Pinfold v Ansell & Ors

This is the petition of Mr Pinfold pursuant to s 994 Companies Act 2006, in which he alleges that the affairs of the third respondent Foundry Miniatures Ltd ("Foundry" or "the Company") have been conducted in a manner unfairly prejudicial to his interests as a shareholder. Mr Pinfold has a 49% shareholding. The remaining shares are held by the first respondent Mr Ansell (50%) and his wife, the second respondent (1%). Mr Pinfold contends that since he became a shareholder at the end of 1999 the Company was operated as a quasi-partnership. He was effectively running its business single handed from about 2003 as a result of Mr Ansell's ill health. However from about 24 June 2012 he was excluded from participation (and later removed) as a director and Mrs Ansell took over the running of the business, introducing various members of her family as employees. Since then he says the turnover and profitability of the business have collapsed as a result of changes introduced by Mrs Ansell. He seeks an order that Mr & Mrs Ansell should buy out his shares at a value which is either determined as at the date he was excluded or, if at a later date, adjusted so as to cancel out what he says are the adverse effects of the decisions he complains of.

Mr & Mrs Ansell's position (if I refer to "the Respondents" it is to them, although the Company is added as a nominal respondent) is that the Company was not a quasi-partnership, that Mr Pinfold voluntarily retired from day to day management of the business and had no entitlement to remain as a director, so that he has no legitimate complaint that he was prevented from acting as such and later removed. They deny all the allegations of conduct said to amount to unfair prejudice. They do however wish to purchase Mr Pinfold's shares and initially invited me to make such an order even if I rejected those allegations. If any order for sale is made, their contention is that the valuation should be at the date of presentation of the petition (for which they have obtained evidence) or alternatively at the date of the court's order, but in either case without any adjustment as sought by Mr Pinfold.

At the opening of the trial I ruled that I would only have jurisdiction to make an order for sale, and so to determine the terms of sale, if I found that some at least of the allegations of unfair prejudice were made out, so that the petition could be held to be "well founded" (Companies Act 2006 s 996(1)). Thus, if I find entirely for the Respondents on the allegations of unfair prejudice, the petition would simply have to be dismissed and the parties would have to agree terms if the sale they all wish for is to proceed.

The business of the Company is in the manufacture of moulded metal military figures which are sold in some cases to collectors but mostly to enthusiasts who use them for war gaming. It is a specialised market, and I hope the parties and others involved in it will forgive what will no doubt be my incomplete descriptions of it and the operations involved, which are intended only for background understanding of this judgment and the legal issues in the case.

The company produces two broad categories of models, referred to as "historical" and "fantasy" figures. Historical figures may be representations of individual known persons, or more generally of soldiers of a given period, army or unit. Precise and historically accurate detail may be very important to buyers. Fantasy figures are imaginary characters. There may be many figures made in a range with a common theme, such as figures from a particular army, or a set of related fantasy figures.

The process of creating each figure begins with artwork; a drawing or sketch of the intended figure. From that a modeller produces an original model. That model is used to create a "master mould". The master mould is then used to create a master model. The master model is in turn used to create a "production mould", and the production mould is used to make models sold to the public.

The production mould is thus used many times over for casting production models. In time it becomes worn by use and the precision of finish of the resultant models deteriorates. From time to time therefore new production moulds are made from the original master models, or a new master model is cast, from which new production moulds are made. The master mould is thus used much more rarely and so preserves its quality, potentially for a long period.

Generally the manufacturer will have one, or a small number, of each of the models it produces painted by professional model painters. These "painted models" are used for catalogue photographs and/or for display purposes in showrooms or at exhibitions. The figures sold to the public are unpainted metal castings, which the buyers then paint themselves.

Mr Ansell is a very well known personality in the war gaming world, with a high profile among collectors and enthusiasts as a designer and maker of models. Mr Pinfold has no such background, but is an accountant by profession. The two men met quite some time ago and Mr Pinfold was invited to become a shareholder in a company Mr Ansell then owned called Games Workshop Ltd. Mr Ansell, who concedes he is only interested in the process of producing the best model soldiers in the world, acknowledges that he needed someone like Mr Pinfold to run his accounts and business administration. Mr Pinfold acquired a minority shareholding in Games Workshop and the two men worked together to build that company up and sell it. That sale was in 1991, for a total of just under £9m.

Mr Pinfold's position is that although Mr Ansell insisted on having a majority of the shares such that he had formal control, the two of them agreed that they would be treated as equal partners in the event of a sale. It is common ground that after the sale Mr Ansell made a payment to Mr Pinfold of over £665,000, the effect of which was to equalise the amounts they received for their shareholdings.

After the sale, Mr Ansell retained a number of valuable motor cars that, it appears, had been purchased using cash produced by Games Workshop and at some point transferred into his personal name. It is common ground he has subsequently sold a number of these cars and paid half the proceeds, an amount of about £200,000, to Mr Pinfold. Other cars are still held by Mr Ansell. Mr Ansell's case is that there was no agreement or understanding between them as to equality and all these payments were entirely voluntary gifts on his behalf. He denies any obligation to Mr Pinfold in respect of the cars he retains (no claim is made in these proceedings about those cars).

The general nature of the relationship is relevant background to the issues in this case however, and given the accepted facts in my view Mr Pinfold's case of an informal understanding of equality of benefit on a sale is more likely to be correct. It is not in my view likely that Mr Ansell would have made payments as large as he has, calculated so as to achieve equality of outcome, other than to honour an arrangement he had previously made, whether or not it was regarded as legally enforceable.

It is also relevant to note that Mr Ansell received other benefits in conjunction with the sale. He was allowed to keep a large number of painted models owned by Games Workshop, which he added to his personal collection of several thousand such models kept at his home. The master and production moulds for ranges of fantasy figures which the purchaser was not interested in producing were transferred to a company called Guernsey Foundry Ltd (Mr Ansell was living in Guernsey at the time). Guernsey Foundry Ltd began to manufacture those ranges, from premises in Nottingham. Its work was mostly carried on or controlled by Mr Ansell's father, Clifford Ansell, but it appears that it was not very successful.

For a number of years after 1990, Mr Ansell and Mr Pinfold had little if any business contact. Mr Ansell lived in Guernsey and Mr Pinfold in Spain. In 1999 however Mr Ansell asked Mr Pinfold to become involved in his business again. They both agreed that it needed the accountancy and administrative expertise Mr Pinfold could provide. According to Mr Pinfold, in a series of meetings with Mr Ansell it was agreed the business would be transferred from Guernsey Foundry Ltd to the Company, which would honour all its debts and obligations, Mr Ansell would have a majority holding, "because of my obsessional paranoia", but they would run it as they had Games Workshop with Mr Ansell dealing with creative input and marketing and Mr Pinfold with accounts and administration. The aim he said was to build it up for sale, and it was specifically agreed that on sale they would share the proceeds equally, as they had with Games Workshop. In the meantime, they would each participate in management in their respective roles, and be remunerated only by dividend. Mrs Ansell was to be a director and company secretary but not actively involved save as assistant to her husband.

The business of Guernsey Foundry was transferred to the Company for £1. Mr Pinfold paid £50,000 and 49 shares were issued to him on 31 December 1999. He was appointed a director, though not until December 2000. At that time he paid a further £22,000 as the balance of the price of his shares. 49 shares were also issued to Mr Ansell, so that he held 50 in all. Mrs Ansell retained one share, so between them the Ansells had voting control of the Board and at shareholders meetings. Mr Ansell told Mr Pinfold that Guernsey Foundry owed him about £300,000, which was confirmed by accountants, and it was agreed this should be paid as a debt by the Company. It amounted to a first call on revenue generated from the business run under their joint management.

Mr Pinfold says that it was impliedly agreed that the Company would be run as a quasi partnership. Mr Ansell's position is that he had insisted on control and was under no obligation of any kind to allow Mr Pinfold to participate in management, since he was no more than an investor.

The business was to operate from premises at St Marks St Nottingham, which Guernsey Foundry had previously rented. It appears that the opportunity to buy the freehold had arisen, and was taken up on 26 January 2000 through a BVI company controlled by Mr & Mrs Ansell called Spangle. It is accepted however that it was intended from the start that it should be owned equally by Mr Ansell, Mr Pinfold and their wives, and in March 2000 Mr & Mrs Pinfold paid half the purchase cost to Spangle. Spangle transferred the freehold into the joint names of the four individuals in 2003. The Company paid rent for its occupation, and it is in my view clear from the correspondence between Mr Pinfold and Mrs Ansell that this rent was regarded together with payment of dividends as a means of distributing, in effect equally between the two families, the income of the Company.

In December 2007 some adjacent premises in St Marks St were purchased, again in the four joint names. The combined site was seen as a development opportunity and was immediately marketed for sale, but in the meantime the newly acquired part was let out.

In August 2000 Mr & Mrs Ansell returned to the UK to live. Mr Ansell set up a studio at their house in which he worked on creative design for the Company. He rarely however visited the manufacturing premises. Clifford Ansell effectively ceased to be involved in the business. According to Mr Ansell he retired in about March 2000. Clifford Ansell resigned as a director in January 2001 and in March 2001 Mr Matthew Fletcher was employed running the production process. He was later designated general manager.

Clifford Ansell however continued to be paid by the Company at the rate of £10,000 pa. Mr Ansell said he had agreed these payments to his father and regarded them as a form of pension obligation, payable indefinitely. Mr Pinfold accepts that he was told about them at the time and accepted they could be made, but he informed the auditors that Clifford Ansell had been appointed as Health and Safety Officer and was being paid as a consultant to give advice in that capacity as and when required. Although it appears some limited health and safety advice was given, I am satisfied the supposed position of Health and Safety consultant was a pretext invented by Mr Pinfold because he considered it would improve prospects of obtaining a tax deduction for the payments to Clifford Ansell. The reality is that this was a family arrangement between Mr Ansell and his father, which Mr Pinfold accepted as part of the package when he became a shareholder. I have no doubt it would have been discontinued by agreement if the Company had been sold to a third party.

According to Mr Pinfold, during 2002 Mr Ansell, who had always suffered from poor health, began to be more seriously ill and effectively withdrew from active participation in the Company. The studio at his home was no longer used for Company activities. Mr Pinfold took an increased role, effectively assuming responsibility for sales and marketing strategy and running all the day to day operations of the Company with Mr Fletcher. Mr Pinfold was not able to take over Mr Ansell's creative role, so that to the extent the Company produced new models in this period it was by use of external designers. Mr Ansell denies that his health deteriorated before about 2006, but does not dispute that at some point Mr Pinfold took on a much increased role in the Company's day to day operations, going well beyond the administrative and accounting function originally envisaged.

There were no board or shareholders meetings at any time. After Mr Ansell withdrew from active involvement Mr Pinfold effectively took all management decisions himself. Mrs Ansell did not become any more directly engaged in the business. She kept in contact with Mr Pinfold, but her involvement was essentially limited to monitoring the flow of dividends and rents she and her husband received and pressing for cash to meet domestic expenses. She received the annual accounts, once finalised, but not the monthly management accounts that Mr Pinfold produced. She was much more engaged with dealing with the property and the tenants.

It does not appear that there were any active steps taken to prepare the Company for sale, or to sound out potential buyers. From time to time people who already owned similar businesses or were wealthy collectors expressed interest in purchasing the Company, and Mr Pinfold had discussions with them. He kept Mrs Ansell informed about these, but they did not ultimately lead anywhere. He however wanted to pursue sale as an exit from the business, and made this clear to Mrs Ansell. An email exchange in 2009 (Bundle vol 3/p767b ff) shows him telling her that he will be 65 in 2012 and wants to have either sold the Foundry business and the property by then or be in the process of doing so. She does not reply directly, but evidently takes the point as she says she has resisted a request by the tenants for a lease beyond 2012 on the grounds he would be 65 by then, the implication being that the freeholders may wish to sell the property with vacant possession at that time.

Mr Pinfold continued to press the matter and sought a meeting with Mrs Ansell about the possibility of a sale in May 2010 (see email exchange at and around 3/773d). It seems she avoided having such a meeting however; in September he chased her saying it was "long overdue" (3/790a). They did meet in October 2010, and at that meeting Mr Pinfold says he told Mrs Ansell that he intended to retire from day to day management in 2012 when he was 65, as soon as the accounts for the period ending in 2011 had been finalised. Mrs Ansell accepts that they had a discussion, but maintains that she did not regard it as a statement of a wish to retire. Mr Pinfold, she said, would often joke that he would retire, and she did not take it seriously.

Mr Pinfold is adamant that it was a serious discussion and as a result he set about planning to replace his day to day input with a view to stepping back to a less frequent board-level supervisory role. He did this by engaging Ms Rachel Heywood as an accounts manager and administrator in November 2010 so that she could be trained up to take over that part of his role, and by preparing Mr Fletcher to take over as General Manager. Mr Fletcher was formally appointed to this position in January 2012 but it appears he was already acting in that capacity in 2010; see the Points of Defence at para 52.

During 2010 Mr Pinfold had pressed for payment to himself of a salary to reflect the fact he had been working full time in the business whereas Mr Ansell was not. This would have had the effect of giving Mr Pinfold a first slice of the Company's income. In June 2010 Mr Ansell turned this down flat saying that it was contrary to the agreement they had that neither would be remunerated other than by dividends. According to Mr Pinfold, Mr Ansell told him at the time that he would not accept any reduction in his own dividends because he needed them "to maintain his lifestyle". This was denied by Mr Ansell in cross examination, though it had been admitted in the Points of Defence. It would be consistent with the continuing flow of emails from Mrs Ansell pressing for cash, some of which was taken by loans in advance of declaration of dividends, which she was then evasive about repaying.

I note that in the Points of Defence (para 52) one of the reasons for refusal to agree a salary is said to be that Mr Pinfold "was expressly reducing his commitment to the Company", which plainly implies that, contrary to Mrs Ansell's evidence, she knew in 2010 that this was his intention.

Mr Pinfold is aggrieved about the refusal of a salary, in my view with justification. Mr Ansell accepts that it had not been intended at the outset that Mr Pinfold would work full time in the business and yet he had voluntarily stepped in to do so when Mr Ansell through illness could not do what he had been expected to. In doing so Mr Pinfold was going beyond his obligations under the original arrangement and managing a business that represented a significant (and urgently needed) source of income for the Ansell family, and yet being held to the terms of that arrangement as regards his own reward from it.

It does not appear from the documents that there was much if any discussion about a possible retirement in 2011, although a decision was taken to change the accounting year end to 30 March, meaning that the final set of accounts Mr Pinfold had said he would see through would be for 15 months ending 30 March 2012. In the normal course those accounts might be expected to be finalised a few months later.

From early 2012 however there are indications Mrs Ansell began to take a greater interest in the affairs of the Company. It is clear that Mr Ansell's health continued to be very poor. On 13 February 2012 she emailed Mr Pinfold (3/804a) saying "I need to talk to you about the future" and requesting a meeting. Mr Pinfold's evidence is that they agreed at that meeting that the Company should be sold. After the meeting Mrs Ansell sent a further email on 2 March 2012 (3/814) summarising a number of points that had either been discussed or on which she wanted further information. These included:

Although Mrs Ansell did not accept that there had been any agreement in principle to seek to sell the Company, this correspondence and that which follows it shows in my view that Mr Pinfold's evidence is to be preferred. The way in which Mrs Ansell raises the matter shows in my view that she was anticipating that Messrs Stallard and Priestly wanted to visit her and her husband on a pretext with a view to discussing buying the business. Mr Pinfold's response (3/815c) was that although he had spoken to them he had not mentioned anything about possibility of sale because (the implication being this was contrary to what he had expected) no estate agent had been to value the premises and as a result he "assumed that you might have had a change of heart or a cunning plan regarding selling the property/Foundry". That is consistent with his evidence that there had been previous discussion of a sale. Mrs Ansell in turn responded that she did not want the financial information with a view to discussing a sale to the two men; she said (3/816) "I would not talk about Foundry value/accounts with them or anyone else without you being there. I want the information so that I can understand Foundry better, specifically what brings the money in and what our costs are."

Mr Pinfold in turn replied (3/818) that he intended to phone Mr Stallard "to see if he wants to buy Foundry before I try to sell it elsewhere… I will simply say that after our meeting we agreed to sell Foundry because… Bryan may well move to the USA and wants to liquidate some of his assets in the UK [and] KP is 65 and wants some money to travel and to leave to his family etc…". Mrs Ansell replied with a terse "Don't talk to J&R yet" but she was clearly still considering a sale; on 7 March she said (3/820) that she herself had now met the two potential purchasers, thanked Mr Pinfold for financial information provided and asked further detailed questions, including wanting to know how much cash was currently held and "How does cash at the bank work in a sale situation? Do we declare a dividend and take all/most of it out?". She asked for "your thoughts on how Foundry would be valued, and how much you are hoping to get.".

Mr Pinfold appears to have considered that Mrs Ansell might be trying to do a deal with the two potential purchasers without involving him. On 9 March 2012 he asked her (3/821) "What did John and Rick come for and what did they have to say about Foundry?... I have to say I do not understand why, with all the trials and tribulations going on in your life at the moment, you want all of this information about Foundry, especially when we have agreed to sell it." In her response, Mrs Ansell said that she had had no discussion of a potential sale with Messrs Stallard and Priestley. She did not object to the statement that it had been agreed that the Company should be sold. Neither did she respond to the question about why she wanted the financial information.

On 3 May 2012, Mrs Ansell spoke to Mr Fletcher and sent an email to Mr Pinfold asking that a job be given at the Company to her nephew Neil Littlewood. It is accepted that Mr Fletcher had told her that the Company was two weeks behind despatching mail orders, though this is not mentioned in her email. Mr Pinfold did arrange for Mr Littlewood to be employed in a junior capacity to help with bringing the despatches up to date.

On the evening of Friday 22 June 2012, Mrs Ansell chased for a copy of the final accounts of the period to 31 March 2012, which were expected to be finalised imminently. She said "I am keen to get the accounts in detail so that we can all decide how to move forward." (4/844a). Mr Pinfold told her that he expected the accounts to be ready to be signed off in the next week and said "as for moving forward with a sale, I think John Stallard would still be keen to buy." He seems to have been making the point that "moving forward" in his mind meant pursuing a sale, but Mrs Ansell appears to have had different intentions.

Over the following weekend, events took a very dramatic turn. On Sunday 24 June, Mrs Ansell sent an email (4/846) which included the following:

“Accounts: please send me the detailed profit and loss account now. I am not concerned about any minor changes and I really do not think I need to wait for a signed copy or the PDF version from the auditors…

Bryan has been on more effective drugs over the last few months which have had a huge positive effect on his health and have reversed most of the damage done over the past seven years.

Foundry: my understanding is that you would like to sell your shares and have nothing more to do with Foundry as soon as possible. I doubt that John Stallard would still be interested in buying Foundry now, unless it was dirt cheap. We will not be selling in the foreseeable future. I hope that you will be happy to hear that the extended Ansell family will be fulfilling more active roles in Foundry.

I called at the factory on Friday … and took Neil [Littlewood] to lunch… I pressed Neil about what is happening at the factory. We need to talk about Matt; he should not be in charge of any factory. You probably already know this and have been unable to find a suitable replacement.

We have had Neil here this weekend and are very alarmed about a lot of what he has told us, shown us and the damage being done to Foundry's reputation as a business concern. The models and rules we have seen are of such poor quality that they will destroy any reputation Foundry has left forever.

As of Monday, Neil will be reporting directly back to Bryan and I (sic)

Neil will inform Matt on Monday that he … will no longer have any contact with any creatives and this role will ultimately revert to Bryan.”

It does not appear that Mrs Ansell immediately provided any further explanation of this email. Early the next morning Mr Pinfold emailed saying "We need a meeting of the three of us ASAP – this afternoon somewhere to discuss all that you have said." Mrs Ansell's response sent at just after 11 am (4/850) said "I have suspended Matt this morning on full pay for lying to me, an Officer of the Company. He has been filming and recording Neil and denied it three times on the telephone when I asked him. There are witnesses….". It appears that they did meet that afternoon when Mrs Ansell said that allegations had been made against Mr Fletcher of homophobic harassment and bullying, breach of other manufacturers' copyright and health and safety infringements at the factory. She later said that she had sought legal advice and "[spent] the weekend looking at legal judgments relation to homophobic harassment." (see email at 4/879f).

If Mrs Ansell had been told about allegations against Mr Fletcher such as she referred to by the time she sent her email on Sunday 24 June, it must have been either during the course of her lunch with Mr Littlewood on the Friday or over that weekend. Yet she did not mention it on the Friday evening when she asked for accounts in order to consider "the way forward". Nor did she mention it in the email on the Sunday, save by way of oblique reference to Mr Fletcher not being suitable to manage a factory. She did not ask Mr Pinfold about any of these allegations, although he had been running the Company for many years and one might have expected that she would have wanted to see what he had to say about them. Instead, and although she had not been involved in managing the factory, she took it upon herself to suspend the general manager, apparently by telephone. Mr Fletcher later alleged that he was told he was being suspended by Mr Littlewood, the most junior employee, in front of all the other staff.

When asked about this in cross examination, Mrs Ansell had no explanation of why she did not discuss these matters with Mr Pinfold before suspending Mr Fletcher. At the time she was maintaining that she was not expecting Mr Pinfold to retire from day-to-day management and only became aware of that intention after the suspension decision. If that were the case, and particularly if whatever was said to her by Mr Littlewood on the Friday or over the weekend came as a surprise, it is very hard to see how she would have thought it appropriate to deal with these matters over Mr Pinfold's head without even consulting him. In fact, I think it is clear from her own email and the reference to her understanding that Mr Pinfold wanted to sell his shares and have nothing more to do with the Company that she did understand that he intended to step back from management, and this email and her actions the following day show her taking steps effectively to seize control of that management for herself and exclude Mr Pinfold from it.

The most likely explanation in my view is that these events were the culmination of a plan formulated by Mr and Mrs Ansell and carried through by Mrs Ansell in view of her husband's incapacity. Having heard both the witnesses and read the documents, I find that Mrs Ansell was aware since 2010 that Mr Pinfold wished to exit the business in 2012 when he would be 65, preferably by selling it but in any event by stepping back from the day-to-day management. Consistent with that, steps were taken to employ and train up Ms Hayward and Mr Fletcher. Mr Pinfold repeatedly raised the question of selling the Company as well as the various properties that the parties owned, and I accept his evidence that Mrs Ansell said in early 2012 that she agreed it should be sold. Thereafter, however, she had a change of heart, ignored the issue when Mr Pinfold pressed it, avoided discussions herself with potential purchasers and deterred Mr Pinfold from pursuing any such discussions. Mrs Ansell began seeking more detailed information about company with a view to taking over management control of it herself with the assistance of members of her family.

I accept that when she began to investigate matters Mrs Ansell discovered things about the way the Company had been run that she and her husband did not agree with. These included the issues that she subsequently raised about poor quality products and repeated heavy discounting. No doubt she regarded these matters as partly Mr Pinfold's responsibility and partly that of Mr Fletcher. That might have been a good reason to remove Mr Fletcher as well as Mr Pinfold. I find that Mrs Ansell had a settled intention to do that before the weekend 24 June, and, at best, any information Mr Littlewood gave her at or about that time only provided the pretext or occasion to put that plan into action.

This in my view is apparent from the terms of the 24 June email itself. The peremptory demand for the accounts does not appear to have been justified by any delay on Mr Pinfold's part in responding to queries she might have raised previously. Insofar as she wanted detailed information about sales or breakdowns of profitability between ranges, this would not be apparent from the accounts. The statement about her husband's health must have been intended to imply that he was expecting now to resume a more active role in the Company. It was not in fact true that his health had recovered, and I do not believe that Mrs Ansell thought it had, although she said that there had been a period when some incorrect test results had given them hope that medication might be having a beneficial effect.

She dismisses the possibility of a sale to Mr Stallard without, according to her, having discussed that with Mr Stallard himself or previously raised any doubts with Mr Pinfold about his willingness to buy. The way in which she does so and follows it up by stating that she and Mr Ansell "will not be selling in the foreseeable future" and that members of her family "will be fulfilling more active roles in Foundry" is in my view clearly informing Mr Pinfold that she is ruling out a sale and that she and her family intend to take control whether he likes it or not. It cannot in my view realistically be interpreted as an offer of assistance in circumstances where it is required because Mr Pinfold himself is stepping back; she does not put it in those terms herself and if she had intended to resolve such a difficulty she would presumably have discussed it with him beforehand.

The statement that Mr Littlewood will in future be reporting back directly to Mr and Mrs Ansell must be premised on his taking a much more senior role in the operation than he had been originally employed to do. There would be little purpose in a junior employee reporting directly to the shareholders, and if the issue had been his personal relationship with Mr Fletcher one might have expected that Mrs Ansell would have said so, made clear what the problem was (which she did not do) and proposed that some other employee ought to have been found to supervise Mr Littlewood whilst Mr Fletcher's position was investigated. Similarly, the statement that Mr Littlewood would be informing Mr Fletcher, the general manager, that he was no longer to deal with creative designers clearly indicates that Mr Littlewood is being significantly elevated in status by Mrs Ansell without consultation with Mr Pinfold. Mrs Ansell was plainly taking it on herself to appoint him to that new position, without even any discussion with Mr Pinfold.

Mr Fletcher brought a claim against the Company in the Employment Tribunal. The Tribunal judge found that although the allegations of bullying and harassment against Mr Fletcher were made out they were not the cause of his dismissal, which was found to be unfair. The tribunal judge concluded, as I have, that Mrs Ansell had determined to dismiss him before he was suspended and without giving him any opportunity to respond to those allegations. The events over the weekend of 22 to 25 June 2012 had, he said, "all the hallmarks of a coup". I agree.

After that weekend, it is clear that relationships between Mr Pinfold and Mrs Ansell deteriorated further. There is an extensive email correspondence between them, which I will not attempt to recite in full. Mrs Ansell set out various respects in which she considered the business had not been well run. Mr Pinfold urged that the Company should settle Mr Fletcher's tribunal claim and made clear that if he was required to give evidence he would say that he regarded the allegations against Mr Fletcher, even if accurate, as being made to justify a decision already taken. He was not called as a witness.

One theme that the Respondents rely on relates to numerous master moulds that had been stored in a basement at Mr Pinfold's house. On 27 June 2012, so almost immediately after the removal of Mr Fletcher, Mrs Ansell demanded the return of these moulds (4/859) saying that "Neil would like" them to be returned to the factory. If Mr Littlewood had anything to do with this request it confirms he had been effectively promoted from the most junior to the most senior employee overnight.

Mr Pinfold prevaricated, saying that the moulds were kept away from the factory for safety so that they would not be lost in the event of a disaster such as a fire. He said that the production moulds were at the factory, that there was no need to have all the master moulds there as well but if specific ones were wanted for a particular reason he would provide them. Mrs Ansell maintained they were company property and were needed. Eventually she caused a notice to be sent convening an "emergency directors meeting" for 12 November 2012 to consider a resolution that solicitors be instructed "to pursue the return of Company Property from the Director and Shareholder, Keith Pinfold. No other business will be discussed at this meeting". Resisting Mr Pinfold's request to adjourn the meeting, the resolution was passed against his objection. The following day Mr Pinfold agreed to return the moulds.

I do not accept either party's evidence as to the motivation for this sequence of events. It is not credible that there was a genuine need immediately to have all the master moulds at the factory, in the sense that they were required to be used. Mrs Ansell, I find, wanted to get control of them in order to cement her family's control over the business and exclude the possibility of interference by Mr Pinfold. Mr Pinfold asserted that they were stored at his house only for safety and that his concern was that they should not be returned until some other safe location away from the factory could be identified, but in reality, I am satisfied, wanted to keep physical control of them precisely to retain some form of influence or bargaining power for himself. He had no legitimate basis to retain them against the will of the majority of the directors, and ultimately, faced with the threat of legal action, he had to back down. He said that he did so as soon as it was made clear that the moulds would be stored away from the factory, but that had been said long ago and was not, in my view, more than a side issue.

Mr Pinfold disagreed with most of the criticisms that were made of the conduct of the business under his control. In a letter of 3 September 2012 (4/890a) he proposed what he called a "new management system" in which the Company would hold regular, initially monthly, directors meetings (there had been few or none previously), with formal reports and minutes. He said "I accept that you and I will have different approaches to the business, and there will be matters about which we may have to agree to differ, but you will understand that I remain a director and significant shareholder and I want to carry out my directorial duties and to safeguard my investment… I will try not to interfere and let you and the new staff 'get on with things' so long as there are no serious issues that affect the long-term future viability of the Company. As stated above, we will inevitably differ about things, but having retired, I recognise that it is wrong for me to insist on retaining 'hands-on' involvement."

Mrs Ansell's reply some six weeks later (4/914) made it clear she was not prepared to have any such system of board meetings and that she could see no need for any meetings "apart from any emergency meetings that we may need to call to resolve issues that require a directors or shareholders vote." In the end, it appears that only two board meetings were convened. The first was the "emergency meeting" in November 2012 to threaten legal action against Mr Pinfold at which, Mrs Ansell was at pains to make clear in the documentation, no other business would be discussed. The second was in connection with a proposed resolution, demanded by requisition of Mr and Mrs Ansell, for the removal of Mr Pinfold as a director. That meeting was held, in Mr Pinfold's absence, on 25 February 2013, and resolved to call a shareholders meeting on 29 March 2013. At that meeting, Mr Pinfold was removed.

The Ansells' proposal to remove Mr Pinfold crossed in the post with a notice from him seeking to requisition a shareholders' meeting at which he would propose resolutions for the provision of financial information to himself. He also proposed that the payments to Clifford Ansell be discontinued. Mr and Mrs Ansell could of course have allowed this meeting to be held and voted against the proposed resolution, but instead Mrs Ansell wrote contesting the validity of the notice on the dubious technicality that it had been sent to her home address and not the Company's registered office.

Throughout this period, attempts were continuing to sell the property in Nottingham, part of which was occupied by the Company. On 24 September 2013 (5/1037) Mrs Ansell wrote a letter to Mr Pinfold "as a director of Foundry" asserting that since the Company would incur cost and disruption in removing its business from the premises, a payment of £75,000 should be made to it out of the sale proceeds to give up its lease. Mr Pinfold protested against this, but was ultimately forced to concede it. In his view, the amount demanded greatly exceeded any true cost to the Company of moving its operation and the real motivation for making that demand was to siphon off part of the property proceeds into the Company where they would be used for payment of salaries to Mrs Ansell and her family and alterations to the Ansells' family home, to which the Company's business would be moved.

Although complaint was made about this payment in the statements of case, ultimately Mr Gunstone conceded that no claim would be pursued in respect of it. These proceedings are, of course, a petition alleging conduct to the prejudice of Mr Pinfold as a shareholder in the Company. A payment to the Company might prejudice Mr Pinfold's interest as a freeholder in the property, but could only benefit the interests of the Company and, potentially, its shareholders. Further, there was no evidence that once the funds had been received by the Company they had been misapplied in the sense that they had been spent in breach of duty to the Company. Monies had been spent in adapting outbuildings at Mr and Mrs Ansell's house for occupation by the Company, but there was no evidence either that the adaptations were not needed for that occupation, or that excessive amounts were spent, or that the Company could have found alternative premises elsewhere at less cost to itself. To the extent the £75,000 funded or facilitated salary payments, those are separately addressed in any event.

Since April 2013 the conduct of the business has effectively been under the sole control of the Ansell family. Mr Ansell himself has not been directly engaged in management on account of his illness, but Mrs Ansell has taken the lead with her nephew Neil Littlewood. She decided to pay herself a salary of £4,000 pm, commencing in January 2013 but backdated to the date of Mr Fletcher's suspension the previous May, though Mr Chapple suggests that in the event she only drew one month’s salary. Mr Pinfold claims this is contrary to the agreement that benefits would be distributed by dividend only, with which he was required to comply. The auditors have been replaced. There have been no members meetings, not even any Annual General Meetings, so Mr Pinfold has not even been able to participate to that extent. Mr and Mrs Ansell have refused to discontinue the payments to Clifford Ansell, notwithstanding Mr Pinfold's protest against them. Mr Pinfold complains of various other matters which he says are breaches of the Companies Acts and the Articles of Association. He criticises the commercial conduct of the business. It is a matter of record that turnover and profitability have fallen; Mr Pinfold attributes this to changes in commercial policy such as the abandonment of the regular discounted product offers he and Mr Fletcher made, in particular in the run up to Christmas, in order to generate sales and clear stock.

It is common ground that the issue of unfair prejudice starts with a consideration whether the Company is to be regarded as a quasi partnership, in which each of Mr Pinfold and Mr Ansell had an expectation of continued participation in the management of the business such that the unjustified exclusion of one of them may be regarded as unfair prejudice to his interests as a member. Further, if an order is made for sale of the petitioner's shares in such a company it will normally be on the basis of a proportion of the value of the Company as a whole, without discount for a minority holding.

In Ebrahimi v Westbourne Galleries [1973] AC 360 the House of Lords held that equitable considerations may be superimposed on the strict rights of the shareholders where appropriate. Lord Wilberforce said (p379) that it was not sufficient for this to be the case that the Company was a small one, and there may be many cases where the association of the shareholders was a purely commercial one that could safely be regarded as exclusively regulated by the Company's constitution.

“The superimposition of equitable considerations requires something more, which typically may include one, or probably more, of the following elements: (i) an association formed or continued on the basis of a personal relationship, involving mutual confidence - this element will often be found where a pre-existing partnership has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be "sleeping" members), of the shareholders shall participate in the conduct of the business; (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 that referring to such companies as quasi partnerships may be convenient but misleading. This has not however stopped that label being used routinely since by litigants and judges.

The three matters mentioned are thus indicators of cases where the courts may impose equitable considerations on the exercise of shareholders rights, but not a set of tests that must be satisfied. They need not all be present in every case, though often they will be. It is a matter for the court's overall assessment in any case whether conduct of a company's affairs which may or may not be in accordance with its constitution, the Companies Acts or other general law is to be regarded as in breach of equitable obligations owed by the shareholders to each other as part of the overall arrangements under which they conduct business through a limited company. If so, the court may find, firstly, that such conduct is to the prejudice of a shareholder's interests as a member, including interests arising from such equitable considerations and, secondly, that such prejudice is unfair.

As to the third consideration, a restriction on transfer of shares, I doubt myself whether that should be considered as making it a necessary condition that there should be a formal restriction on transferability of shares in the constitution. The essence of the inequity identified is that if the shareholders fall out, one of them cannot realise his stake and go elsewhere. In a company regarded as a quasi partnership, the fair realisation of his stake requires, usually, that he can sell his shares without a minority discount, and yet even if there were no formal restriction on transfer he could not in practice find a third party who would pay a price without such a discount because, necessarily, the third party would be an arms length investor without the advantage of the quasi partnership relationship with the other shareholders. Fortunately, this is not a matter of controversy in the present case however since it is common ground the Articles do in any event contain a restriction on transfer.

As to the first two elements, I am in no doubt that they are present. Mr Pinfold was invited to become a shareholder and to take part in the management of the Company because of his personal relationship with Mr Ansell formed during their successful participation in Games Workshop. The mere fact they knew and trusted each other is not itself sufficient - there are many cases in which an employee may be approached or taken on because the owner has previous good experience of him. But Mr Pinfold was not taken on as a mere employee, even an employee with a shareholding for bonus or incentive purposes. The overall arrangements make clear in my view that what was formed was a scheme for the joint conduct of the business for their mutual benefit on the basis of their trust and confidence in each other.

The main factors that lead to this conclusion are:

I should say that I do not accept Mr Pinfold's assertion that the arrangement agreed was that the Company be groomed for sale in a short timescale. There is no evidence of any steps in that direction, even when Mr Ansell was participating fully, nor of any discussion of an alternative strategy when he became unable to do so. No doubt it was in general contemplation that there would be an exit at some point, which would be likely to be by way of sale since it does not appear that either side anticipated any family or other succession to their interests. But so far as can be seen from the documents both sides were content to deal with any interest that might be expressed from time to time until they might agree to pursue a sale. Mr Pinfold sought to press for such a sale from 2010, and Mrs Ansell as I have found told him she agreed to that course in early 2012. If she (and Mr Ansell) ever meant what she said however they must have quickly changed their minds because Mrs Ansell thereafter dissembled until she put in place her own strategy in May of that year.

I do however accept Mr Pinfold's evidence that it was agreed that on a sale he would receive 50% of the proceeds notwithstanding his shareholding was only 49%. There are no documents or actions of the parties to corroborate this, so it is a question of whether I prefer Mr Pinfold's evidence on the point to that of the Respondents. I do, because in my view his account of the arrangements made is more consistent with the surrounding circumstances and contemporary events. Mrs Ansell's evidence I consider to have been heavily influenced by the position she now takes to justify the expulsion of Mr Pinfold. Mr Ansell's recollection of matters other than the artistic and creative process he was, by his own account, solely interested in, was not in my view reliable. Strikingly, at one point he was taken to an account of events in a witness statement. He was adamant and forceful that "that never happened", until it was pointed out to him that he was reading his own statement.

This was, then, a business association giving rise to equitable considerations going beyond strict legal rights. Moreover, since the basis of it was that both were expected to participate in the management of the business, Mr Pinfold has in my view shown what Lord Wilberforce described as:

“some special underlying obligation of his fellow member(s) in good faith, or confidence, that so long as the business continues he shall be entitled to management participation, an obligation so basic that, if broken, the conclusion must be that the association must be dissolved.”

The Respondents argue that because Mr Pinfold himself stated that he wished to step back from day to day management, he cannot complain that he was thereafter excluded from participation on a more restricted basis as a director. But that in my view is no answer. It has not been suggested that, in making clear his wish to step back from "hands on" management at the age of 65 and arrange for that to be continued by employees he was himself in breach of the arrangement on which he became a shareholder such that it might be said he forfeited any expectation of participation at all. A certain amount of flexibility must be accepted as part of such arrangements, since the circumstances of the business and the participators are bound to change over time. The Ansells took it on themselves to do away with the arrangements Mr Pinfold had made for his own succession and substitute direct management by themselves and their family. Even if they had good cause to dismiss Mr Fletcher, it was their own choice not to engage a comparable third party replacement but to place control in a combination of Mr Littlewood and Mrs Ansell. It was accordingly in my judgment unfair for Mr Pinfold's remaining means of involvement and influence, if not control, over the conduct of the business to be terminated by his removal as a director and the refusal of provision of any financial or management information.

Given that finding it is not in dispute that, to use Lord Wilberforce's words, the appropriate conclusion is that the "association should be dissolved" and the appropriate way to do so is to order that Mr Pinfold's shares be purchased by the Respondents. I go on to address the other allegations of unfair prejudice briefly, and only insofar as they may affect the terms on which a sale is directed.

I do not doubt that Mr Pinfold is right to regard these payments as commercially unjustified. Clifford Ansell had no contractual or other right to a pension for life and it would not have been a commercial decision to award him such a pension when he stopped managing the business. That seems to have been the reason why Mr Pinfold thought there would be more justification in claiming a tax deduction for payments to him labelled as being for consultancy advice, though the supposed consultancy appears to have been almost entirely notional. It seems unlikely, contrary to the Respondents' assertion, that there was any legally enforceable obligation to Clifford Ansell to continue the payments for life.

In truth, these payments were the sort of arrangement that is commonly made in family companies and for family purposes. Mr Ansell wished to make them to confer a benefit on his father, and not for any commercial reason. They amount to a first share of the revenues of the Company in favour of Mr Ansell, paid at his direction to his father. Mr Pinfold accepts that he agreed when he became a shareholder that they could be made, and does not say they were agreed to be temporary. No doubt the directors and shareholders could have reviewed and discontinued them if they chose, and as I have said I have no doubt they would have done so (and that Mr Ansell would have procured his father to agree) if the Company had been sold. But absent any such agreed discontinuation they were part of the sharing arrangement Mr Pinfold agreed when he joined the Company and it cannot be said to be unfair to him that Mr Ansell would not drop them. To the extent therefore that the uncommercial payments prejudiced Mr Pinfold's interests, such prejudice is not unfair because he agreed to it.

Mr Pinfold complains that such payments are prejudicial to his interests because they are:

On the first point, although Mrs Ansell produced evidence as to rates of pay for managers in similar businesses and maintained that the rate for her was reasonable, and had some relevant experience from her previous involvement in Games Workshop, it is hard to see that the value of her services would exceed that of Mr Fletcher as General Manager, particularly since it appears part at least of Mr Fletcher's role was being performed by Mr Littlewood, who is paid separately. Mr Fletcher was recruited in the open market and presumably paid at a level sufficient to keep him. That level is in my view the best evidence of a market rate for the work and skills required, and any more paid to Mrs Ansell is appropriately regarded as being on account of her family connection.

I would therefore in any event have regarded any such additional payments as being unfairly prejudicial to Mr Pinfold's interest and directed they be left out of account or added back if to do so would affect the calculation of the sale price of his shares.

I do not consider Mr Pinfold is assisted by the second point. Regulation 76 deals with the directors' remuneration for acting as such, ie for their role in attending meetings of directors and dealing with the affairs of the Company in that context. It does not prevent a director being employed by the Company to provide management or other services to it or prohibit any payment to them by virtue of a contract of employment.

I do however accept Mr Pinfold's position on the third point. Mr Chapple submitted that whatever might have been agreed between Mr Pinfold and Mr Ansell, that agreement did not affect or bind Mrs Ansell who was not a party to any such agreement. That however is in my judgment to miss the point. The agreement of the two men, who were the controlling shareholders (Mrs Ansell's holding being nominal and to secure effective voting control by Mr Ansell) was that shareholders' rewards should be by way of dividend only (ignoring for this purpose the payments to Clifford Ansell). They did not anticipate Mrs Ansell working in the business and in the circumstances of the agreement and expectation at the time it would in my view have been a breach of the understanding for Mr Ansell to pay his wife to do some or all of the things that he was expected to do, without making any adjustment to his own share of distributions.

Circumstances changed in that Mr Ansell became too ill to do these things himself, but he did not regard it as appropriate to allow Mr Pinfold any additional remuneration for extra work taking over part of his role as a working shareholder. As between the two men, it seems to me it follows that it would be equally inappropriate to allow what would be an additional first slice of revenue to Mr Ansell by payment to a connected party for performing part of the same role. As between the two men, Mrs Ansell is to be seen in my view as the alter ego of Mr Ansell.

It follows that, as between them, it would be a breach of their understanding for Mr Ansell to cause part of the Company's revenue to be diverted to his wife without taking it out of his own distribution. Accordingly, in determining what is fair in requiring Mr Ansell to buy out Mr Pinfold, any effect of that diversion should be reversed.

This does not mean that Mrs Ansell is bound by the agreement of her husband, or required to repay any benefit she has received, but that that her husband must make adjustments so that Mr Pinfold is not affected by the fact she has been paid.

Any such adjustments would apply to the whole of the payment, not just the amount in excess of the level of Mr Fletcher's salary. No doubt the Company might have chosen to provide the services Mrs Ansell performed by paying a third party instead of them being done by or on behalf of a shareholder. That would have affected both the major shareholders equally and not been a breach of their agreement. But they did not and instead Mr Ansell has ensured they were done by his wife, effectively in his stead, and he should fairly bear the cost out of his own share as he would if he had done the work himself.

As it turns out, however, the basis of valuation that I have decided upon below is not affected by remuneration paid to Mrs Ansell, so in the end no adjustments have to be made for it unless I am found to have been wrong on that issue.

Although the statements of case indicated that complaint was made of salaries paid to other family members, Mr Gunstone confirmed in closing that this was not pursued.

There were many respects in which Mr Pinfold disagreed with changes made to the Company's methods of operation after his exclusion. Particular point is made in the petition at paras 34 and 35 of the decision not to have a sale in the run up to Christmas, which had historically generated a substantial proportion of annual sales. He also considered that Mrs Ansell had failed to exploit material such as books and compendia of articles and scenarios that had been under preparation, intended to be sold themselves and to lead to increased sales of miniatures.

His email exchanges with Mrs Ansell saw him ventilating his disagreement, while she in turn asserted that under his management the Company's brand had been cheapened and relationships with customers spoilt by what she and Mr Ansell regarded as poor quality products, excessive discounting and bulk sales to certain individuals who then made a profit by reselling and bombardment of customers with mailshots. Her evidence was that the books and compendia were in a much less advanced state of readiness than Mr Pinfold claimed and she doubted their quality and the effect they might have. The compendia, for instance, were she said largely collections of material already freely available on the Internet.

Mr Gunstone relied on Re Elgindata Ltd (1991) BCLC 959 and Re Macro (Ipswich) Ltd (1994) 2 BCLC 354 for the proposition that in appropriate circumstances acts of mismanagement might be treated as conduct unfairly prejudicial to a shareholder. In the former case Warner J said:

“There is little authority on the extent to which negligent or incompetent management of a company's business may constitute conduct which is unfairly prejudicial to the interests of members for the purposes of s 459. Mr Chivers referred me to Re Five Minute Car Wash Service Ltd[1966] 1 All ER 242, [1966] 1 WLR 745, where Buckley J held that allegations that the chairman and managing director of a company had been unwise, inefficient and careless in the performance of his duties could not without more amount to allegations of oppressive conduct for the purposes of s 210 of the Companies Act 1948. Mr Chivers rightly conceded, however, that that authority afforded little guidance in a case under s 459, because the concept of oppressive conduct in s 210 was narrower than the concept of unfairly prejudicial conduct in s 459. Mr Nurse referred me to a paragraph in Gore-Browne on Companies (44th edn, 1986) vol 2, p 28.021 which reads as follows:

'Another aspect of the enforcement of directors' duties by means of a petition under section 459 which remains unclear is the directors' duty of care. It would seem that the Jenkins Committee intended that the reformed statutory remedy might be used in this regard, although the courts decided otherwise in the case of the old section 210.'

Then there is a reference to Re Five Minute Car Wash Service Ltd:

'Where serious mismanagement causes real economic harm to the Company's business (and therefore to the value of the members interests) the general conceptual developments examined earlier should enable the courts to hold that unfair prejudice has been established. The terminology in section 459(1) (referring to “any actual or proposed act or omission of the Company including an act or omission on its behalf” where this “is or would be so prejudicial”) should be of assistance here. Once again, however, a petition in the case of a public listed company may present greater difficulty.'

Lastly I was referred, on this point also, to the judgment of Peter Gibson J in Re Sam Weller & Sons Ltd at the end of which (see [1990] BCLC 80 at 89, [1990] Ch 682 at 694) he said that he had no doubt that the court would ordinarily be very reluctant to accept that managerial decisions could amount to unfairly prejudicial conduct. The point for which that judgment is mainly authority is, of course, that conduct may be unfairly prejudicial to the interests of minority shareholders even if those responsible for that conduct may, as members of the Company, have suffered the same or even greater prejudice. That point is relevant here.

I do not doubt that in an appropriate case it is open to the court to find that serious mismanagement of a company's business constitutes conduct that is unfairly prejudicial to the interests of minority shareholders. But I share Peter Gibson J's view that the court will normally be very reluctant to accept that managerial decisions can amount to unfairly prejudicial conduct.

Two considerations seem to me to be relevant. First, there will be cases where there is disagreement between petitioners and Respondents as to whether a particular managerial decision was, as a matter of commercial judgment, the right one to make, or as to whether a particular proposal relating to the conduct of the Company's business is commercially sound. I heard much evidence, including the expert evidence of Dr Rhodes, directed to issues of that kind arising from decisions made by Mr Purslow, or from decisions that it was said he should have made but did not make. In my view, it is not for the court to resolve such disagreements on a petition under s 459. Not only is a judge ill-qualified to do so, but there can be no unfairness to the petitioners in those in control of the Company's affairs taking a different view from theirs on such matters.

Secondly, as was persuasively argued by Mr Chivers, a shareholder acquires shares in a company knowing that their value will depend in some measure on the competence of the management. He takes the risk that that management may prove not to be of the highest quality. Short of a breach by a director of his duty of skill and care (and no such breach on the part of either Mr Purslow or Mrs Purslow was alleged) there is prima facie no unfairness to a shareholder in the quality of the management turning out to be poor.”

In the latter case Arden J quoted the above passage without disagreement. She found on the facts that there had been specific acts of mismanagement by a firm owned by the controlling shareholder in failing to maintain and repair the Company's stock of houses for letting that had caused loss and which the shareholder had failed to prevent or rectify which (p406G) "viewed overall… are sufficiently significant and serious to justify intervention by the court under s 461 [Companies Act 1985]". She thus treated them as amounting to unfairly prejudicial conduct and took account of them by making an adjustment, acknowledged to be arbitrary, to the net assets of the Company for the purposes of valuation (p410A).

In my judgment, the matters complained of in this case fall in to the category of disagreement between shareholders as to the best commercial course for the Company. It is not a case of neglect to carry out basis matters that any competent management should (such as failing to keep assets in repair). Mr Pinfold's approach was to maximise sales and revenue by regular discounting and sales through various channels. Mr and Mrs Ansell regard that as too short term and prefer to develop (restore as they would see it) the Company's reputation for quality, keep prices up and control all sales directly rather than allowing third parties to resell. The court is not in a position to judge which of these approaches is preferable, and as Warner J said, should not attempt to do so. Mr Pinfold regards it as evident that his strategy was better from the fact that turnover and sales have fallen since he was excluded, but it cannot be said that it is not a legitimate commercial approach to sacrifice sales in the short term with the aim of changing the Company's market profile and making gains in the long term. The Ansells' approach may or may not be proved successful in the long run, but the court is in no position now to say they have not acted wisely, still less that they have not acted properly, in following it.

Further, Mr Pinfold accepts that he entered into an arrangement in which Mr Ansell would have ultimate control of decisions at Board and shareholder level. He was entitled to participate in those decisions and to seek to influence them, but in the end if they disagreed, as they now do (and assuming that Mrs Ansell would side with her husband) Mr Ansell's wishes would prevail. Mr Pinfold's exclusion from that participation is unfair, but the separate fact that the Company now follows the commercial course Mr Ansell prefers is not.

I do not therefore treat the alleged mismanagement as itself amounting to unfairly prejudicial conduct in this case. The disagreement over conduct of the business remains relevant to the outcome however, as appears below.

I will not set out in any detail or deal further with the various matters complained of since in light of my conclusions above they do not have any bearing on the order for sale of shares, and they do not result in any loss to the Company or Mr Pinfold that should be reflected in the price or other terms of that sale.

The principal issue is whether, as Mr Pinfold contends, his shares should be valued at the date of his exclusion or, if later, with adjustments that have the effect of taking the valuation back to that date. Both counsel accept that the starting point for consideration is that the value of an asset ordered to be sold as a going concern should be assessed at the date of the order for sale; see Profinance Trust SA v Gladstone [2002] 1 WLR 1024. The court in that case went on to say:

“[61] The general trend of authority over the last 15 years appears to us to support that as the starting point, while recognising that there are many cases in which fairness (to one side or the other) requires the court to take another date. It would be wrong to try to enumerate all those cases but some of them can be illustrated by the authorities already referred to:

(i)

Where a company has been deprived of its business, an early valuation date (and compensating adjustments) may be required in fairness to the claimant (Meyer).

(ii)

Where a company has been reconstructed or its business has changed significantly, so that it has a new economic identity, an early valuation date may be required in fairness to one or both parties (OC Transport, and to a lesser degree London School of Electronics). But an improper alteration in the issued share capital, unaccompanied by any change in the business, will not necessarily have that outcome (DR Chemicals).

(iii)

Where a minority shareholder has a petition on foot and there is a general fall in the market, the court may in fairness to the claimant have the shares valued at an early date, especially if it strongly disapproves of the majority shareholder's prejudicial conduct (Cumana).

(iv)

But a claimant is not entitled to what the deputy judge called a one-way bet, and the court will not direct an early valuation date simply to give the claimant the most advantageous exit from the Company, especially where severe prejudice has not been made out (Elgindata).

(v)

All these points may be heavily influenced by the parties' conduct in making and accepting or rejecting offers either before or during the course of the proceedings (O'Neill v Phillips).”

I have come to the conclusion, after some hesitation, that in this case fairness to Mr Pinfold requires that his shares be bought at the value they had at the date of his expulsion. Fairness is the overriding consideration, and it seems to me that to choose a later date confers on Mr and Mrs Ansell, the wrongdoers, an unfair advantage at the expense of Mr Pinfold.

The various points that lead me to this conclusion may be summed up by saying that the essential unfair prejudice to Mr Pinfold is that since his expulsion he has been locked in against his will to a company which now pursues a commercial strategy that, contrary to the agreement for his participation as a member, he has no opportunity to be involved in or influence. The way in which the business is run has since changed substantially. I do not consider this to be sufficient for it to be regarded as a "new economic entity", nor has it been changed in a way that excites suspicion that it may be being deliberately run down to defeat his claim (cf Croly v Good [2010] EWHC 1 (Ch), referred to by Mr Gunstone). Nevertheless it represents a "sea change" in conduct, to use an expression that appears in a number of the cases that preceded Profinance, and there is a substantial flavour in the evidence that the new approach is influenced by the private interests of the Ansell family, including the protection and enhancement of Mr Ansell's reputation and legacy as an influential figure in the gaming world.

That strategy may or may not work out in the commercial best interests of the Company, and Mr Pinfold is exposed to the risk it will fail or that commercial considerations will be less prioritised without any say in the matter. If he had remained an effective participant he might still have been overridden, but he would have had the chance to influence the outcome in a way now denied to him.

He is locked in because no reasonable offer has been made to purchase his shares at their proper value. There has been one offer by the Ansells, which was made in December 2013 for £73,500, essentially the return of the amount Mr Pinfold invested in 1999/2000. This is not to say that making a proper offer would have cured any unfair prejudice arising from his expulsion such that he could not petition at all - this is not a case of a minority shareholder who is essentially an employee, such as O'Neill v Phillips [1999] 1 WLR 1092, in which it may not be unfair at all to remove him from participation if a fair offer is made for his shares. I gave the view in Harborne Road Nominees Ltd v Karvaski [2011] EWHC 224 (Ch) that the principles set out by Lord Hoffman in O'Neill were not intended to provide a mechanism for the exclusion and appropriation of the shares of one of two equal shareholders, and this case is much closer to that scenario.

However, it seems to me that if a fair offer had been made and turned down, or if Mr Pinfold had delayed in complaining or in exercising his rights such that it might be said he had settled for taking the risk that the value of his shares would fall, or was waiting to see if it rose or fell, it would be much harder for him to say he should in fairness be bought out as at an early date. He has done none of these things however. For the same reasons, an early valuation cannot be regarded as allowing him a "one way bet" in the sense that he has been able (or has chosen) to wait and see if the value rose or fell. Any delay has been as a result of the Ansells and not him.

Further, if as may be the case the Ansells' approach is to forego profit in the short term for potential long term advantage, the effect is likely to be to depress the value of the Company initially and so reduce the amount they would have to pay Mr Pinfold if the valuation date is taken at the date of the petition or order, while the benefits they hope for will come through later and accrue to them. A valuation at either of the dates they seek would be more akin to a one way bet in their favour, and more objectionable because it is in favour of the wrongdoer than any fortuitous advantage to Mr Pinfold of taking an earlier date.

As to valuation I have the reports of Mr Harshad Bharakhada of Grant Thornton, instructed as a single joint expert, who relies in part on the valuation of certain assets not fully reflected in the balance sheet by Mr Charles Loake of John Pye & Sons. Both experts gave oral evidence.

Mr Bharakhada's valuation of the share capital as a whole at 30 June 2012 was £618,000, based on a multiple of 6 times future maintainable earnings of £103,000 pa. In arriving at this figure, I note that he :

Mr Bharakhada noted as a cross check that this valuation implied a value of goodwill of some £257,000 over the value of net assets, after adjusting the book values of assets (£261,681) to reflect a valuation by Mr Loake of assets such as moulds that were either fully written off or otherwise not recognised in the balance sheet.

Mr Pinfold argues for certain further adjustments to this figure. As set out in Mr Gunstone's skeleton and submissions, these came down to the following:

I conclude then that the order should be for the Respondents to purchase Mr Pinfold's shares for £309,000, representing 50% (not 49% for the reasons given earlier) of Mr Bharakhada's valuation at 30 June 2012. There is an issue as to interest since that date, which I deal with below.

I note that the effect of valuation on this basis is that no adjustment is required for the fact that Mrs Ansell has drawn a salary for providing "shareholder level" management contribution to the business since May 2012. Any cost to the Company prior to 30 June 2012, and so any effect on its value if sold at that date, is de minimis.

If I had concluded that the valuation should be taken at a later date, in view of the decline in profitability thereafter the value of the assets of the business would assume a greater importance. Mr Loake, as noted, considered the values of various assets that Mr Pinfold contended were not properly reflected in the accounts and concluded that some £99,000 should be added to the book values. This principally represented the value of income earning assets such as moulds that had been written off in the books and intellectual property that was not recognised in the accounts at all.

Mr Pinfold contends that these are worth considerably more than Mr Loake was prepared to accept. His points were put to Mr Loake, whose position was unchanged. In summary, Mr Pinfold's argument was that the Company had spent much more to create these assets than the values attributed, and they could be sold to a purchaser either already involved in a similar business or wishing to start one at a price based on the cost of manufacture, since the purchaser would thereby avoid the cost of making new ones. Mr Loake's opinion however, which I accept, was that such a purchaser would be interested in the assets only as income producers, and so would pay for them only what was justified by the income they could generate. As far as intellectual property is concerned, that could not in my judgment be realised separately. If the Company were to be sold, it would only be able to carry on its business if it continued to hold the intellectual property it need to do so and use its assets. If moulds were to be valued for separate sale they would only have a value greater than scrap if sold with the right to use them to make models.

Mr Loake fully recognised that it was a difficult exercise to value such items since they did not come up for sale often and were likely to be bought by specialist purchasers already having an interest in the market. He had done his best to assess the value they might realise on the basis of available market information. Although Mr Pinfold considers this is nevertheless an undervalue, it represents the best evidence available to the court and I would have accepted it.

Mr Gunstone submits that if the Respondents had acted fairly towards Mr Pinfold they would have made a fair offer to purchase his shares at the time of his expulsion and terms could have been swiftly agreed, so avoiding the present dispute. Mr Pinfold should be compensated for the delay by payment of a sum equivalent to interest, at a suggested rate of 6% simple.

It is accepted that the court has no power to award interest prior to judgment per se in the exercise of the s994 jurisdiction; see Re Bird Precision Bellows Ltd [1986] Ch 658. But the Court of Appeal recognised in Profinance a power in the exercise of the court's wide discretion in that jurisdiction to order a supplemental payment equivalent to interest in a case where the circumstances made it appropriate to select an early valuation date. It was, the court said, a power to be exercised with great caution (see the judgment of the court at para 32) and normally only where such a claim is clearly pleaded.

In the present case, a claim for interest is made, but not in my view particularly clearly. The petition seeks an order for sale "at a price to be determined by the court in such manner as it thinks fit" with interest "at 8% pursuant to s35A Senior Courts Act 1981 … from the date of valuation or alternatively the date of judgment…". Alternatively interest was sought as a "due allowance for the unfairly prejudicial conduct of the Company's affairs…". The reference to interest on judgment debts was clearly inappropriate, and it was not until the Reply that the case was clearly made that the petition sought a valuation at the date of expulsion.

Bearing that in mind, and also that

I will list a hearing at which this judgment will be handed down, and invite the parties to agree the order resulting. I do not expect attendance on that date, save that if there are matters arising that can be dealt with in 30 minutes I will take them at the handing down. If a longer hearing is required, counsel should submit an agreed time estimate and availability for a hearing which will be separately listed.