Wootliff v Rushton-Turner & Ors

This is the trial of an unfair prejudice petition presented by Mr Stanley Wootliff who has been excluded from a company in which he was an employee, shareholder and director. He has not received an offer for his shareholding, fair or otherwise. The claim is that his dismissal as employee, the dilution of his shareholding and exclusion from management as director constitutes conduct that amounts to unfair prejudice for the purposes of s994 of the Companies Act 2006.

Harden's Limited ("HL") was incorporated in February 2000 and traded as a London-based publisher of restaurant guides. Peter Harden and his brother Richard were directors and shareholders of HL. Peter and Richard had been in business together since the 1990s.

Smart Diner Limited (“SDL”) was incorporated in January 2011. The petitioner, Mr Wootliff, was the sole director and shareholder. SDL’s business was the marketing and sale of “dynamic pricing grid” technology, which aimed to help restaurants attract customers at quieter times by using time sensitive pricing.

SDL and HL entered into a dialogue in March 2012. It was recognised that the business of SDL and HL could benefit from each other. HL had an established reputation and was profit making. It needed to evolve. It had been a book based business. SDL owned the IP rights of the technology platform. It had no existing reputation, proven track record or available funds to develop its business. It was posited that a new vehicle through which the parties could operate the combined business could be formed. For this purpose Smart Diner Group Limited (the “Company”) was incorporated in December 2012 when a conditional agreement was entered into between the Hardens and Mr Wootliff. The conditional agreement required funds to be raised to progress the new business. To facilitate transfer of business interests Mr Wootliff and the shareholders of HL entered into a share exchange agreement dated 24 January 2013 (“SEA”). In addition the directors of HL entered into the Harden’s Agreement (“HA”) which concerned the sale of the shares in HL to the Company. An outside investor, Martin Rushton-Turner, subscribed £25,000 to the Company. In February 2013 an investment memorandum was produced for the purpose of attracting outside investment. No outside investor was found. In or about May 2013 the project appeared to be doomed to failure. Hearing of the failure to find an outside investor, Mr Rushton-Turner decided to underwrite the project. Completion of the arrangements took place on 3 July 2013. On the same day the share capital of the Company increased from £322,816 to £645,632.

Mr Wootliff was appointed and assumed the position as Chief Executive Officer of the Company. Peter and Richard Harden were appointed directors. All three directors had Service Agreements and were shareholders.

On 19 July 2013 the Company granted a share option to the part-time finance director, Mr Thomson. A friend and advisor to Mr Rushton-Turner, Mr Nathan, was granted a share option. A few months later in September, the Company suspended Mr Wootliff pending an investigation into his conduct. A disciplinary hearing took place the following month resulting in dismissal. His appeal was rejected. Mr Wootliff initiated proceedings in the Employment Tribunal. Those proceedings were dismissed on withdrawal the following year. In the meantime, a second option to purchase shares was exercised by Mr Thompson. One effect of the exercise of the second option was that Mr Wootliff’s shareholding reduced below 25% and, with the reduction, the loss of his ability to unilaterally appoint a director.

I heard evidence from Mr Wootliff for two and a half days. He was the only witness giving evidence in support of the petition. For the respondents I heard evidence from Mr Tim Nathan, Mr Thompson, Mr Peter Harden, Mr Richard Harden and lastly Mr Martin Rushton-Turner. I will have something more to say about the evidence they gave in determining issues of fact below.

As a general observation I found Mr Wootliff to be an intelligent individual who knew the documents well. He could recall dates and times with a high degree of accuracy and spoke with a great deal of force and conviction. His evidence was at times evasive. He deliberately failed to answer some questions but chose to give evidence on an issue that he wanted to discuss. During his evidence he became irascible and cantankerous when challenged. His evidence moved to a position that suited him when responding to cross-examination. He accepted he had lied to the board of directors. I had the firm impression that he changed facts to suit his position and changed his position to suit undeniable facts. He was quick to take on a challenge and slow to back down when faced with a contradictory document. Having heard and watched him in the witness box I find his evidence was not always reliable and not reliable on key issues effecting the outcome of this petition.

Mr Nathan gave straight forward honest evidence. He was clear as to what he knew or did not know and careful in response to questions. His evidence was reliable. Mr Thompson’s evidence was undermined in cross-examination at times. He was quick to accept if a document contradicted his evidence and did not seek to exculpate himself if he got things wrong. He drafted his own witness statement. I had the impression that he tried his best to answer questions put to him even when, at times, he faced pressured and caustic cross-examination. He was an honest witness and he gave, in my judgment, reliable evidence in respect of key issues.

Mr Peter Harden gave straight forward evidence. He is evidently an intelligent man who was also able to remember with clarity some of the key events. He did not snap at answers, sought to break down the questions, and was careful to read documents before giving an answer. At times he was keen to expand on answers he gave. Although not conducive to getting through the trial time-table, given a little time to explain matters he became sure of his ground. His brother Richard gave evidence in a similar manner. At times Richard demonstrated some irritation but that did not undermine his reliability. He spoke at speed, was thoughtful and generally spoke with great care. I found the evidence given by the Harden brothers reliable.

Mr Rushton-Turner gave evidence for a day. At times his evidence was hard to follow as he answered his questions as if he were in a conversation, interrupting questions, talking over counsel, and abbreviating language. Despite his manner in the witness box, I find that he gave reliable and at time insightful evidence. Mr Robinson is the Company secretary. He produced a witness statement for the proceedings. Due to ill health he was not able to attend court for cross-examination. It was agreed between the parties that his evidence should be admitted, and the court should give such weight to it, in light of all the evidence, as it sees fit.

The case management order included a requirement for the parties to agree a list of issues. These are:

I am grateful to counsel and solicitors for agreeing the list of issues. It has helped reduce the amount of time this trial may otherwise have taken.

Mr Wootliff relies on a series of e-mails and his evidence in respect of meetings between June 2012 and July 2013 to establish that the Company was a quasi-partnership (the first issue). It is agreed that the Hardens were introduced to Mr Wootliff by a PR company in the early part of 2012. Mr Peter Harden’s unchallenged evidence is that HL’s revenues dropped in or about 2008 due in part to the financial crisis (a large part of the business involved selling guides to banks), and in part due to the growing popularity of online and digital texts. They considered options. Peter said that Richard formed the view that a merger with another business may work. In his oral evidence Richard explained that this was not the only option on the table. The business could have been run as a hobby as he and Peter had other income streams. Richard had spent some time working in merchant banking and corporate finance. Aware of his corporate background, Peter was prepared to consider merger proposals advanced by Richard. Nevertheless, he was not in favour of surrendering control of HL without new money coming into it, or without some form of cash pay-out. Richard accepted in evidence that his relationship with his brother was not at its best, but understood his concerns. The business of HL meant a lot to the brothers. Richard explained that HL “was something of a life’s work”.

Richard found a potential merger partner through an online advertising and offers site but the talks came to nothing. Peter had not enjoyed the experience which led to difficulties between the brothers. Regardless of their difficulties they maintained a civil and workman-like relationship. At an early meeting in 2012 Mr Wootliff explained the business of SDL to Richard: a restaurant booking grid which enabled restaurants to offer discount prices to their customers which varied according to the day of the week and time of day. Peter understood the talks with Mr Wootliff were aimed at a “minor marketing tie-up, wherein HL might display the SDL grid on the HL web pages for SDL client restaurants”. In May 2012 Peter and Richard met with Mr Wootliff. This was the first occasion when all three discussed the possibility of combining the two businesses of HL and SDL. Peter’s evidence is that he was “taken aback at this initial meeting” as he was not expecting talks of a merger. It was clear to Peter that Richard and Mr Wootliff shared enthusiasm for the idea.

In cross-examination Peter was asked about his enthusiasm on the basis that HL had no other alternative if the business was to be saved. Peter responded that it was quite possible that it “would have had to have restructured in some way” but that his wages were a large drain. He explained that he did not need to take drawings from HL. If he did not take drawings or even reduced the drawings HL would have saved a considerable sum, “I mean I already had an alternative employment”. He did not think he needed HL to make money and “I think Richard would struggle[d] to keep it going in exactly the same way, shape or form. Obviously with a restaurant guide there are…...aspects of congenial business to have as a hobby…….I think we could have chosen to stop going for it as a money making concern and turned it into a much loved hobby.” Having observed Peter in the witness box, seen and heard how he responded to this question in a straight forward but careful manner (as I have indicated above), I find that this was a truthful account. It is through the prism of keeping a cherished business, not necessarily a profit-making business, that Peter and Richard sought alternative business strategies.

After the meeting, Mr Wootliff wrote to Peter and Richard and said that he was not sure if an understanding had been reached that funds would need to be raised for a joint company enterprise. He set out his hope for the future and articulated a hope that “there is a lot of merit in combining Hardens and SmartDiner on the basis that we briefly discussed. We would increase Harden’s brand awareness and convert visits to Harden’s site into revenue producing bookings using the SmartDiner dynamic booking system.” Richard agreed “in principle”, but explained that he wanted to meet other proposed directors in the joint venture and wanted to see more detail from Mr Wootliff. The e-mail sent by Mr Wootliff is a good example of him following-up on a meeting in writing, recording (not each word, but the general gist) the main points discussed and setting a future agenda.

Soon after Richard and Peter visited SDL’s Leeds office. There followed a series of e-mail exchanges concerning the shape of the combined business and in particular the need for a “the combined business plan in detail”. On 5 June 2012 Mr Wootliff wrote to Richard explaining that SDL had a “cash burn” of £10,000 per month with £150,000 of reserves. This was because Mr Wootliff had managed to obtain funding from Mr Martin Rushton-Turner who was prepared to invest £100,000 for 15% of the share capital, on the basis that he would obtain tax relief under the Seed Enterprise Investment Scheme (“SEIS”). Mr Rushton-Turner is a private investor who trusted Mr Nathan (a close friend) to identify or introduce investment opportunities that he may find of interest. The unchallenged evidence of Mr Rushton-Turner on this issue is that he had very limited contact with Mr Wootliff during this period, and received updates from Mr Nathan. He says that his relationship with Mr Wootliff was “nothing wider than as a minority investor in an early stage SEIS company”. I accept his evidence: he had nothing to do with the day to day control or any strategic management of SDL, he was an investor and, at that stage, had no personal relationship with Mr Wootliff. Mr Rushton-Turner also gave £40,000 to Mr Nathan to invest.

With this investment Mr Wootliff was concerned to progress with reasonable haste. He stated that there were “two difficulties about the merger. First is deciding to go ahead. Second is the relative values of Hardens and SmartDiner.” He thought everything else to be “technical” and expressed an aspiration that “the merger would be by end July”. He thought that once the merger had completed a few months could be used to seek funding. The Hardens wanted the investment before any merger.

By email return on 5 June 2012, Richard stated that Mr Wootliff’s thoughts “provide a clear roadmap for the future…we look forward to pursuing the journey together on Monday”.

Following the meeting Mr Wootliff sent an e-mail (which may be viewed as a characteristic of his business dealings in connection with this matter) setting out an agenda which included a need to agree the relative values of HL and SDL, and produce a “future strategy and outline narrative to support the merger and fund-raising proposition”.

Peter remained hesitant, despite Mr Wootliff sending attractive financial projections showing revenue in excess of £1,000,000. One of the reasons for his hesitation may have been that he had obtained a third party’s thoughts on the merger. The document containing the review expressed surprise at the small value placed by Mr Wootliff on HL: “you have to be worth more. You have a brand. All he’s got is a lot of talk a bit of investment in a piece of tech….doesn’t set much store by the patent I just don’t see how you can protect something like that….Have you tried working together. You’ve got to start trailing. Wouldn’t investors want to see that? Heads of terms should be fine. If you really have to commit yourself, go for a legally binding Sale & Purchase Agreement. You don’t need to bind yourself to one another. Just don’t do it.” This is important advice. It is important as it (i) appears to have set the framework within which Peter was prepared to consider a merger (ii) put him on notice of the relative value of SDL and (iii) alerted him to the potential of patent insecurity. The author suggested a conditional agreement. This advice will have been accepted by Peter and Richard as a conditional agreement was progressed.

Mr Robinson’s view, at this time, was that Peter and Richard were unsure that Mr Wootliff would be able to raise the capital to support the merged business. Mr Robinson’s view is confirmed by an e-mail sent by Peter to Mr Wootliff where he said “I have been having discussions with some friends and acquaintances who work in private equity, publishing and banking. No-one I’ve spoken to can see the logic of a Smart Diner/Harden’s merger should the money not be there for some reason to execute the business plan.” He went on to explain that more time was required to explore going into business with others as well as SDL to form a “dream team”. Richard agreed with Peter and pointed out that “parity valuation” as suggested by Mr Wootliff, “is not obviously appropriate”. This sparked the possibility of SDL purchasing Hardens, but the costs of acquisition were never discussed, and in any event an outright purchase would require funding.

Discussion by e-mail continued through August 2012 and following a lunch (which appears to have been the favoured forum for business discussions (often suggested by Mr Wootliff), Mr Wootliff wrote an e-mail setting out a proposed role for Peter, to appoint Mr Nathan as finance director, and Mr Hawer, Mr Angela and Mr Gilby as non-executive directors. It is not clear that Mr Wootliff discussed these proposed appointments with any of the parties concerned in advance of the e-mail.

During September and October 2012 Mr Wootliff was agitating for progress. He e-mailed “I am concerned that a deal could be slipping away”, noting that Peter “told me, it took him 12 years to propose to his wife, regrettably we do not have that much time available.”

Although untested by cross-examination Mr Robinson’s seemingly uncontentious evidence is that during November 2012:

“a number of complex proposals were put forward in which Tim was involved, as to the correct way to arrive at a satisfactory share price. During 22 to 26 November 2012 I was engaged in email correspondence between myself and Stephen Marshall (who was the solicitor for Richard and Peter) and copied into email correspondence from Stephen Marshall and Tim. During this time negotiations took place over the concept of forming a holding company, which at that point was to be called Hardens Holding Limited, which would acquire both HL and SDL. The SPA entered into on 14 December 2012.”

Mr Robinson explains in his evidence, that the SPA provided for a payment to Richard and Peter and that the Company would complete the SEA on or before 30 April 2013 on the basis that, among other things it had raised by a placing not less than £1,500,000 (having held meetings with prospective investors for a placing, and having received expressions of interest for not less than £1,000,000 by 14 February 2013). This would permit the Company to be “operating the respective businesses of [HL] and Smart Diner as one group”

Mr Robinson incorporated the Company for this purpose and was its first director. The parties to the SEA dated 24 January 2013 were the Company, Peter and Richard Harden and Mr Wootliff.

In closing Mark Harper QC submitted that the relationship between Mr Wootliff and Mr Richard Harden was particularly close as evidenced by an accumulation of e-mail exchanges during the period April 2012 to 3 July 2013 when the merger completed. The exchanges demonstrate a relationship of a personal character. An example will serve to demonstrate. In an e-mail sent by Richard on 31 January 2013 he said “I may have finally realised WHY this marriage, made in Heaven – which I really do believe in – is proving so difficult to sell to the in-laws”. Richard went on to explain, by way of analogy, that investors were likely to want to understand the prospects of the merged companies: “I’m not suggesting we don’t mention synergy, especially orally, but the journey we’ve embarked on has led us to the conclusion that, from a financing point of view, it’s a relatively small part of the story? From an investor’s point of view, is the ‘synergy’, in fact, not just largely the use of the Harden’s brand as a marketing aid for SD?”. The reference to in-laws was intended to be a reference to investors.

The Hardens and Mr Wootliff worked together on the production of an investment proposal but there were no investors for the joint enterprise at that time. Mr Robinson’s evidence accords to some extent with the evidence of Mr Wootliff as to the events in January 2013. In his statement he states:

“Accordingly, from the early part of 2013 there were attempts to raise such finance, in which Peter and Richard were involved as well as Stanley. In particular Stanley instructed Merchant Securities Limited who were a merchant bank and investment advisers based in Leeds and local to Stanley, but with a London office. Their involvement was to produce an investment presentation ………and an investment summary……to be used by Merchant for the fundraising…. The fund raising activities were not wholly limited to Merchant…The fundraising efforts with Merchant failed, and their mandate cancelled by Stanley.”

According to Mr Rushton-Turner’s evidence he heard from Mr Nathan in January 2013 that Mr Wootliff required more capital. His understanding was that there had been some discussions with the Hardens. He was familiar with Hardens being a regular user of the London restaurant guide. He understood that Mr Wootliff was seeking to acquire Hardens and at the same time raise £2 million from professional investors knowledgeable in the industry (although that would dilute his investment). He was informed that the Company needed £50,000 to assist with the fundraising and contemplated acquisition. Mr Wootliff asked Mr Rushton-Turner if he would subscribe to a convertible loan note in the Company. It was agreed that he would subscribe £25,000 for a convertible loan note, and Mr Wootliff would do the same. By an e-mail dated 24 January 2013 the solicitor for the Company attached a copy of the loan and explained to Mr Rushton-Turner “Stanley Wootliff is putting in £25,000 in parallel however his loan will not have the conversion right attached.” In fact, Mr Wootliff never made the £25,000 investment. I infer that he did not make the investment because he could not afford to do so, rather than having an intention to cheat Mr Rushton-Turner. Mr Rushton-Turner’s evidence is that he did not have any material contact or updates from the Company or Mr Wootliff from completion of the loan note investment until end or May/ beginning of June 2013.

In addition to the e-mail exchanges referred to above, a personal relationship involving mutual trust and confidence is said to be evident (in part) from the work of the respondents to the petition (although it is not clear that this involves all the respondents) and Mr Wootliff on the investment proposal, and an e-mail in February 2012 from Mr Wootliff to Richard and Peter asking if they would agree that the condition in the SPA, to demonstrate interest from investors by 14 February 2013, had been met, enabling a merger. Mr Wootliff explained that several investors had shown an interest. Richard drafted a response to the effect that they should press ahead, but it is said that the response was not sent.

Mr Robinson explains what happened next

“For a while it looked likely that the acquisition of HL would not proceed at all. In or around June 2013, I became aware from Stanley that Tim had re-introduced Martin to the circumstances and that Martin had indicated he was willing to provide most of the £500,000 needed so that the acquisition could continue.”

The circumstances in which the further investment was made is of interest. A meeting was arranged by Mr Wootliff with Mr Rushton-Turner for 5 June 2013 to seek financial support for SDL to continue alone. Mr Wootliff’s evidence of the meeting is thin but Mr Thompson was present. Mr Thompson had known Mr Wootliff since 1978 and was employed by him as a financial controller of a business known as Pawson Plc. Although they had known each other for a long time and Mr Thompson had attended the bar mitzvahs for Mr Wootliff’s sons, he gave evidence that he did not share a close social relationship. That did not mean that he was not loyal to him or ungrateful for a helping hand at times. Mr Rushton-Turner said that this was the first time he had met Mr Thompson, and that he was introduced to him as an accountant who had experience of “accounting, planning, project review” and “corporate functions”. Mr Rushton-Turner said that the meeting “crystallised my view” of progress made by Mr Wootliff in respect of the enterprise. He thought that “Stanley had made very little (if any) progress in developing the SDL business (technology, restaurant customers or sales generally). Rather, Stanley’s focus had been on the hope of the “transformative” acquisition and fund raising”. He considered that any success would require a “brand” name and that there was no money or time to develop a brand. He recognised that “SDL was clearly running out of money and not generating much (if any) revenue”. His untested evidence (of this meeting) is that consideration was given, following a suggestion by Mr Rushton-Turner to offering 33.33% of SDGL to “Richard and Peter in return for contributing Hardens”; 33.33% of SDGL should be retained by its existing shareholders (Mr Wootliff, himself and Mr Nathan); and 33.33% of SDGL should be owned by new money investors. This would provide the required £500,000 for working capital. His evidence is that he would underwrite any new issue. The evidence given by Mr Rushton-Turner has the ring of truth and fits well with what was going on at the time.

Mr Rushton-Turner gave evidence in cross-examination to the effect that that he was not too troubled about the details concerning the division of shares. He was, however, concerned that he should be able to qualify for Enterprise Investment Scheme tax relief (“EIS”) on any investment. The division of share issue (who would get what) was not based on an enterprise value, or any analysis of the Company’s value. There is no evidence supporting a factual background of negotiations regarding how many shares should be available to Mr Wootliff at this stage (June/July 2013). The share capital and subsequent division of shares was aimed at providing sufficient working capital to permit the Company to start trading, and become “self-sufficient”. In his written evidence he explained that he found “the Harden business (long established reputation, close links with top restaurants, publishing) a more interesting investment than the “financial industry” type world with which I was familiar”. I accept his evidence that he “did not by then believe SDL really had any future absent attaching to some established brand”. His evidence that he “did not ever see this as a “partnership” or pooling of interest, whether with Stanley or indeed with Peter and/or Richard”, and viewed his involvement as “a rescue funding (at least of SDGL and thus SDL)……” explains his attitude, and has the resonance of truth. His evidence that “the detail of the contractual arrangements [were] core” I accept as he became involved and was sure footed as to what he required.

In cross-examination Mr Rushton-Turner said that he did not require a shareholder agreement “as such because I could deal with it in the articles. I mean I didn’t need a shareholders’ agreement because I didn’t- I will be straightforward about it. Shareholders agreements are usually about protecting, not the minority but setting out protections for management and other such people, right. I don’t see the point of having a shareholders’ agreement because I could, I thought, do everything I needed to do in the articles and the conditional subscription agreement and I did, I think.” His written evidence is not inconsistent with his oral evidence. I accept his evidence as representing a true account.

On Friday 7 June 2013 Mr Wootliff wrote to Mr Rushton-Turner saying that he would like to proceed with the plan that he, Mr Rushton-Turner, would underwrite the share issue and gave details of the roles the Harden brothers and he would take in the Company, adding that Mr Thompson could be the financial director employed 1 day a week and Mr Rushton-Turner a non-executive director.

The first time Mr Rushton-Turner met with Peter and Richard Harden was on 17 June 2013. The evidence suggests that the parties got on well. Mr Rushton-Turner accepted in cross-examination, as did the Harden brothers, that the relationships were amicable. As I have set out above, Mr Rushton-Turner was the major funder and wanted to have input into the Articles and SPA. By an e-mail dated 19 June 2013, Mr Wootliff provided the bank details of Sherrards solicitors (the Company’s nominated solicitor) and wrote “we await your proposed amends to the Mem & Arts. I have mentioned to our solicitor the drag and tag and pre-emption changes you mentioned and we would have no problem with them.” Mr Wootliff is an experienced businessman and understood the terms used and the operation of articles of association. The e-mail of 19 June 2013 is evidence of Mr Wootliff’s involvement in the Articles of Association and, he does not dispute that Sherrards Solicitors took him through the documents (see paragraph 43 below). He also enclosed the “final” draft of the SPA which had been sent to “Richard and Peter’s solicitors”.

Mr Rushton-Turner explained that the articles were to be changed in order to provide him with “as much minority protection as possible against a majority whilst (quite consciously) seeking to ensure that none of Peter, Richard or Stanley could ultimately protect themselves against a majority or individually have the power to block special resolutions”. In an e-mail dated 22 June 2013 to Sherrards Solicitors copying in Mr Wootliff, he informed them he had amended the Articles and SPA and signed a clean version which should be held in escrow.

The amended Articles were to go to the Hardens’ solicitors for approval. He provided amendments and gave an explanation: “[a]s for the Articles (and working from the Smart Diner pro forma) changes I require are Articles 18/19 Any single shareholder holding Shares representing 25% or more by nominal amount has the right to appoint a non-executive Director including removing and re-appointing”. A few of the shareholders would have 25% or more but article 40 “permitted the Board to issue £150,000 (by nominal value) of new shares to any such person, at any time and subject to such terms and conditions as they thought proper”. His written evidence is that the £150,000 sum was not accidental. It was sufficient to dilute all shareholders below 25% except him. He expanded on this in cross-examination:

“But why Article 40 originally—Article 40, which is the provision for additional share capital to be issued without pre-emption. That originally, I think had—I think originally had a number of a million quid in it that could be issued. That was the original proposal of Keith with no pre-emption rights, no carve-out for pre-emption, which obviously could have diluted me. In other words, it would have allowed the board to take me below 25 per cent if they’d wanted to. I originally crossed that number out and said I am not having that at all. Then I thought about it, did some mathematical calculation and put 150,000 in there. 150,000 being the kind of money that the company might need for funds, so allowing for the company to get funds but being the amount, which meant that I could never be taken below 25 per cent. But it did mean that Stanley could.”

Under pressure in cross-examination he gave careful evidence that he was concerned that Richard and Peter Harden would work together to out vote him and that Mr Wootliff on his own, did not provide such a threat: “the reason—obviously that was drafted for my benefit because I was a single substantial shareholder. By complete fluke of numbers Stanley did have more than 25 per cent, but I emphasise a complete fluke of numbers”. I take this evidence to mean that there was never a conscious decision by any of the parties (and in particular on behalf of Mr Rushton-Turner) that Mr Wootliff would be a Substantial Shareholder (as defined in the Articles of Association). The following answers in cross-examination are revealing in relation to his negotiated position as shareholder:

“Q. First of all, I am just going to deal with the background and then we will come to the meeting itself. First of all, there wasn't ever a discussion, was there, about your shareholding remaining at a set percentage?

A. No.

Q. And you recognised the possibility that your shareholding might be diluted?

A. It was a possibility that everybody's shareholding might be diluted.”

As there is no reliable evidence that Mr Wootliff bargained to be a Substantial Shareholder; the evidence is that he became one due to a “fluke of numbers”; and he knew he was exposed to a dilution risk, I find that Mr Wootliff did not have an expectation of being able to appoint a non-executive director prior to completion of the merger.

If it were otherwise I would have expected Mr Wootliff to have negotiated a position whereby he would have retained the benefits of being a substantial shareholder even if his shareholding was diluted.

Mr Rushton-Turner’s evidence on the change to the Articles is free from contradiction. Mr Robinson, in his written evidence explains:

“The terms of investment stipulated by Martin did include him having the right to become a Director and also a requirement that SDGL adopt new Articles of Association with pre-emption provisions. My firm acted as Solicitors to SDGL with Martin acting for himself. I took Richard, Peter and Stanley through the documents produced by Martin and explained his requirements, including the provisions of the new Articles of Association. After discussion it was agreed between Stanley, Peter and Richard that the terms were acceptable to all of them.”

It is common ground that Mr Robinson had known Mr Wootliff for a long time prior to the merger of HL and SDL. Mr Wootliff had instructed him as a solicitor to advise shareholders of a limited company then called Dumpton (Thanet) Greyhounds Limited on the sale of that company to Mr Wootliff. That company, continued to instruct his firm on various corporate and commercial matters, fundraising and other transactions until 2011. The evidence of Mr Wootliff is that his relationship with Robinson was personal. He reached this conclusion on the basis that they had dinner a few times, and been to the opera. Their respective wives joined them on occasions.

This relationship is different from other relationships between the directors of the Company. Mr Robinson acted in his capacity as a solicitor in an established professional partnership exchanging advice for fees. Although he had become a non-executive director and minor shareholder any trust and confidence that arose was in the context of a pre-existing solicitor-client relationship. It is not uncommon for professional people to lunch, dine, and attend entertainment or sporting events with clients. The aim is to build a working relationship. Mr Wootliff’s oral and written evidence was peppered with references to lunches where business matters were discussed. It may be going too far to conclude that to lunch with various businessmen and women was the sole business facilitating forum for Mr Wootliff. It was a forum that he enjoyed and used frequently. The fact that he combined the social occasion with business discussion or was simply at functions where other business associates congregated did not give rise to a personal relationship of trust and confidence as envisaged or described by the authorities. The introduction in the evidence of wives meeting, meeting through friends, wife of friend or even attending a bar mitzvah does not add to the quality of the relationship. Something more is required to add the ingredients of trust and confidence.

Mr Wootliff’s written evidence is that his relationship with Mr. Nathan arose because he had known his wife for “the best part of 40 years” and was introduced to him by “his wife’s parents”. He had been a guest at Mr Nathan’s wedding and met on family occasions. The wife of Mr Wootliff had invited Mr Nathan’s wife to dinner and Mr Nathan had attended. These are thin grounds, in my judgment, to support the contention that there existed a relationship of a nature required to trigger equitable considerations of a personal character arising between one individual and another, that may make it unjust to insist on legal rights.

Mr Wootliff was asked in cross-examination why he had included Mr Nathan as a respondent to the petition. The answer he gave was, in my judgment, straight forward and honest. It had nothing to do with his relationship with Mr Nathan, but rather the fact that Mr Nathan was associated with Mr Rushton-Turner:

“Q. You brought an action against various respondents and that includes Mr Tim Nathan.

A. Yes.

Q. You know who he is?

A. Yes.

Q. Why have you brought this action against Mr Nathan?

A. Because he is an associate with Martin Rushton-Turner, in the EIS claims that they have jointly made.

Q. You are not suggesting he's ever been a director of the company, Smart Diner Group Limited, are you?

A. No.

Q. And he was not involved in any material decision-making at that company, was he?

A. No.

Q. All he did was introduce you to Mr Rushton-Turner, is that right?

A. No.

Q. No? Would you care to expand on that?

A. He drew up the business plan.

Q. But he was not involved in the business?

A. No.

Q. At all, was he?

A. No.

Q. He just happened to be a shareholder in the company as a result of the shareholders' agreement?

A. No, he drew up the business plan.”

The evidence given resonates with the evidence provided by Mr Nathan. Accordingly, even on his own evidence, there was no relationship of the type required. His association with Mr Nathan may be contrasted with the relationship between Mr Nathan and Mr Rushton-Turner. Mr Nathan is a close and long-term friend of Mr Rushton-Turner, and was involved in the Company not because of any prior relationship with the Hardens or Mr Wootliff, but because of Mr Rushton-Turner. Their relationship was forged a long time ago and may be described as a deep long-term friendship. The gift of monies by Mr Rushton-Turner to enable Mr Nathan to subscribe for shares in the Company was made, I find, as a result of the deep friendship and the gift is consistent with the actions of a person who had amassed sufficient wealth so as to be able to be generous with those with whom he had forged a close bond. Mr Rushton-Turner and Mr Nathan explained in oral evidence some of the hall-marks of their friendship including Mr Nathan’s family living at Mr Rushton-Turner’s home while the family home was renovated. I have little difficulty in finding that Mr Rushton-Tuner reposes trust and confidence in Mr Nathan, respects his abilities to analyse and trusts his judgment. Their relationship is very different to either one of theirs, and Mr Wootliff. Taking the evidence of Mr Rushton-Turner as a whole, I have formed the view that he was approaching the financial arrangements and constitution of the Company as an outside investor. Although he may, when viewed objectively, have been generous, he was careful to ensure he retained control of his investment through his shareholding rights, and ability to invest (and thereby dilute other shareholders) further. His relationship with Mr Nathan would have led to shareholder vote co-operation. The evidence he gave about his motivation to be involved in a commercial project that sounded of interest to him (HL), and to obtain tax relief (SDL), I find truthful.

The evidence given by Mr Wootliff in cross-examination completes the picture of these various relationships. He accepted that Mr Rushton-Turner had “negotiated quite thoroughly to ensure that he’d have various protections under the amended Articles of Association”, had only “met the two Hardens once” prior to completion, and met Mr Thompson “once for an hour” on 5 June 2013 (although I accept that Mr Wootliff knew Mr Thompson from previous business encounters). He accepted that Mr Nathan was no more than a “minority shareholder” and “was not going to take part in the business”.

Peter Harden, on any version of events, had less contact with Mr Wootliff in the period April 2012 and July 2013. Cross-examination about the merging businesses, and forging a relationship of a personal character, focused on Mr Wootliff’s exchanges with Richard Harden. Peter Harden did accept, however, that there would have been no merger unless there was a strong relationship:

In his live evidence Peter Harden said he let Richard “make the running, if you like, pre-transaction”, he did not like the “marriage” analogy and “would quite like to distance myself from quite a lot of the tone of the correspondence”. When asked if there was an analogy that would better suit the merger he responded simply “two businesses coming together, of businessmen sitting down in a rational way and working out what is in their legitimate economic interests.” Mr Wootliff accepted in cross-examination that he had not known the Hardens “for very long”, and had “signed a formal agreement for the possible merger of the business”.

The Articles as amended were adopted by the Company on 3 July 2013, the SPA signed, and a business plan adopted. There is a dispute, reflected in the witness statement of Mr Wootliff, as to whether or not a business plan ever existed. The issue is not fundamental to my findings but there was a document that set out projections for the Company. The issuances of shares took place on 8 August 2013 after all moneys had been collected from subscribers.

There is little between the parties as to the relevant legal tests (although emphasis is different). The starting point is section 994 of the Companies Act 2006 which provides:

“A member of a company may apply to the court by petition for an order…..on the ground that the company’s affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally or of some part of its members (including at least himself) or that any actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial”.

Section 996 of the 2006 Act (where relevant for this case) provides:

“(1)

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

(2)

Without prejudice to the generality of subsection (1), the court's order may–…

(e)

provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company's capital accordingly.”

I start this analysis with a comment. The petition does not allege a breach of any of the agreements regulating the affairs of the Company. The case was not run on that basis.

Mr Wootliff needs to demonstrate to the satisfaction of the court that: (i) the acts or omissions of which he complains relate to the affairs of the Company; (ii) the conduct of those affairs has caused prejudice to his interests; (iii) as a member of the Company; and (iv) the prejudice is unfair: Hawkes v Cuddy (No 2) [2008] B.C.C 390 at 437, 440 quoting Re Saul D Harrison & Sons Plc [1994] B.C.C 475 at 499.

In Re A Company (No 004377 of 1986) Hoffmann J was concerned in a case where there were no allegations in the petition of any wrongful conduct by the board or majority shareholders. There was no suggestion they were paying themselves excessive salaries, or diverted business to other companies. The petitioner claimed relief because he became a shareholder on the basis of a legitimate expectation that he would participate in the management of the company and would be employed on a long-term basis. In fact he had been excluded. Hoffmann J (as he was) cited from Posgate & Denby (Agencies) Ltd (1986) B.C.C. 99:

“But the concept of unfair prejudice which forms the basis of the jurisdiction under section 459 enables the court to take into account not only the rights of members under the company’s constitution but also their legitimate expectations arising from the agreements or understandings of the members inter se. There is an analogy in Lord Wilberforce’s analysis of the concept of what is ‘just and equitable’ In re Westbourne Galleries Ltd [1973] A.C.360, 379. The common case of such expectations being superimposed upon a member’s rights under the articles is the quasi-partnership, in which members frequently have expectations of participating in the management and profits of the company, which arise from the understandings upon which the company was formed and which it may be unfair to other members to ignore…. Although the answer to the question “-of whether such a legitimate expectation exists” must in each case depends upon the particular facts, it is well to recall that In re Westbourne Galleries Ltd Lord Wilberforce said that in most cases the basis of the Association would be “adequately and exhaustively” laid down in the articles. The “super imposition of equitable considerations” requires, he said, something more. This was said in the context of the “just and equitable” ground for winding up, but in my judgment it is equally necessary for a shareholder who claims that it is “unfair” within the meaning of section 459 for the board to exercise powers conferred by the articles to demonstrate some special circumstances which create the legitimate expectation that the board would not do so. Section 459 enables the court to give full effect to the terms and understandings upon which the members of the company return associated but not to rewrite them.”

The House of Lords’ consideration of “just and equitable” winding up is required reading. The leading opinion in Ebrahimi v Westbourne Galleries Ltd was given by Lord Wilberforce. It was submitted that a limited company, however small, essentially differs from a partnership… In the case of a company, the rights of its members are governed by the articles of association which have contractual force; that the court has no power or at least ought not to dispense parties for observing the contracts; but in particular, when one member has been excluded from the directorate, or management, and the powers expressly conferred by the Companies Act and the articles, no analogy with a partnership should be drawn. Lord Wilberforce in his analysis, thought the whole judgement in re Wondoflex Textiels Pty. Ltd [1951] V.L.R 458 had value. He cited Smith J. at page 467 as follows:

“It is also true, I think, that, generally speaking, a petition for winding up, based upon the partnership analogy, cannot succeed if what is complained of is merely a valid exercise of powers conferred in terms by the articles…… To hold otherwise would enable a member to be relieved from the consequences of a bargain knowingly entered into by him….. But this, I think, is subject to an important qualification. Acts which, in law, are a valid exercise of powers conferred by the articles may nevertheless be entirely outside what can fairly be regarded as having been in the contemplation of the parties when they became members of the company…”

He went on to explain that the exercise of legal powers conferred may be subjected to “considerations ….of a personal character arising between one individual and another…”. In answer to the question when is it appropriate to subject the legal powers to equitable considerations, he opined:

“Certainly, the fact that a company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of association is adequately and exhaustively laid down in the articles.”

Lord Wilberforce explained that the superimposition of equitable principles may arise where one or more of the following arose on the facts (i) “an association formed or continued on the basis of a personal relationship, involving mutual confidence”; (ii) “an agreement, or understanding, that all, or some…of the shareholders shall participate in the conduct of the business”; and (iii) “restriction upon the transfer of the members’ interest in the company – so that if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere”. He went on to say:

“It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves. To refer, as so many of the cases do, to “quasi-partnerships” or “in substance partnerships” may be convenient but may also be confusing. It may be convenient because it is the law of partnership which has developed the conceptions of probity, good faith and mutual confidence, and the remedies where these are absent, which become relevant once such factors as I have mentioned are found to exist: the words “just and equitable” sum these up in the law of partnership itself. And in many, but not necessarily all, cases there has been a pre-existing partnership the obligations of which it is reasonable to suppose continue to underlie the new company structure. But the expressions may be confusing if they obscure, or deny, the fact that the parties (possibly former partners) are now co-members in a company, who have accepted, in law, new obligations. A company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in”.

Consistent with this analysis Lord Hoffmann in O’Neill v Phillips [1999] BCC 600 observed that a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company would be conducted. These terms are contained in the articles of association and sometimes in the collateral agreements made between shareholders. Equitable considerations affecting the manner in which legal rights can be exercised will only arise in cases where there exist considerations of a personal character between the shareholders, which makes it unjust or inequitable to insist on legal rights or to exercise them in a particular way.

In Strahan v Wilcock [2006] B.C.C 320 the appeal court considered a case where there was a finding of a quasi-partnership and there had been unfair prejudice. The dispute before the Court of Appeal was about the basis of the valuation in the buy-out order. Arden L.J. said:

“In general, the relationship between shareholders is governed exclusively by the terms of the memorandum and articles of association of the company of which they are shareholders. Their rights and obligations are derived from those documents and those documents alone. In some circumstances, however, equitable obligations will arise between shareholders. The relationship where such equitable obligations exist is often labelled, not always helpfully, as a 'quasi-partnership'……”

Lady Justice Arden quoted from speech of Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd and went on to explain that:

“The question whether the relationship between shareholders constitutes a 'quasi-partnership' is relatively easy to answer if the company's business was previously run by a partnership in which the shareholders were the partners. It is indeed common for partnerships to be converted into companies for tax or other reasons. It is also relatively easy to establish whether a relationship between shareholders constitutes a 'quasi-partnership' when a company was formed by a group of persons who are well known to each other and the incorporation of the company was with a view to them all working together in the company to exploit some business concept which they have. It is much less easy to determine whether a company is a 'quasi-partnership' in a case such as this. Mr Strahan did not know Mr Wilcock when the company was formed. He joined the company as an employee. It was only subsequently that he acquired some of its shares from Mr Wilcock and became a director. However, it is clear on the authorities that a relationship of 'quasi-partnership' may be acquired after the formation of the company. Lord Wilberforce specifically refers to an association 'formed or continued' on the basis of a personal relationship.”

Lady Justice Arden thought that the appropriate question was to ask (on the facts of the case) whether the company in question qualified as a quasi-partnership at the time of formation taking into account the guidance provided by Lord Wilberforce. Logically, the appropriate question is whether, if the company had been formed (viz incorporated) at the time the company is alleged to have become a “quasi-partnership” (that is, in this case, at the time when Mr Strahan acquired his shares), the company would have qualified as a 'quasi-partnership', applying the guidance set out by Lord Wilberforce

Relevant to the question posed by Lady Justice Arden is the contractual arrangements existing at the time of formation. In Re Coroin Limited (No. 2) [2013] 2 BCLC 583 David Richards J (as he was) held that there was no room for equitable considerations on the facts of that case as (i) the investors were sophisticated and experienced business people; (ii) “there was little prior relationship between many of the investors…”; and (iii) “more importantly, articles of association and a shareholders’ agreement were negotiated and drafted, containing lengthy and complex provisions governing their relations with each other and with the company”. He observed “… I find it hard to imagine a case where it would be more inappropriate to overlay on those arrangements equitable considerations…”. Although on the facts of that case it could not be more inappropriate to overlay the arrangements with equitable considerations, other contractual arrangements, less extreme, will also make it inappropriate to overlay such considerations.

In Third v North East Ice & Cold Storage Co Ltd [1998] B.C.C. 242, the petitioners had been directors of a company which had been founded and run by members of their family and another family (who were the majority shareholders). They averred that the company had been run as a quasi-partnership. One of the majority shareholders sold her shares to another company and the first and second petitioners were granted new service agreements. The petitioners complained that the affairs had been conducted for the advantage of the majority shareholder, and to the disadvantage of the minority. Lord Coulsfield (sitting in the Court of Session (Inner House)) said:

“For the purposes of the present case, what is important, in my opinion, is the stress laid by Lord Wilberforce upon the existence of some form of personal relationship of a kind which can be seen to give rise to a right in all shareholders, or at least in the petitioners’ shareholders, to participate in the conduct of the business. In my view, in the circumstances of this case, the respondents’ argument that the acceptance of new service contracts, which conferred on the majority shareholders a power to exclude the first and second petitioners from involvement in the management of the company by dismissing them, is wholly inconsistent with the continuance of any such personal relationship”. (my emphasis)

In Croly v Good [2011] B.C.C 105 HHJ David Cooke thought, in his clear judgment, that one factor alone would not be sufficient to constitute and quasi-partnership “this is a question which requires an overall judgment on the totality of the arrangements made. No one element is conclusive either way.” Having considered the authorities he found that the parties did not have to “articulate any feelings of trust and confidence”; and that it does matter “that they each in fact have had reservations about the extent to which they trusted or had confidence in the other.” One factor the trial judge thought important was the regard each of the parties had to the Companies Act and Articles of Association: “to all intents and purposes each of these parties paid no attention to such obligations whatsoever”.

I have been taken to BC&G Care Homes Limited [2015] EWHC 1528, a judgment of Mr Malcolm Davis-White QC sitting as a Deputy Judge of the Chancery Division. He had no difficulty in finding that a quasi-partnership arose in circumstances where a company was incorporated as a successor business to a former partnership. The oral and written agreements found to exist governed their respective relationships, were based on trust and confidence, and ‘akin’ to those of expected of a partnership. On the issue of quasi-partnership, this was a case that was (to use the words of Arden LJ) “relatively easy” to determine: the company was founded on mutual trust. Similarly, Mr Justice Roth found that a family business comprising brothers formed a quasi-partnership in Re Mister Dee International Plc [2010] EWHC 313.

In this case there are many professionally drawn documents that govern the relationships. To save repetition I deal with them below. However, the existence of such documents does not necessarily preclude the intervention of equity. Lord Hoffmann considered that the personal relationships were of great importance explaining in O’Neill v Phillips [1999] BCC 600 that he had no “difficulty” with the formulation given by Jonathan Parker J in Re Astec (BSR)) plc [1999] BCC 59 at 86H:

“….in order to give rise to an equitable constraint based on “legitimate expectation” what is required is a personal relationship or personal dealings of some kind between the party seeking to exercise the legal right and the party seeking to restrain such exercise, such as will affect the conscience of the former.”

I turn to the particular circumstances focussing on the documentation and the relationships.

It is apparent from the e-mail exchanges between HL and SDL that initially a pure merger was proposed, but Peter Harden was not keen on the prospect of merging these companies. He understood that HL had a track record and SDL had none. By October 2012 an investor memorandum had been created to raise external funds. The need to raise and use of external funds in the circumstances described is an indicator, in my judgment, of a commercial transaction rather than an association formed on the basis of a personal relationship, involving mutual trust and confidence. By December 2012 the Hardens and Mr Wootliff had entered into a conditional share purchase agreement. It was an agreed requirement, at that time, that £1.5m would be raised from investors.

The conditional agreement was a professional drawn document produced by Sherrards solicitors. It provided that if any of the conditions set out in the agreement were not satisfied it would cease to have effect. The Company was to purchase HL’s entire share capital for £560,000 and provide an allotment of shares. The conditional agreement entitled the Company to rescind in the event of certain defaults. Mr Wootliff was to procure that the Company enter into a share exchange agreement whereby the whole of the issued share capital in SDL would be exchanged for shares in the Company. The SEA was executed on 24 January 2013.

In my judgment negotiations by Tim Nathan and Sherrards solicitors (on behalf of Mr Wootliff) and Stephen Marshall (solicitor for HL), in the period to December 2012 culminating in the conditional agreement, (demonstrated by e-mail exchanges), provide unequivocal evidence that the business merger of HL and SDL was commercial in nature and a further indicator against an association formed on the basis of a personal relationship, involving mutual trust and confidence. The evidence points firmly in the direction of an arms-length negotiation, as explained by Mr Robinson and set out in paragraphs 26 and 27 above. The negotiations undertaken by the Hardens were though the prism of a “cherished business” where they had options (including a not for profit option) and based on the advice received that the purported patent of SDL’s technology would be difficult to protect. The negotiations were set in the context of SDL “running out of money” and the need for a “brand”.

The attempts to find external investors failed. On 7 May 2013 Mr Wootliff wrote to say that he was no longer going to commit to the project. On 6 June 2013 Mr Wootliff and the Hardens had a “post mortem lunch”. It was at this lunch that Mr Wootliff informed the Hardens that an outside investor was interested, namely Mr Rushton-Turner. He had agreed to provide cash for equity.

The intervention of Mr Rushton-Turner as an investor (as well as Mr Nathan) changed everything, once again. All parties through solicitors became engaged in formulising binding agreements setting out their respective obligations and rights.

The 44 page professionally drafted SPA, terminating the conditional agreement, selling the shares in HL to the Company with the provision of warranties, in exchange for shares in the Company and, the issue to 8 different shareholders of 8 different share allocations against the background of an outside investor is further evidence of the commercial nature of the merger.

The evidence I have set out above regarding the negotiated Articles of Association where Mr Rushton-Turner provided amended terms for solicitors to distribute and advise upon brings the case closer to the facts of Re Coroin Limited. The evidence of Mr Wootliff is that Mr Rushton-Turner was at the forefront of the negotations regarding the Articles. The documentation governing the relationships is detailed and professionally drafted. The pre-emption rights in the Articles do not prevent a shareholder from selling their shareholding. Neither do they provide a restrictive formula whereby a discount is mandated. The background is an important factor. The parties planned to take the combined businesses to the market and float. A floatation would have changed the rules of the game, but in the meantime, it was Mr Rushton-Turner as investor, who wanted control. The pre-emption rights merely permitted him (or another shareholder) to have the first option to purchase at the market value.

At the same time Service Agreements were drafted by Sherrards solicitors, with the intention of governing employment rights between the Company and employees. Mr Wootliff’s Service Agreement has terms relating annual holiday, salary, sickness, duties, termination and an entire agreement clause. It is signed and witnessed by him. The Service Agreement provided for an initial term of 2 years with a 6-month notice period. In my judgment there is no room for an expectation, as has been submitted, that he would be employed on a basis other than that set out in the Service Agreement: less still that the length of his engagement would be significantly different. The Service Agreement contradicts the purported expectation that he would remain engaged by the Company or involved in the business on a "long term basis".

In his pleaded case Mr Wootliff relies on a meeting in March 2012, where “an agreement was concluded between SDL and HL and, among others to merge their respective businesses…”. Mr Wootliff does not give evidence of any further agreement or common understanding that contradicts the rights and obligations of the parties recorded in these legal documents that post-date the March 2012 meeting, or events subsequent to entering into the conditional agreement in December 2012. In any event in cross-examination Mr Wootliff accepted that the Articles of Association, Service Agreements and SPA formed the basis of how the business of the Company would be conducted. It also governs the relationshjps. This admission coupled with the factual matrix leading up to 3 July 2013 takes this case a long way from the facts of Croly v Good where the parties gave little thought or had little regard for the Articles. I find that there was no expectation, legitimate or otherwise, that Mr Wootliff would participate or always participate in the management in the Company other than that expressly provided for in the Service Agreement he signed and entered into of his own freewill. Mr Wootliff is not only an intelligent man but has the benefit of an impressive memory. When he chose, he could be precise. His abilities lead me to conclude that it is more likely than not he knew his obligations as an employee were to be governed by the Service Agreement and understood the restrictions and rights set out. In any event he had the benefit of legal advice. Borrowing the phrase of David Richards J in Re Coroin Limited, the commercial nature of the merger does not permit room for an overlay of equitable considerations.

Focussing on the relationships, Mr Harper QC concentrated on evidence that the parties had a “strong relationship”. I am not convinced that this furthered an understanding of a relationship that could be described as “akin” to a partnership. A distinction needs to be drawn. Business often requires an ability to get on and build relationships with customers, clients or other business people. A strong working relationship may be forged between members of a musical band, employees, professionals or other co-workers. They are not all relationships that fall into the category of relationship required to trigger this jurisdiction. I accept the evidence of Mr. Peter Harden:

“If you are going to go into an ongoing business relationship with somebody -- you can't go into an ongoing business relationship with anyone. That is true of employing somebody. That is true of just about any business relationship.”

Mr Wootliff and the Harden brothers had not been in partnership together prior to the incorporation of the Company or entering the SPA. They did spend many months considering whether to combine their businesses. They did negotiate. They did spend some time communicating by e-mail and met for lunch on occasions. Mr Wootliff had been a business associate of Mr Thompson prior to December 2012, but not a business associate of the Hardens, Mr Nathan or Mr Rushton-Turner. I have found his relationship with Mr Robinson was professional. Mr Harper QC submitted that these developing relationships prior to merger constitute the type of relationships necessary to introduce equitable considerations in this petition. I disagree.

In my judgment a useful way testing his submission and determine the nature of the relationships, is to view them at a certain time. I have found that in the period April 2012 to December 2012 there was no personal relationship between either of the Harden brothers and Mr Wootliff that could be described as a personal relationship of the type required. Looking at the matter from a different point of view, there was similarly no personal relationship between Mr Rushton-Turner and the Harden brothers, Mr Nathan and the Harden brothers or Mr Thompson and the Harden brothers. These are all respondents to the petition who Mr Wootliff claims constitute members who formed an association on the basis of a personal relationship, involving mutual trust and confidence. At the time of the conditional agreement the personal relationships of the Hardens and Mr Wootliff were of commercial nature. They were entering a joint enterprise on the basis that sufficient funding would be found to pay the Hardens a cash sum and trade shares in the new enterprise. If the conditions were not met the proposed merger of their businesses would not proceed. It very nearly did not proceed due to a lack of investor interest. The evidence negates a personal relationship: the conditional agreement, the e-mail exchanges, the involvement of solicitors and an e-mail from Mr Wootliff in May 2013 saying he was withdrawing from the project. In the period December 2012 to end of May 2013 the parties worked jointly to find outside investors, to no avail. The personal relationships did not alter in that period (nor is it contended that they did change into something more). If the clock were to stop at the end of May 2013 there would have been no merger as a direct result of a funding gap. Mr Wootliff would have no factual ground to claim that Mr Nathan was in a personal relationship with him of a type required. The same is true of Mr Rushton-Turner. Mr Thompson was not involved. Mr Robinson was the advising solicitor. And the relationship between the Hardens and Mr Wootliff was all but over because the commercial terms of the conditional agreement had not been satisfied. In my judgment the quality of the personal relationships between Mr Wootliff and the respondents to this petition would have fallen a long way short of the required quality.

Mr Harper QC submits that they agreed to pool their resources. Mr Wootliff would not have done so if he did not have an expectation of remaining employed for a long time and being involved in the management. Pooling resources is what happens when businesses merge. It is not of itself indicative of a relationship of a personal character or quasi-partnership (it may be a factor, but such a factor has to be set in the context of all the facts). The relationship between the Hardens and Mr Wootliff did not have such a personal character that they would have marched-on regardless of achieving outside funding. The Hardens were aware of the advice they had received about the respective values of the merging companies, they had alternatives to merging with SDL, and Peter Harden, at least, was wary of the vulnerability of any patent value. There was no suggestion that the Hardens and Mr Wootliff would fund the proposed business merger through debt, perhaps secured against personal assets. Mr Wootliff was the director of a company that was running out of money, needed the Hardens brand to market the technology which was untested, behind other technology in the same field and risked having no application or market. The Hardens wanted a cash exchange and shares in the new enterprise.

The facts move this case away from the typical partnership that evolves into a corporate body on the basis of a relationship of good faith and trust. The personal relationships were framed within a business merger. Central to the merger was the outside investor. Any expectations Mr Wootliff may have harboured were subsumed into a relationship with the Company governed by contractual documentation.

In my judgment, focussing on the period April 2012 to December 2012 (the first period)there is no evidence to support that Mr Wootliff and the respondents to the petition enjoyed a relationship of a personal character sufficient to overlay the Company’s constitution and governing documents with equitable considerations. Exchanges of ideas, e-mail and enthusiasm for a merger are not sufficient. In the period December 2012 to May 2013 (the second period) the Conditional Agreement, and Share Exchange Agreement provides powerful evidence of a commercial relationship between the Harden brothers and Mr Wootliff. It is not suggested that Mr Wootliff forged relationships of a personal nature with any of the other petitioners during this second period. Couching the relationship as commercial and not personal is consistent with the advice the Hardens received not to commit themselves, and the conditional nature of their merger in the second period. The relationship is very likely to have ended had Mr Rushton-Turner not been prepared to underwrite the merger and business. In the third period (end of May 2013 to 3 July 2013) the involvement of Mr Rushton-Turner, the Subscription Agreement for investment, the Articles of Association, the involvement of solicitors, negotiations leading up to their approval by the board, the SPA and Service Agreements, powerfully demonstrate that the relationships remained commercial. There is no room for an extraneous understanding or agreement that all or some of the shareholders should participate in the conduct of the business as contended by Mr Wootliff, and none was in evidence. I find that the participation of the individuals in the affairs of the Company, was governed by the contractual agreements they freely entered. The relationships were not of a quality that can be described as an association formed or continued, on the basis of a personal relationship, involving mutual confidence, as described by Lord Wilberforce and Lord Hoffmann. The fact that the Company is small or private is not sufficient. On this basis I shall dismiss the petition of Mr Wootliff.

Due to the arguments and time taken by counsel addressing the issues set out in paragraph 12, I shall deal with exclusion and the post July 2013 events, but due to the findings I have made above, more briefly than I otherwise might.

After the adoption of the Articles of Association and having entered into the Service Agreement an issue arose as to whether or not Mr Wootliff misled the other shareholders and in particular the Harden brothers in respect of ongoing litigation between SDL and a company known as the Whole Caboodle Limited (“WCL”). Richard and Peter Harden believed that they had been misled in respect of a payment into court and the likely costs of the litigation. The first spark of the issue occurred upon the Hardens receiving a letter from the solicitors acting for WCL who wrote, on 8 July 2013, that they were aware that “Smart Diner and or Mr Wootliff are involved in a proposed transaction with you which may involve the transfer of money or assets out of Smart Diner Limited”. The letter proceeded “the purpose of this letter is to put you on notice that should our client obtain judgment against Smart Diner Limited, in circumstances where there are insufficient funds available to pay the judgment we will be seeking to reverse any transactions which have taken place…..pursuant to the provisions of the Insolvency Act”. Richard Harden wrote immediately to Mr Wootliff suggesting that the matter be added to the meeting scheduled for the 16 July 2013. The meeting was difficult for all who attended. The Hardens produced a joint note soon after, recording Mr Wootliff’s suggestion an offer to settle for £10,000 should be made and if not accepted WCL could pursue SDL which would have, by then, no assets. The note records the surprise the Hardens had at hearing an underhand suggestion. Mr Wootliff is recorded as becoming defensive, taciturn, dogmatic, argumentative and obstructive of rational conversation. The issue for the Hardens was threefold. First, the failure of Mr Wootliff to produce a proper estimate of the potential liability prior to 3 July 2013, second, his suggestion to permit SDL to enter insolvent liquidation to frustrate the claims of WCL, and third his obstructive behaviour when discussing the situation. Mr Wootliff took exception to Richard Harden’s challenges.

At a board meeting on 19 July 2013 the issue of the litigation, amongst other things, was discussed. There is a hand written contemporaneous note of the meeting, a draft minute and a fuller minute produced later by Mr Rushton-Turner. I find that there was no reason why the fuller minute was produced other than to record more comprehensively the events of the meeting on 19 July and can be relied upon. Mr Rushton-Turner explained in an e-mail dated 24 September 2013 that he had “expanded on the Minutes of 19^th July to cover other matters discussed, produced (from my memory, your draft and Keith’s notes)…will everyone please review these for accuracy.” It is not clear from the copy in the trial bundle, the identity of “everyone” but it is reasonable to infer that “everyone” included those present at the meeting on 19 July 2013 save for Mr Wootliff who had by then been suspended. It was at this meeting that David Thompson agreed to work 50 days a year for the Company, was appointed as director (he was paid from 3 July- but nothing much turns on that) and it was resolved that he should have an option to subscribe to 10,000 shares.

After the meeting on 19 July 2013 a series of conflicts arose between Mr Wootliff and other members of the board of directors. There was a failure by Mr Wootliff to transfer the patent application for the intellectual property rights owned by SDL; a transfer made by Mr Wootliff of £25,000 on 25 July 2013 from the Company to a company owned and controlled by him (the money was later returned); a fracas between Mr Wootliff and an employee; Mr Wootliff’s unilateral decision to change the locks of the office in Leeds; two payments of money from the Company, made by Mr Wootliff to himself totalling £35,000 (later returned); a purported unauthorised termination of an employee (Roz Robinson); causing a transfer of monies received from a placing in the Company (£278,445) to be paid to SDL (Mr Wootliff was the only signatory on the SDL bank account); and later breaking the locks and forcing entry to the Leeds office. These events led to Mr Wootliff’s suspension, and dismissal proceedings. Mr Rushton-Turner invited Mr Wootliff to a disciplinary hearing in October 2013, which was recorded. Following the hearing Mr Rushton-Turner wrote to Mr Wootliff informing him that he was dismissed. That was on 18 October 2013. On 26 October 2013 written reasons for the dismissal were sent. Mr Wootliff invoked the appeal procedure. This led to an appeal that was conducted by Peter Harden. The appeal hearing was recorded. Mr Harper QC argues that the whole process was charade or forgone conclusion.

It is not necessary that I deal with each ground relied upon by the Company. A few allegations deserve comment. These concern the movements of money into and out of SDL’s and Mr Wootliff’s own bank account.

In respect of the cheques for £25,000 and £10,000 on drawn on 27 August 2013 and 30 August 2013 respectively Mr Wootliff claimed that Mr Thompson, the financial director, had advised or agreed to the payments as a compromise. I do not accept his evidence. Mr Wootliff, throughout his evidence insisted that documents be shown to him in order that he may satisfy himself that something was said or done. He complained about disclosure. In stark contrast there is no document that evidences a compromise agreement reached between Mr Wootliff and Mr Thompson acting on behalf of the Company. Mr Wootliff is not slow to send e-mails. He has produced no e-mail exchange or communication regarding a compromise. Furthermore, an e-mail sent by Mr Thompson to Mr Peter Harden on the same day as the alleged compromise meeting on 21 August 2013 describes how the business could move forward with Mr Wootliff, and how his idea about a share purchase of another company (Captivate) could be considered by the board. There is no suggestion in the reporting e-mail that Mr Wootliff (i) agreed to leave the business (ii) agreed to accept a payment to leave or (iii) write himself (and SDL) Company cheques without informing any member of the board. Mr Wootliff’s evidence is incredible and unreliable on this issue.

There are other factors that lead me to conclude that Mr Thompson as a witness, who denies there was a compromise agreement justifying the cheques, is to be preferred. The alleged compromise took place prior to the dismissal hearing and appeal; Mr Wootliff continued after the alleged compromise was reached to act in relation to the Company in a manner inconsistent with having reached a compromise to leave the business; and his position is inconsistent with an e-mail from Peter Harden to Mr Wootliff on the same day proffering his view about “a sweet deal with Captivate” (Mr Wootliff’s idea). In an e-mail sent by Mr Thompson to Mr Rushton-Turner the following day (22 August 2013) he said “Stanley must be given the express authority to execute the business plan- and Richard/Peter must accept this”. Such an e-mail is inexplicable if an agreement had been reached to the effect that Mr Wootliff would leave the Company upon payment of £35,000 which he could draw himself.

On an issue going to the credibility of Mr Wootliff (particularly at this stage of his involvement in the Company), a board meeting was tabled for 28 August 2013. Mr Wootliff e-mailed the Board to say “Regretfully I have been delayed and will not be able to make the meeting”. There is no mention in that e-mail (which may have been an ideal time to mention the compromise agreement) that it was fruitless he attend as he would have no further role in the Company. The cross-examination by Mr Cook took the following line:

“Q. Right. While we are on this, saying this, saying you are delayed and you might not be able to attend the meeting, is itself, I say, inconsistent with the suggestion that you had formed an agreement with Mr Thompson that you were not going to attend. Would you agree with that?

A. I don't understand that question.

Q. Right. So if you had reached an agreement with Mr Thompson that you were not going to attend –

A. Yes.

Q. -- you would agree that sending this email is inconsistent with that?

A. No, I could have said: "I'm not attending because I have agreed with Mr Thompson that I won't attend." I accept that.

Q. Okay.

A. It was a euphemistic way of putting the situation.

Q. I suggest that the reason you sent this email was because you were not being truthful with the board.

Chief Registrar Briggs: I want an answer to that, please.

A. I'm sorry. No, I was not being truthful with the board.”

The admission that Mr Wootliff lied to the board on that occasion, raises the possibility that he lied to the board on other occasions, when it suited him. Throughout his evidence Mr Wootliff demonstrated his tendency to avoid answering questions, and answered questions in a manner that often led to obfuscation; often he had to be pressed for an answer. His evidence was at times malleable. I have mentioned that there are no documents to support Mr Wootliff’s version of events. The failure to record the purported compromise agreement adds to the picture. The failure is inconsistent with Mr Wootliff’s business personality which is one of control. Despite stating in evidence that he had been “disenfranchised” by social media and electronic transferring (in a different context), he is very capable of producing, sending and responding to electronic mail. He frequently sent e-mails after a meeting referring to the meeting and setting out who was to do what next: see for example paragraph 17 above. I find, on the balance of probabilities, the failure to record the compromise agreement at all is inconsistent with his propensity to make some sort of record of an important event. The event of a compromise meeting will have been important to Mr Wootliff as it will have had dramatic consequences in respect of his personal position. This failure is compounded by an unusual unwillingness to discuss the compromise with any board member.

Although credit should be given to Mr Wootliff for being honest about being dishonest I find that his ability to obfuscate and willingness to lie to the board (as revealed in cross-examination) makes it more likely than not that his version of events in respect of the compromise agreement being reached with Mr Thompson on 21 August 2013, is unreliable. Mr Wootliff’s position on the compromise agreement and reasons for making the payments to himself are not credible. The e-mail exchanges I have referred to in paragraph 91 above between Mr Peter Harden and Mr Wootliff, and Mr Thompson and Mr Rushton-Turner, are more consistent with the evidence of Mr Thompson. Ultimately in a contest between the evidence of Mr Thompson and Mr Wootliff, I find Mr Thompson’s evidence more reliable.

Later Mr Wootliff was asked by Mr Thompson to transfer all but £5,000 (for wages) back to the Company. He obliged. In my judgment the payment out of Company funds without authorisation, the ability to hide the truth and not inform members of the board and the falsehood about the compromise agreement amount to a serious breach of his director duties and failure to act in good faith required by the Service Agreement. Simply put, in the absence of the purported compromise agreement there was no reason consistent with a director’s duties to a company to transfer the funds. His actions in relation to the transfers would, in my judgment, have justified the action taken by the board.

The process leading to and of the disciplinary hearing, and subsequent appeal is not to be criticised. A reading of the appeal recording demonstrates Mr Wootliff’s ability to follow his own agenda and act in an obstructive manner. The payment to a connected company, Albion Street Trust Company of £25,000, and transfer of the Placing money (even though these sums were repaid) are at the very least difficult to reconcile with a person obliged by the Service Agreement to “faithfully and diligently serve the Company to the best of his power, skill and ability”. I need not deal with all the other allegations relied upon by the Company for dismissal.

The Amended Petition pleads that “on 12 February 2014 the Company purported to grant [Mr Thompson] a new additional option to acquire 15,000 shares in the Company (the “Second Option”)….on 13 February 2014 [Mr Thompson] exercised the Options in part to acquire 16,000 shares in the Company with the result that [Mr Wootliff’s] shareholding in the Company was reduced from 25.3% to 24.99% with the consequential result that (among other things) the value of [Mr Wootliff’s] shareholding was substantially reduced and he was no longer able to block special resolutions of the Company or to request and be granted board representation….further or alternatively …no special resolution was passed…further or alternatively there was and is no reason why the directors of the Company acting properly…should have agreed to grant the Second Option.” The pleaded defence is that Mr Thompson injected £25,000 cash into the Company (although it is accepted that this sum came from Mr Rushton-Turner); all shareholders suffered dilution; Mr Wootliff always knew that his shares could be diluted by reason of the Articles of Association; he expected dilution as his business plan included an issuance that would facilitate the Company’s acquisition of Captivate and he had himself, promised the share rights to Mr Thompson as part of his remuneration package.

Section 551 of the Companies Act 2006 provides that the directors of a company may allot shares or grant rights to subscribe “if they are authorised to do so by the company’s articles or by resolution of the company”. The authorisation must state the maximum amount of shares that may be allotted. The directors were “unconditionally authorised”, by Article 40.2 of the Articles of Association, “for the purposes of section 551 of the 2006 Act and generally, to exercise any power of the Company to offer or allot….any shares in the Company to any person at any time”. Article 40.2 was limited but not in a way that has an effect on this issue.

In cross-examination Mr Wootliff accepted that one of his e-mails to Mr Thompson in October 2012 stating that “we have now put Smart Diner and Hardens together” was wrong, but that he did offer him “one day per week, 30,000 per annum…option 2.5 percent of equity post placement”. That would equate to £600 a day and 25,000 shares. He also accepted that Mr Thompson agreed to these terms. Mr Wootliff re-thought and then changed the offer he had made in June 2013. Aware of the first offer and acceptance he then offered a lower salary (£300 per day) and lower option (10,000 shares) on the basis that he “would sort things out in a year’s time” (June 2014). There is no evidence that the Hardens were unhappy with the first agreement, but Mr Thompson took Mr Wootliff at his word.

At a meeting convened in January 2014 Mr Thompson was offered what has become known as the Second Option giving him the shareholding that he anticipated he would receive in October 2012. The minutes of the meeting record:

“It was recognised by the Board that the role of Mr Thompson had expanded during the last four months and that it was appropriate to recognise his current activities and responsibilities. It was resolved and agreed that Mr Thompson should be remunerated at the rate of £600 per day on the basis of two days per week up to 30 June 2014. In addition, it was resolved that Mr Thompson would be granted a further option over 15,000 shares in the Company at an exercise price of £1.55 with an exercise period and other terms equivalent to those that he had for his initial trance of options. It was noted that the grant of such options would bring the total options held by Mr Thompson to a level roughly equivalent of the proposal put forward to him by Mr Wootliff in an e-mail of 31 October 2012, a copy of which had been produced to the meeting by Mr Thompson.”

The Second Option was granted on 12 February 2014 and Mr Thompson exercised his option in March 2014 (subscribing for 16,000 shares). Mr Wootliff was the first to propose that Mr Thompson have a right to subscribe for 25,000 shares, had represented to him that he would have such an option in 2014, and anticipated the possibility (as he acknowledged in cross-examination) of a dilution by agreeing to the terms in the Articles of Association. The grant of the Second Option was entirely consistent with the evidence of the parties understanding and agreement. Mr Wootliff now complains that the Second Option has diluted him below 25%. His pleaded case is unsustainable due to his acknowledgment that he could be diluted, the anticipation that a merger with Captivate would lead to dilution, the agreement I find existed for Mr Thompson to have an option for 2.5% of the equity, and the possibility of dilution by flotation. This bolstered by the knowledge he had when agreeing to the Articles of Association. Mr Harper QC argued that the evidence supports the contention that the Second Option was only granted for the purpose of ousting Mr Wootliff by dilution. The submission can be sustained if the court closes its eyes to the factual history. I do not accept that submission. I prefer the evidence of Mr Thompson on the issue, and comment that his evidence was carefully tested under sustained pressure in the witness box:

After Mr Wootliff’s dismissal (but prior to his appeal from dismissal) Mr Thompson, as the finance director, reported to the board that a plan should be put in place to remove Mr Wootliff as director. The share placing made for a tidy but combined way of achieving both the proposal made to Mr Thompson (and accepted) by Mr Wootliff, as stated in the minutes I have set out above, and the removal of Mr Wootliff as director. The language used in the report indicates a connection between two independent clauses in the same sentence: “We need to be putting in place a plan to remove SJW as director of SDGL, SDL and Hardens Ltd and to have a share placing to raise some money” (my emphasis). Mr Harper QC’s cross-examination unfolded this way:

“Q. Lets put it like this. We are looking at those documents against the backdrop of expressly stated intention to dilute Mr Wootliff’s shareholding below 25 per cent. The instrument and method that you devised was the grant to you of the second option. That is in circumstances where you give conflicting evidence as to why the option was granted to you. And that’s why the board exercised its power to grant you the second option not in the interests of the company, but because of an interest in making sure they brought Mr Wootliff’s shareholding below 25 per cent, isn’t it?

A.

No.

Q. You honestly sit there and say that that was not the intention behind that?

A. No.

Q. I put it to you, you are not telling the truth and I want to know from you- I’m going to give you a final chance now- do you think was there a discussion between the directors of this company from the date of your report, 4 November 2013, as to how they should bring Mr Wootliff below 25 per cent?

A. There was a lot of talk about how we got rid of him, yes.

Q. No, I will repeat the question. Was there discussions between the members of the board as to how you brought Mr Wootliff below 25 per cent?

A. In terms of getting him below 25 per cent, the board were aware that with 25 per cent they couldn’t actually get rid of him as a director.

Q. I am going to repeat the question for the third time. If you don’t answer it then the Registrar will take such inference from your refusal to the answer the question. Was there discussion after this report amongst the members of the board as to how you were going to bring Mr Wootliff below 25 per cent?

A. Collectively, no. Not to my knowledge.

Q. Uncollectively, between individuals, then?

A. Yes. I discussed it with Martin

Q. When?

A. Some time between the 8^th and the- whenever the notice for the January meeting was issued….I in terms of getting below 25 per cent I agree, that the intention was there.

Q So presumably by the time of the issue of that notice you had decided what you were going to do to bring him below 25 per cent?

A. No.”

The evidence supports the view that there was more than one purpose for the grant of the Second Option.

Mr Thompson gave straight forward and honest evidence in cross-examination. He made reference to 25% because he understood (wrongly as it turns out) that if Mr Wootliff held that proportion of shares he could not be removed as director. Mr Thompson made no secret of his desire to “get rid of him”. It is not a far reach to conclude that the board or individuals on the board could no longer work with Mr Wootliff and did not want him to remain a director. Accordingly, there were two purposes for the grant of the Second Option.

The legitimacy of the Second Option, in light of there being more than one purpose, is achieved by a search for the dominant purpose. Having seen and heard Mr Thompson in the witness box, taking into account the history leading to the Second Option namely, the original offer by Mr Wootliff and acceptance by Mr Thompson in October 2012 followed by a representation that an option be granted in 2014 to permit a subscription for 25,000 shares; the admitted desire to oust Mr Wootliff as a director; but the clear evidence from Mr Thompson that there was no collective decision on the issue, I find that the primary purpose for the Second Option is as stated in the defence: “the promise was being fulfilled by the grant …[which] in reality [was] one which back dated to (before) the July 2013 transactions”.

This finding is consistent with the evidence given by Mr Rushton-Turner in cross-examination, when asked about the purpose of the Second Option:

He played a key role in the grant of the Second Option. In cross-examination he explained:

“I was the one who decide – proposed that we should grant the option and the going forward pay in part -- in part delivering on Stanley's own promise. I see what you mean. Okay. Obviously, you know, the point about the amount of work he's been doing, et cetera, was the context in which the board granted him the options and the pay. And I think it's -- it is contained in the whole of -- you know, it's David's contribution, willingness to continue working two days a week, et cetera.”

In Eclairs Group Ltd v JKX Oil & Gas PLC [2016] B.C.C 79, Lord Sumption explained that the law had developed so that where more than one purpose for the exercise of a power can be identified (as here), all influential in different degrees, a decision will only be set aside where the dominant or primary purpose was improper. This is not a case where the decision should be set aside. Taking into account the totality of the evidence on this issue, the primary or dominant purpose for the grant of the Second Option was to honour the October 2012 promise made to Mr Thompson (as Mr Wootliff had contemplated) and retain his services: see also Re Charterhouse Capital Ltd [2015] EWCA Civ 536. Finally, it has been argued that Mr Wootliff was misled about the agenda of the meeting on 17 January 2014. If he had known that his shareholding would be diluted, he would have voted against. I have set out above Article 40 of the Articles of Association. His presence and vote against the Second Option would not have affected the outcome of the resolution, passed (as it was passed unanimously) by what would have constituted the majority if Mr Wootliff had been present.

In conclusion I shall dismiss the petition presented by Mr Wootliff. He has failed to make out his case that the various relationships were of a personal character sufficient to trigger equitable considerations or that the substratum of the Company was a quasi-partnership. As a matter of fact, I find that the Mr Wootliff’s behaviour in the post-merger period was such as to justify the actions taken by the board of directors. I find that the Second Option was made in accordance with the Company’s constitution, the shareholders anticipated dilution at the time of merger, and the primary reason for the grant of the Second Option was to honour a pre-existing promise.

In answer to the list of issues the first, third, fifth, sixth and seventh issues are answered in the negative. The answer to the first issue in great part disposes of the petition. The second and fourth issues do not require answering.

Order accordingly.