the lease. His submission was that to cause Energy Express to take on such a liability was in itself unfairly prejudicial to Mr Corran. He also pointed out that the first year’s rent under the new lease was also paid directly by Energy Express which, he submitted, perfectly illustrated the prejudice to Mr Corran.

I accept that this was, even on the Butters brothers’ case, an unsanctioned change. However it does not seem to me to have been unreasonable in the context of the 2014 re-organisation. Energy Express was the holding company. It had received £5M of Greendealexpress’ profits by way of dividend and was a non-trading cash rich company. For the future it was anticipated that its success depended on Greendealexpress’ commercial success. There was no good reason why it should not have agreed to guarantee Greendealexpress’ obligations under the lease. There was nothing unreasonable in all of the circumstances in causing Energy Express to guarantee this lease, nor was it unfairly prejudicial to Mr Corran in my view. The same is true of the point made on behalf of Mr Corran that the rent which was paid in September 2015 was for the whole year in advance and was paid by Energy Express. It may be that strictly speaking that payment should be formalised by an inter-company advance, but any failure to do so does not in my view unfairly prejudice Mr Corran.

As regards the sub-letting, it is clear that although Mr Corran has had his suspicions he has no direct knowledge of the transactions nor, in my view, any objective basis for his suspicions. The same is true of Mr Simms. It would appear from his cross-examination [TS4/106] that as regards the principal element of apparent concern, failing to account for rent due from a company known as Blue Energy, the most likely explanation is that Mr Simms would have been correctly instructed not to invoice the company whilst he was still in position because there was an initial rent free period which ran, according to Mark Butters in cross-examination [TS6/32] for 3 months from when they moved in around July 2015. In re-examination Mark Butters was taken to bank accounts [TB27/431 onwards] showing that rent had been paid by Blue Energy to Greendealexpress subsequently. Having considered the evidence I am satisfied that the Butters brothers have not deliberately sought to avoid accounting or paying for rent received from sub-tenants and I reject this criticism of them.

In the circumstances I am not satisfied that it was a breach of directors’ duty to enter into the 5 year lease or in any event that it was unfairly prejudicial to Mr Corran to do so. Even if I was wrong about that I am satisfied that it would have been perfectly reasonable in June 2015 for the Butters brothers to cause Greendealexpress to renew the lease for a further year with effect from that autumn and that since then the Butters brothers have made reasonable efforts to sub-let and thus minimise any loss. In the circumstances, I would not have regarded this conduct as unfairly prejudicial to any significant extent in any event. I reject the complaint that the Butters brothers have used the companies as cash cows to obtain a regular guaranteed rental for the use of the Hall above and beyond what they could reasonably have expected to obtain on the open market in order, effectively, to secure for themselves disguised dividend payments which they are not prepared to pay to Mr Corran as well.

Benefits wrongfully conferred upon the Butters brothers and their businesses?

This complaint concerns benefits which Mr Corran contends were wrongfully conferred on 3 businesses owned and controlled by the Butters brothers, namely Haus, Unicom and Express Capital, which Mr Corran contends were unfairly prejudicial to his interests. I shall address each in turn.

As already recorded, in November 2014 the decision was taken not to proceed further with the online bathroom retail business. It is common ground that it was then agreed to revert to the original plan for Haus to be used for the purchase and re-sale of residential property. The pleaded complaint is that expenditure incurred on Haus, particularly in relation to advertising, was funded by Greendealexpress and not repaid, even though his case was that the agreement was that the monies should be repaid from the profits made by Haus on the re-sale of the properties and even though properties acquired as part of this agreement and since been sold at a profit so Mr Corran believed.

In his witness statement Mr Corran accepted that it had been agreed that Greendealexpress would fund the operational expenditure and repay the expenditure from the profit made by Haus from the sales of the property, so that there is no complaint that Greendealexpress funds were wrongly used for Haus business; his complaint as I say is that this expenditure had not been repaid. Although Mr Corran also complained that it had never been agreed that properties would be purchased by Simon Butters or Mark Butters using monies advanced by them for such purpose or that they would be entitled to charge interest on those monies I am satisfied that he was aware of and agreed to this at the time, as evidenced by the fact that he was copied in to emails at the time and did not object. I reject his explanation that this was all a charade to seek to reduce the commission payable to a Mr Booker; this did not appear in his witness statement and appeared to me to be yet another opportunistic attempt to explain away inconvenient contemporaneous documentation.

In cross-examination [TS4/55] Mr Simms appeared to accept that there was an expectation that this expenditure would be accounted for via a loan account as between Greendealexpress and Haus. Although he also said that he did not believe that in reality it would have come back, he did not appear to have any basis for that belief. He was also [TS4/79-80] unable to say that during his time with Greendealexpress the properties had been sold and that Haus had actually made a profit so as to activate the obligation to repay. He accepted he was preparing the accounts for Haus and that if profits had been made during his time he would have been expected to invoice Haus accordingly. However in re-examination [TS4/120-1] he was taken to a schedule disclosed by the defendants which appeared to show that all but four of the properties had been sold at a profit prior to September 2015. His evidence was therefore rather confused and confusing.

The Butters brothers accept that it was agreed that Haus should repay Greendealexpress for the administrative expenses funded by Greendealexpress from the profits gained from its activities. They pleaded at [70(b)] APOD that once the outstanding properties had been sold “a full account will be undertaken by external accountants to ascertain … the sums due to Greendealexpress from Haus …”.

In February one invoice and in April 2016 a further two invoices were produced by Mrs Rose from Greendealexpress to Haus totalling approx. £436,000 (inclusive of VAT). The February 2016 invoice was backdated to April 2015 on the advice of a VAT consultant engaged by Greendealexpress. Her evidence in cross-examination [TS5/19-21] was that there had been a reconciliation undertaken by Finnies and discussed with Mrs Scaife and herself in which invoices rendered to and paid by Greendealexpress which were identified as being for Haus’ benefit were re-charged to Haus in accordance with the original agreement. It was her understanding that Mr Simms ought to have undertaken this exercise previously but had failed to do so. It was common ground, as appeared from cross-examination of Mark Butters [TS6/168], that the invoices produced by Mrs Rose were paid by Haus in August 2016.

There is some issue as to whether or not this reconciliation captured all of the relevant invoices. In his witness statement Mr Simms said that he believed around £600,000 was paid out by Greendealexpress for Haus’ benefit. In cross-examination Mark Butters said [TS6/163] that he thought it might be even more. He was then [TS6/165-167] taken to further payments totalling approx. £163,000 shown in Greendealexpress’ bank statements. As regards the majority he accepted they were for Haus’ benefit and as regards the remainder he accepted that they may well have been.

The position as to whether or not invoices had been raised by Greendealexpress against Haus in relation to some or all of the further payments and whether or not Haus had reimbursed those payments was not resolved. Both in cross-examination [TS6/170-1] and in re-examination [TS7/100-101] Mark Butters asserted that all such payments as were due had been accounted for and paid; however it was clear that he had no direct knowledge of this and in re-examination he accepted that he did not know how this had been done in accounting terms. Since these payments had not been made the subject of invoices from Greendealexpress to Haus through the reconciliation process undertaken by Finnies, Mrs Scaife and Mrs Rose I am unable to see how they could possibly have been invoiced and paid. Although in re-examination of Mark Butters Mr Pipe floated the possibility that they had justifiably not been paid since Haus had not made sufficient profit to do so, Mark Butters did not give any evidence to the effect that a positive decision had been taken to this effect for this reason. In my view the more likely explanation is that because the reconciliation had not been done contemporaneously these further invoices were missed when it was performed subsequently. I am satisfied that this is simply an error as opposed to a deliberate attempt to avoid payment of these invoices insofar as they are properly chargeable to Haus. There is no reason to consider that a further reconciliation will not be done now that these further payments have been identified and such further invoices as ought to be produced will not be submitted and paid. I do not regard the failure to do so before now as amounting to unfairly prejudicial conduct, as opposed to simple error.

However, it is Mr Corran’s case that the accounting process undertaken by Finnies beginning in early 2016 would not have been undertaken and the payments would not have been made but for the pressure exerted by the pre-action correspondence and this litigation. I do not accept this. It is clear from the evidence of Mrs Spence at [4] of her witness statement that Finnies were indeed instructed to take over the accounting records in November 2015, at around the time of Mr Simms’ departure. It is also clear from her evidence [25-26] that the decision to rebuild the accounts was taken in December 2015 and commenced in January 2016. This was before the first letter was written by Mr Corran’s solicitors to the Butters brothers. Furthermore, it does not appear that Mr Corran had specifically raised the issue of Greendealexpress not invoicing or being paid by Haus in his correspondence in May 2015. There is no evidence from Mr Simms that he was instructed not to undertake this activity, which fell within his sphere of responsibility. It appears from the spreadsheet [TB2b/G(b)/51] he referred to in his witness statement at [73] that the last properties sold in August 2015. The most likely explanation, I am satisfied, is that this was a job which Mr Simms put off due to pressure of work and in the expectation that he could leave it until all of the properties had sold. Whilst complaint may be made about the delay from February and April to August 2016 in paying the three invoices, that is not so serious as to lead me to conclude that this was all part of a plan by the Butters brothers to delay and delay. In the circumstances I am not satisfied that there was any unfairly prejudicial conduct as regards Haus.

Substantially the same complaint is made in relation to Unicom. The context for this complaint is that properties owned by the Butters brothers and let as student accommodation were eligible for Green Deal Home Improvement Fund grants for wall insulation and other energy saving home improvements. The Butters brothers made applications for these grants and had the work done by contractors instructed by Greendealexpress, who paid for that work to be undertaken. The primary complaint is that there was no agreement for the work to be instructed and paid by Greendealexpress in the first place and the further complaint is that the cost has not been charged to or paid by Unicom.

I do not accept Mr Corran’s first complaint that there was never any agreement for Greendealexpress to instruct or pay for the work. He was cross-examined about and accepted that he had written an email at the time congratulating Greendealexpress staff in relation to this work which tends to indicate that he knew about and did not object to this being done which, in my view, tends to show that it was agreed. Moreover, in my view there is no reason at all why Greendealexpress should not have agreed to act as a Green Deal provider in relation to this work. Furthermore Mr Simms confirmed in cross-examination [TS4/54-5] that it was expected that Unicom would pay Greendealexpress for the work which was done which again indicates that this was all open and above-board.

As regards the second complaint, it is clear that invoices were produced by Greendealexpress against Unicom in relation to the work instructed and paid for by Greendealexpress at Unicom-owned properties. In cross-examination [TS5/48-51] Mrs Rose stated, by reference to the schedule that she produced and sent to Mr Simms in October 2015 [2B/g(b)/63 & 69], that she had produced these invoices contemporaneously, in other words at or around the time that the grant applications were made, the work was done and the Butters brothers received payment of the grant, over a period from February to September 2015. Indeed, it appears that these invoices would have been required in order for the grant application to be made. Mrs Scaife when asked, whilst unsure in relation to the invoices produced by the installer known as Hamiltons, confirmed in cross-examination [TS8/131-2] that the remainder would - as Mrs Rose said - have been produced contemporaneously in order to apply for a grant. As regards Hamiltons it appeared from her evidence later in cross-examination [TS8/146] in relation to payment that the Greendealexpress invoices had not been prepared until approx. one year after the work had been done and invoiced to Greendealexpress. Mrs Scaife said, and I accept, that it was Mr Simms’ responsibility to produce these invoices. As regards the others, although the position was not completely consistent and there was one example of a 3 month gap between invoices, there appeared to be a reasonable time correlation between the invoices raised by the installers, Total Eco and Hodgsons, and those produced by Greendealexpress.

However Mrs Rose went on to explain that the invoices had not been raised formally as against Unicom at the same time as they were produced. What she meant by this was that whilst she had created them she had not entered them onto Sage or sent them on to Unicom. Mrs Scaife explained that these invoices were produced before the work had in fact been done and before the installer had actually invoiced Greendealexpress. In other words, they appeared to be what are sometimes referred to as “pro forma invoices”, recording the agreement for the work to be done and to be charged by Greendealexpress to Unicom in advance of the work being done. Indeed when she explained the process further in cross-examination [TS8/135-6] by reference to the schedule at [TB2D/11/49] it became clear that the invoice from Greendealexpress to Unicom was not simply a re-invoicing of the installer’s invoice to Greendealexpress but an invoice for the balance due to Greendealexpress from Unicom after taking into account the amounts already received direct from Greendealexpress from other funding applied for, namely any Green Deal scheme plan and any ECO cashback plan.

It is quite clear in my judgment that the majority of these invoices had been produced at the time the work was undertaken not because they were intended to be raised against and paid by Unicom at that time but in order to enable Unicom to obtain the Green Deal Home Improvement Fund payment contribution. Since they were not formally raised as invoices against Unicom they did not appear on the system and Unicom did not actually have to pay Greendealexpress at that time.

The position in relation to the Hamiltons invoices is more obscure. Apart from one apparently issued on 24 March 2017 they were all issued on 8 April 2015. Greendealexpress had paid Hamiltons on 23 May 2014 [TB2D/11/49A], a year previously. On 27 March 2015 Mr Corran had emailed requesting Mr Simms to invoice for work done on Unicom properties and paid by Greendealexpress. It is difficult to avoid the inference that they were issued in response to the email. There would be no reason for the invoices not to be have been entered onto Sage or sent to Unicom for payment at that point, nor any reason for them not to have been paid by Unicom at that point.

However, the position became more complicated still when Mrs Scaife was asked whether the invoices from Greendealexpress to Unicom had been paid. In cross-examination of Mrs Scaife [TS8/140→147] Mr Maynard-Connor produced a schedule prepared by Mr Corran’s advisers which identified the relevant properties, the installer invoices, the evidence of payment of those installer invoices, the Greendealexpress to Unicom invoices and any evidence of payment of these Greendealexpress invoices. In short, it was Mr Corran’s case that whereas there were invoices from the installers to Greendealexpress and invoices from Greendealexpress to Unicom and whereas there was at least some documentary evidence of the installer invoices being paid, there was no evidence at all of the Greendealexpress invoices having been paid. Nonetheless Mrs Scaife said that she could say that the invoices had been paid. She said [TS8/158] that Claire Butters had paid by bank transfer whereas the Butters brothers had discharged their obligation by way either of credit to directors’ funds or debit to directors’ loan account, which would have been entered into the relevant Sage account.

This was the subject of further disclosure in the period between the close of the evidence and the day fixed for oral closing submissions. It would appear that Mrs Scaife is correct in her evidence, although as Mr Maynard-Connor observed the evidence shows that these payments and contras had all been made in 2016 and 2017, much later than the dates of the invoices and the dates of payment by Greendealexpress to the installers.

In re-examination Mrs Rose was asked whose responsibility it was to decide whether or not invoices should be raised. She replied “I – we assumed it was the accountant, Chris Simms” [T/D5/52]. In his witness statement Mr Simms had said, in the context of charging Unicom for the Green Deal Home Improvement Fund funded work instructed and paid for by Greendealexpress, at [83]: “I was also reluctant to raise the subject as I did not consider it to be my place, given that Mark and Simon were the directors in charge of the company”. He maintained that evidence in cross-examination. It follows that he was not saying that he had been given an express direction by the Butters brothers not to invoice for these sums. In his cross-examination [TS6/172] Mark Butters maintained that all these monies had been accounted for. In his cross-examination [TS8/32] Simon Butters claimed that Mr Simms “will have been instructed to do that, but … he won’t have done it”.

In my view, the proper conclusion from this morass of evidence is that whilst Mr Simms ought to have ensured that these invoices were formally raised as against Unicom at the appropriate time and either paid or otherwise appropriately accounted for on Sage at that time, the Butters brothers are also at fault in failing to take positive steps to ensure that this was done. I am unable to accept Simon Butters’ evidence that despite being expressly instructed to raise these invoices Mr Simms had not done so. There is no documentary or other evidence to show that Mr Simms was asked by anyone to submit invoices to and obtain payment from Unicom. It is inconceivable in my view that if those instructions had not been given the Butters brothers would not have realised that they had not received invoices or been asked to pay and would not have taken the matter up with Mr Simms and Mrs Scaife. It is also inconceivable in my judgment that the Butters brothers, having had the benefit of the vouchers, would not have been aware that they had not been invoiced for the work to have been carried out and that arrangements had not been made for them either to be paid or otherwise accounted for. I am quite satisfied that the Butters brothers took no positive steps at the time to ensure that they and Claire Butters as the respective house-owners were invoiced and either paid or ensured that the invoices were properly accounted for. This amounted to a breach of directors’ duty, albeit a failure to do what should have been done as opposed to a deliberate decision to act wrongfully. I am not satisfied however that the only reason why steps were belatedly taken for these invoices to be raised and paid or otherwise properly accounted for was the institution of these proceedings. I am satisfied that this all happened as a result of the reconciliation process undertaken by Finnies. I do not find that the Butters brothers intended all along to avoid making any payment and only did so as a result of Mr Corran’s actions.

In those circumstances, I am not satisfied that the Butters brothers’ conduct was unfairly prejudicial to Mr Corran, even at the time. It would have been prejudicial if not remedied but having regard to all of the circumstances I am not satisfied that it was unfairly prejudicial given that it was always going to be the case that at some stage, once external accountants were involved as they would have to be for auditing purposes, the omission would have been picked up. As matters presently stand the most that can be said is that in consequence Greendealexpress was out of pocket for the period of time between paying the installers and being paid and, presumably, is still out of pocket as regards the contra items unless there is provision for interest to be paid on the directors’ loan account. There is no evidence however that Greendealexpress is paying interest on any bank or other commercial borrowing and no evidence that it has suffered other specific substantial loss as a result of this delay. In the circumstances I regard this as closer to negligence than deliberate default and with no evidence of substantial loss or prejudice suffered by Mr Corran as a result.

A further pleaded complaint in relation to Unicom is that Greendealexpress employees, specifically Lynne Holt and Mark Sherer, were used to provide services for Unicom, particularly the development of its website, without their time being charged out to or paid by Unicom.

In evidence [TS2/119] Mr Corran said that Simon Butters used to ask Greendealexpress staff to undertake work for Unicom and that he did complain about it the amount of time that one particular staff member, Kerri Smyth, was working on Unicom business with the result that it was agreed that she would be paid for by Unicom for a period of time. He accepted that he did not specifically complain about other staff being used on Unicom business and that he agreed to it so long as Greendealexpress charged Unicom for the work done. It follows that Mr Corran’s case cannot be that what happened was unauthorised; the real issues are why Greendealexpress did not invoice and obtain payment for the staff time until after proceedings were instituted and whether or not the staff time has all been charged or paid.

So far as the first issue is concerned, the Butters brothers seek to put the blame fairly and squarely upon Mr Simms, saying that they expected him to do this and only realised that it was not being done once the investigation undertaken by Finnies had revealed this. In contrast, in his witness statement at [76] what Mr Simms said was that “whilst I was there, there was never any discussion or acknowledgement that the time spent by us would be recharged to Greendealexpress”. As was pointed out to him in cross-examination, that was rather different to him saying that he was instructed not to invoice for this time. He then said [TS4/56] that “the issue was raised several times with the directors” but also said “I was just under the impression that Greendealexpress would just subsidise it”. In my view his evidence was confused and confusing in this respect.

Mark Butters addressed this question in his witness statement at [55(iii)] and explained that only Lynne Holt provided services for Greendealexpress to Unicom in respect of which a charge ought to have been made. He explained why Mark Sherer did not provide services to Unicom whilst employed by Greendealexpress. There is no counter-evidence to this and I accept it. The Butters brothers rely upon an invoice relating to Lynne Holt which is dated 19 August 2016 [2D/19/001] and is for a relatively modest amount (under £1,500, even after VAT) which Mark Butters said has been paid.

Mrs Scaife addressed the position of Kerri Smyth in her witness statement at [37], saying that although she did undertake work in relation to Unicom properties that was in the context of promoting the Green Deal home assessment work in the course of her employment with Greendealexpress, so that she was not working for Unicom and there was no reason why her time should have been charged to Unicom. I accept and prefer that evidence to that of Mr Corran.

In my judgment the most likely explanation, which is what I find to be the case, is that the Butters brothers never expressly instructed Mr Simms to levy charges for this staff time but nor did they expressly instruct him not to do so. I am satisfied that in this respect the Butters brothers breached their duty as directors because they should have ensured that Mr Simms, Mrs Scaife and the relevant members of staff concerned were all made aware that staff time working for Unicom should be chargeable and should be charged and therefore that they should maintain records to enable Mr Simms to do so. In this respect I do conclude that the Butters brothers had no real intention of ensuring that all staff time was appropriately charged out against the company for whom staff were providing services and that but for the pressure exerted by Mr Corran in the pre-action correspondence and by issuing these proceedings that this time would not have been charged for.

I am satisfied that the position has now been remedied. I am nonetheless satisfied that there was a breach which did unfairly prejudice Mr Corran at the time. However, in the context of the trading affairs of the company as a whole and in the context of this case it was an extremely trivial breach. It was not part of a consistent course of conduct by the Butters brothers of using Greendealexpress as a free resource for the benefit of their other businesses.

The same complaint is pleaded in relation to Express Capital in relation to the use of Greendealexpress staff without charge or payment as is pleaded in relation to Unicom. In this case it is specifically Mrs Scaife and Mr Simms who are referred to in the Petition.

Mark Butters also addressed this in his witness statement at [55(iii)]. He confirmed that both Mr Simms and Mrs Scaife, and Mrs Rose as well, undertook work for Express Capital. He said that Mrs Scaife kept a log of all hours worked which was then used to produce quarterly invoices which have been paid. It is clear from the log [2D/19/19-21] that entries from August 2015 have been recorded for the three employees and it is also clear that these records have been used to create invoices from 24 August 2016 onwards.

It is clear and I find that Mrs Scaife as a conscientious manager did maintain these records, possibly as a response to the email from Mr Corran of 27 March 2015 seeking to ensure that staff time was properly recorded and charged. Moreover, her evidence was supported by the evidence of Mrs Rose [TS5/54] that she was instructed to and did record her time on spreadsheets as from January 2016, although not before that. There is no indication however that these records were sent to Mr Simms and I am satisfied that the same explanation as with the Unicom time applies, namely that there was no express instruction to the staff involved that this time should be recorded and charged for and that the Butters brothers were in breach of directors’ duty in that respect, albeit that the breach was essentially minor and has now been resolved but, even if it had not been, any unfair prejudice to Mr Corran would have been at best modest.

My conclusion is that whilst the conduct of the Butters brothers as regards these connected transactions has in some respects been open to justified criticism, nonetheless the essential thrust of Mr Corran’s case, which is that there has been a deliberate attempt to use Greendealexpress and Energy Express to provide funding and assistance for the Butters brothers’ other business interests without any intention of ensuring that this funding was repaid and that the only reason why any funding and assistance have been accounted for and repaid was because the Butters brothers were forced to do so as a result of these proceedings being threatened and issued, has not been made out. Insofar as some conduct has, I accept, involved a breach of the Butters brothers’ duties as directors and has or would have – unless or until remedied – resulted in some unfair prejudice to Mr Corran, the extent of that unfair prejudice has been relatively modest.

Wrongful retention of debenture?

There is no complaint about the fact that the debenture was entered into or as to its terms. The complaint is that when the monies were repaid as they were by April 2014 the debenture was kept alive by way of an artificial loan rather than being cancelled and removed from the register maintained at Companies House. The complaint is that the loan in question is artificial since it relates to the cost of improvements to the Hall which the Butters brothers claim it was agreed Greendealexpress should pay, whereas Mr Corran disputes that there was any such agreement. I have already dealt with this above and have decided that there was an agreement to pay and that the invoice relating to it is genuine.

It is however clearly the case, I am satisfied, that it would have been perfectly possible for Greendealexpress to pay this invoice in the ordinary course of business. Indeed the email enclosing the invoice states that payment is expected. It is said by Mr Corran that it was kept alive so as to allow the Butters brothers to maintain control over Greendealexpress in the event of any risk that it might be wound-up as insolvent. I accept that this was the motive for the invoice not being paid off by Greendealexpress and reject the evidence of the Butters brothers to the contrary as plainly implausible. It is also said by Mr Corran that he did not agree to this being done, however I consider that on balance he was aware that this was the intention and was willing to go along with it, on the basis that it was as much for his benefit as it was for the benefit of the Butters brothers. I am unable to accept that in the circumstances prevailing in October 2014 he would not have been aware both that the invoice had been raised and that it had been decided not to pay it or that the reason for not paying it was to keep the rights under the debenture alive. Indeed I note that the invoice was rendered in the name of Simon Butters t/a Unicom Property Co rather than in the name of the Brantingham Group as the landlord.

I am satisfied that insofar as it gives Simon Butters an enhanced opportunity to control Greendealexpress in the event of its actual or threatened insolvency that is not and was not prejudicial to Mr Corran, let alone unfairly so. It is plain in my judgment that the decision to keep the debenture alive in October 2014 and thereafter was in the interests of Energy Express and, thus, of Mr Corran and the Butters brothers in their mutual capacity as shareholders in Energy Express, since insofar as it enabled Simon Butters to exercise control over Greendealexpress it enabled him to avoid a situation in which a liquidator appointed on a petition brought by say BG was authorised to take action against Energy Express to recover the £5M dividend. The fundamental point in my judgment is that there is no credible case or evidence that this is or was in any way unfairly prejudicial to Mr Corran in his capacity as shareholder of Energy Express. This is not a case where a security is created in favour of a majority shareholder so as to prevent or hamper the minority shareholder from exercising rights which otherwise he would have been able to exercise in order to prevent unfairly prejudicial conduct by the majority shareholder.

In cross-examination it was also suggested by Mr Corran that it was prejudicial in that it prevented Greendealexpress from accessing commercial funding but since there is no evidence that Greendealexpress has ever needed let alone sought commercial funding it is difficult to see the relevance of that point and I reject it.

In the circumstances, I am not satisfied that this allegation is made out. Even if I was wrong about this, it does not seem to me that this has any relevance to the claim as a whole, so that the only proper relief would have been to order the Butters brothers to require Greendealexpress to pay the invoice (without interest) and to order Simon Butters to take the necessary steps to cancel the debenture and secure its de-registration.

Overall – conduct unfairly prejudicial to Mr Corran?

It is appropriate to stand back and consider the case in the light of the findings I have already made. In summary, the position is that:

It follows that the only conduct which is unfairly prejudicial to Mr Corran on my findings consists in:

It is evident that these finding are far more limited than the findings which Mr Corran set out and continued to invite the court to find. Whilst they cannot be said to be insubstantial they are extremely modest set against the serious allegations complained of which have been at the heart of this case.

Relief – if any - to which Mr Corran entitled?

Mr Maynard-Connor submitted in closing that even if I found – as I have – that Mr Corran concealed his bankruptcy from the Butters brothers in September 2014 it was nonetheless unfairly prejudicial to Mr Corran to exclude him from the business completely, in circumstances where he had worked hard to make the business a success and had been principally responsible for the spectacular turnover and profits obtained from the ECO trading. He submitted that in such circumstances the Butters brothers could not properly have completely excluded him from the business nor insisted that he transfer his shareholding to them for nil value. He submitted that in the circumstances it would be inequitable and unconscionable to prevent him from obtaining relief on that basis.

Forcefully though it was put I am unable to accept that submission. Applying the “clean hands” principle as summarised by Morgan J in the Interactive Technology Corporation case and by Hollington in his textbook, I am satisfied that Mr Corran’s conduct in entering into the 2014 re-organisation without disclosing his bankruptcy, with the consequences which it had on his continued participation in the central management of the companies by February 2015 once he had been given the opportunity but failed to have his bankruptcy discharged or annulled within a short timescale, had the consequence that the Butters brothers’ conduct in excluding him, which was admittedly prejudicial to him, was not unfairly so. Moreover and in any event it has the consequence that the court should not grant Mr Corran the primary relief he seeks, that of an order for his shareholding should be bought out with no discount for his minority shareholding. That would, I accept, have been appropriate had Mr Corran been unfairly excluded from the company, but it is not appropriate in circumstances where his exclusion was justified.

As a fall-back argument Mr Maynard-Connor submitted that even if was to conclude – as I have – that Mr Corran’s exclusion was justified that was not fatal to his contention that the Butters brothers’ post-exclusion conduct was itself unfairly prejudicial and to decide that this by itself justified the court in deciding that Mr Corran was entitled to an order for a buy-out of his interest with no minority discount. As his final fall-back argument Mr Maynard-Connor submitted that I could and should at least award relief to Mr Corran which was appropriate to the individual conduct of the Butters brothers which I have found to be unfairly prejudicial.

I accept, as indeed did Mr Pipe, that if I were to find unfairly prejudicial conduct subsequent to Mr Corran’s exclusion it would in principle be open to me to grant appropriate relief. However having regard to my conclusions I accept Mr Pipe’s submission that it would not be appropriate to grant Mr Corran the primary relief which he seeks on this basis, namely a buy-out of his interest with no minority discount. If one considers the unfairly prejudicial conduct which I have found established, both in its own right and set against the conduct of Mr Corran to which I have already referred as justifying his exclusion, I am quite satisfied that it would be a wholly disproportionate response to conclude that Mr Corran is entitled to an order for the buy-out of his interest, whether with or without a minority discount.

As regards the appropriateness of granting any relief at all, Mr Pipe accepted that if my findings justified it that was indeed an option open to me. He disclaimed any intention of arguing that there was no basis for any relief at all in circumstances where I have determined that, had Mr Corran made disclosure of his bankruptcy in September 2014, the Butters brothers would not have proceeded with the 2014 re-organisation and would have elected to invoke the forced sale procedure in the shareholders agreement so as to acquire Mr Corran’s shares in Greendealexpress for nil value with the result that Mr Corran should be treated as having no relevant shareholding in either company for the purposes of this s.996 claim. In my judgment he was right to do so, for the following reasons.

First there is no claim, whether pleaded or otherwise, to the effect that Mr Corran ought to be required to transfer his shareholding in Energy Express to the Butters brothers for nil consideration on the basis of this argument, so as to disentitle Mr Corran from seeking s.994 relief of any kind and on any basis whether now or in the future. Second, it would not in my judgment have been realistic to advance such a claim. The fact is that the position as at September 2014 was very different from the position which it was anticipated it would have been in within the initial two year period as at the date of entry into the shareholders agreement. The business had made spectacular profits very early from a business activity which had not even been anticipated at that time. Very substantial dividends had already been paid and a further £5M had been identified as available for dividend but a decision made to upload it to a new holding company in order to seek to protect it from possible future clawback claim from BG and others. If the case had been argued on this footing I would have had to consider it by applying the principles considered by Hildyard J in the LCM Wealth Management case. For the Butters brothers to have sought to invoke the shareholders agreement in early 2015 in order to obtain Mr Corran’s shareholding for nil consideration, in circumstances where that would have allowed them to take for themselves his share of such of the £5M dividend as was available for distribution once the BG and other claims had been settled would not, in my view, have been in good faith or for proper motives. Whilst there might have been scope for argument as to whether it would have been reasonable to do so, as long as the Butters brothers also either paid Mr Corran his share of the £5M dividend or acknowledged his entitlement to it once the BG and other claims had been finally resolved, that is a matter I need not decide. The fact is that the Butters brothers have not argued and I do not decide that Mr Corran should be treated for the purposes of this case as if he had no relevant shareholding in Energy Express at any material time since September 2014. In his suggested alterations Mr Pipe submitted either that I should not express any conclusion at all on these matters or, if I did, that I should reach a different decision. However I consider that it is helpful for me to express my opinion on this issue, albeit not pleaded or argued, since it is so closely connected with the matters with which I have been concerned and with which I have dealt, in case either the matter goes further or there are further proceedings between the same parties. What, if any, weight may be attached to my opinion on this issue is a matter for others. I have no hesitation in rejecting Mr Pipe’s suggestion that I should reach a different conclusion on this issue.

In my view the only order which I need make is one which restores Greendealexpress to the position it would have been in had the payment of £64,000 as regards the Butters brothers’ pension not been made, as I am satisfied it ought not to have been made in the circumstances obtaining in April 2015. It would appear that the simplest way of achieving this outcome is by simply ordering the Butters brothers to transfer £32,000 each to Greendealexpress together with interest which, assuming I am correct in my understanding that Greendealexpress does not operate in overdraft, simply reflects what it might have obtained had it been able to put that sum in a deposit account for the equivalent period. I am satisfied that it is appropriate to make this order having regard to the close connection between Energy Express, Greendealexpress and the Butters brothers.

Whilst I accept that it would also have been possible to make an order requiring the Butters brothers to compensate Greendealexpress in relation to the interest which it would have received for the period in which it had laid out monies in relation to Haus, Unicom and/or Express Capital, given my factual findings as to the nature and extent of the Butters brothers’ conduct in these regards and the extremely limited respects, both generally and in monetary terms, in which I have found unfair prejudice, it does not seem to me to be necessary or proportionate to do so in the circumstances.

Conclusion

The claim fails save to the limited extent identified at [317] above.

List of Abbreviations