Brewin & Anor v Bathroom Brands Holdings UK Ltd (& Anor

Contents

This is a petition for unfair prejudice, under sections 994 to 996 of the Companies Act 2006 (“the 2006 Act”). The allegations arise from the conduct of the affairs of Cintep Development Limited (“the Company”) by the First Respondent (“BBHUK”) through its nominated directors of the Company, Messrs Hance, Riley and de Beer. It is alleged that this conduct was unfairly prejudicial to the Petitioners, Messrs Brewin and Christy.

The trial is of liability only, with valuation to be determined at a separate hearing if I find that unfair prejudice has been established.

The following brief outline of the claim is taken largely from the agreed Case Summary.

The Petitioners, Mr Brewin and Mr Christy, invented patented technology for use in a new water recycling shower system (the “recycling shower”). Technically, Mr Brewin is the inventor of a water recycling shower system and Mr Christy is the inventor of a heat pump recycling shower system. They incorporated an Australian company, Cintep

Following discussions, in August 2014, BBHUK and the Cintep AU shareholders agreed to enter into a joint venture via a new company, being the Company, to develop and commercialise the recycling shower.

Heads of Terms were signed on 8^th August 2014 by BBHUK and Mr Brewin on behalf of the Cintep AU shareholders (the “Heads of Terms”). On 12^th August 2014, the

On 22^nd August 2014, BBHUK subscribed for 6,493,492 shares in the Company pursuant to the terms of a Subscription Agreement (the “Subscription Agreement”). Under the Subscription Agreement, BBHUK paid £112,000 and agreed, inter alia: (a) to make further contributions into the Company of not less than £1 million between the date of the Subscription Letter and 8^th August 2015; (b) after 8 August 2015, to pay the cost of developing the recycling shower to manufacture and (c) to enter into a shareholders agreement (the “Shareholders’ Agreement”) by way of Deed of Adherence (the “Deed of Adherence”).

The initial equity split was 75.5% to BBHUK and 24.5% across the Cintep AU shareholders, some of whom would receive share options in the Company, to be exercised at a later date, which could have increased their minority holding to 37.02%.

The Company acquired technology and the relevant intellectual property rights from Cintep AU.

BBHUK did not however sign a Deed of Adherence to the Shareholders Agreement.

In the months between August and November 2014, as had been agreed, BBHUK requested that Mr Christy and two engineers who were employed by Cintep AU (Mr Conway-Lamb and Mr Dyhrberg) relocate to the UK and offered them terms of employment.

BBHUK contends that during a visit to the Petitioners’ premises in Australia in October 2014, their engineers, including a Mr Glenn Porter, discovered fundamental problems with the recycling shower. In summary, BBHUK says that it became clear to Mr Porter during the course of discussions with Mr Christy and the other employees of Cintep AU during that visit that, contrary to what had been stated by or on behalf of the Petitioners in the discussions leading up to the August 2014 agreements, the recycling shower required very substantial further design and development work and that there was no guarantee that the product would ultimately be commercially viable. This is disputed by the Petitioners.

Following that visit, Mr Porter prepared a report dated 3^rd November 2014 which set out Mr Porter's allegedly serious reservations about the recycling shower in terms of compliance with UK legislation, production issues, and costs. The Petitioners say that this report was not shown to, or seen by, them until it was disclosed during these proceedings in April 2019. BBHUK did not follow a suggestion in Mr Porter’s report that a feasibility study be undertaken.

The Petitioners dispute the commentary and findings in Mr Porter’s report. They say that in 2014 the recycling shower was in the research and development stage and that the funding committed by BBHUK under the Subscription Agreement would have been used to complete research and development so that the recycling shower could be brought to a state in which it could be manufactured and sold commercially.

BBHUK says that in around early to mid-November 2014 its nominated directors of the Company decided to cease all further spending on the joint venture. During a Company board meeting held on 14^th November 2014, Mr Riley on behalf of BBHUK, proposed an indefinite extension to the longstop date of 8^th August 2015 by which BBHUK was required to provide the initial £1 million of funding to the Company under the Subscription Agreement.

Subsequently, on 25^th November 2014, Mr Hance sent an email to the Petitioners and others, communicating BBHUK’s decision to cease investment in the joint venture. The Petitioners say that BBHUK breached the Subscription Agreement by, inter alia, unilaterally withdrawing funding of the Company.

On BBHUK’s case, it took a commercially sensible and reasonable decision to postpone its funding commitments indefinitely after the fundamental problems with the recycling shower came to light, in circumstances where no reassurance or explanation as to the viability of the product was forthcoming from the Petitioners. BBHUK says that on 5^th November 2014, Mr Christy declared his intention to resign indicating an intention to walk away from the project.

The Petitioners disagree. On their case, acting in its capacity as major shareholder and investor, BBHUK wrongly and in breach of contract unilaterally withdrew from its contractual funding commitment and wrongly and unfairly prejudicially used its nominated Directors to block the Company from pursuing its commercial objective and its legal rights against BBHUK.

The Petitioners allege that BBHUK, by itself and through its nominee directors (Mr Hance and Mr Riley), seriously and grossly mismanaged the Company’s business in a way that destroyed its commercial vitality, and that they conducted the affairs of the Company for ulterior purpose.

BBHUK disputes this and says that a misleading impression of the status of the

The Petitioners further allege that BBHUK has:

The Petitioners assert that the matters complained of have caused them to suffer a loss of rights associated with, and a diminution in the value of, their shares in the Company. The principal relief claimed is an order requiring BBHUK to purchase the Petitioners’ shares in the Company at a price to be determined by the court, and on the basis set out in the prayer (without prejudice to the parties’ rights in due course to seek such directions as appear appropriate on any valuation).

BBHUK asserts that the Petitioners effectively invite the Court to second-guess the commercial decision of the Company's Board, in 2014, to suspend any further investment in a project that had been over-sold by the Petitioners; despite the Petitioners acquiescing in that suspension at the relevant time and despite the fact that the Petitioners have, in any event, suffered no prejudice. BBHUK accordingly denies causing unfair prejudice. The claimed relief is denied.

The following is a brief introduction to the people and the companies who appear in this judgment.

Peter Brewin, the First Petitioner. Following a Short Service Limited Commission as an officer in the Royal Engineers, he studied engineering at Cambridge University and then Industrial Design Engineering at the Royal College of Art (“RCA”) and Imperial College London. While at the RCA, he developed the novel re-circulating (or recycling) shower technology used in the recycling shower and co-developed other technology which lead to the development of a company called Concrete Canvas. He spends most of his time on the Concrete Canvas business. Both projects have however won design and business awards and he is the holder of multiple patents. Along with Mr Christy, Mr Brewin founded Cintep AU of which he was non-executive director. On incorporation he became, and still is, a director of the Company. He holds 5% of the Company’s issued share capital.

Nicholas Christy, the Second Petitioner. He is a Chartered Management Accountant, having trained with KPMG in London and worked on and with “Clean Technology” companies since 2000. These have been what he calls “early stage, turnaround, or rapid growth” companies. He has held more than 40 board appointments, as either director or company secretary, in the UK and Australia. He moved from the UK to Australia in 2007 and along with Mr Brewin he founded Cintep AU in 2009 to develop the recycling shower. He was its Chief Executive Officer. He was appointed as a director of the Company on its incorporation but resigned on 14^th November 2014. He holds 12.62% of the Company’s issued share capital.

David Hance. Mr Hance has been a director of BBHUK since 28^th May 2009. He has extensive experience in the sanitaryware industry having worked in that business since 1987. He has owned or been involved in many such businesses. He founded Crosswater Limited in 1998 to market bathroom fittings. This company merged with the Bathroom Brands business which had been founded by Mr Riley and Tim Powell (A). The merged company is BBHUK which, until 28^th March 2015, was known as Crosswater Holdings UK Limited. BBHUK is a distributor of bathroom products and has experience of taking bathroom products through the regulatory approvals process. Mr Hance is thus an experienced businessman and, in particular, has experience of UK water standards and regulations. Mr Hance was appointed as a director of the Company on incorporation and is still a director.

Patrick Riley. Mr Riley is also an experienced businessman. He started working in the bathroom industry in 1989. In 1991 he started his own company, Bathstore.com (which he co-founded with Nico De Beer), and of which he was CEO until 2000, and thereafter, and until 2004, a non-executive director. In 2003, Bathstore.com was sold to Wolseley Group, and in 2005 he co-founded (with Tim Powell (A)) what is now known as the Bathroom Brands business. He was the CEO of the Bathroom Brands business from

Nico de Beer. Mr de Beer is another experienced businessman who co-founded Bathstore.com with Mr Riley. He joined Bathroom Brands in 2012. He was a director of BBHUK and also of the Company from its incorporation until his resignation on 14^th November 2014.

Tim Powell (A). There are two Tim Powells who feature in this case. This Mr Powell is an Australian associate of Mr Riley who was a director of various companies in the BBHUK group. He is based in Australia and has experience in the sourcing of products and in product development in the bathroom fitting industry.

Christopher Gee. He is a Chartered Engineer and Member of the Institution of Mechanical Engineers. For most of his career he has worked on the design and development of electromechanical products that are connected to the mains water supply (e.g. hot drinks equipment and showers). He thus has over 25 years’ experience of product development and the relevant regulatory standards. From 2002 he worked for some years at Aqualisa Products Limited (“Aqualisa”) (which is a company that develops and then markets electronic shower technology and products) as Technical Director with responsibilities for research and development, customer service and quality assurance. It was at Aqualisa that he came across Mr Porter (see below). From February 2007 until 2014, he was the Chairman of the Bathroom Manufacturers Association Technical Committee. The BMA is the UK trade association for manufacturers and providers of bathroom products. As will be seen, for a period in 2014 he was a consultant to Cintep AU assisting it in its development of the recycling shower. From October 2014 he was employed by Aspen Pumps. He holds a small number of shares in the Company.

Glenn Porter. Mr Porter is an engineer. He began his career as a production engineer making turbine blades for the aerospace industry. He then moved into the design and development of consumer goods where he worked for about 20 years. This included seven years at Aqualisa Products Limited. During his time at Aqualisa, he managed the research and development teams for shower products. From 11^th August 2014 until September 2017 he was employed by BBHUK. Since October 2017, he has been working as an Engineering Consultant elsewhere in the bathroom industry.

Chris Conway-Lamb and Matt Dyhrberg. These are two Australian engineers who, until November 2014, worked for Cintep AU and were closely concerned with the development of the recycling shower. They each hold a small number of shares in the Company.

Alex Hill, Phil Capon and Dean Hayden. These are three English engineers whom Mr Porter had known from his time at Aqualisa. They all had considerable experience in the design and development of bathroom products. They were employed by the Company from 13^th October 2014. Their employment was effectively transferred to BBHUK in November 2014.

Tony Formica. An Australian who was a director of Cintep AU.

Tim Powell (E). The former finance director of BBHUK based in England.

Paul Caneparo, Michael Coughlin: These gentlemen are directors or former directors of BBHUK. Mr Coughlin is also a former director of the Company.

When considering the oral evidence given by the various witnesses at the trial, both parties reminded me of the well-known words of Leggat J (as he then was) as to the weight to be placed upon documentary evidence and the fallibility of oral evidence: GESTMIN SGPSSA V. CREDIT SUISSE (UK) LTD.[2013] EWHC 3560 (Comm.), at [15-23]. At paragraph 22 he concludes:

Thus, the following (of necessity lengthy) recital of the facts is taken as far as possible from the copious quantity of contemporaneous documentation which consists largely of email communications between the various characters involved. Where necessary I have referred to, and taken account of, the evidence (both written and oral) of the various witnesses who gave evidence to me.

Also where necessary, I have made findings of fact where there was conflicting evidence of events.

The Petitioners are the inventors of patented technologies for use in a ground-breaking water recycling shower (the “recycling shower”). In brief, the recycling shower takes a small volume of water in from the mains and reuses it in real-time by collecting water from the shower tray, cleaning, reheating and recirculating the water to the showerhead on a short and continuous loop. The process is intended to save a significant volume of water and energy compared to a conventional shower.

The Petitioners incorporated Cintep AU in September 2009 in order to develop and commercialise the recycling shower. Mr Christy was and is domiciled in Australia. As Mr Christy pointed out in his witness statement, between 2009 to 2014, Cintep AU had: built up and developed a small but talented and dedicated team of engineers to develop the recycling shower; won multiple international awards (including the BSI Sustainable Design Award, a Dyson Award and a British Standards Institution Environmental Design Award); received AU$ 2.4 million in external government grants and funding; successfully developed four iterations of the prototype recycling shower, including bespoke componentry for the system; and undertaken extensive testing, with, he described, promising results.

From late 2013, into early 2014, Cintep AU set about raising capital to fund the further development of the recycling shower so as to bring it to market. An Information Memorandum was prepared, which was nearing its final draft in early 2014. The intention at that stage was to raise capital by listing the company on the Australian Small Scales Offering Board (“ASSOB”).

The Information Memorandum was prepared in early 2014. It was a relatively lengthy document (running to nearly 100 pages including appendices). It contained the following passages:

The clear impression given is that, at that time, Cintep AU had produced a pre-production prototype which could result in a production model ready for sale by the end of 2014. This was not in fact the case.

However, in evidence Mr Christy said that this was only a “final draft” of the Information

Although Mr Campbell on behalf of BBHUK eschewed any direct reliance on the Information Memorandum, a copy of it was sent by Mr Christy to Mr Powell (A) of BBHUK under cover of an email dated 17^th April 2014.

In early 2014, Cintep AU was seeking distributors for its products in various markets including the UK. It sent out a pro forma letter signed by Mr Formica stating it was seeking a distributor one copy of which, dated 4^th February 2014, was addressed to and received by Mr Hance at BBHUK.

The letter of 4^th February 2014 stated, amongst other things:

Following an initial telephone conversation on or around 24^th February 2014, in an email dated 25^th February 2014, Mr Formica introduced Mr Hance to Mr Christy. In the mail he stated:

In his email in response dated 10^th March 2014 (in which he responded in red print directly to Mr Formica’s text), immediately underneath the passage set out above, Mr Hance stated: “We have all the knowledge and expertise you need for CE approvals, WRAS and KIWA-I will introduce you to these guys too.”

In March 2014, Mr Christy travelled to the UK. On 3^rd April 2014, he met with Mr Hance at BBHUK’s premises to discuss BBHUK becoming Cintep AU’s UK distributor. At the meeting, after discussing the technology, it was apparently Mr Hance who expressed his wish to invest in the recycling shower.

On 4^th April 2014, without the Petitioners’ knowledge, Mr Hance sent information about the recycling shower (including the Information Memorandum) to Mr Porter, who was then in the process of applying to work at BBHUK. This followed a meeting between the two men at BBHUK’s offices at which Mr Hance had told Mr Porter that BBHUK was contemplating an investment in the recycling shower. Mr Hance said he would send Mr Porter some information about the product and asked for his “high-level thoughts” on it. In evidence both Mr Hance and Porter agreed that Mr Hance wanted Mr Porter’s expert

Prior to the last two passages, Mr Porter had set out in tabular format a series of dates in two columns: one under the heading “Est Completion (optimistic)” the other “Realistic Completion”. The “Available for Sale” date in the first column is May 2015. The equivalent date in the “Realistic Completion” is November 2015. These dates were of course based on the four assumptions set out in the paragraphs immediately above the table.

Thus, with his experience, Mr Porter appears to have been alive to the potential problems of bringing a prototype through development to production. In answer to questions from Mr Lewis, Mr Porter accepted, as indeed is the case, that anyone reading his response (which would of course have included Mr Hance) would understand that the recycling shower was ground-breaking technology which came with a risk that it might not succeed as a product and indeed might not gain regulatory approval. Indeed he accepted that anyone reading his response would realise that current regulatory standards might have to be amended to allow this new technology to come to the market. He accepted that, even

It is also quite clear, and indeed accepted, that, at that stage, Mr Porter was seeking employment at BBHUK. He continues:

Thus, although he denied it in oral evidence (asserting, as stated, that he had effectively been offered the job already by Mr Hance) it rather looks like Mr Porter was at the same time as providing his expert views on the recycling shower, “pitching himself” to Mr Hance as an experienced engineer who could significantly assist in bringing the recycling shower to market in the UK. That is certainly how Mr Hance saw him and indeed why he sought his views.

On 7^th April 2014, Mr Hance sent an email to Mr Porter acknowledging receipt of his material and asking for “a day or two to digest both” the email and the accompanying document. In evidence he stated that he had read both.

It appears that Mr Hance was impressed with what he was hearing about the recycling shower. He sent an email on 5^th April 2014 to Mr Christy in which he stated:

He proposed to Mr Riley that they personally invest in the business. Mr Hance believed the investment opportunity to be an “iPhone moment” that would revolutionise the industry.

In response to Mr Hance’s enthusiasm, on 5^th April 2014, Mr Christy sent to Mr Hance an email with further information regarding Cintep AU and the recycling shower. He explained that Cintep AU wanted to raise some AU$ 4-5 million. In the email also stated:

On 11^th April 2014, Mr Christy met with Mr Hance at BBHUK’s premises. Mr Christy sent an agenda for that meeting by email which focussed on BBHUK becoming adistributor. Mr Christy states that at that meeting he answered Mr Hance’s questions as to the stage of development of the recycling shower technology. However, at the meeting Mr Hance again raised the possibility of BBHUK becoming an investor rather than a mere distributor.

Mr Hance then sent two chasing emails to Mr Christy on 11^th and 13^th April 2014 both communicating his enthusiasm for the project and expressing his appetite to be involved.

In mid-April 2014, Mr Hance spoke to Mr Riley about the recycling shower. According to the latter, such was the former’s enthusiasm, he described the product as potentially “an iPhone moment” for the shower industry.

Mr Hance also at that time asked Mr Tim Powell (A) to visit the Cintep AU’s premises in Brisbane. In his email of introduction dated 15^th April 2014, Mr Powell wrote to Mr Christy:

In preparation for this meeting, on 17^th April 2014, Mr Christy sent Mr Powell a link to the Information Memorandum. However, in his covering email Mr Christy pointed out that the document was not up to date. He stated:

On 22^nd April 2014, Mr Hance wrote a letter committing BBHUK to distribute the recycling shower in the UK. It said:

In an email dated 27^th April 2014, Mr Christy wrote to Mr Powell (A) as follows:

He visited the Cintep AU’s premises in Brisbane on 28^th April 2014. He spent approximately three hours there. Following his visit, Mr Christy sent an email to Mr Hance in which he said:

Indeed, Mr Powell (A)’s view, as reported back to BBHUK, was not positive. It was recorded in a note prepared by Mr Hance for the BBUK Board meeting on 24^th June 2014. In this note Mr Hance states as follows:

On 19^th May 2014, Mr Christy exchanged email correspondence with Messrs Hance and Canapero regarding the challenges posed by UK water regulation of “greywater” reuse. In an email to Mr Christy, copied to Mr Hance of that date, Mr Canapero stated:

Also on 19^th May 2014, Mr Christy emailed Mr Hance about an approach he’d had from the Guardian newspaper. He said:

During a visit to BBHUK’s UK premises, on 23^rd May 2014, Cintep AU’s Technical Director Chris Conway-Lamb had further discussions with Mr Canapero and Mr Hance. In an email to Mr Christy, Mr Formica and Mr Gee the next day, Mr Conway-Lamb described the meeting. He said:

At BBHUK’s request, Mr Christy travelled to Hong Kong and met with Mr Riley, Mr Hance and Mr De Beer at their hotel on 30^th May 2014. The meeting took place around the rooftop pool of the hotel. After a two-hour discussion about Cintep AU and the recycling shower, Mr Hance and Mr Riley committed, in principle, to invest AU$ 5 million. Mr Christy in his witness statement describes Mr Hance and Mr Riley leaving briefly so that the latter could have a cigarette, he then states:

In his witness statement, Mr Riley asserts that at that Hong Kong meeting:

“my impression from Mr Christy was that the Product was very close to being able to launch on the market”

When quizzed about this in cross examination, he went further and stated that he believed that Mr Christy had actually said that the recycling shower was close to launch. I’m afraid that I do not accept that evidence. Firstly, it is not the recollection of either Mr Christy or Mr Hance neither of whom mention such a statement being made. Secondly, as described above, Mr Riley’s evidence in chief (given in his witness statement) differs from that in cross-examination. Given the case put by BBHUK, one would have thought that, if such a clear statement had been made, then it would have featured prominently in Mr Riley’s witness statement. The suggestion that he had made such a statement at the Hong Kong meeting was not put to Mr Christy in crossexamination. Finally, an assertion that the recycling shower was “very close to being able to launch on the market” is directly contrary to the evidence of Mr Christy and, more importantly, to what is stated in the contemporaneous documents. I find that no such statement was made by Mr Christy and nothing said by him at that meeting could reasonably have given that impression.

In an email dated 31^st May 2014, (apparently drafted on his flight home) Mr Hance requested more documentation and information. The email stated:

The Guardian article about the recycling shower was published on 2^nd June 2014. On that date Mr Hance sent another email to Mr Christy stating:

On 3^rd June 2014, Mr Hance contacted Mr Christy by email, referring to the Guardian article and the relevant EU regulatory standards. The email stated:

In the meantime, BBHUK had sought accountancy advice as to whether any investment in Cintep AU or the recycling shower could be subject to “R&D tax relief”. In two emails dated 3^rd June 2014, partners in the firm of HW Fisher Accountants had advised that it was possible for BBHUK to claim this relief provided that it could be demonstrated that any investment by BBHUK had either created or attempted to create “an advance in overall knowledge or capability through the resolution of technological uncertainty”. BBHUK could, in that case, potentially benefit from tax relief of up to 225%.

Given BBHUK’s offer of funding and apparent enthusiasm, Cintep AU at this stage ceased its efforts to seek alternative capital through ASSOB listing in Australia.

On 6^th June 2014, Mr Gee (who at that time was in Australia working on water standards with the Cintep AU team) emailed to Mr Hance an explanation and diagram showing seven regulatory standards that the recycling shower would have to meet, and how Cintep AU planned to do this. In the email Mr Gee stated as follows:

In an email in response on the same day, Mr Hance stated:

Again, it is difficult to see from these exchanges how either Mr Hance or, for that matter, Mr Porter could have had any impression that the Cintep AU team thought that obtaining regulatory approval for the product was going to be simple or easy.

Also on that date, Mr Riley, who had engaged IP lawyers, Kempner & Partners, to act on behalf of BBHUK, sought information on Cintep AU’s IP rights to the recycling shower. Mr Christy provided this information by giving access to the “OneHub” site.

In an email sent early in the morning on 12^th June 2014 (Australian time) Mr Christy wrote to Mr Hance:

On 13^th June 2014, Mr Christy sent Mr Hance and Mr Riley, amongst others, a detailed report on Cintep AU’s competition including their main rivals, Orbital Systems. One of the points made by the Petitioners is that Orbital Systems have since proceeded to raise capital (in 2017) at a valuation of some US$124.8 million. They say that Orbital Systems’ accomplishments support the conclusion that the recycling shower was indeed a viable proposition and was, as at 2014, the leading product in an emerging market.

On 13^th June 2014 Mr Brewin spoke to Mr Hance for the first time.

On 16^th June 2014, Mr Hance caused the Company Secretary of BBHUK to circulate to the Board, which included himself, Mr Riley and Mr De Beer, the note headed “Note of 24^th June Bathroom Brands Board Meeting”. Part of the text of that note has already been set out. It contained reference to Mr Powell’s warning about the risky nature of any investment in the recycling shower.

On 23^rd June 2014 Mr Christy sent an email to Mr Riley attaching draft heads of terms for the proposed investment by BBHUK. The proposal at that stage was for an investment of AU$5 million by BBHUK in exchange for a 40% stake in the business. In the text of the email Mr Christy referred to “two big delays at our end” one of which was:

A detailed technical development plan was at that stage being prepared by Mr Gee and Mr Conway-Lamb.

A draft Heads of Terms was uploaded by Mr Christy to the “OneHub” site on 27^th June 2014. Mr Christy sent an email to Mr Riley explaining the purpose of the document which was to be sent the following week. The email stated:

In the meantime, at the BBHUK Board meeting on 24^th June 2014, and despite the terms of the note prepared by Mr Hance containing Mr Powell (A)’s comments on the recycling shower (the contents of which were apparently endorsed by both Mr Riley and Mr de Beer), it was decided that, nevertheless, the company BBHUK (as opposed to the individual directors) would invest. Mr Hance said this was because:

Thus the decision by BBHUK to invest was taken by the Board in circumstances in which it was clearly aware of both the risk that the product might not successfully be developed and the time required before it could be brought to market even if it could.

On 1^st July 2014 Mr Porter had dinner with Mr Gee. According to Mr Gee, they had a general discussion about the recycling shower project. Mr Gee explained to Mr Porter that his (Mr Gee’s) role would be to work with the Australian team to develop the existing prototype into one that could be scaled up for production, to help choose a manufacturing partner and to ensure that all the standards and approvals were obtained. On 2^nd July 2014 Mr Porter sent an email to Mr Hance informing him of the meeting. In that email, Mr Porter said: I had dinner with Chris Gee last night and he filled me in on CINTEP. There's a lot to do but I've offered whatever assistance he needs in getting the product into production…There's a lot to be done in terms of compliance and reliability testing. I'm looking forward to getting stuck in properly.

On 7^th July 2014 Mr Brewin and Mr Gee met Mr Hance and Mr Riley at Mr Riley’s home. According to Mr Brewin, at that meeting he explained to Mr Hance and Mr Riley what the current development plan looked like and that the current estimate was that the first products would be ready for market in 2016. Mr Riley and Mr Hance both asked if the product could be brought to market more quickly. They were, he said, “interested in the fastest route to market”. According to Mr Brewin, Mr Riley wanted the product to be on the market within 12 months. There was a discussion as to how that might be made possible, by, for example: outsourcing some of the research and development and manufacturing; hiring more engineers, and working on aspects of the development plan concurrently. There was also, according to Mr Brewin, a discussion about the technical risks involved. He explained that there was always technical risk in a project at this stage but that the key technologies: hydro-cyclones and pasteurisation were all pre-existing and “well characterised” and therefore, whilst there would be challenges,

Mr Gee recalls that, at the meeting, Mr Riley and Mr Hance were excited by the opportunity that the recycling shower represented. He was aware that they had not been involved in this type of research and development project before. He says that he made it clear to Mr Hance and Mr Riley that there were still “unknowns” and distinctly recalls explaining to them that there were challenges to address in relation to standards and approvals for which there were plans in place.

It was suggested to Mr Gee in cross-examination that, at this meeting, Messrs Hance and Riley made it clear that they were only interested in investing in a product that could be put into production relatively quickly. Mr Gee did not accept this. He insisted that it was made clear at the meeting that there was research and development work that had to be done and that the work had been planned out.

When he was asked about the meeting in cross-examination, Mr Hance said that, whilst he recalled that it had been what he called a positive meeting, he could not recall the finer detail of the conversation.

Mr Riley recalls only slightly more detail. He said that he expressed a wish that the product should be brought to the market within a year and was told that this was impossible. He was “not sure” whether Messrs Brewin and Gee spoke about the regulatory position. He accepted that there was a “lot of discussion” about hydrocyclones and pasteurisation but he had no recollection, he said, of Mr Brewin telling him that there was always a technical risk in this project. He said that Messrs Brewin and Gee said that they would go away and work on a revised timeline for the product development.

The discussions are reflected in the emails sent within the Cintep AU team, Mr Brewin, Mr Christy, Mr Conway-Lamb and Mr Formica, the next day. Mr Gee wrote:

This concern that the product be brought to market as soon as possible was reflected in an email exchange between Mr Hance and Mr Christy on 8^th July 2014. Mr Hance wrote: Pat and I are both concerned on the time line of bringing this to market and I want to discuss with you how we accelerate the process.

In further response to this, Mr Gee sent an email on 8^th July addressed to Mr Hance and Mr Riley in which he stated:

Following a further conversation between Mr Hance and Mr Christy on 9^th July, under cover of an email dated 10^th July 2014 sent to Mr Riley and copied to Mr Christy, Mr Brewin sent what he described as a “Technical Development Plan” in the form of a GANTT Chart. In the email Mr Brewin stated:

In his evidence Mr Brewin stated that he was clear from his discussions with Mr Riley that the latter was aware that the revised development plan was “aggressive” and that no outcome could be guaranteed. He described the Development Plan as “the best possible realistic achievable plan”.

A few hours prior to that email being sent by Mr Brewin, the same GANTT chart had been sent as an attachment to an email sent by Mr Gee to Mr Conway-Lamb and copied to Mr Christy and Mr Brewin. In that email Mr Gee has stated as follows:

BBHUK place particular emphasis on these emails and in the GANTT chart attached to them. Mr Brewin accepted in cross-examination that Mr Gee’s email painted a different picture to that in his own email to Mr Riley.

On 23^rd July 2014, and in preparation for the visit by Mr Hance and Mr Riley to the Cintep AU premises in Brisbane, Mr Christy sent six separate documents as attachments to separate emails. In the first of these emails he stated as follows:

One of the documents sent by Mr Christy as an attachment was one entitled “Sales Opportunity Document”. This was 16 pages long and included the following passage under the heading “Executive Summary”:

The Petitioners rely on this document and its contents.

Mr Hance accepted in cross examination that he had read “most of” these documents although he said that he had skim-read some of them. He also sent five out of the six documents (including the two referred to above) to Mr Porter on 9^th August 2014.

In cross-examination, Mr Porter accepted that, reading these documents, a number of things were clear. One would assume, he accepted, that there was not, at that time, a fully functioning pre-production prototype of the recycling shower ready to go into mass production. He also accepted that it was clear that the plan in relation to compliance with water regulations was for Cintep AU to hire a specialist and open dialogue with WRAS but that this had not yet occurred.

In an email sent to Mr Christy later that day, Mr Hance wrote:

On 30^th July 2014, Mr Hance, Mr Riley and Mr de Beer visited the Cintep AU premises in Brisbane. The visit was planned to last two days but in fact the visitors only stayed for approximately three hours on the morning of the first day. During the visit they saw the four prototypes and took a shower in the latest one, Alpha 4. They saw the shower workings laid out on a flat surface and Mr Dyhrberg controlling the shower from a laptop. Mr Riley says that he did not realise that this was the case. Mr Hance says that he tasted some of the water that was coming from the shower head. He recalls that it did not taste pleasant but was rather “soapy”. Mr Riley also took a sip. The Cintep AU team also explained that they did not yet have the correct filter.

Mr Christy said that it was pointed out to the visitors that the current prototype required two engineers to control it via a laptop computer and that development was needed to turn it into a packaged, reliable and safe product. Other than regulatory water quality challenges, it was also pointed out that a rushed product launch could cause other safety issues. In cross-examination, it was put to him that he did not in fact say this. He insisted that he did. I accept his evidence in this regard not least because it is consistent with the contemporaneous documents.

Perhaps indicative is what Mr Christy says was Mr Riley’s reaction when faced with the proposed two-day programme prepared by the Cintep AU team for the visitors. Mr Riley dismissed it as “bullshit” and the BBHUK team returned to their hotel after three hours leaving Mr Christy to prepare a breakdown of the AU$5 million BBHUK investment into five tranches of AU$1 million each.

Mr Christy says that on 31^st July 2014 he had a series of phone calls with Mr Hance and met with Mr Hance and Mr Riley. He says that he again tried to impress upon them the nature and extent of the research and development work that had still to be undertaken.

The clear impression one gets is of the Cintep AU team trying to point out to the BBHUK team the potential problems of bringing the product to market but struggling to make the BBHUK team understand this in the face of the latter’s obsession with having a saleable product as soon as possible.

This is reflected in a chain of emails sent by the Cintep AU team to each other. In one of these, sent by Mr Christy to Mr Conway-Lamb, Mr Brewin and Mr Gee, he says as follows:

There is another email chain dated 2^nd and 3^rd August 2014 sent by the Cintep AU team to each other.In an email dated 3^rd August 2014 sent by Mr Conway-Lamb to Mr Christy and Mr Brewin, Mr Conway-Lamb has added comments to an earlier email dated 2^nd August from Mr Christy. The email reads as in part as follows (with the comments added by Mr Conway-Lamb are underlined):

Again, the clear impression one gets is that the Cintep AU team, whilst keen to secure the investment, were trying very hard to impress on those from BBHUK that this was still a research and development project with no guaranteed outcome. The BBHUK team were, on the other hand, keen to bring the product to market as soon as possible. BBHUK were proposing that the Development Plan timeline could be shortened by outsourcing certain aspects of the process. This was doubted by both Mr Conway-Lamb and Mr Brewin. Nonetheless, and despite these reservations, Cintep AU did some research with a view to identifying potential outsourcing manufacturers and R&D consultants.

It also appears that, at around this time, and due to the evident differences in approach, there were also further negotiations with a view to BBHUK becoming a distributor, as originally envisaged, rather than an investor.

On 4^th August 2014 Mr Brewin had a telephone call with Mr Riley. The latter said his main concern was the ability of the Cintep AU team to deliver a product quickly. He was also concerned about the lack of oversight which BBHUK would have if the development of the product remained in Australia. It was concluded that, in order to assuage Mr Riley’s concerns, it would be better if development of the product was relocated to the UK. However Mr Brewin pointed out that such a move would inevitably cause disruption and delay to the product development timetable. Mr Riley was content with any further delay provided product development was relocated. There was discussion, Mr Brewin said, about a possible three-year development timetable. In cross-examination he accepted that this was the “worst case scenario”.

There followed a phone call between Mr Christy and Mr Riley on 5^th August 2014. An agreement in principle for BBHUK to invest in the recycling shower was reached. This is reflected in an email sent by Mr Riley to Mr Hance and Mr de Beer on that date. It reads:Just finished a call with Nick. This is where we are up to. He seems positive, and we will chat again tomorrow. I think he will ask for more - the answer is no!

Following this, Mr Christy produced a document headed “Cintep/BBL New Proposal at 5^th August 2014”. He sent this to Mr Brewin. Mr Brewin amended it and then, in an email dated 5^th August 2014, sent the amended document to Mr Riley with a copy to Mr Christy. In the email he said: Hi Patrick,

BBL licenses the patents to newco (needs to be for the patents life andNewcoGIB undertakes to fund all maintenance and defence costs for first 3years.

This formed the basis of the Heads of Terms that were eventually signed on 8^th August 2014. There are two points to note. The first is that there appears to have been express discussion about the dates on which “first product is delivered” with different royalty payments to be made depending on whether this was in 2015, 2016 or 2017. There was a buy-back provision relating to the re-purchase of the patents if the new product was not launched by 31^st December 2017. The second point is that there also appears to have been a discussion around the possibility of Mr Christy leaving the Board.

Heads of Terms were signed on 8^th August 2014. They are on “Crosswater Holdings UK Ltd” headed paper. They were drawn up by Mr Riley and signed by him and Mr Hance for BBHUK and by Mr Brewin on behalf of Cintep AU. 128.They contain the following terms: The new proposal is:

To unpack this a little, the structure of the deal reached was as follows:

In answers to questions in cross-examination, Mr Hance accepted that, from the date of the Heads of Terms: BBHUK was effectively in a joint venture with the Petitioners; they would have to act in good faith towards each other; there would be a free flow of information between the parties; all of Messrs Christy, Brewin, Riley and de Beer as well

It is significant to my mind that, whereas the agreement contained a specific longstop date by which the recycling shower was to have been launched onto the market, there was no target date for the product launch apart from that. Indeed Mr Hance accepted in crossexamination that no launch date for the product was ever contractually stipulated. When pushed, Mr Riley stated that the omission of any such launch date was, with hindsight, “an error in the contract”. However, it was he who had drafted the terms. I have no doubt that, if the prospective product launch date was ever as important as BBHUK now says it was, then Mr Riley was well capable of inserting a term to that effect and indeed would have done so.

Mr Porter formally started working for BBHUK on 11^th August 2014. Thus, as he accepted, at all times his job was to have the best interests of BBHUK in mind. He was not, however, aware of the exact contractual relations between BBHUK and the Petitioners or Cintep AU. He also accepted that there was a lack of clarity as to his exact role vis-vis the Company and Cintep AU.

On 9^th August 2014 Mr Hance had sent to Mr Porter copies of five of the six documents which had been sent to him on 23^rd July by Mr Christy. The documents sent by Mr Hance included both the “Technical Development Plan” and the “Sales Opportunities Document”. Mr Porter accepted that, if one read these documents, a number of things were clear:

On 12^th August 2014 Mr Porter sent an email to Mr Gee announcing his employment with BBHUK. In that email he made some comments about and sought some information on the recycling shower. He stated as follows:

The Company was incorporated on 12^th August 2014.

The Articles of Association include the following provisions:

On 20^th August 2014, the Company, Mr Brewin and Mr Christy entered into the Shareholders’ Agreement. It was signed by Mr Hance and Mr De Beer on behalf of the Company. This agreement contained the following terms:

The clear intent evidenced by this document, consistently with the Letter of Subscription described below, was that BBHUK would enter into a separate agreement with the Company and with the Petitioners, referred to as a Deed of Adherence, to comply with the terms of this Shareholders’ Agreement.

Pursuant to the terms of a “Subscription Letter” dated 22^nd August 2014, BBHUK subscribed for shares in the Company. By the terms of the letter, which was signed by Mr Hance on behalf of BBHUK, it paid the Company some £112,000, and agreed, inter alia as follows: 1.We will make further contributions into the Company of not less than GBP1,000,000 between the date of this Subscription Letter and 8 August 2015 of which the sum of GBP65,000 shall be paid contemporaneously with the subscription price for the Shares, with the intention such sum shall be on lent to CINTEP Pty Limited, an Australian company, to assist it in its orderly winding up.

The Petitioners complain, and it is accepted, that BBHUK never entered into any such Deed of Adherence and never otherwise bound itself to the terms of the Shareholders’ Agreement. This is despite chasing emails sent on 22^nd and 26^th August 2014 by Mr Christy to Mr Chaplin at BBHUK.

By an Asset Purchase Agreement dated 23 August 2014, made between the Company and Cintep AU, in return for a payment of £112,000 and an additional loan of £65,000, the former acquired from the latter “the Technology” and all the other assets of the latter. The “Technology” was defined as: all know-how, patents, IP licenses, trademarks, designs or other intellectual property relating to the recycling of shower waste water owned, licensed or used by CINTEP and as are more particularly, but not exclusively, described in Schedule 2 hereto

Despite the clear terms of clause 3.3 of the Asset Purchase Agreement, it was subsequently agreed that the best course of action was not to ship the prototype straight to the UK but to keep it in Australia for a further few months, until after Christmas, to allow it to be worked on there. In an email dated 28^th August 2014 Mr Christy explained to Mr Porter why this was so. He said:

One of the stated reasons for the retention of the prototype in Australia was the fact that

This agreement to retain the prototype in Australia until after Christmas 2014 is further reflected in an email sent by Mr Christy to Mr Hance on 8^th October 2014 and in the response to that from Mr Hance. In the first of these Mr Christy stated:

The reference to the “Aqualisa guys” in the email of 28^th August 2014 is to three former Aqualisa employees known to him: Alex Hill, Phil Capon and Dean Hayden. In late August 2014, Mr Porter had, without reference to Mr Christy or Mr Brewin, approached these people with a view to them working for the Company. In his email to which the email set out above was a response, Mr Porter had referred to them:

Whilst Mr Christy did not complain about the fact that these people were eventually employed by the Company, he did feel that it was wrong that Mr Porter, who was an employee of BBHUK and held no position at or on behalf of the Company, should have made the approach without reference to him, who was after all the Managing Director, or to Mr Gee. He made the point in an email to Mr Hance dated 28^th August 2014 in which he said:

Mr Porter said that he saw his role as “technical oversight of the [recycling shower development] project” although there is no evidence that this was formally agreed by either Mr Christy or Mr Brewin. His increasing involvement is evidenced by a document, which he called a “brain dump”, which he sent to Mr Conway-Lamb and Mr Christy under cover of an email sent on 28^th August 2014. The “brain dump” document consisted of comments made and questions raised under 9 points. In point 3 “Compliance” he said this:

There was a meeting in the BBHUK offices on 15^th September 2014 attended by Mr Christy, Mr Brewin, Mr Hance, Mr Dyhrberg, Mr Conway-Lamb and Mr Porter. What was discussed is reflected in the email exchanges which followed.

Following the meeting, Mr Brewin sent a lengthy email to Messrs Christy, Dyhrberg, Conway-Lamb and Hance. He asked that it also be forwarded to Mr Porter. In it he said the following:

Mr Brewin’s email then continued with what he described as “my thoughts/notes” the third of which was as follows:

Mr Christy responded to this in a chain email sent to the recipients of Mr Brewin’s email as well as Mr Porter. Mr Christy said this: Excellent summary. Thanks.

Mr Hance responded to these emails with one of his own on 16^th September. He signalled his agreement by stating simply:

This was in effect confirmed when, on 30^th September 2014, in response to a request from Mr Hance for an “updated timeline”, Mr Conway-Lamb sent to Mr Hance a further revised GANTT chart which showed the “Products Available” date as 29^th September 2016.

In the meantime, Mr Powell (E), who in his emails is described as the “Group Finance Director” of BBHUK, was expressing concerns about exactly how BBHUK was going to meet its funding commitments to the Company. There is an email exchange dated 23^rd September 2014 which (relevantly) starts with Mr Powell (E) saying this to Mr Hance: Crazy-we have created a new Facilities Mgr position (which I still don't think will be full time 52 weeks a year) and now a £18.5k maintenance agreement! I'm thinking how are we going to create the money to fund Cintep!

It is thus clear that, at that time, Mr Powell (E) was expressing concerns about the ability of BBHUK to meet it funding commitments to the Company. Mr Hance, whilst it might appear that he was not as troubled at Mr Powell (E), did not seek specifically to reassure him about the financial position of either BBHUK or the group of which it was a member.

This concern at BBHUK’s cash flow situation at this time could be said to be grounded in certain documents:

It is suggested by the Petitioners that the fact that the BBHUK finances were “under great strain” at the time may be the reason, or one of the reasons, for what occurred subsequently. Mr Hance and Mr Riley were both questioned about this and both strongly denied that BBHUK was in any financial difficulty at all at the time or that this would have formed any part of the motivation for wishing not to fund the Company. However, in cross-examination, Mr Hance accepted that Mr Powell (E) was the person whose job it was to keep an eye on the day to day finances of BBHUK and would be the person to whom questions about the financial position of the company would be directed. I suspect that the truth was as set out in Mr Powell (E)’s emails but that this was not something that greatly troubled either Mr Hance or Mr Riley at the time.

In the meantime, Mr Christy was negotiating salary packages with Mr Conway-Lamb and Mr Dyhrberg in the expectation that they and their families would be relocating from Australia to the UK. He was also proposing a salary package for himself. Mr Christy agreed, in principle, Mr Conway-Lamb’s and Mr Dyhrberg’s annual salary at £85,000, and requested £100,000 for himself. He sent details of these proposals to Mr Hance in an email dated 14^th October 2014 in which he said:

Mr Christy had discussed these figures with Mr Conway-Lamb and Mr Dyhrberg without consulting the other member of the Company’s Board. This, he now acknowledges, was a mistake. Mr Hance and Mr Riley in fact thought the offers were too generous. Their concern is expressed in an email from Mr Hance to Mr Riley by which he forwarded Mr Christy’s email to him. Mr Hance stated:

The response from Mr Hance to Mr Christy, in an email dated 20^th October 2014, expresses some annoyance. He stated:

On receipt of this, Mr Christy apologised in an email in which he stated:

These emails overlapped with a visit to Cintep AU’s premises in Brisbane by Mr Porter and the three former Aqualisa engineers, Mr Hall, Mr Capon and Mr Hayden, who had formally started working for the Company on or around 13^th October 2014. The visit was scheduled to last, and did indeed last, from 19^th until 29^th October 2014. The visit was intended to allow the English engineers to familiarise themselves with the recycling shower prototype and technology with a view to working on the development of the product as

Immediately prior to his departure from the UK, Mr Porter had an email exchange with Mr Hance which, with hindsight, seems rather prescient. On 17^th October 2014 Mr Hance wrote to Mr Porter:

The four English engineers arrived at the Cintep AU premises on 19^th October 2014 and spent 8 working days there. The premises were relatively small, being over two floors. They met with and had presentations from and discussions with, the Australian team (Mr Christy, Mr Dyhrberg and Mr Conway-Lamb). There was a formal series of demonstrations, presentations and slideshows and a wider-ranging series of less formal discussions.

So far as Mr Christy was concerned, despite detailed and “challenging” discussions, the visit appeared to be going well. On 24^th October 2014, he sent an email to the Company Board: Mr Hance, Mr Brewin, Mr Riley and Mr De Beer. The terms of the email had been specifically approved in advance by Mr Porter. Mr Christy wrote:

Mr Christy in evidence did accept that the English engineers had, in the course of the visit, raised concerns about whether the recycling shower could produce potable water and that this could have serious implications for the sale of the product in the UK. However he stated that this had always been a concern and was one of which the Cintep AU team was already aware.

In a similar vein is an email dated 29^th October 2014 from Mr Conway-Lamb to Messrs Hill, Hayden, and Porter copied to Mr Christy and headed “Actions from product spec review meeting”. This sets out a series of agreed targets and actions with no hint of any lack of progress or that any problems were insuperable. In his evidence Mr Porter accepted that this email of 29^th October 2014 showed a “cooperative approach”.

However, unbeknownst to Mr Christy, Mr Brewin or any of the Australian engineers, Mr Porter and indeed the three English engineers, had been reporting back to Mr Hance and Mr Riley. The tone of these reports was almost wholly negative.

In an email sent to Mr Hance in the morning (Australian time) of 23^rd October 2014 (and thus at a time when he had been at the Cintep AU premises for three days) Mr Porter, under the heading “Update”, stated as follows:

Mr Hance’s response was:

Mr Porter stated that his key concerns were: the stage of development of the product; the fact that the prototype was not fully functional; the fact that it did not appear to be removing chemicals from the water; whether the product would ever be cost-effective for consumers; the risk that the product would never comply with UK water standards.

Later that day, as he had promised, Mr Porter sent a more detailed report to Mr Hance under cover of an email copied to Mr Riley but again not to either Mr Christy or Mr Brewin. He also enclosed with that email copies of reports prepared by the three engineers, Mr Hall, Mr Capon and Mr Hayden. Despite the fact that these three were employees of the Company, and not of BBHUK, these reports were also never shared with Mr Brewin or

Mr Porter’s email stated:

This is a damning conclusion which is, to my mind, at odds with the positive tone of the email sent the next day by Mr Christy to the Company Board (recited above), the terms of which Mr Porter had approved. Mr Hance and Mr Riley are being told that: (i) the product will take much longer to bring to production than envisaged; (ii) it will be more expensive to operate than a normal shower; (iii) it probably will not, in any event, work in that it will not be able to meet current UK water safety standards.

In cross examination Mr Porter accepted that he had come to the conclusion, within three or four days of the visit, that the recycling shower was not going to work. He also accepted that he had not said as much to the Cintep AU team.

Mr Porter’s report was never shown to Mr Brewin or Mr Christy who only became aware of it when it was disclosed in this ligation.

In cross examination, Mr Hance accepted that, having received Mr Porter’s negative report, he should have challenged the more positive tone in the email of 24^th October from Mr Christy. He accepted however that he did not do so.

Mr Hill’s report was just over a page in length. He concluded:

Mr Capon’s report was two pages in length. It concluded:

Mr Hayden’s report is 2 ½ pages long and concludes as follows:

Thus the three engineers were effectively “singing from the same hymn sheet” as Mr Porter. Their reports were never shown to either Mr Brewin or Mr Christy. This is despite the fact, as stated, that they were in fact employees of the Company of which Mr Christy was Managing Director and Mr Brewin a Director. 183.In a subsequent email of 23^rd October 2014, Mr Porter stated:

The reference to “Pats frustration” is to the reaction of Mr Riley to the earlier email from Mr Porter summarising his views. Whilst Mr Hance in his email (recited above) had thought Mr Porter had conveyed a “fatal message”, Mr Riley, in an email of 23^rd October 2014, appeared to be much more positive. He said this: I don't accept this!!!

Despite Mr Riley’s view, Mr Hance appears to have been more pessimistic. In an email to Mr Porter he said this:

Mr De Beer’s view was expressed in a subsequent email sent by Mr Hance to Mr Porter on 24^th October in which he said:

Mr Porter responded:

This reflects the fact that, on 24^th October, Mr Christy had made contact with Professor Tom Stephenson of Cranfield University with a view to discussing water standards with him. In addition, on that date, Mr Porter had separately contacted Paul Taylor, an experienced engineer, on 28^th October 2014, to discuss the relevant English water safety regulations. Mr Porter had written:

On 28^th October 2014 Mr Christy sent another email to Mr Hance which reflected a positive view on how the visit of the English engineers was progressing. He said:

In the meantime, Mr Christy was writing on 24th October 2014, to Mr Powell (E) effectively asking for further funds from BBHUK in order to facilitate the winding-up of Cintep AU.

At the same time it appears that, following the discussions about the salaries on offer, Mr Dyhrberg, certainly, and Mr Conway-Lamb were having second thoughts about re-locating to the UK. There was an email exchange with Mr Christy on 29^th October 2014 which followed a phone call between the two men. Mr Dyhrberg wrote:

The reference to Karen is to Mr Dyhrberg’s wife. The reference to “the package we came up with” must be a reference to the level of salary originally agreed with Mr Christy and proposed by him to Mr Hance which the latter rejected. The reference to “Phil and Alex” is to two of the English engineers, Mr Capon and Mr Hill. Whilst it is clear that the rejection of the salary level was an important factor in Mr Dyhrberg’s reluctance to relocate to the UK, it is also clear that there were significant family reasons which made him reluctant to move.

Mr Christy’s response was:

Thus it is clear that, at the time Mr Christy, as he acknowledged in evidence to me, had accepted that he had handled the salary negotiation badly and that this may have had an impact on the willingness of Mr Dyhrberg to relocate. However it also seems clear that Mr Dyhrberg had not at that stage completely ruled out a move to the UK, otherwise there would have been no reason for Mr Christy to offer to speak to his wife.

In his evidence Mr Christy said that he had a conversation with Mr Hance in which he told him that, if the then salary offer to Mr Dyhrberg was not improved, then he (Mr Dyhrberg) would probably not want to relocate to the UK. The offer would not have to be improved by very much however. Mr Hance had told him, he said, that it would not be good for the project if Mr Dyhrberg did not relocate. He would, he said, speak to Mr Riley and see if the offer could be improved. Mr Christy said that he had a subsequent conversation with Mr Hance on 29^th October 2014 in which the latter had said that he had spoken to Mr Riley and that he felt that a bonus system could be put in place which, subject to the attainment of certain targets, could make up the difference between what Mr Dyhrberg expected and what the Company was currently offering. Mr Christy told him that, provided what was offered was reasonable, then he was almost certain that Mr Dyhrberg would relocate. I accept this evidence as it appears to be consistent with the contemporaneous documents which, as stated, appear to show that whilst Mr Dyhrberg was disappointed by the outcome thus far of the salary negotiations and was reluctant to relocate to the UK, he had not completely closed his mind to that prospect.

However, something else of immense significance occurred on 29^th October 2014. In an email sent at 16.56 UK time, Mr Hance instructed Mr Porter to remove the prototype recycling shower and associated equipment from the Cintep AU premises in Brisbane and arrange to have it shipped to the UK. His email said this:

This was a decision made by Mr Hance alone although he had spoken to Mr Riley before he sent the email to Mr Porter. Mr Hance had neither consulted nor given any prior warning to either Mr Brewin or Mr Christy, the latter of whom was of course the Managing Director of the Company whose property the prototypes were. Mr Porter was not of course an employee of the Company but of BBHUK. It was also, as Mr Hance knew, directly contrary to the previous agreement made between him and Mr Christy to keep the equipment in Australia until after Christmas.

In his evidence Mr Hance says that he took the decision because he felt that it was in the Company’s best interests to have the prototype in England given that he had been told that Mr Dyhrberg was not going to relocate and that he (Mr Hance) thought that Mr Christy might not come either. However he accepted in cross-examination that the decision to relocate the prototype should have been agreed with Mr Christy and that he had “made a mistake” in doing as he did.

I do not accept that Mr Hance had been told that Mr Dyhrberg was definitely not relocating. As stated, I accept Mr Christy’s evidence as to the conversations which he had with Mr Hance on that topic. It may be that Mr Hance had formed the view that Mr Dyhrberg was unlikely to come to England or that he was unwilling to increase any salary offer to persuade him to come, however I do not accept that Mr Christy at that stage told Mr Hance that Mr Dyhrberg was definitely not coming.

In his oral evidence Mr Riley said that, in addition to the concerns about the unwillingness of the Australian team to relocate, he had an additional concern at the time. This was that, because Mr Christy had asked for additional funds from BBHUK for the winding-up of Cintep AU, then there was a risk that Cintep AU, being short of funds, was not paying the rent on its premises and that the landlord would repossess. I do not accept that evidence: it was not contained in his witness statement and is nowhere reflected in any of the contemporaneous documents.

When pressed, Mr Riley did accept that there ought to have been a Board meeting of the Company to sanction the removal of the prototype and that it was wrong that Mr Brewin was not informed.

Mr Porter did not question the instruction from Mr Hance. He responded by email

Mr Porter simply arrived in the Brisbane office in the morning of 30^th October 2014 and informed the staff that he had instructions to remove the prototypes and equipment to the UK. Mr Christy describes arriving at the Cintep AU office on 30^th October 2014 and Mr Porter taking him aside for a private chat. He told him that Mr Hance had instructed him to immediately package up the prototypes and essential equipment and ship them to the UK. Mr Christy was, he said, “stunned”. Mr Porter did as instructed. He and the English engineers dismantled the prototypes and put them and the associated equipment onto pallets and into crates which they had arranged to be delivered.

The reaction was described by Mr Porter in an email sent to Mr Hance in which he said: Well that went about as well as can be expected. Nick wasn't really surprised, he was nervous when he came in and I think he knew he'd overplayed his hand. He was actually very reasonable and helpful.

Mr Hance’s reaction, as expressed in an email sent in response, was jubilant:

The reaction of Mr Christy and Mr Brewin was quite the opposite. As Mr Christy puts it in his witness statement, in his view, it “was a truly disastrous move”. He says that he felt “betrayed and appalled”. His reaction at the time was recorded in an email sent by Mr Hance to Mr Riley following a phone call between Mr Hance and Mr Christy: Not gone down well with Nick

Mr Brewin’s reaction when he found out was equally concerned, particularly when it came to the effect on Mr Dyhrberg and Mr Conway-Lamb and the future development of the recycling shower. He says he was “appalled” and that it was an “incredibly destructive” decision an “act of vandalism” which was a “tragic mistake”. In his view it put Mr Dyhrberg and Mr Conway-Lamb off coming to the UK. 208.In an email sent on 30^th October 2014 to Mr Riley and Mr Hance, he said this:

On 30^th October 2014, Mr Dyhrberg sent an email to Mr Christy and Mr Formica in which he expressed his dissatisfaction. He said this: With regards to the events of the past 24 hours, my understanding of the relevant information is:

Mr Christy states that he had a meeting with both Mr Conway-Lamb and Mr Dyhrberg in a cafe opposite the Cintep AU premises in which they both expressed their reluctance to relocate in the light of what had happened.

However, it is clear that Mr Hance subsequently sought to persuade Mr Conway-Lamb to relocate to the UK. In an email dated 30^th October and sent to Messrs Brewin and Riley, but not to Mr Christy, he records a telephone conversation. He stated:

In the meantime on 3^rd November 2014 Mr Porter sent what he called a “Technical Report” by email to Mr Hance. This was not sent to anyone else. It is a document of seven pages and sets out Mr Porter’s detailed views on the recycling shower project. As he said: This report is a review of the technical issues surrounding the CINTEP recycling shower based on the information given to us in Australia over the last 2 weeks

Mr Christy expressly denied that the recycling shower was ever “sold to Crosswater as a product ready to be put into production”. In his witness statement (at paragraph 200) Mr Christy takes issue with a number of the assertions made by Mr Porter in this report as does Mr Brewin in his second statement and Mr Gee in his statement (at paragraph 39).

I do not have to come to a view as to whether Mr Porter’s assertions, which are challenged by Messrs Christy, Brewin and Gee, are correct or not. Neither party invited me to do so and in the absence of specific expert evidence, I am not in any event in a position to do so.

In his Technical Report, Mr Porter then proceeds to recommend that a feasibility study is conducted, one of the objectives of which would be to:

Given that Mr Porter was an employee of BBHUK and not of the Company and given also that the report was sent to Mr Hance and to no one else on the Company’s Board, one has to assume that the “we” in his Report is a reference to BBHUK and not to the Company.

This is confirmed by the fact that Mr Hance sent a copy of the report to Mr Riley and Mr de Beer (but not to either Mr Christy or Mr Brewin) as an attachment to an email dated 3^rd November 2014. In cross-examination Mr Hance accepted that he should have shared what he accepted was an important document with Mr Christy and Mr Brewin.

In his evidence Mr Hance says that the suggested feasibility study was not undertaken because the Australian team were not going to relocate and because of Mr Porter’s view that there was little chance of the product being successful. Mr Hance states that he had conversations with Mr Porter about this. Mr Porter, when pressed in cross examination, at first stated that he did not share his view as to the likelihood of the product being successful with anyone else (because he did not wish anyone to pre-judge the feasibility study) but, when faced with Mr Hance’s evidence, then said he could not recall having any conversation with Mr Hance although such a conversation might have taken place. This is all rather unsatisfactory. My impression is that Mr Porter, when faced with the evidence of Mr Hance

On 4^th November 2014, Mr Porter forwarded a copy of Mr Taylor’s email of 3^rd November to Messrs Hance Riley and De Beer. He indicated that he would arrange to meet Mr Taylor to discuss water regulation issues.

In the meantime on 5^th November 2014, Mr Christy gave notice to Mr Dyhrberg and Mr Conway-Lamb separately terminating their employment with Cintep AU. Both emails stated:Further to our recent conversation and in light of the decision not to transfer to the UK I am very sorry to have to give you notice of termination of your employment.

On 4^th November 2014, Mr Christy informed Mr Hance of his decision to resign from the Board of the Company. On 5^th November 2014, he sent an email to Mr Riley asking for a telephone conversation to which Mr Riley replied:

The reference to a Board Meeting is to a Board Meeting of the Company which was due to be held on 14^th November 2014.

In his evidence Mr Riley asserted that he thought Mr Christy had resigned because he had been “found out” and that he had realised that he could not “pull the wool over the eyes” of Mr Porter and the English engineers as to the true status and prospects of the recycling shower. Whilst that may or may not have been what Mr Riley thought, I do not accept that it is an accurate reflection of why Mr Christy resigned.

The attitude of Mr Riley and Mr Hance towards Mr Christy at this time is summed up in an email exchange later that day in which Mr Hance tells Mr Riley that Mr Christy wanted to attend the Board meeting on 14^th November. Mr Riley responded:

On 5^th November 2014, in an email to Mr Chaplin and Mr Hance, Mr Riley sought a copy of the Shareholders Agreement which, of course, BBHUK was obliged to sign but had not. He was sent a copy of the document by Mr Chaplin by return.

It appears however that Mr Christy and Mr Riley did have a conversation. In an email sent by him to Mr Hance, Mr Powell (E) and Mr De Beer on 7^th November 2014, Mr Riley wrote:

What may have soured things somewhat is an email sent by Mr Christy on 11^th November 2014 to Messrs Hance and Riley with a copy to Mr Powell (E) in which he asked for further funds from BBHUK or the Company in order to wind up Cintep AU. This request went down badly with Mr Hance and Mr Riley. In an email from the latter to Mr Hance and Mr Powell (E), he wrote:

In ignorance of this exchange, on 11^th November 2014, Mr Christy sent the agenda for the Board meeting of the Company which was to take place on 14^th November to Messrs Riley, De Beer, Hance, Brewin and Mr Powell (E). This contained a lengthy section headed “Handover Plan”. The first section of this document dealt with the recruitment of a new “Technical Lead” to replace Mr Conway-Lamb and a new development team. There was then a reference to Messrs Conway-Lamb and Dyhrberg being retained as temporary consultants to assist with the recruitment and handover. Under “Commercial” there appeared the following passage:

In another section headed “Closure of Australian Company” Mr Christy proposed that further funds be provided to Cintep AU to fund the closure costs of that company which included sums that were due to Mr Conway-Lamb and Mr Dyhrberg as well as himself.

A few days prior to the Board meeting, Mr Brewin had a telephone conversation with Mr Riley in which he expressed what he described as his frustration and disappointment at what he called the “unilateral and secretive” decision to remove the prototype from Australia. Mr Riley, he said, assured him that he would personally ensure that the recycling shower made it to market. According to Mr Brewin, and I have no reason to doubt his account, Mr Riley made no mention of having any doubts about the shower’s technology.

There were no comments from any of the directors of the Company on the agenda circulated in advance by Mr Christy (“the Agenda”).

The meeting took place at BBHUK’s premises. Messrs Hance, Riley, De Beer, Coughlin and Brewin attended in person. Mr Christy attended by telephone from Australia. The meeting was relatively short, lasting somewhere between 15 and 20 minutes.

There is not much dispute about what occurred. The meeting did not follow the Agenda put forward by Mr Christy. It was effectively taken over (perhaps, put more pejoratively, “hijacked”) by Mr Riley. Mr Christy’s account of events is supported by Mr Brewin and not seriously challenged by either Mr Hance or Mr Riley himself.

Mr Riley began by stating that Cintep AU’s invoices for the Australian team’s salaries and the winding up costs would not be paid. Mr Christy pointed out that it had been previously agreed that BBHUK would fund those salaries through the Company and by refusing the money BBHUK was pushing Cintep AU into immediate insolvency. Nevertheless there was no agreement to pay them.

Mr Brewin also recalls that, early in the meeting, Mr Riley asked him effectively to guarantee that the recycling shower would work. Mr Brewin’s recollection is that he explained that this was a research and development project with all the attendant risks but that he thought that any risks could be overcome and that it was likely to work.

Then Mr Riley said that he wanted to renegotiate the terms of the deals signed in August 2014. Mr Riley made two demands to Mr Christy and Mr Brewin:

In making the first of these demands, Mr Riley used words along the lines of: “I am not agreeing to any further spending if I think you are going to buy the patents back just before we finish development”. Mr Christy and Mr Brewin, despite having had no prior notice of this proposal, were prepared to agree to it.

As far as the second proposal was concerned, Mr Brewin recalls Mr Riley using words to the effect that “we” (by which he took to mean BBHUK) would continue to fund the recycling shower project but had to be released from the requirement in the Subscription Agreement to pay £1 million by 8^th August 2015. Mr Riley accepts that, in making this proposal for a significant change to the terms on which BBHUK was to provide funds to the Company, he gave what he accepted was an ultimatum: unless Mr Christy and Mr Brewin agreed to the terms which he was proposing, then BBHUK would cease to provide any further funds at all.

Mr Brewin was prepared to contemplate a change whereby the deadline for payment of the £1 million was extended by one year provided that the Company was adequately funded in the meantime.

Mr Christy, who was attending by phone, refused to agree to any such alteration to the contractual terms. According to Mr Brewin, Mr Riley said that Mr Christy had to agree or BBHUK would withdraw (Mr Brewin thinks that he said “or we are out”). Mr Christy continued, despite pressure, to refuse to agree to this proposal. He said that he would not agree to anything on the spot and stated that he had to deal with the Cintep AU liquidation urgently. This would keep him busy until the following Tuesday. He indicated that he would revert to Mr Riley then.

Mr Brewin’s recollection is that Mr Riley apparently left it that Mr Christy had until the following Tuesday to reconsider or BBHUK would pull out. Mr Christy is adamant that, whilst he did indicate that he would respond by the next Tuesday, no such ultimatum was given in that, whilst there was a threat that BBHUK would refuse to provide funds if a revised agreement was not entered into, there was no agreement to the effect that any such refusal would be tied to his response. Mr Hance accepted in cross examination that, whilst it was agreed that Mr Christy was to revert with a response to the proposals by the Tuesday, there was no ultimatum or default position to the effect that if he did not agree to the proposed change by that date, then BBHUK would refuse to fund the project. Mr Riley was however adamant that this ultimatum was given and the position agreed.

Insofar as it makes any difference I prefer the evidence of Mr Christy and Mr Hance on this point. It is evident that there was a clear threat made by Mr Riley that, if Mr Brewin and Mr Christy did not agree to the proposed change to the funding agreement, then BBHUK would cease to provide any further funding. However I do not find that there was any sort of agreed position whereby, if Mr Christy did not revert by the next Tuesday, then the Company would either agree or be deemed to have agreed to release BBHUK from its funding obligations.

Mr Christy was then asked to confirm his resignation from the Board of the Company which he duly did. He then left the meeting. Mr De Beer also resigned from the Board and Mr Coughlin was appointed.

Mr Brewin recalls that there was then a discussion on the way forward and it was agreed that a new technical lead would be appointed to replace Mr Conway-Lamb. He was to work on that task and Mr Conway-Lamb was to be engaged as a consultant once the new technical lead had been recruited. This new technical lead would then be responsible for recruiting a new technical team. Mr Riley then asked Mr Brewin if he would be willing to take over the development of the recycling shower full time. Mr Brewin explained that he could not do so due to his other business commitments. He was willing, however, to put in extra time in the short term to help recruit a capable new Research and Development team in the UK.

Mr Riley had not shared his intention to make these proposals with anyone in advance of the meeting. None of the rest of the Board of the Company had been made aware of his intention. He appears not to have considered the clear conflict of interest that arose from his attempting to force through a renegotiation of the terms of contracts previously entered into between BBHUK and the Company, with him being a director of each company. It is difficult to see how it could possibly be in the best interests of the Company, as opposed to BBHUK, for there to be a delay in the provision of funding for the development of the recycling shower.

In cross examination, Mr Hance accepted that it was “utterly inappropriate” that, at a board meeting of the Company, Mr Riley had sought to renegotiate the terms of a contract between it and BBHUK.

Mr Riley, in his witness statement, described the requests he made as “completely reasonable” but did concede in cross examination that “it was a bit mean of me in spirit” even “childish”. He said that at that stage he was “fed up” with Mr Christy and “couldn’t bear to think that we would wind up the company and effectively have to pay Nick some money”. He explained that:

“…it did not make commercial sense for BBHUK to invest £1 million up front. My thinking was that if BBHUK was required to invest the remainder of the £1 million (i.e. £1 million minus the sums BBHUK had already expended on the project) in the first year, and then it became clear at some point shortly afterwards that the project was not feasible (which, at 14 November 2014, was not only a real possibility, but the most likely outcome by far), CDL would be left holding a significant amount of unspent cash. I feared that, in such a situation, Mr Christy would claim that this cash should be distributed among the shareholders of CDL in proportion to their shareholdings, and he would, as a shareholder, be able to walk away with thousands of pounds as a result of the Product/project having failed. This would not have been fair…”

Thus it is quite clear that, at the Board meeting of the Company, Mr Riley’s focus was on protecting the position of BBHUK. He described the meeting as “a little tense”. He even went so far as stating that the reason why he made no concrete proposals as to when the funding from BBHUK would actually be made was that the meeting had gone “pearshaped”.

It is accepted by all that there was no consensus in relation to either of Mr Riley’s proposals and no formal resolution of the Board of the Company to agree to either of them. In relation to the funding proposal, Mr Riley thought Mr Brewin had agreed but he accepted that Mr Christy had not.

It is accepted that Mr Christy did not respond to the proposals by the next Tuesday or at all.

It appears that after the Board Meeting Mr Christy phoned Mr Dyhrberg and informed him of the Board’s decision not to pay the further Cintep AU invoices. As a result Mr Dyhrberg wrote an email dated 14^th November 2014 to Messrs Brewin, Hance and Riley and copied to Messrs Christy, Formica and Conway-Lamb. He said this:

Also on that date and following the Board meeting Mr Brewin sent an email to Mr Coughlin about both Mr Conway-Lamb and Mr Dyhrberg. He said this:

Thus a number of points are clear. Firstly Mr Brewin was attempting to assist the Company in making a success of the handover of the prototypes to the new development team in the UK. Secondly, he seemed to believe that both Mr Dyhrberg and Mr Conway-Lamb were prepared to come to the UK, at least temporarily, to assist. Thirdly, it is also clear that Mr Brewin appeared to think that there was still a chance that Mr Conway-Lamb might be persuaded to come to the UK on a more permanent basis.

The attitude of the BBHUK directors of the Company to the payment of any further sums to Cintep AU is clear from an email sent by Mr Powell (E) to Messrs Hance and Riley in which he forwards a copy of Mr Dyhrberg’s email set out above. In this email, Mr Powell states this:

Mr Dyhrberg sent a further email on 18^th November 2014 to Mr Coughlan copied to Messrs Christy, Formica, Conway-Lamb, Brewin and Riley in which he reiterated the fact that his employment with Cintep AU had just been terminated and that he had just arranged a second interview for another job. Thus any offer of further employment from the Company had to come quickly.

Despite further contact with Mr Coughlin, no job offer was forthcoming from the Company and, on 20^th November 2014, Mr Dyhrberg sent another email to Messrs Christy, Brewin, Riley and Hance copied to Messrs Coughlin and Conway-Lamb in which he said this:

The position in relation to both Mr Dyhrberg and Mr Conway-Lamb was summarised in a further email dated 20^th November from Mr Coughlin to Mr Riley and Mr Hance. He said: Further to the e-mail you received from Matt Dyhrberg this morning, I have spoken to Chris Conway Lamb today and summarise our conversation below.

In the meantime under cover of an email dated 20^th November 2014, Mr Powell (E) sent a copy of draft minutes of the Board meeting on 14^th November 2014 to Mr Riley. Mr Riley has never fully, or indeed at all, explained by what right he, as opposed to any of the other directors of the Company, was entitled to see and comment on the draft Board minutes before any of the other directors. He said it was an informal arrangement. The email said this:

Amendment to the Asset Purchase Agreement dated

Just after this, and on the same date (which was a Thursday), there was an email exchange between Mr Powell (E) and Mr Riley into which Mr Hance was copied. Mr Powell (E) wrote: Did Nick Christy come back to either of you on whether he agreed to the proposal of extending the handing back of the patents for £1 after 5 years instead of 3? He mentioned in the meeting that he would reply by Tuesday? I haven't heard from him.

The next day, Mr Riley sent to Mr Powell (E) his suggested amendment to the draft Board Minutes. He had made a significant alteration to what was recorded under item 3. The second paragraph read:

Having received Mr Riley’s draft Mr Powell (E) then sent a copy of the minutes as amended by Mr Riley to Mr Riley himself and to Messrs Hance, Coughlin, Brewin, De Beer and Christy. 263.In an email dated 25^th November 2014 sent to Mr Brewin, Mr Christy said this:

On 25^th November 2014 Mr Brewin responded to Mr Powell (E) with some “comments” in track changes. Under paragraph 3 he wrote:

In response to Mr Brewin’s comments, Mr Riley sent an email dated 25^th November 2014 to Messrs Brewin, Hance, De Beer and Christy. It read as follows:

Insofar as it differs from the evidence of Mr Christy, I do not accept that this was Mr Riley’s recollection and, even if it is, I do not accept that it is accurate.

The next significant event is that, as Mr Hance puts it, “the BBHUK-appointed directors of [the Company] decided…to cease spending on the joint venture”. Although Mr Hance states that he thought that this decision was made in the Company’s best interests, I do not accept that this was the case. Whilst the decision might well have been seen to be in the best interests of BBHUK by its directors, such a decision could not possibly have been in the best interests of the Company. Mr Brewin, who was of course a director of the Company, was neither consulted nor informed.

On 25^th November 2014 Mr Hance sent an email, from his BBHUK address signing himself as “Group Chairman”, to Messrs Riley, De Beer, Powell (E), Coughlin, Brewin, Christy and Conway-Lamb. The email was copied to Messrs Powell (A) Caneparo, Formica, Dyhrberg and Porter. It read as follows:

This reflected an earlier telephone call that had been made by Mr Coughlin to Mr Brewin who relayed the news to Mr Christy. It also appears that Mr Coughlin had been in direct contact with Mr Conway-Lamb as, on 24^th November 2014, Mr Coughlin wrote to Mr Riley and Mr Hance:

It is not disputed that this was a unilateral decision by BBHUK to renege on its contractual commitments to fund the development of the recycling shower though the Company. It is accepted that neither Cintep AU nor the Company had agreed to allow BBHUK to do this. Neither Mr Brewin nor Mr Christy had personally agreed either. In cross-examination, Mr Hance accepted that it was a breach of contract on the part of BBHUK, which it undoubtedly was.

Mr Brewin had a series of telephone calls with Mr Hance and Mr Riley on 28^th November

The Minutes of the Board Meeting of Bathroom Brands PLC held in Jersey on 16^th December 2014 and attended by Messrs Riley, De Beer, Powell(A) and Hance include the following passage:

The Company has effectively been moribund since 24^th November 2014. No further funding had been provided to it by BBHUK. No further development work has been carried out on the prototypes. It appears that BBHUK effectively absorbed the assets and staff of the

Since that date, the Petitioners complain of a number of breaches of company law.

From the 14^th November 2014 Board meeting onwards, and despite his remaining a director, Mr Brewin was excluded from the Company’s management and affairs. The Company’s statutory accounts have apparently been approved by the Board but without reference to him.

The Petitioners also say that, since November 2014, controlled by BBHUK’s nominated directors, the Company has failed to meet its statutory accounting obligations. In the statutory accounts:

In 2015 the Petitioners say they considered trying to salvage the recycling shower project. They set up a company in Australia, Reshoco Pty Limited, with that in mind. However they were not able to proceed as: they could not afford the £200,000 price which Mr Riley was demanding for the return of the patents; BBHUK had possession of the prototypes; the Australian staff were no longer available to work on the project; it was extremely difficult to procure third party funding given what had occurred.

Perhaps of more significance is the General Meeting of the Company which took place on 15^th November 2017 at the instigation of the Petitioners. The Resolutions that were voted on were as follows:

As can be seen this was a belated attempt by the Petitioners to force the Company to take legal action against BBHUK in respect of its clear breach of the Subscription Agreement in refusing on 25^th November 2014 to provide the funding to the Company that it was contractually obliged to provide.

In an email dated 13^th November 2017 from Mr Powell (E) to Messrs Hance, Riley, Chaplin, Coughlin and Powell (A), Mr Powell (E) said this:

The General Meeting took place on 15^th November 2017. It was attended by Mr Riley, Mr Powell (E) and a Mr Matthew Reach of the Petitioner’s solicitors. Mr Reach had been appointed proxy for a long list of shareholders including the Petitioners as well as Mr Conway-Lamb and Mr Dyhrberg.

Mr Reach’s recollection of the meeting (set out in an email dated 15^th November 2017 to Mr Powell (E)) and which is not contested is that:

Thus BBHUK as majority shareholder in the Company effectively blocked any move by the Company to take action against BBHUK in respect of its, now admitted, breach of the Subscription Agreement. 284.This petition was issued on 18^th February 2019.

There was not much dispute about the relevant legal principles.

Under section 996 of the 2006 Act:

In order to engage the Court’s discretion to grant relief under section 996 of the 2006 Act, it is necessary for the Petitioners to establish that the affairs of the Company have been conducted in a manner which is unfairly prejudicial to their interests as a minority shareholders within the meaning of section 994. This provides:

In RE: SOUTHERN COUNTIES FRESH FOODS LIMITED [2008] EWHC 2810 (Ch) Warren J analysed the elements that a petitioner under section 994 has to show in order to obtain relief under section 996. In paragraph 39 he said:

I shall look at each of these elements in turn.

In the Southern Counties case, at paragraphs 40 and 41 Warren J said this:

In RE SAUL D HARRISON[1995] 1 BCLC 14, Hoffmann LJ adopted with approval the Jenkins Committee’s summary of unfair prejudice. The Jenkins Committee said that unfair prejudice entailed:

“a visible departure from the standards of fair dealing and a violation of the conditions of fair play on which every shareholder who entrusts his money to a company is entitled to rely”.

In RE METROPOLIS MOTORCYCLES LIMITED [2006] EWHC 364 (Ch) Mann J said this (at paragraphs 52-54):

Of particular importance in the present case are the following ingredients:

Patten J (sitting as a judge in the Court of Appeal) said this in GRACE V BIAGIOLI[2006] 2 BCLC 70 (at paragraph 61):

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

In FISHER V CADMAN [2006] 1 BCLC 499 Mr Philip Sales QC said this (at paragraphs 86 and 87):

“The test of unfairness is an objective one…: would a reasonable bystander observing the consequences of the conduct of those persons who have de facto control of a company regard that conduct as having unfairly prejudiced the petitioner’s interests?…conduct of the de facto controllers of a company may qualify as unfairly prejudicial to the interests of a member for the purposes of [section 994] if it involves (i) a breach of the agreement between the members contained in the articles of association or (ii) a violation of such other, wider equitable constraints as may have arisen to bind the controllers…

Having quoted this passage, in the Southern Counties case, Warren J added (at paragraph 50):

In RE GUIDEZONE [2001] BCC 692, Jonathan Parker J said this (at paragraph 175);

Mr Lewis drew my attention to the case of RE MACRO (IPSWICH) LTD [1994] 2 BCLC 354 in which (at page 404-5) Arden J had stated that mismanagement of a company’s affairs can amount to unfairly prejudicial conduct provided that it is “sufficiently serious to justify the intervention by the court”.

Mr Campbell, on behalf of BBHUK, however drew my attention two cases which, he said, exemplified the submission that, in deciding whether minority shareholders have been unfairly prejudiced, the conduct of the majority cannot be looked at in isolation. The Court has to look at the conduct of the majority in the context of the behaviour of the minority whose interests are said to have been unfairly prejudiced: conduct on the part of the majority which, viewed in isolation, might otherwise be said to be unfair, may, when viewed in the round and taking into account the behaviour of the minority, be seen to be fair, or rather not unfair.

The case of RE RA NOBLE (CLOTHING) LTD [1983] BCLC 273 involved a petition under a statutory predecessor of section 994 brought by a Petitioner, Anafield, a company controlled by a Mr Bailey, which had invested in the relevant company which had been formed to purchase the business previously run by a Mr Noble. Having examined the facts, the judge, Nourse J, held that whilst Mr Noble’s behaviour has been prejudicial to Mr Bailey and his company, it had not in all the circumstances been unfair. This was due principally to the conduct of Mr Bailey himself. At pages 291-2, Nourse J said this:

In RE LONDON SCHOOL OF ELECTRONICS [1986] 1 Ch 211, Nourse J said this at page 222):

It appears that the nature of prejudice under section 994 is also to be construed widely. In

There was some discussion about the nature of directors’ duties in this context.

In the Southern Counties case, Warren J said this (at paragraphs 51 and 53): The…directors and employees in sufficiently senior positions…owed [the Company] fiduciary duties:

In RE TOBIAN PROPERTIES [2013] BCC 98 (at paragraph 22) Arden LJ said this:

Messrs Hance, Riley and De Beer were directors of the Company but also directors of BBHUK. They owed their positions on the Board of the Company to BBHUK. They were in that sense, of course, nominee directors. Mr Campbell on behalf of BBHUK submitted that:

So far as the duty of nominee directors is concerned, the position was summarised by Warren J in the Southern Counties case where he said (at paragraph 67-8): 67…the position of a nominee director is, I conclude, as follows. a.First, he owes the same duties to the company as any other director.

Mr Lewis drew my attention to the case of SCOTTISH COOPERATIVEWHOLESALERS V MEYER [1959] AC 324 in which Viscount Simonds said this (at page

In summary, on behalf of the Petitioners, Mr Lewis made the following case.

It was common ground, he said, that the Company was a quasi-partnership: that is an association formed on the basis of a personal relationship involving mutual confidence and an agreement or understanding that the members would participate in the management of the Company. Thus BBHUK, through its nominee directors, and the Petitioners were expecting to be involved in the day to day management of the Company with Mr Christy indeed being Managing Director.

This lead, he said, to there being a reciprocal duty of good faith between the quasi-partners, BBHUK and its nominee Directors, on the one hand, and the Petitioners, on the other, to the effect that each quasi-partner would inform and consult the other in relation to all matters material to the Company. This he referred to as the “Common Understanding”. This was again common ground.

On the formation of the Company, both BBHUK and the Petitioners had a legitimate expectation that the Company would pursue the commercial objectives of: developing and commercialising the recycling shower for profit; in the longer term, the development and commercialisation of what he called “clean technologies”. This he labelled the “First Legitimate Expectation”. BBHUK accepts that the initial commercial objective of the Company as a joint venture was to bring the recycling shower to commercial production.

There was also what he referred to as the “Second Legitimate Expectation” which was that the affairs of the Company would be conducted in accordance with the Subscription Agreement, Articles of Association, Shareholders’ Agreement and the 2006 Act, and that the Directors would act lawfully for the benefit of members as a whole, and would not breach their fiduciary duties owed to the Company. This is described as “legally incoherent” in BBHUK’s Amended Points of Defence. However, it seems to me to be no more than a (trite) assertion that the parties would have expected each other to comply with their agreements, the Company’s Articles of Association and the law.

The Petitioners allege eight instances of unfairly prejudicial conduct by BBHUK through its directors and employees. BBHUK, they say, committed or caused to be committed multiple serious breaches of their contractual obligations, the contractual and statutory obligation of good faith and their nominated directors’ fiduciary duties owed to the Company.

The eight instances of unfairly prejudicial conduct were as follows.

First, Mr Lewis states, in breach of the Subscription Agreement, BBHUK failed to sign a Deed of Adherence to the Shareholders Agreement. BBHUK’s nominated directors who were charged with procuring BBHUK’s adherence, did nothing. In consequence, all the rights which the Petitioners should have had directly against BBHUK under the Shareholders’ Agreement were lost.

Secondly, at the direction of the BBHUK-nominated directors, and in breach of the Shareholders’ Agreement, the Company failed to implement the share options scheme thereby depriving the Petitioners of additional shares.

Thirdly, and in breach of the Subscription Agreement, BBHUK did not release any of the agreed funding (save for the initial subscription price of £112,000). He asserts that this was probably, in the first instance, due to short term cash flow difficulties. In any event he says, the funding delay in turn caused a delay to the recycling shower development project.

Fourthly, on 30^th October 2014, and directly contrary to a decision taken by Mr Christy as Managing Director (which decision was taken with Mr Hance’s express agreement) that the prototype recycling shower and associated equipment was to remain at the Brisbane premises until January 2015, Mr Hance instructed Mr Porter, a BBHUK employee, to pack up and immediately ship to the UK, the prototype and associated equipment. Mr Hance

Fifthly, he relies on the behaviour of Mr Riley, of course one of the BBHUK nominated directors, at the Board meeting of the Company on 14^th November 2014, when he, without any prior warning, abandoned the pre-agreed Agenda and sought, in BBHUK’s interests, to renegotiate the terms of the Subscription Agreement to BBHUK’s advantage. Given the fact that he was seeking to reduce the pre-existing contractual liability of BBHUK to the Company and that he was a director of BBHUK, he could not have voted on any resolution without express authorisation under Article 34 of the Company’s Articles of Association. No such authorisation was sought. Further, following that meeting, Mr Riley tried to manipulate the Board Minutes to record matters which had not been agreed.

Sixthly, he relies on the fact that, on 25^th November 2014, BBHUK unilaterally, and in repudiatory breach of contract, withdrew from the Subscription Agreement. BBHUK’s nominated directors failed to take any action to protect the Company and its members and, thereafter, effectively abandoned the business which in consequence became dormant. This was, he says, contrary to, inter alia, clause 3.2 of the Shareholders’ Agreement requiring the Company to pursue its business.

Seventhly, he relies on the conduct of BBHUK and its directors Mr Riley and Mr Powell (E) at the General Meeting of the Company on 15^th November 2017 at which BBHUK, as majority shareholder, voted down a resolution which would have compelled the Company to pursue its rights against BBHUK.

Eighthly, he relies on the fact that, controlled now by BBHUK’s nominated Directors, since November 2014, the Company has failed to meet its statutory accounting obligations and

He asserts that the resultant prejudice is simple to identify. In 2014, the Company was a highly promising start-up possessed of revolutionary patented technology (and a five year history of awards, grants, engineering work and brand development). He asserts that, a competitive venture that was less advanced than the Company in 2014, Orbital Systems, is now achieving significant commercial success. BBHUK’s unfair destruction of the Company’s commercial vitality, the squandering of its potential, its disregard for contractual commitments and its nominated directors’ statutory duties, he submits, cannot be other than prejudicial. Any value that the Petitioners might have had in the Company and the recycling shower project has been destroyed. Any rights which the Petitioners or the Company might have had against BBHUK either never existed or were rendered nugatory.

In summary, on behalf of BBHUK, Mr Campbell made the following case.

BBHUK accepts that the Company was a joint venture between BBHUK and the

So far as there being any “legitimate expectation”, BBHUK denies that the Petitioners ever had any legally relevant “legitimate expectation” other than that the Company would be run by its directors and shareholders in accordance with their respective legal rights and duties. In particular, it denies that there was any legal or equitable duty on BBHUK or its nominated directors to continue to pursue the Company’s initial commercial objective even after it became clear that it was unfeasible.

At the heart of BBHUK’s case is this. It asserts that it entered into the joint venture on the strength of various assurances made by the Petitioners during negotiations. In particular, in spring and early summer 2014, BBHUK was led to believe by the Petitioners that they had developed a prototype of the recycling shower which would be ready to be placed into tooling and manufacturing in or around March 2015. Thus, the fundamental basis for BBHUK entering into the joint venture was that it was led by the Petitioners to believe that, while there was significant commercial and technical risk involved, the project involved taking an advanced and fully-functioning prototype into manufacturing and through the testing required for approvals. BBHUK’s case is that it was reassured by the Petitioners, by the time the joint venture was formed in August 2014, that it was realistic to expect demonstrator models to be in showrooms by February 2015, and products to be sold to consumers by November 2015.

BBHUK’s enthusiasm to be involved in the project was engendered by these assurances and it was in reliance on them that it decided to enter into the various agreements and invest in the recycling shower project. Not only did it enter into an agreement to invest substantial sums in the Company to develop the recycling shower, BBHUK also: (i) spent substantial sums building a laboratory for the Company at its headquarters in England; (ii) made arrangements for Mr Christy and the Cintep AU engineering team to move to England; (iii) recruited the three English engineers; and (iv) loaned a further £65,000 to the Company which was loaned onwards to Cintep AU (£50,000 of which was used to repay its debt to Mr Riley).

However, according to BBHUK, in autumn 2014 relations began to sour and enthusiasm for the joint venture rapidly diminished on both sides. This was catalysed, on BBHUK’s side, by the visit of Mr Porter and the English engineers to Australia in October 2014. On that trip, they discovered what they regarded as fundamental problems with the Petitioners’ prototype. It became clear, it is said, during Mr Porter’s visit to Australia that the picture presented by the Petitioners pre-investment had been significantly over-optimistic. In particular, it became clear to all involved that: (1) there was no fully-functioning preproduction prototype, but instead one that required significant development work to bring it anywhere close to functioning on a commercially marketable basis; (2) there was recognition by the Petitioners that a plan to overcome serious regulatory hurdles was needed, but none had been formulated; and (3) on any view, the product was years away from being sold to consumers. In addition to uncovering a host of technical problems of varying degrees of seriousness, Mr Porter and the English engineers also formed the view that the recycling shower product might never comply with UK water regulatory standards (which in turn would have prevented the Company obtaining approvals for sale of the Product in the UK).

In short, as a result of Mr Porter’s visit to Australia, BBHUK discovered for the first time that, far from being on track to enter mass production in the foreseeable future, the recycling shower product actually required an enormous amount of further design and development work, without any assurance of ultimate technical or commercial viability, and on a significantly different timescale to that originally proposed by the Petitioners.

Far from obtaining any reassurances from the Petitioners, at this time, Mr Christy announced that he wished to leave the Company and resigned as a director, while other key members of Cintep AU staff, Mr Conway-Lamb and Mr Dyhrberg, confirmed that they were unwilling

Whilst it is accepted that originally Mr Hance had agreed with Mr Christy to leave the prototype in Australia until January 2015, the changed circumstances justified Mr Hance in making the decision immediately to remove the prototype to England. That decision was open to Mr Hance and Mr Christy had no right to veto such a decision, either alone or in combination with Mr Brewin. Accordingly, no unfair prejudice arises in respect of Mr Hance’s decision. In reality, this episode represented an operational disagreement between co-directors over the precise timing of the transport of equipment belonging to the Company, to the Company’s new premises in England.

As Mr Campbell emphasised on a number of occasions, the Court’s role here is not to intervene in, or by reference to, such management disputes. The Court cannot second-guess commercial decisions made six years ago.

I should accept the evidence of Mr Hance and Mr Riley that they took the decision to remove the prototype from Australia to England bona fide in what they thought was in the best interests of the Company.

Further, I should find, Mr Campbell submits, that the decision to remove the prototype was not the major reason either for Mr Christy’s decision to resign or for the decisions made by Messrs Dyhrberg and Conway-Lamb not to relocate to England.

Whilst BBHUK accepts that that reports produced by Mr Porter and the English engineers on and after their Australian trip were not shared with either Mr Christy or Mr Brewin, I should find that they were nevertheless fully aware of the nature of the concerns raised. I should also find that they were aware of the existence of these reports but refrained from asking for copies.

As to the Board Meeting on 14^th November 2014, the Board met and discussed the issues, with full awareness on the part of all parties of the concerns held by the BBHUK-nominated directors. That discussion was recorded in the minutes. There was no impropriety in the BBHUK-nominated directors making proposals to change the funding arrangements: they were entitled to advance proposals in good faith and in what they perceived to be the interests of the group as a whole. Thus, BBHUK submits, I should find that Mr Riley made his proposals honestly and in good faith, based on his view of what was reasonable in all the circumstances. He had in mind, in particular, that the patent’s hand-back period and the provision of the £1 million funding should match what was now the obviously longer timeline to manufacture. Specifically, I am asked to reject any suggestions that Mr Riley acted so as to advance an ulterior agenda of either: (1) saving BBHUK from cashflow difficulties; or (2) “stealing” the project from the Petitioners or the Company.

Alternatively, if it is established that there were any procedural deficiencies in the manner of the Board’s decision-making, BBHUK submits that the substantive outcome, i.e. the decision to suspend funding, would have been the same regardless of whether any particular procedure was followed. As a result, any such deficiencies did not, and could not, amount to unfair prejudice.

I am asked to reject the suggestion that Mr Riley acted in bad faith in making amendments (at to the draft minutes originally sent to him for comment by Mr Powell (E)).

So far as the unilateral decision by BBHUK and/or the BBHUK-nominated directors to cease any further funding is concerned, it was accepted by Mr Campbell in closing that this, taken in isolation, was unfair and prejudicial conduct. However, he submits, it cannot be looked at in isolation. Messrs Hance, Riley and de Beer were entitled to balance the interests of BBHUK and the Company, in light of all the circumstances. Further, the Petitioners themselves were under a duty to act in good faith towards BBHUK as their quasi-partners: the relevant equitable obligations under the quasi-partnership were mutual, rather than oneway. The Petitioners were in no position to insist on BBHUK continuing to fund the joint venture in circumstances where Mr Christy had decided to walk away from the management role that had been contemplated by the parties from the outset. Accordingly, the Petitioners were not entitled, at the time or subsequently, to insist on the strict funding obligations imposed on BBHUK under the Subscription Agreement, blind to changing circumstances and BBHUK’s genuine and reasonable concerns.

He asks me to find that BBHUK would, even after Mr Hance’s email of 25^th November

There is no substance, he says, to the stand-alone allegation of unfair prejudice in the form of BBHUK failing formally to enter into the Shareholders’ Agreement. No complaint was made in this regard before the decision to suspend funding; and, thereafter, there was no purpose in formally adhering to a Shareholders’ Agreement in respect of a dormant company. Further, in circumstances where the Company became dormant after November 2014 (and the Petitioners then broke off contact for the following three years), there is nothing in the allegation that BBHUK caused the Company not to implement the terms of the Shareholders’ Agreement, for example as to the implementation of a share option scheme, or the maintenance of any relevant intellectual property.

BBHUK was entitled to conduct itself as it did at the General Meeting on 15^th November 2017 because, in all the circumstances, the Company did not have any legal basis for pursuing a claim against BBHUK.

Standing back he submits that that the Court should find that, as between shareholders:

Having cited to me the cases of RE RA NOBLE (CLOTHING) LTD and RE LONDON

Firstly, the fact that, as described above, the Petitioners were less than candid with BBHUK, in terms of the status of the product/project pre-investment. Indeed they misled BBHUK. The timeline they proposed was, in fact, never realistic or achievable. A matter of weeks after the formation of the joint venture, the timetable had already slipped to the end of 2016. BBHUK might have tolerated that slippage, but Mr Porter’s visit to Australia revealed to all concerned that even the extended timeline was wholly unrealistic. This undermined the whole basis of the joint venture, as expressed in the transaction documents. Together with the other factors identified below, it is submitted that this justified BBHUK seeking a variation of its funding commitment: and made it inequitable for this to be refused by the Petitioners.

Secondly, whilst their instruction to Mr. Porter to ship the prototype to England was poorly handled, it was a decision made by Messrs. Hance and Riley honestly and in good faith, and not for an ulterior motive. The Petitioners have significantly over-stated the commercial impact of it. It did not cause or entitle Mr Christy to walk away from his own commitment

Thirdly, Mr Christy’s decision to resign as a director of the Company and effectively walk away from the recycling shower project was not caused by any conduct of the part of BBHUK but was rather his own decision taken for his own motives. In particular, following Mr Porter’s visit to Australia, Mr Christy had realised that the recycling shower project was going to take much longer than he had anticipated and that motivated his desire to leave.

Fourthly, he submits that Mr Riley’s proposals made at the Board Meeting on 14^th November 2014 were objectively reasonable and sensible in all the circumstances. Whilst they can fairly be described as an ultimatum, they accorded entirely with the spirit of the joint venture that the parties had entered into. By the date of the Board Meeting, it was obvious to everybody that the product was years away from market, if it could ever be brought to market at all. In those circumstances Mr Riley wanted appropriate adjustments to be made to the timing of BBHUK’s obligations to fund. The Petitioners acknowledged that position, to a degree, by agreeing to extend the patents’ hand-back longstop, from three years to five years. They could not sensibly have refused without blatantly acting against both the interests of the Company and their duties of good faith and co-operation as quasi-partners. However Mr Christy (at least) did not agree that BBHUK’s funding commitment could also change in the light of the changing circumstances. No proper explanation has ever been provided for that refusal. Even if the Petitioners were to an extent “ambushed”, Mr Christy did not respond to the proposals either within the three business days he had requested in the meeting, or at all.

Fifthly, the Petitioners’ adoption of that position, as between quasi-partners, was in the circumstances inequitable.

Sixthly, it is highly significant that, even after Mr Hance made good on Mr Riley’s ultimatum, by announcing the withdrawal of funding: (1) BBHUK remained willing to take the project forward, on the revised (and fair) terms proposed; and (2) the response of the Petitioners was to consider taking the product to market on their own.

Seventhly, the Petitioners’ attempts to portray the BBHUK directors as acting in bad faith for an ulterior motive have failed. There is no coherent explanation as to why BBHUK would have acted as it did to deliberately sabotage the Company. In reality, BBHUK neither sabotaged the joint venture to save its cashflow, nor sought to misappropriate the Company’s resources for its own benefit. The simple truth is that the Company, as a joint venture vehicle, fell into abeyance because the parties could no longer work together. That is a sad outcome, it is said, but not one that calls for this Court’s intervention, years after the event.

It is worth pointing out one thing that the parties agreed that I do not have to decide.

As I have set out in the recitation of the facts above, Mr Porter had firm views about the prospects of the recycling shower ever successfully being brought to market. In both his email of 23^rd October 2014 and in his “Technical Report” dated 3^rd November 2014, Mr Porter set out his views which, in summary, were that the recycling shower project “had a very low chance of success”.

Mr Christy and Mr Brewin disagreed with those views and gave evidence as to why they thought Mr Porter’s conclusions were wrong. In their evidence they criticised both Mr Porter’s views and his expertise. These criticisms were put to Mr Porter in crossexamination.

However, I am not in a position to decide who is right about this. No independent expert evidence was called and I could not, even if invited, have properly formed a view as to whether Mr Porter, on the one hand, or Messrs Christy and Brewin, on the other, were correct.

Further and in any event, it seems to me that the parties were correct in their assertion that I do not need to decide this dispute in order properly to determine this case.

Another point worth making is this. As I have set out above, the authorities are clear that the test of unfairness is an objective one. Whether or not one introduces the “reasonable” or “officious bystander” into the equation, it is the court which decides whether the conduct of the majority and its consequences amounts to unfair prejudice and its judgement is objective in its focus. The subjective state of mind of those whose conduct is said to amount to unfair prejudice is thus irrelevant. The possible motivation behind the actions of those whose conduct is said to amount to unfair prejudice is also irrelevant.

The point is this. During his cross-examination of Mr Hance and Mr Riley, Mr Lewis, on behalf of the Petitioners, put to them that their actions towards the Company and the Petitioners were motivated by a number of factors: a desire on the part of BBHUK to take control of the recycling shower project; a lack of funds on the part of BBHUK to enable it to comply with its contractual funding obligations. However, in order to succeed, he does not have to show that any of the BBHUK directors of the Company had any particular motivation. Whilst it might, tactically, assist the Petitioners’ case to persuade me that the conduct of Messrs Hance, Riley and/or De Beer was motivated by some ulterior motive, I do not have to come to any such conclusion in order for the Petitioners to succeed.

I do however bear in mind the test of whether or not a director is acting bona fide in the

As will be clear from my summary of the case put by BBHUK, fundamental to that case is the assertion that, in entering into the suite of documents which formed the joint venture, BBHUK and its directors, Mr Hance and Mr Riley, were effectively mislead (my word not theirs) as to the stage of development which the recycling project had reached and the time required successfully to bring it to market. It is said that, as a result of various assurances that it received from the Petitioners during negotiations, BBHUK was led to believe that they had developed a prototype of the recycling shower which would be ready to be placed into tooling and manufacturing in or around March 2015. By the time the joint venture was formed in August 2014, BBHUK had been lead to believe that it was realistic to expect demonstrator models to be in showrooms by February 2015, and products to be sold to consumers by November 2015.

The case as pleaded in the Amended Points of Defence is as follows:

Before I consider whether or not I accept BBHUK’s case on this, there are two points to make.

Firstly, I remind myself that I am not trying a case in misrepresentation. As Mr Lewis pointed out, no such case has been raised. Thus, I do not have formally to consider each of the elements which a party bringing such a claim has to prove. Rather, I am required to consider this issue as part of a consideration of whether, on the facts of this case, the conduct of BBHUK and its directors was unfairly prejudicial to the Petitioners as minority shareholders in the Company. BBHUK relies on the assurances which it says were made and the false picture which it says was thereby painted as conduct on the part of the Petitioners which explains and justifies BBHUK’s own conduct. It is said that it is material conduct on the part of the Petitioners which renders what might otherwise be unfairly prejudicial conduct on the part of BBHUK not unfair.

Secondly, it seems to me that, in deciding whether or not anything said or done by the Petitioners did lead BBHUK to have a false impression of the stage of development which the recycling shower had reached, I must look at the Petitioners’ words and actions objectively. As set out above, the test of whether conduct is unfair or not is an objective one. As Hoffmann LJ stated in RE SAUL D HARRISON [1995] BCLC 14 (at paragraph

The point is this: it is not enough for BBHUK to prove that Messrs Hance and Riley genuinely believed that the recycling shower was nearer to commercial production that it in fact was if there was no reasonable basis for such belief. BBHUK must show both that Messrs Hance and Riley did believe that the prototype was nearer to commercial production than it in fact was and also that this belief was engendered by words or actions on the part of the Petitioners which reasonably lead them to that view.

I have reached the conclusion that, even if Messrs Hance, Riley or de Beer (or any of them) did genuinely believe that the Petitioners: (1) had a functional prototype of their recirculating shower product; and that (2) they would be ready – subject to obtaining external investment – to put that prototype into production within around a year, any such belief could not reasonably have arisen from anything said or done by or on behalf of the Petitioners. Put another way, whatever Messrs Hance Riley and/or de Beer might have thought or believed, when looked at objectively, what was said by or on behalf of the Petitioners could not have given rise to any misapprehension about the state of development of the recycling shower.

Thus I do not accept BBHUK’s case on this.

It must be remembered that Mr Porter in his evidence accepted that, in arriving at the conclusion in his Report of 3^rd November 2014 that the project “was sold to Crosswater as a product ready to be put into production”, he had come to that view from the documents which he had seen (and which were before the court) and from the discussions that were reflected in those documents (see paragraph 212 above). Thus, he did not say that either the Petitioners or anyone else on their behalf had given him an oral assurance to that effect. Similarly, Mr Hance, when questioned, did not assert that his stated belief arose from any particular conversation but rather from the documents which he had seen. Mr Riley did assert that, at the meeting in Hong Kong on 30^th May 2014, Mr Christy had said to him that the recycling shower product was close to launch. However, I have not accepted that evidence as accurate or truthful (see paragraph 76 above).

Thus, BBHUK is left with seeking to establish the assurances which it says were made from an examination of the documents and email exchanges. To my mind these do not come close to establishing that the Petitioners made the assurances which BBHUK alleges. The position is to my mind quite the opposite.

The Information Memorandum prepared in early 2014 could, when viewed in isolation, have given the impression that Cintep AU had a pre-production prototype which could result in a production model ready for sale by the end of 2014 (see paragraphs 44 and 45 above). However BBHUK does not assert that it actually relied on anything in that document. Further it was sent to Mr Powell (A) under cover of an email dated 17^th April 2014 which flagged up its inaccuracy and the “overly ambitious” nature of the timeline set out in that document (see paragraphs 47 and 67 above).

The email from Mr Formica to Mr Hance dated 25^th February 2014 states that regulatory approvals, including from WRAS, were still required (paragraph 50 above).

Mr Porter’s email to Mr Hance dated 6^th April 2014 and the attached summary document, clearly state that the recycling shower product is “completely unproven at the moment and therefore high risk”. In his view the product was 18 months away from production (paragraphs 54 to 56 above).

In his email to Mr Powell (A) of 27^th April 2014, Mr Christy made it clear that the Alpha 4 prototype was not then functioning (paragraph 69 above).

In his report back to the Board of BBHUK following his visit to Brisbane on 28^th April 2014, Mr Powell (A) is quite clear: the project was “a high risk research and development play”. His report was specifically considered at the BBHUK board meeting on 24^th June (paragraph 71 above).

The email sent by Mr Conway-Lamb following his meeting in the UK with Mr Hance and Mr Canapero on 23^rd May 2014 clearly indicates that there had been discussions at the meeting about water quality and that Mr Conway-Lamb had stated that the current strategy was to pursue a scientific test programme and market research before approaching the regulatory authorities (see paragraph 74 above). Again, there is no evidence that Mr ConwayLamb had indicated that these regulatory bodies, including WRAS, had already been approached, let alone given any indication that they would grant approval.

As I have stated, I do not accept that anything said by Mr Christy at the meeting in Hong Kong could have contradicted the clear impression as to the state of readiness of the prototype which, for example, Mr Powell (A) had gained (paragraph 76 above).

Following that meeting, the email sent by Mr Hance to Mr Christy on 3^rd June 2014 referred to the fact that the product had to be compliant with, amongst others, WRAS standards in the UK. As stated (paragraph 79 above), this seems to me to indicate that Mr Hance was not only aware of the need for regulatory compliance but had not been lead to believe that such compliance had been obtained or was certain to be granted.

The email from Mr Gee to Mr Hance dated 6^th June 2014 and the response from Mr Hance (paragraphs 82 to 84 above) again seem to me to indicate clearly that Mr Hance was well aware of the “challenge” of obtaining regulatory approval for the recycling shower.

At the Board Meeting on 24^th June 2014, in addition to receiving the note from Mr Powell (A), it is recorded both that Mr de Beer thought that the project “very high risk” and that Mr

Following his meeting with Mr Gee on 1^st July 2014, Mr Porter records in his email to Mr Hance that there “is a lot to be done in terms of compliance and reliability testing” (paragraph 95 above).

The meeting on 7^th July 2014 between Messrs Brewin, Gee, Hance and Riley is discussed in paragraphs 96 to 101 above. It is quite clear that Messrs Hance and Riley were keen to ensure that the recycling shower product in which they were about to invest was brought to market as soon as possible and were pressing Messrs Brewin and Gee to takes steps to speed up the development process. It is also true that Mr Brewin and Mr Gee were agreeable to considering what steps could be taken to make the process shorter. However I find that nothing said at that meeting could have given either Mr Hance or Mr Riley a false impression as to the stage of development of the recycling shower or the risks involved. The very fact that Mr Gee wrote that he “didn’t do a great job explaining why it will take the time we are predicting” clearly indicates to me that he was at least trying to do that.

So far as the GANTT chart sent on 10^th July 2014 is concerned (paragraphs 104 to 107 above), this was, as Mr Brewin stated, a “stretch” plan: that is one that all parties knew was as optimistic as one could possibly be. I accept Mr Brewin’s evidence to the effect that Mr Riley knew that the production timetable in this document was “aggressive” and that no outcome could be guaranteed. In any event, the chart set out certain key milestones leading to the aim of the final product being available from 3^rd November 2015. A moment’s thought would have lead the reader to realise that, if any of the key dates was delayed or missed, then there would be an inevitable consequent delay to the end date.

Whilst the internal Cintep AU emails sent on that date indicate concerns being expressed as to the proposed timetable, they do not in my view lead to the conclusion that BBHUK and its directors were being misled or being fed false or inaccurate information as to the state of development of the product.

The six documents sent by Mr Christy on 23^rd July 2014 (paragraphs 108 to 112 above), when read as a whole, do not give an inaccurate or misleading picture. Any milestone dates are stated to be dependent on certain earlier events occurring. The “Assumptions and Risks” section in the Cintep Technical Development Plan, as it says, makes clear what assumptions were being made and what risks existed which might delay or derail the product development timetable. As Mr Porter accepted, reading these documents it was clear that: there was not at that time a fully functioning pre-production prototype ready to go into mass production; dialogue with WRAS about regulatory compliance had not yet commenced.

I have discussed the visit to Australia on 30^th July 2014 by the BBHUK directors in paragraphs 114 to 119 above. They were able to see the Alpha 4 prototype in action. They could see that it was being controlled by Mr Dyhrberg from a laptop. I accept Mr Christy’s evidence that he pointed out that the Alpha 4 required two engineers to control its operation and that there were regulatory and development challenges to be overcome. As stated, it seems clear that, by that stage at least, Messrs Hance and Riley were perhaps hearing only what they wanted to hear.

Even so, the email chain dated 2^nd and 3^rd August 2014 (paragraphs 120 and 121 above) does seem to indicate that the BBHUK directors were aware that the development plan involved risks.

It is also, in my view, important to note that the “Cintep/BBL New Proposal at 5^th August 2014” email sent by Mr Brewin specifically included proposed terms as to the product delivery date: that is when the “first product is delivered” (paragraphs 125 and 126 above). The proposed terms included an incentive for the new company to get the product to market as soon as possible. This must therefore have formed part of the discussions which lead up to that email. However, as I have pointed out (paragraph 131 above), it is to my mind highly significant that the Heads of Terms drafted by Mr Riley and eventually signed three days or so later, did not include any such term. The agreement contained a specific “longstop date” (31^st December 2017) from which, if no product had been brought to market, Mr Brewin and Mr Christy could buy back their patents. It did not contain any target date by which the product was to be on the market. It would not have been that difficult for such a provision to be inserted if, as it now says was the case, BBHUK had regarded such date as significant.

There is nothing after the date of the Heads of Terms which is consistent with the Petitioners having given the alleged assurances:

Standing back, when looked at as a whole, there is in my view no evidence to support the assertions made by BBHUK as to the assurances which it says were given to its directors by the Petitioners. To my mind the evidence points all the other way. There is no doubt that Mr Hance and Mr Riley were, entirely unsurprisingly, keen to ensure that the recycling shower product was brought to market as soon as possible. It is also clear that the Petitioners and the Cintep AU engineers were equally keen to seek to facilitate this aim. It was, after all, in everyone’s best interests. However, I find that there was nothing said or done by or on behalf of the Petitioners which could reasonably, or at all, be said to have amounted to the assurances which BBHUK assert were given. It may well be that, by July 2014 at the latest, Mr Hance and Mr Riley were so excited by the prospect of investing in their “iPhone moment” that they were only “hearing what they wanted to hear” and “seeing what they wanted to see”. Mr Gee’s email of 8^th July 2014 and the reaction of Mr Riley to the programme prepared for the Brisbane visit on 30^th July would tend strongly to indicate that. However, I find that nothing in the words or conduct of the Petitioners could reasonably or at all have mislead them.

Nor, for the avoidance of doubt, do I find that there was any reasonable reliance on any assurances by BBHUK or any of its directors. If, as I have held, there were no assurances given, then there cannot have been any reliance. However, I would go further and hold that, to the extent that Messrs Hance and Riley did rely on what they (wrongly) perceived to be assurances made by or on behalf of the Petitioners, then any such reliance was not objectively reasonable. They may have persuaded themselves that the Petitioners had developed a prototype of a product that would be ready to be placed into mass manufacturing within a matter of months, however any such belief was self-induced or, at least, not reasonably induced by anything said or done on behalf of the Petitioners.

Finally I do not accept BBHUK’s pleaded case that, in late October or early November 2014, Messrs Hance, Riley and de Beer sought reassurances or explanations from Mr Christy or Mr Brewin as to the technical and commercial viability of the recycling shower, which reassurances and explanations were not forthcoming. There is no evidence to support such an allegation.

It is submitted on behalf of BBHUK that Mr Christy’s resignation from the Company’s board was again conduct on the part of the Petitioners which I should take into account when deciding whether the actions of BBHUK or its directors constituted unfair prejudice. In his closing submissions, Mr Campbell, on behalf of BBHUK, submitted that I should find that there were three reasons behind Mr Christy’s departure: (i) his mishandling of the salary negotiations in respect of himself, Mr Conway-Lamb and Mr Dyhrberg; (ii) his defensiveness at the views of the recycling shower project recently expressed by Mr Porter; (iii) a desire to leave it to someone else to deal with BBHUK. In short, he submitted, Mr Christy had been “caught out” in overselling the recycling shower project to BBHUK and wanted to rid himself of any further responsibility for it. This is the case that was put to Mr Christy in cross-examination.

I have discussed Mr Christy’s resignation at paragraphs 222 to 228 above.

I do not accept BBHUK’s case on this.

There is no doubt that Mr Christy was keenly aware in late October 2014 that he had handled the salary negotiations badly. He acknowledged as much. However, I do not think that this was the primary, or indeed any, reason for his offered resignation. To my mind the catalyst was the unilateral decision by Mr Hance, with the approval of Mr Riley, to remove the prototype from Australia to England on 30^th October 2014. As I have recorded, Mr Christy called this a “truly disastrous move” and stated that he felt “betrayed and appalled”. That is entirely unsurprising to my mind in that: he was Managing Director of the Company and had not been consulted; the decision was directly contrary to one taken earlier to the effect

I find that Mr Christy’s motivation for his resignation was as he stated in evidence. Given what had occurred and the fact that his authority within the Company had been undermined, he felt that his position was untenable and that the sensible course of action was to resign rather than try to fight back and antagonise BBHUK which was, after all, contractually committed to funding the development of the product. He felt (rightly in my view) that Mr Hance “wanted me out of the picture”. There had been a breakdown in trust between the parties and it would be better, he felt, for the future development of the recycling shower to be led by someone BBHUK trusted and in whom it had confidence.

Thus the primary reason for Mr Christy’s resignation was not some sort of recognition that he had mislead BBHUK, but was, I find, rather a direct result of the BBHUK directors’ unilateral decision to remove the prototype from Australia without consulting, or getting the agreement of, the Petitioners.

Another issue which was discussed in both evidence and in submissions were the reasons behind the decision of Mr Conway-Lamb and Mr Dyhrberg not to relocate to the UK as was originally envisaged.

I have discussed this in paragraphs 191 to 195, 198 to 199, 204, 209 to 211, 221, 252 to 258 and 269 above.

So far as Mr Dyhrberg is concerned, it is clear from the email of 29^th October 2014, that there were at that stage a number of factors which made him reluctant to move: the salary package being offered; the significance of the move for himself and his family; his lack of trust in BBHUK. However, as I have concluded, at that date, despite his reluctance, Mr Dyhrberg had not ruled out a permanent relocation. I have accepted Mr Christy’s evidence that he told Mr Hance on 29^th October 2014 that an improved offer would persuade Mr Dyhrberg to relocate. I have rejected Mr Hance’s evidence that he had been told that Mr Dyhrberg was not going to relocate.

However, it seems to me that the key here is again the events of 30^th October 2014. Mr Dyhrberg’s reaction to the removal of the prototype is described in Mr Porter’s email as follows:

“Matt had a bit of a tantrum and packed up all his stuff, personal tools & monitors etc and went home saying tomorrow is his last day”

For the avoidance of doubt, whilst I accept that Mr Dyhrberg’s reaction was to walk out of the office, I do not think that the pejorative description of his having a “tantrum” is appropriate. I find that Mr Dyhrberg’s reaction was entirely understandable given what had just occurred. Mr Porter’s description that Mr Conway-Lamb and Mr Dyhrberg were “slightly offended and aggrieved” is probably an understatement.

Mr Brewin’s email of 30^th October 2014 to Mr Riley and Mr Hance described Mr Dyhrberg as having handed in his notice. Mr Dyhrberg expressed his unhappiness in his email dated 30^th October 2014 and in his meeting with Mr Christy in the café opposite the Brisbane premises.

Having been given notice of the termination of his employment with Cintep AU on 5^th November 2014 and having been informed by Mr Christy after the Company Board Meeting on 14^th November that there would be no further funding for Cintep AU, he wrote the email of 14^th November 2014 in which he still offered, subject to certain conditions, to come to the UK on temporary basis to assist in any handover. No offer was forthcoming and, having

In those circumstances, in my view, the main if not the sole reason behind Mr Dyhrberg’s decision not to relocate permanently was the removal of the prototype from Australia and the events of 30^th October 2014. As a result, Mr Dyhrberg effectively “handed in his notice” (as Mr Brewin put it). Thereafter, he might well have been prepared to come to the UK on a temporary basis to assist with any handover to new engineers, but no acceptable offer was made. As Mr Christy indicated in his evidence, Mr Dyhrberg was also upset at the contents of the email from Mr Powell (E) which he viewed as accusing Mr Christy of removing funds from Cintep AU which could have been used to pay his wages.

Thus the real reason why Mr Dyhrberg eventually refused to relocate as planned was the behaviour of BBHUK and its directors. I find that the less than competent handling of the salary negotiations by Mr Christy had little or no effect on his decision.

I find that the same is true of Mr Conway-Lamb. Whilst still upset, his reaction to the removal of the prototype on 30^th October 2014 was perhaps less demonstrative and definitive than that of Mr Dyhrberg. He is recorded in Mr Porter’s email of 30^th October as having questioned whether the removal was legal. He was said, in Mr Brewin’s email of the same date, to have “lost confidence” and to believe that “if he relocates to the UK he will be caught without authority to manage his own team and stuck playing politics.” Accordingly, for Mr ConwayLamb, “it will not be about money”. Mr Brewin continued:

Indeed he sent an email on 3^rd November 2014 to Messrs Dyhrberg, Capon, Hill and Hayden apologising for the events of 29/30 October and discussing technical details for the transport of the prototype to England and the continuation of the development work.

It is also clear from the terms of Mr Brewin’s email to Mr Coughlin of 14^th November 2014 that he thought that it was still possible that Mr Conway-Lamb could be persuaded to relocate permanently.

However Mr Dyhrberg forwarded to Mr Conway-Lamb (as well as to Mr Christy) a copy of the email which he had received from Mr Powell (E) on 15^th November. He was subsequently contacted by Mr Coughlin who attempted to persuade him to come to the UK. The position at that date is set out in Mr Coughlin’s email of 20^th November 2014.

However, the decision by BBHUK to cease to provide any further funding to the Company appears to have effectively killed off any further discussions.

As with Mr Dyhrberg, I find that the principle reason for Mr Conway-Lamb’s reluctance to relocate was the events of 30^th October 2014. Whilst he might thereafter have been persuaded to relocate temporarily or even permanently, any further discussion with him was curtailed as a result of the unilateral decision of BBHUK to cease funding.

I have set out the details of the relevant agreements in paragraphs 127 to 141 above. It seems to me however that it is important to bear in mind the following.

It is accepted that the Company was a quasi-partnership; a joint venture between BBHUK and the Petitioners. The latter brought to the partnership the patents, the prototypes, their knowhow and experience; the former brought primarily the funding and its experience of marketing bathroom products.

It is thus accepted that each of the quasi-partners was to act in good faith towards the other. Further, each quasi-partner had an expectation that they would be involved in the day to day running of the Company’s affairs. Thus, despite the fact that the Petitioners were minority shareholders, it is clear from both the Heads of Terms and the Shareholders’ Agreement that both the Petitioners were to be on the Board and that Mr Christy was to be the Managing Director of the Company.

The object of the Company was initially to be the further development and marketing of the recycling shower product.

This was reflected in the fact that under the Company’s Articles of Association, an 85% majority was required to pass a special resolution and the agreement that the shareholding of the Petitioners combined would never be diluted to below 15%. The Heads of Terms provided for them to be able to acquire further shares via a share option scheme.

BBHUK was contractually obliged by the Heads of Terms and the Subscription Letter to put funds into the Company to support the further development of the recycling shower project: at least £1 million on or before early August 2015; further funds thereafter to enable the recycling shower to be brought to market within a three year period.

BBHUK was contractually obliged to enter into a Deed of Adherence to the Shareholders Agreement.

The failure of BBHUK to sign a Deed of Adherence to the Shareholders’ Agreement

The Petitioners complain that BBHUK failed to sign a Deed of Adherence to the Shareholders Agreement. It is said that, as a result, the Petitioners lost valuable rights. BBHUK accepts that it did not enter into such an agreement. Its defence appears to be that there was no purpose in formally adhering to a Shareholders’ Agreement in respect of a dormant company and that any rights that the Petitioners might have had were rendered nugatory by the fact that the Company effectively became dormant on and after November 2014.

There is no doubt that BBHUK was obliged by the Heads of Terms and the Subscription Letter (or a combination of the two) to enter into a Deed of Adherence to the Shareholders’ Agreement. It was an obligation owed to the Petitioners under the Heads of Terms and to the Company under the Subscription Letter. However even if, contrary to my view, BBHUK was not technically obliged as a matter of contract to adhere to the Shareholders’ Agreement, it clearly ought to have done so, in my view, given the duties it owed to the Petitioners, its quasi partners in the Company. To fail to do so was, in my view, unfair conduct on the part of BBHUK being in breach of its duty to act in good faith as part of the joint venture.

Had BBHUK agreed to be bound by the terms of the Shareholders’ Agreement then it would have obliged itself to comply with those terms and in particular clauses 2.1.2, 3.2, 4 and 5.4. Further, the Petitioners as parties to the Shareholders’ Agreement, would have had a direct remedy against BBHUK for any breach of these terms. In particular they would have had an immediate and direct remedy against BBHUK under clause 4 for its subsequent failure to provide the funding promised to the Company. That would have enabled them to take direct proceedings against BBHUK without, for example, having to try to persuade the Company to do so or, eventually, to issue this petition.

In my view therefore the failure by BBHUK, for whatever reason, to enter into a Deed of Adherence to the Shareholders’ Agreement was unfair conduct which has caused prejudice to the Petitioners who have lost rights that they would otherwise have had against it.

Clause 5.4 of the Shareholders Agreement obliged to Company to put in place an Employee Share Option Plan on or before 1^st January 2015. Such a scheme was also envisaged in the Heads of Terms. No such scheme was put in place, perhaps unsurprisingly as in the event the Company effectively became moribund on 25^th November 2014.

Whilst a failure to implement such a scheme may have been unfair conduct on the part of

BBHUK accepts that Mr Hance’s instruction to Mr Porter to ship the prototype from Australia to the UK on 29^th/30^th October 2014 was done: (i) without any prior consultation with the Petitioners; and (ii) contrary to the previous agreement that had been made with Mr Christy to delay shipping until January 2015. However it seeks to justify the decision and its subsequent implementation by asserting that:

I do not accept this.

As I have described already and as accepted, the decision to remove the prototype was taken by Mr Hance with the agreement of Mr Riley without any consultation with, let alone the agreement of, the Petitioners one of whom was, pursuant to the terms of the Heads of Terms and the Shareholders’ Agreement, the Managing Director. It was a clear breach of the understanding between the quasi-partners on which the Company was founded: the Petitioners were excluded from a key decision which was made and implemented without their agreement and against their wishes.

I do not accept the justification put forward by BBHUK for taking the decision. I do not accept Mr Riley’s account that he was concerned that Cintep AU was unable to pay its rent. I do not accept that Mr Hance had been informed that Mr Dyhrberg was not going to relocate. I do not accept that the visit of Mr Porter and the English engineers had revealed to BBHUK that it had been misled by the Petitioners as to the state of development of the recycling shower.

In short, I do not accept that, in making the decision to remove the prototypes from Australia, the BBHUK directors, Mr Hance and Mr Riley, were genuinely acting in what they thought was the best interest of the Company. I do not really think that they gave the interests of the Company the first thought. I think they were entirely motivated by what they thought was in the best interests of BBHUK as the company which was obliged to fund the further development of the project. I do not think that any director of the Company, had they given it a moment’s thought, could genuinely or reasonably have thought that the peremptory and unilateral decision to remove the prototype without the agreement of the Company’s Managing Director or the Board, contrary to the prior consensus and at a time when negotiations with Mr Conway-Lamb and Mr Dyhrberg were at a delicate stage, could possibly have been in the best interests of the Company.

I do not think that the position of Messrs Hance, Riley and de Beer as BBHUK nominee directors can make any difference. As Warren J emphasised in the passage from the SouthernCounties case cited above, the primary duty of a nominee director is, as with any other director, still to the company of which he is a director. If the duty of a nominee director towards the company is to be qualified then, as Warren J emphasised, it must be done in the clearest possible terms and with the assent of the shareholders. There was no such qualification here. In fact, it seems to me that the position here was quite the opposite. Given that the Company was a quasi-partnership and given the duty on BBHUK to act in good faith towards the Petitioners, it seems to me that, far from being able to prioritise the interests of BBHUK, in carrying out their duties as directors of the Company, Messrs Hance,

To say, as Mr Hance did, that he had “made a mistake” is a gross understatement. I agree with Mr Christy that this was “a truly disastrous move”. It undermined the entire basis of trust and confidence on which the quasi-partnership was based. It undermined the authority of Mr Christy. It was the major reason behind the decision of Mr Conway-Lamb and Mr Dyhrberg not permanently to relocate to the UK. It was the major reason behind Mr Christy deciding to resign from the Board. It automatically entailed further delay to the product development timetable. These were matters which clearly affected the Company in an adverse way. It was also in my view gross mismanagement of the business of the Company which, by itself, is unfairly prejudicial conduct.

In my view it precipitated the events which were shortly to follow.

Thus in my view this is the clearest of examples of unfairly prejudicial conduct on the part of BBHUK and it directors Mr Riley and Mr Hance. The conduct was clearly unfair to the Petitioners. It caused them prejudice not only because it was clearly contrary to their expectations as to how the business of the Company was to be run but also because it had the adverse impacts on the Company and its business which I have highlighted above.

I have discussed the events at the Board meeting on 14^th November 2014 in paragraphs 233 to 251 above.

At that meeting:

In his closing submissions Mr Campbell, on behalf of BBHUK, submitted that I should find that Mr Riley made his proposals honestly and in good faith based on his view of what was reasonable in all the circumstances and in particular in order to match the patents hand-back period and the £1 million funding period with the longer period which had become clear was required before the product could come to market. He asked me to reject the suggestion made by Mr Lewis in cross-examination that Mr Riley had in fact been motivated by either BBHUK’s cashflow difficulties or a desire to take control of the project from the Petitioners.

I agree with Mr Campbell to this extent. Save that he was intending to protect the position of BBHUK, I cannot come to a firm conclusion as to the actual motivation behind Mr Riley’s behaviour. However, as I have already stated, I do not have to do so. I suspect, as he indicated in his evidence, that at least part of it derived from his distrust and dislike of Mr Christy.

However I reject BBHUK’s justification for Mr Riley’s behaviour.

There were clear breaches of the Company’s Articles of Association. In raising significant matters which had not been put on the Agenda for the Board Meeting, there was breach of Article 28. More importantly, as I have stated, there was a clear conflict of interest in Mr Riley attempting to force through a renegotiation of the terms of agreements previously entered into by BBHUK. Mr Riley was director of both BBHUK and the Company. Article 34 should have been complied with and it was not.

I have already held that, at the meeting, Mr Riley’s focus was on protecting the position of BBHUK. I do not think that he gave any thought to the separate position of the Company of which he was also a director. I think he was entirely motivated by what they thought was in the best interests of BBHUK as the company which was obliged to fund the further development of the project. It could not, in my view, possibly have been in the best interests of the Company (as opposed to BBHUK) for there to be any delay in the funding for the development of the recycling shower project. I do not think that any director of the Company, had they given it a moment’s thought, could genuinely or reasonably have thought that any delay in funding from BBHUK could possibly have been in the best interests of the Company. I do not think that Mr Riley did.

In any event, there was a clear conflict between Mr Riley’s duty as a director of the Company and his position as director of BBHUK. As he was in clear breach of the “no-conflict” rule, even if he had a genuine belief that he was acting in the best interest of the Company (which I find he did not), this would not have prevented him from being in breach of his directors duty to it (see the passages from the Southern Counties and Re Tobian cases cited in paragraphs 304 and 305 above).

Nor do I think that Mr Riley’s conduct can be excused by his being a nominee director for the same reasons as discussed in relation to the removal of the prototype from Australia.

Mr Riley’s behaviour was unfair towards the Petitioners. They were effectively ambushed at the Board meeting and faced with an ultimatum. It was contrary to their expectation that they would be involved in the day-to-day management of the Company. It was behaviour by or on behalf of BBHUK which was, in my view, not in good faith. It constituted a threat by the majority shareholder that, if they, as the minority, did not agree to allow it significantly to alter its existing obligations, then it would breach them. That is indeed what it did. It caused the Petitioners prejudice in that they were further excluded from the management of the Company and faced with a threat to withdraw its funding.

I have dealt with this issue in paragraphs 259 to 266 above.

Mr Riley was sent the draft of the minutes by Mr Powell (E) before the other members of the Board. This was unfair conduct vis-à-vis the Petitioners. Mr Riley has no right to receive the draft minutes before anyone else.

Further, as I have found, he purported to make an amendment to the draft to include something which had not been discussed or agreed. This was again unfair conduct.

However I do not think that this unfair conduct has caused any prejudice to the Petitioners. The minutes were sent to Mr Christy and Mr Brewin who disputed their contents. They were never agreed or signed and no formal resolutions were recorded.

In his oral closing submissions, Mr Campbell accepted (rightly in my view) that the unilateral decision by BBHUK to cease to provide the agreed funding to the Company was unfairly prejudicial conduct. It was a clear and unagreed breach of its contractual obligations as set out in the Heads of Terms and the Subscription Letter. It was contrary to the Petitioners fundamental expectations derived from the quasi-partnership and joint venture. The whole point of the arrangement which lead to the formation of the Company was for BBHUK to provide the funding to complete the development of the recycling shower. The entire foundation of this was effectively destroyed by the refusal of BBHUK to provide anything other than the initial £112,000.

In answer to this Mr Campbell asked me to find that this was, at the end of the day, simply a joint venture that had soured with fault lying on both sides. In the light of what he said were all the circumstances, BBHUK had made a bona fide and reasonable commercial decision not to fund a project which, contrary to what it had initially been lead to believe, was nowhere near to commercial production and indeed might never be commercially viable. Faced with this and the fact that Mr Christy and the Australian engineers had apparently walked away and washed their hands of the project, BBHUK took a commercial decision which the court should not second-guess. It would be wrong for the court to exercise its discretion and grant relief.

As will have become clear, I do not accept BBHUKs case on this. I do not accept that the Petitioners painted a false picture of the state of development of the recycling shower or that BBHUK, or any of its directors, could reasonably have been misled. I have come to the view that the main reason why Mr Christy decided to resign as a director, and why Mr Conway-Lamb and Mr Dyhrberg decide not to relocate, was the conduct of BBHUK. Whilst I cannot come to a firm view as to exactly why BBHUK and its directors changed their mind about funding the recycling shower, I do not have to.

Thus I find that there are no acts or omissions on the part of the Petitioners which could possibly justify this admitted unfair and prejudicial conduct by BBHUK.

The failure by the Company to meet its statutory accounting obligations455.I have discussed these at paragraph 274 to 276 above.

I agree with Mr Lewis when he submits that it does BBHUK no credit to describe these as “make-weight allegations” or as a “litany of inconsequential matters” (as BBHUK do in its Amended Points of Defence and its Opening Submissions). They are clear, and undenied, breaches of company law.

However, even if they constitute conduct on the part of BBHUK which is unfair towards the Petitioners, I do not think that such conduct has caused them any prejudice. By the time of these breaches the damage had effectively been done in that the Company was moribund. Nothing that was or was not in the Company’s accounts could alter that fact.

The General Meeting of the Company on 15^th November 2017458.I have discussed this issue at paragraphs 278 to 283 above.

I think that the conduct of BBHUK at this meeting, in effectively blocking the Company from taking any action against it, was unfairly prejudicial conduct towards the Petitioners.

BBHUK as majority shareholder blocked any move by the Company against it in respect of its admitted breach of its obligations. By that stage it might well be thought that the cause of action against BBHUK was the only real asset which the Company had left. To prevent the Company from attempting to realise that asset was certainly unfair towards the Petitioners. This is essentially for the same reasons that I have held that the unilateral decision to cease funding was also unfairly prejudicial. Indeed, it can be seen as all part of the same course of conduct by BBHUK: unilaterally and in breach of obligation ceasing to provide funding (thus effectively killing off the Company and its business); then preventing the Company from taking any action to assert its rights against BBHUK.

I have held that BBHUK was guilty of a number of instances of unfairly prejudicial conduct towards the Petitioners. As well as seeking to examine the prejudice caused by each individual instance of unfair conduct, it seems to me that one has also to stand back and look at the prejudice which the cumulative impact of all this unfair conduct has had.

As Mr Lewis points out, in September/October 2014, the Company was a highly promising start-up with ground breaking patented technology and a five-year history of awards, grants engineering work and brand development. Its product had the potential, as Mr Hance recognised, to be an “iPhone moment” for the bathroom industry. The effect of BBHUK’s unfair conduct was effectively to “kill off” the recycling shower project.

It seems to me that the Petitioners have been prejudiced in that they have lost: their expectation of having an input into the day-to-day running of the Company and the continuing development of the recycling shower product; any value which their present and future shareholding in the Company might have had; the ability to develop for market the recycling shower into which they had invested five years of time and effort.

As stated at the outset of this judgment, this trial was on liability only. As I have determined that the Petitioners have succeed in proving unfairly prejudicial conduct on the part of BBHUK under section 994 of the 2006 Act, it will be necessary to have another hearing to determine what order, if any, the court should make under section 996.

Despite this, I was asked by both parties in their closing submissions briefly to indicate my preliminary thoughts on what remedy might be appropriate. I shall do so.

I am conscious that section 996 accords to the court a wide discretion to grant appropriate relief.

My present view is that there would be no point in granting relief the effect of which would be to attempt to resurrect the Company or the recycling shower project. The Company has been moribund for six years. No development work has been carried out on the recycling shower project. Time has moved on and a competitor now has “pole position”.

Thus my present view is that the Petitioners should obtain financial relief representing what they have lost by reason of the unfairly prejudicial conduct on the part of BBHUK. My present view is that this would be represented by their being awarded the value of their shareholding (to include the value of the right to acquire further shares in future and without any minority discount) as at late October 2014, that is before the decision taken by Mr Hance to remove the prototype from Australia.

I hasten to add that these are my preliminary views. I will invite submissions from the parties (as they envisaged) as to what directions I should give as to the remedies trial. I will invite the parties now to agree an order which embodies the outcome of this judgment as well as directions for the exchange of written submissions on consequential issues.