ANDREW JAMES BRIDGEN v PAUL JULIAN BRIDGEN & Ors

This judgment concerns 3 Petitions (as Amended) (“the Petitions”) issued by Andrew James Bridgen MP (“Andrew”). In the Petitions Andrew asserts that, the affairs of: (a) A.B. Produce Trading Limited (“ABPT”); (b) Bridgen Investments Limited (“BIL”); and (c) AB Farms Limited (“ABF”) are or have been conducted in a manner which is unfairly prejudicial to the interests of Andrew as a member of those companies for the purposes of Section 994 (a) of the Companies Act 2006 (“CA 2006”). The petition for ABPT relates to the manner in which the affairs of its wholly owned subsidiary, AB Produce PLC (“PLC”) have been conducted. The petitions for BIL and ABF relate to the way in which their affairs have been conducted.

Andrew seeks relief under Section 996 of the CA 2006, in the event that the court finds that any or all of the Petitions are well founded (i.e. that the affairs of: ABPT and/or BIL; and/or ABF are being, or have been conducted in a manner which is unfairly prejudicial to the interests of Andrew as a member of those companies for the purposes of Section 994 (a) of CA 2006).

On 15 November 2019 Insolvency and Companies Judge Jones directed that there would be a trial to determine all issues of unfair prejudice (except for remedy). I am therefore only concerned with the question of whether the affairs of ABPT and/or BIL and/or ABF are or have been conducted in a manner which is unfairly prejudicial to the interests of Andrew as a member of those companies, for the purposes of Section 994 (a) CA 2006 and not with the question of what relief should be granted to Andrew under Section 996 CA 2006, if I find that any or all of the Petitions are well founded.

The shareholders of ABPT are:

The shareholders of BIL are:

The First- Sixth Respondents to the BIL Petition are the same as for the ABPT Petition.

The shareholders of ABF are:

Paul, Mr Ellis and Mr Tomkinson are the first three Respondents to the ABF Petition.

The remaining respondents to each of the Petitions are ABPT, BIL and ABF, joined as nominal respondents to the petition presented in respect of the conduct of their affairs.

Whilst Alan, Ann and JLT, as trustees of the SSAS are not, unlike ABPT and BIL, nominal respondents to the petitions presented in respect of their affairs, bound to adopt a neutral stance, in reality none of them are alleged by Andrew to be in any way involved in the conduct of which Andrew complains and they have adopted a neutral position. Neither Alan, nor Ann appeared as witnesses for any party. The real respondents to all three of the Petitions are therefore Paul, Mr Ellis and Mr Tomkinson and when I refer to “the Respondents”, I am referring collectively to Paul, Mr Ellis and Mr Tomkinson.

From the above it is apparent that ABPT, BIL and ABF do not own shares in each other and none of them are a “Subsidiary” of another company for the purposes of Section 1159 of the CA 2006 (PLC is a wholly owned subsidiary of ABPT and therefore a “Subsidiary” for the purposes of Section 1159) but Andrew and the Respondents often refer to ABPT, PLC, BIL and ABF as “the Group” and when referring to all four companies collectively, I will also refer to them as the Group.

In or around 1969 Alan established a fruit and vegetable delivery business as a sole trader.

From in or around 1983, Alan continued that business, but in partnership with Paul, trading under the name of AW Bridgen & Sons, the business now including the growing of crops at Woolstitch Farm, the family home.

On 6 April 1988 PLC was incorporated under the name A.B. Produce Limited, as a private company limited by shares.

Initially the shareholding in PLC was: Alan 500 shares; Ann 100 shares; Andrew 200 shares and Paul 200 shares.

Following incorporation, PLC took over and continued the business of AW Bridgen & Sons and each of the shareholders were appointed directors.

Mr Ellis was appointed potato buyer for PLC, in April 1994 and subsequently purchasing director and a statutory director of PLC, on 1 May 1996.

On 14 February 1997, Alan and Ann resigned as directors of PLC having already retired from active involvement in the management of PLC and moved to Spain.

Mr Tomkinson was appointed a non-executive statutory director of PLC, on 1 September 1998.

On 4 November 1998 PLC was re-registered as a public limited company, its core business at this point was processing and trading potatoes and at least one of the purposes of relisting it as a PLC was, with a view to it listing on the AIM Market (which never occurred).

On 27 November 1998 an investment agreement was entered into, pursuant to which shares in PLC were issued to: Mr Tomkinson, 667 shares; Mr Ellis 500 shares; and Alan Parker, the then financial director of PLC, 1000 shares (“the Investment Agreement). The terms of the Investment Agreement inter alia required Andrew and Paul to dedicate all their time to the business of PLC and a mechanism was included for the minority shareholders (Mr Tomkinson, Mr Ellis and Alan Parker) to have their shares valued and acquired by PLC at their request.

In 2003 the production operations of PLC moved to Enterprise House, Westminster Industrial Estate, Measham (“Enterprise House”) which were much larger premises and enabled the business of PLC to expand. The freehold to Enterprise House was acquired by a Retirement Scheme of which Andrew, Paul and their parents were the beneficiaries.

On 9 September 2005 PLC acquired Alan Parker's shares and Alan Parker retired as financial director of PLC.

Neil Sharratt (“Mr Sharratt”) was appointed Financial Controller of PLC in 2005, to replace Alan Parker and Finance Director of PLC in 2006.

On 4 December 2006, ABPT was incorporated and all the shares in PLC were transferred to ABPT. This included shares then held by a trust of which Alan and Ann were the beneficiaries and from this point Alan and Ann ceased to have an interest in the business, other than as trustees and beneficiaries of the SSAS. Andrew became the sole director of ABPT. The shares in ABPT were issued in the proportions set out in paragraph 4 above and PLC carried on its business as before. One of the effects of this restructuring was that the Investment Agreement which related to the shares in PLC (now all held by ABPT) was rendered redundant and no replacement investment agreement was put in place for ABPT's shares, a consequence of the restructuring which Mr Ellis and Mr Tomkinson say they were unaware of, until they sought to dispose of their shares in ABPT, in 2016. It also meant that the requirement, in the Investment Agreement, for Andrew and Paul to dedicate all their time to the business of PLC fell away.

On 1 December 2006, broadly contemporaneously with the incorporation of ABPT and the transfer to it of PLC’s shares, BIL was incorporated. Andrew became the sole director of BIL on 1 December 2006. BIL took a lease from the SSAS of Enterprise House and sub-let Enterprise House to PLC.

It is common ground that, from around 2008, Andrew and Paul began to take less of a day to day role in the operation of the business of PLC/BIL. Andrew started to explore the possibility of becoming a Member of Parliament for the Conservative Party and on 23 December 2008, Paul took a lease of Home Farm in Elford, Staffordshire (“Home Farm”) comprising approximately 400 acres, which was carried on as a partnership business, between Paul and his wife Claire Bridgen known as PJ & CL Bridgen (“the Partnership”).

On 10 March 2010 Mr Paul Large (“Mr Large”) was appointed as statutory director of PLC, with a view to him becoming Managing Director of PLC, in place of Andrew.

On 6 May 2010, Andrew was elected as a Member of Parliament for North West Leicestershire. The next day Andrew resigned as statutory director of ABPT and BIL and was replaced by Mr Sharratt as sole director of both, he also resigned as Managing Director of PLC and was replaced as Managing Director by Mr Large, but remained as a statutory director of PLC and became non-executive chairman of PLC. Paul says he remained as Transport Director for PLC, but he accepts that he concentrated most of his time on the Partnership business, at this time.

Unfortunately the business of PLC did not flourish under the stewardship of Mr Large as Managing Director and, having been profitable before his appointment, began to incur trading losses. There is a dispute between Andrew and the Respondents as to what involvement Andrew had in the trading issues facing PLC after it became apparent that PLC’s business, under Mr Large was on a downward trajectory. Andrew claims that, whilst he did not become involved in the day to day trading of PLC, from January 2012 he started attending Board Meetings and making decisions on the future trading of PLC. The Respondents say that Andrew only attended one board meeting in January 2011, after his election as an MP, in May 2010 and that whilst Andrew started to attend board meetings again in early 2012, this was only to deal with the poor performance of Mr Large, and his subsequent dismissal.

On 31 July 2012, Mr Large was dismissed, it is common ground that Andrew dealt with the dismissal of Mr Large, in terms of the disciplinary process, leading to Mr Large’s dismissal and the Employment Tribunal proceedings which Mr Large commenced after he was dismissed. Paul became Managing Director of PLC in place of Mr Large. Paul says that he asked Andrew to take on this role but that Andrew refused to do so and Paul reluctantly took on the role. Andrew says that, notwithstanding that he continued as non-executive Chairman of PLC and not Managing Director, he assumed de facto control of the business and he claims credit for turning around the financial fortunes of PLC. The Respondents deny that Andrew took control of PLC, or played any material role in its management or the turning around of its fortunes following the departure of Mr Large.

Andrew petitioned for divorce, from his wife, Jackie, on 6 June 2013. The hearing of the financial relief aspects of the divorce took place on 9 and 10 July 2014 and judgment was handed down on 22 September 2014.

By letter dated 4 August 2014 from Mr Sharratt to Andrew, Andrew’s employment by PLC was terminated with immediate effect and the Respondents say that Andrew resigned as a director of PLC. The Respondents say that the termination was consensual and Andrew requested that his employment be terminated and agreed to resign as director of PLC. Andrew denies that the termination of his employment by PLC was consensual and that he resigned as a director.

On 29 August 2014, form TM01 was submitted by Mr Sharratt to Companies House confirming that Andrew had ceased to be a director of PLC on 1 August 2014. On 2 September 2014, Mr Sharratt sent a letter to Andrew confirming the termination of his employment and his resignation as a director.

On 14 August 2015, the Board of PLC approved the purchase of Barn Farm, Hilton (“Barn Farm”) at an auction taking place the following day, provided that the price did not exceed an agreed level. Mr Ellis made the successful bids at an auction which took place the next day. ABF was incorporated on 28 August 2015 to complete the purchase of Barn Farm, in its name. The cost of the acquisition of £1,006,000 was funded by PLC from its cash reserves and treated as a debt owed to PLC by ABF.

The subscriber share for ABF was held by Mr Tomkinson who was also initially its sole director. On 3 September 2015, Mr Sharratt was appointed as a director of ABF and on 13 July 2016: (a) the subscriber share was transferred by Mr Tomkinson to Paul; (b) Mr Tomkinson resigned as director of ABF; and (c) Paul was appointed as a director of ABF (Mr Tomkinson was reappointed as a director of ABF and Mr Ellis was appointed as a director of ABF, on 26 May 2017).

On 8 February 2017 share certificates were issued in ABF so that: Andrew held 49 shares; Paul 49 shares; Mr Ellis 1 share; and Mr Tomkinson 1 share.

In early 2017, Andrew asked Paul, Mr Ellis and Mr Tomkinson to support his reappointment as non-executive Chairman of PLC. They did not support his re-appointment.

On 1 September 2017 Andrew wrote a formal letter to Paul, threatening to take proceedings under Section 994 of the CA 2006 unless Paul agreed either: (a) to Andrew’s reappointment as a director of all of the Group companies; (b) to split ownership of the Group companies so that Andrew would own BIL and Paul would own the remainder of the Group companies; or (c) that there be an alternative dispute resolution process such as mediation to try to resolve the dispute. The letter was copied to Mr Ellis, Mr Tomkinson and Mr Sharratt.

Paul responded on 29 September 2017 setting out the reasons why he did not accept that there was any basis for Andrew to present a petition under Section 994 CA 2016, but indicating that he and the other shareholders and directors were willing to discuss alternative means of satisfying Andrew’s requirements.

In October 2017 Andrew made contact with Leicestershire Police and alleged that the directors/shareholders of the Group had perpetrated a fraud of which he was a victim. He subsequently contacted the auditors of PLC, KPMG and the Group’s bankers, Lloyds Bank PLC making the same allegations.

KPMG resigned as auditors of PLC on 7 February 2019 and on 13 February 2019, the directors of the Group instructing RSM, forensic accountants, to prepare a report on Andrew’s allegations. On 8 May 2019 RSM produced a report which concluded that Andrew’s allegations were not supported by the evidence that RSM had reviewed (“the RSM Report”).

On 30 November 2018 the Petitions were issued by Andrew.

The allegations and the Respondents’ responses to them are set out in: (a) the Petitions issued by Andrew (as amended); (b) the Respondents’ Amended Points of Defence; and (c) Andrew's Replies to the Points of Defence. In addition, by order dated 15 November 2019 Insolvency and Companies Judge Jones directed that Paul file and serve a witness statement providing details of his account of credits and debits applied in relation to the matters set out in Schedule 1 to that order (sums credited or debited in relation to transactions between the Partnership and PLC/BIL/ABF) and Andrew was directed to file and serve a document which identified what issues remained after service of Paul’s statement with an explanation from Andrew of why those issues remained. Paul served and filed a witness statement dated 10 January 2020 and Andrew filed and served a response dated 31 January 2020.

In describing below the conduct complained of by Andrew and the response of the Respondents to those complaints, I do so separately for ABPT (and in particular its subsidiary PLC) BIL and ABF and by reference to the Petitions, Points of Defence and Reply for the relevant company, the witness statement of Paul dated 10 January 2020 and Response of Andrew dated 31 January 2020.

Before turning to deal with the conduct complained of by Andrew and the Respondents’ responses to those complaints, I will describe the basis of Andrew’s assertion that the Group companies were quasi-partnerships. Andrew relies upon his assertion that all the Group companies have been, at all relevant times, quasi partnerships (“Quasi Partnership” and "Quasi Partnerships”) in support of his contention that what he says has been his exclusion from the management of the Group companies is unfairly prejudicial to him as a shareholder of the Group companies (or in the case of PLC, of its parent company, ABPT).

Andrew says that, at the time PLC was incorporated, its business and affairs were conducted on the clear understanding between all the shareholders, that: (a) PLC was a family business run by Alan, Ann, Andrew and Paul; (b) each of them would have a say in how the affairs of PLC were to be run; (c) each of them would be entitled to be a director in PLC; (d) the business was to be run by consensus; and (e) the underlying basis for the association would be one of trust and confidence in each other and in consequence of that PLC was a Quasi-Partnership. Andrew says that the basis upon which the affairs of PLC were conducted did not change, when outside minority shareholders were introduced (Mr Ellis, Mr Tomkinson and Alan Parker) who he describes as “loyal advisers”.

Andrew says that, when the entire share capital of PLC was transferred to ABPT, PLC continued trading as before; the only change being that it was now a wholly owned subsidiary of ABPT owned by the same family members and loyal advisors. Nothing changed in the management of the business; and the affairs of both ABPT and PLC continued to be conducted on the basis of mutual trust and confidence between members, such that ABPT was a Quasi-Partnership.

Andrew says that BIL was incorporated on 1 December 2006 as part of the corporate restructuring that resulted in the incorporation of ABPT and there was no intention to depart from the principle of mutual trust and confidence between members that applied to ABPT and PLC, BIL was also therefore a Quasi-Partnership.

Andrew’s position on ABF is different, Andrew says that ABF was incorporated without his knowledge to acquire Barn Farm, which farm, Andrew says ought to have been acquired by PLC. Andrew says that once he discovered what he says was the wrongful conduct of Paul in incorporating ABF and causing it to acquire Barn Farm and the shareholding was altered to include Andrew as a shareholder (which only occurred because of Andrew’s complaint) ABF became subject to the same considerations of mutual trust and confidence as the other companies in the Group and it too is therefore a Quasi-Partnership.

The Respondents deny that any of the Group companies affairs were conducted on the basis of mutual trust and confidence between members or that they were Quasi-Partnerships, alternatively they all ceased to be Quasi-Partnerships well before the Respondents refused to support Andrew’s re-appointment as a director of the Group companies, in 2017

In his Amended ABPT Petition, Andrew alleges that there are nine instances or categories of unfairly prejudicial conduct by the Respondents, all relating to ABPT’s subsidiary, PLC. I will summarise the nine instances first and then describe them in more detail by reference to the pleadings.

That conduct/those instances, are:

[ABPT Petition] The termination of Andrew’s employment by PLC on 4 August 2014 was in breach of the mutual trust and confidence that underlay the Quasi Partnership and it is further alleged that this was done in an attempt to exclude Andrew from the business so that Paul could continue unfettered with his breaches of fiduciary duty. Andrew’s continued exclusion from the management of PLC and ABPT, is also unfairly prejudicial to Andrew.

[Points of Defence] The Respondents say that, prior to a letter being sent to Andrew terminating his employment/directorship, Andrew discussed with Mr Sharratt ending his employment as non-executive Chairman of PLC and a form of agreement to facilitate that was sent to Andrew’s divorce solicitors, but it was not completed before the final financial relief hearing, in Andrew’s divorce, on 9 July 2014. After that hearing Andrew said that the judge at the hearing had not accepted that it was intended that Andrew would cease to be employed by PLC and Andrew wanted his employment by and position as director of PLC, to be terminated. As a consequence of that, a draft of the 4 August 2014 letter terminating Andrew’s appointment by PLC was prepared and sent to Andrew to approve, he did approve it and the signed letter was sent to him on 4 August 2014, and Andrew therefore orchestrated and consented to both his removal as employee of and the termination of his position as director of PLC. Andrew’s wish to return to the management of PLC is not bona fide, or in the interests of PLC/ABPT.

[ABPT Petition] On or about 14 September 2015, ABF purchased Barn Farm using funds provided by PLC. Mr Tomkinson originally held the subscriber share in ABF and was its sole director. That subscriber share was transferred to Paul, on 13 July 2016, and Paul also replaced Mr Tomkinson as a director of ABF. Andrew was not consulted about the purchase of Barn Farm, the incorporation of ABF or the advance of funds to ABF by PLC. It is to be inferred that the arrangements were intended to benefit Paul personally.

Andrew challenged Paul about the acquisition of Barn Farm and the transactions surrounding that acquisition and it was only following that challenge and the threat of proceedings that the shareholding in ABF was altered from Paul holding the only share, to: Andrew 49 shares; Paul 49 shares, Mr Ellis 1 share; and Mr Tomkinson 1 share.

[Points of Defence] The decision to purchase Barn Farm was made by the board of PLC on 14 August 2015. Mr Ellis bid successfully at the auction of Barn Farm, on 15 August 2015 and Paul informed Andrew the following day of the purchase, that the purchase would be carried out through a new company and that the shares in the new company would be issued in line with ABPT’s shares.

Andrew did not object to the acquisition of Barn Farm by a new company but he told Paul that he did not want to appear as a shareholder of that new company whilst he was in the process of appealing against the financial relief order made against him in his divorce proceedings.

The £1,006,000 advanced by PLC to ABF came out of its cash reserves and it was noted that Andrew in his petition: (a) did not take issue with the commercial rationale for the purchase of Barn Farm and should be taken therefore to have ratified the decision to purchase it; (b) does not assert that any failure to consult him regarding the purchase undermined his trust and confidence in Paul; and (c) does not allege that his financial or other interest were prejudiced.

Once Andrew’s appeal against the financial relief order was completed, in October 2016 and the threat of proceedings by the Local Authority against PLC for emitting noxious fumes from Enterprise House receded, the agreed allocation of shares in ABF was carried out in February 2017. This was not done as a result of any challenge raised by Andrew or the threat of proceedings.

It is not clear if Andrew is alleging that Paul had been dishonest in relation to the acquisition of Barn Farm, or the allocation of shares in ABF, if that is alleged then the allegation should be properly pleaded.

[Reply] it was denied that Paul told Andrew that Barn Farm was to be put in the name of a new company and the shares would be issued in line with the shareholding in ABPT. The purchase of Barn Farm was presented to Andrew as a fait accompli; carrying out the purchase without consulting with Andrew was in itself a breach of the obligation to consult and obtain Andrew’s agreement as a Quasi-Partner; the conduct did undermine the trust and confidence that existed in the Quasi Partnership.

It is noted that there is no explanation in the Points of Defence as to why the only share in ABF was transferred to Paul on 13 July 2016, and Mr Tomkinson resigned as director and was replaced by Paul.

Dishonesty is not a necessary ingredient for a breach of fiduciary duty but Andrew does advance the case that Paul intended to misappropriate over £1 million from PLC by acquiring sole ownership of Barn Farm which was a dishonest breach of fiduciary duty.

[Petition] From 2010 the Partnership entered into a contract to remove lime from the Cemex Site and Paul procured the following for the advantage of the Partnership at the expense of PLC: (a) Anthony Bridgen (Andrew and Paul’s brother) (“Anthony”) worked at Cemex loading tipper lorries with lime, Anthony was self-employed and his invoices were paid by PLC; (b) two of the Partnership’s tipper lorries were added to PLC’s Operating Licence (“PLC’s Operating Licence”) and were maintained, repaired, taxed, insured and fuelled at PLCs expense; (c) employees of PLC operated two or three vehicles at the Cemex Site; and (d) additional vehicles supplied by Gilbert Transport Services (Tamworth) Limited (“Gilbert”) used on the contract were invoiced to and paid by PLC.

If, as the Respondents assert, PLC was the contracting party for the removal of lime from the Cemex Site and the Partnership acted as sub-contractor to PLC. then: (a) Paul did not disclose his interest in the sub-contract to the PLC board; (b) Andrew was unaware of any sub-contract despite being a director of PLC at the time; (c) PLC paid for the maintenance, repair, fuel and tax of the Partnership’s vehicles; and (d) there is no evidence of the Partnership giving any credit to PLC when it used PLC’s employees or self-employed contractors, which were paid for by PLC.

(Points of Defence] In early 2010, Paul told the board of PLC about an opportunity for PLC, in conjunction with Prestons Contractors Ltd (“Prestons”) to tender for a contract, to be awarded by BI Products Recovery Ltd (“Bi-Products”) to haul away dust produced at the Cemex Site. The board agreed that PLC should bid which it did, and the bid was successful.

Paul made full and frank disclosure to PLC’s board of the Partnership’s involvement, Andrew was aware of the Partnership’s involvement in the contract and PLC profited from the contract. 4R later took over from Bi-Products as the contracting party with PLC (“4R”).

[Paul’s Witness Statement 10/1/20] PLC employed the Partnership and Gilbert as sub-contractors because PLC did not have suitable vehicles to carry out the work. PLC provided someone to sit in the lorries whilst they were being loaded with dust but otherwise the Partnership/Gilbert Transport provided their own vehicles and drivers.

Details of invoices sent by PLC to Bi-Product/4R and by the Partnership to PLC from 2010-2014 are provided.

PLC provided the following assistance/met the following costs connected to the Cemex contract for the benefit of the Partnership, which were recharged to the Partnership:

[Andrew’s Response 31/1/20] The whole arrangement was not a bona fide arrangement in the interests of PLC, was not a proper purpose and placed Paul in conflict with his duties to PLC/ABPT. Andrew does not accept that all benefits provided by PLC to the Partnership in relation to the Cemex contract have been dealt with as asserted by Paul, does not accept that the credits were raised contemporaneously or that they are appropriate. Paul has not disclosed how much profit the Partnership made from the arrangements.

[Petition] In late 2010/early 2011 Paul told Andrew that the Partnership had acquired a contract to remove digestate waste from the Biffa Site. Andrew believes that 4 articulated tractor units and tanker trailers, used by the Partnership on the Biffa contract were put on PLC’s Operating Licence and were maintained, repaired, taxed and fuelled at the expense of PLC.

If as the Respondents assert, PLC had the contract with Biffa and the Partnership was sub-contracted by PLC to provide transport services then: (a) Paul did not disclose the nature and extent of the Partnership’s interest in that sub-contract; (b) Andrew did not know of the sub-contract in spite of being a director of PLC; (c) the vehicles used were maintained, repaired, fuelled and taxed and insured at PLC’s expense; and (d) there is no evidence that credit was given by the Partnership to PLC for employees of PLC and self-employed contractors paid by PLC, but used in the Biffa sub-contract, by the Partnership.

[Points of Defence] In October 2013 PLC and Prestons entered into a contract with 4R (as successor to Bi Products) to remove liquid digestate waste from the Biffa Site. Where liquid was to be used for direct spreading on land, PLC sub-contracted to the Partnership/Prestons to transport and spread the liquid, as PLC did not have the necessary equipment to do this.

If the use of PLC employees benefited the Partnership inadvertently then this was dealt with by way of a credit.

The board of PLC knew of Paul’s involvement in the Biffa sub-contract and it is denied that vehicles owned by the Partnership were added to PLC’s Operator’s Licence or maintained, repaired or fuelled at PLC’s expense.

[Paul’s Witness Statement 10/1/20] In late 2011/early 2012 PLC entered into a sub-contract with Bi-Products to remove solid waste from the Biffa Site. PLC sub-contracted with the Partnership to carry out this work, but once the Environmental Agency forbade Biffa from depositing solid waste on the ground, Biffa started instead putting the waste in skips, PLC/the Partnership could no longer perform the contract after this happened.

In March 2012 PLC paid £19,200 of the cost of the Volvo, purchased by the Partnership. PLC invoiced the Partnership for this amount and the invoice was credited to the PLC Purchase Ledger.

In 2012 PLC started to remove liquid waste from the Biffa Site on a trial basis, as sub-contractor to 4R. There was a suggestion that Biffa would enter into a 5 year contract with 4R but they never did. The price paid for the removal of liquid waste was reduced over time from £12.50 per tonne at the start to £8.05 per tonne, at that point it became uneconomic for PLC to continue with the contract and it was ended.

The Partnership gave 3 credits to PLC in relation to this sub-contract: (a) when spreading liquid waste the Partnership used its tractor to pull PLC’s tankers and reduced its charges to PLC by £1 per tonne to take the use of PLC’s tankers into account; (b) in March 2014 PLC paid £2,160 for the Partnership, this was credited to the PLC Purchase Ledger; and (c) on 1 April 2015 the Partnership credited £13,840 to the Partnership Sales Ledger for machinery purchased by PLC, but used by the Partnership.

[Andrew’s Response 31/1/20] Andrew can neither admit nor deny that credits were provided as asserted by the Respondents, he does not understand or admit the basis upon which invoices were calculated, that they were contemporaneous with events or that costs were paid by the Partnership. Paul has not disclosed how much profit the Partnership made from the arrangements.

[Petition] From around 2009, employees of PLC worked for the Partnership at Home Farm and PLC maintained and repaired vehicles and machinery used by the Partnership and also provided labour, equipment, insurance and consumables (including fuel) for the vehicles/machinery. The employees are: Anthony, Richard Whetton (“Mr Whetton”), Adam Elliott-Dickens (“Mr Elliott-Dickens”), Nigel Miller (“Mr Miller”), Stuart Ward (“Mr Ward”), Tony Emery (“Mr Emery”), Samuel Bridgen (“Sam”) and William Bridgen (“William”).

[Points of Defence] when PLCs employees have occasionally worked for the Partnership at Home Farm it has been done openly and has been properly accounted for.

[Paul’s Witness Statement 10/1/20] from early 2012 the Group used Home Farm at no cost as an operational base and to store non-food waste (waste soil and water). Group equipment was repaired and maintained at Home Farm.

In September 2012 PLC recharged the Partnership for fuel, oil and tyres that PLC had paid for the Partnership’s vehicles. The Partnership paid the invoices by cheque.

As to the employees of PLC and self-employed contractors paid by PLC who Andrew alleges have worked at Home Farm for the Partnership:

The Partnership has not benefited from any insurance taken out by PLC.

The only equipment of PLC used at Home Farm, for the purposes of the Partnership is a digger used to move waste soil. As PLC is benefiting from having its waste soil disposed of at Home Farm, Paul says that no credit is appropriate for this.

It is possible that machinery owned by the Partnership has occasionally been repaired at PLC’s premises (where Partnership employees have been unable to repair it).

The Partnership has always paid for its own fuel.

[Andrew's Response 31/1/20] It is noted that Paul admits that the employees identified by Andrew in the ABPT petition were working for the Partnership and paid by PLC. No records of this had been kept by Paul and he has put arbitrary figures on the sums he says should be paid, which have not been paid by the Partnership to PLC. Andrew does not accept in any event that the details set out in Paul’s witness statement represent the full extent of the Partnership’s use of PLC’s employees.

[Petition] During the 2015/2016 growing season the Partnership started supplying potatoes to PLC either directly or indirectly through ABF. Andrew was not consulted about this arrangement.

The cost of labour, cultivation, husbandry and harvesting was borne by PLC alternatively ABF.

Even if the potatoes were supplied at market rates, this still breaches the no conflict duty of Paul and he must disgorge any profit made by the Partnership to PLC.

[Points of Defence] In 2016 ABF and the Partnership agreed that ABF would grow potatoes at Home Farm. The agreement was entered into openly and with the knowledge of Andrew and approval of the board of ABF. The agreement was:

[Paul’s Witness Statement 10/1/20] between 2009 and 2011 when Andrew and then Mr Large were Managing Directors of PLC, the Partnership started supplying potatoes at market rates to PLC.

From 2016/2017 the Partnership carried out cultivation services for PLC and PLC set off those charges against the price it paid to ABF for the potatoes. The charges for cultivation services included the cost, for a period, of supplying sprays and fertiliser as specified by Agrovista.

It was agreed that the Partnership would charge at National Association of Agricultural Contractors (“NAAC)” rates for its cultivation services, however the Partnership charged less than NAAC rates in light of: (a) Mr Miller and Paul’s sons working for the Partnership and (b) Paul intended to provide the Group with a cost-effective source of potatoes rather than to make a profit for the Partnership.

The RSM Report commissioned after Andrew alleged that the arrangements amounted to a fraud concluded that the Partnership had undercharged for cultivating services in a sample of 22 of its invoices to PLC, by £133,860, against NAAC rates because it had both underestimated the acreage cultivated and charged reduced rates. In addition the Partnership did not charge for irrigation in spite of NAAC rates allowing for this. The cost of sprays supplied by the Partnership to ABF was £169,371 but the Partnership only charged PLC £134,852.

[Andrew’s Response 31/1/20] Andrew does not accept the account provided by Paul and asserts the prices were set for the benefit of the Partnership and PLC had no similar arrangement with other suppliers, effectively guaranteeing the Partnership a profit.

[Petition] WPS was incorporated on 13 November 2013 and Paul and Mr Tomkinson became its directors. £623,000 was transferred from PLC to WPS. On 3 November 2014 Paul applied to strike off WPS from the register. Even if, as asserted by the Respondents, the sum of £623,000 was repaid by WPS to PLC, in September 2014, it was still a breach of duty for that money to have been paid to WPS in the first place.

[Points of Defence] PLC wished to explore a project involving the acquisition of an anaerobic digester for the purpose of its business, but, through the use of a separate corporate vehicle. WPS was incorporated for that purpose and the arrangement was entered into with the full knowledge of Andrew and the Board of PLC. The sum of £623,000 was transfer to WPS in order to take the project forward.

The decision to use WPS for the project was abandoned in favour of using BIL and the sum of £623,000 was therefore returned (with accrued interest) from WPS to PLC in September 2014.

[Petition] PLC incurred costs of around £25,000 per month for mechanical and electrical parts. In around 2015, Carl Woolrich (“Mr Woolrich”), PLC’s Maintenance Manager undertook a review of costs and on two occasions alternative suppliers offered identical products and better service with a cost reduction of 50%. Mr Woolrich reported this to Mr Sharratt and Paul but they rejected the alternative suppliers, without explanation. The decision to not even countenance a change in supplier was a breach of fiduciary duty and gross mismanagement.

[Points of Defence] It is denied that Paul and/or Mr Sharratt refused to countenance saving costs on the purchase of spares.

[Petition] PLC acquired a diesel generator in 2005 as a back-up power source for Enterprise House (“the Diesel Generator”).

Since an Anaerobic Digester Plant (“AD Plant”) has been in operation supplying the electricity needs for Enterprise House, the Diesel Generator has been available to supply electricity to the National Grid (“the Grid”) in the event of a local power failure. There is no evidence that the Diesel Generator has ever been used for that purpose, this is a breach of fiduciary duty and serious mismanagement in failing to receive or account for that source of revenue.

[Points of Defence] The Respondents say as follows:

In his petition concerning BIL, Andrew alleges that there are 4 instances or categories of unfairly prejudicial conduct by the Respondents. That conduct/those instances, in summary relate to:

[Petition] On 7 May 2010 Andrew resigned as a director of BIL to enable him to pursue his political career, but he continued as a de facto director.

Andrew asked on a number of occasions to be reappointed as a director of BIL, but Paul refused.

[Points of Defence] The understanding of Paul and the other directors and shareholders of BIL was that Andrew resigned as director of BIL and ABPT, on 7 May 2010 on the basis that he no longer wished to be involved in the management of any of the Group companies.

It is accepted that, between February and August 2017 Andrew sought to be reappointed as a director of the companies in the Group. This request was rejected because of Andrew’s abusive, contemptuous and aggressive behaviour towards fellow shareholders and the board of the Group companies.

[Petition] In 2010/2011 BIL started to construct a house to replace the existing farmhouse at “the Willows”. Paul caused John Bridges Construction Ltd to take on hire a Telehandler which was in fact used by the Partnership at Home Farm but was paid for by BIL as part of the construction cost of the new house at the Willows. Paul’s assertion that BIL was reimbursed for this cost is rejected.

[Points of Defence] The Telehandler was brought onto Home Farm by John Bridges (“Mr Bridges”) so that topsoil for the Willows development could be transported to the Willows. No charge for the cost of hiring the Telehandler to BIL has been found.

[Paul’s Witness Statement 10/1/20] Mr Bridges did provide a Telehandler which was used to enable top soil to be removed from Home Farm and deposited at the Willows, owned by BIL. Paul does not believe that Mr Bridges charged for the use of the Telehandler and the transport of the top soil to the Willows was for the benefit of BIL which needed the soil for earth works at the Willows.

[Petition] Andrew believes, following disclosure to him at a shareholders meeting in early 2017, that management charges have been applied to BIL. No information has been provided to Andrew as to the nature and extent of those charges. Any such charges bear no relationship to actual services provided and are a method of extracting value from BIL.

[Points of Defence] Andrew’s beliefs have no foundation in fact and should be struck out for lack of particularity.

[Petition] BIL invested in 3 renewable energy schemes:

These three schemes were intended to reduce PLC's energy and waste costs but also to provide income streams from: (a) feed in tariff (“FIT”) payments; (b) renewable heat incentive (“RHI”) payments; and (c) exporting green energy to the Grid.

An additional 500 KWH CHP was added with the sole intention that it would provide electricity to be exported to the Grid.

Electricity has been exported to the Grid since 2015 : (a) May 2015 - November 2018 - 2,139,059 kWh; and (b) November 2018 - March 2021 - 5,171,950 kWh.

There was a contract in place between BIL and E.on for the export of electricity to the Grid for the six months up to 30 September 2018, no revenue has been received by BIL under this contract.

E.on reports that its export tariff (excluding FIT) is 5.5p per kWh, Ofgem suggest an average export tariff equating to approximately 21p per kWh (excluding FIT). BIL should have received between £402,105 and £1,535,311 for electricity exported to the Grid, but has not done so

Future revenue will be lost: (a) the AD Plant’s maximum capacity is 1,000 kWh per day with the ability to export 860 kWh per day, but the AD Plant has not been operating at maximum capacity ; (b) assuming utilisation at 80% of maximum capacity lost future income would equate to £331,478 at 5.5p per kWh and £1,262,645 at 21p per kWh.

It is a breach of fiduciary duty and serious mismanagement to fail to collect or pursue these substantial revenues.

[Points of Defence] Andrew was involved in and knew of the matters of which he now complains.

The purpose of the Solar Panels was: (a) to generate electricity for use in the factory reducing energy costs (not to supply electricity to the Grid); (b) to show engagement of the Group with environmental concerns at a time when the business was under threat as a result of the environmental nuisance caused by noxious fumes from waste produced by the factory; (c) to promote the business to customers who had “green credentials”; and (d) to provide a nominal additional revenue stream from FIT electricity generation receipts. Andrew was aware of these purposes for the Solar Panels.

The purpose of the AD Plant was as a solution for the environmental nuisance caused by strong odours emitting from the existing waste treatment. This had resulted in the service of an abatement notice by the council (which had been appealed and the appeal was due to be heard in June 2016). The council applied for an interim injunction to abate the nuisance on 9 September 2016, there were over 400 complaints from the public about the smell and a class action had been started by 106 local residents. The directors of BIL were however aware of the potential to export electricity to the Grid and of the availability of FIT payments from Ofgem for doing so.

It was estimated that more biogas would be produced than had originally been calculated and a second CHP was needed to capture and utilise the additional biogas produced in excess of the capacity of the first CHP.

The AD Plant has been processing waste and the CHPs generating electricity since May 2017, and it is admitted that as at 17 November 2018 the electricity export meter purported to record that 2,139,059 kWh of electricity had been exported to the Grid. A contract was agreed with E.on for the export of electricity as an adjunct to a contract for the supply of electricity by E.on, but the approval of Western Power Distribution (“WPD”) for the export of electricity to the Grid and approval of the export/import meters by E.on was not obtained until November 2018. It is admitted that the meter installed in November 2018 read 5,171,950 kWh as at March 2021. Discussions with E.on are ongoing about a payment for electricity exported to the Grid.

It is admitted that E.on reported an export tariff of 5.5p per kWh (excluding FIT payments) but denied that Ofgem identified 21p per kWh (excluding FIT payments) as an average payment made to generators of electricity by suppliers. The figure of 21p that Andrew relies on also includes FIT power generation payments and Andrew has incorrectly assumed that all exported electricity (in accordance with meter readings) is eligible for FIT payments.

The maximum amount of electricity which can be exported to the Grid is capped at 860 KWH per day, but the CHPs could not achieve that maximum export capacity, even ignoring the energy needs of the factory, the fluctuations in waste product used to generate energy, reduce the amount of electricity available for export to the Grid.

In the 29 month period from November 2018 to March 2021 5,172,000 kWh is shown as having been exported, giving an average monthly export of 178,343 KWh or 6000 KWh a day.

Andrew’s figure for future loss of revenue includes income already fully recovered as well as revenue which remains recoverable

It is denied that the Respondents failed to collect and pursue revenue or account for revenue. BIL has received £1.97m in FIT power generation payments from Ofgem up to 22 March 2021 for electricity generated by the CHPs and Solar Panels and the Group has saved approximately £1m from the in house generation of electricity.

In his petition concerning ABF, Andrew alleges that there are 4 instances or categories of unfairly prejudicial conduct by the Respondents. That conduct/those instances, in summary relate to:

[Petition] ABF was incorporated in secret without consulting the shareholders of PLC and in particular Andrew.

The subscriber share in ABF was put in the name of Mr Tomkinson and he was the only director. Mr Tomkinson subsequently resigned as director and Paul was appointed in his place and the subscriber share was transferred to Paul on 13 July 2016. It was only after Paul was challenged by Andrew about the position in respect the shareholding in ABF and proceedings were threatened, that the shareholding was altered to 49 shares for Paul, 49 shares for Andrew, 1 share for Mr Ellis and 1 share for Mr Tomkinson.

Barn Farm should have been acquired by PLC. Once the ABF shares were reallocated (after Paul had challenged Andrew and proceedings were threatened) in August 2017, ABF was also a Quasi-Partnership, subject to considerations of trust and confidence. Andrew should have been appointed as a director of ABF, but he was not and he has not been consulted regarding its management. Andrew has been locked into a substantial investment with ABF over which he has no control.

[Points of Defence] The decision to purchase Barn Farm was made by the directors of PLC on 14 August 2015. ABF was judged to be needed: (a) to preserve Barn Farm from enforcement action being taken against PLC in relation to statutory nuisance for noxious fumes emitting from its factory; and (b) major customers if they saw PLC making significant profits, would press PLC to reduce the prices they paid for processed potatoes, the incorporation of ABF kept profits made from Barn Farm out of PLC’s accounts.

Andrew was informed about the purchase of Barn Farm, the day after the auction and was told that it would be purchased by a new company. Andrew raised no objection or concern about the purchase, other than that he did not want to appear as a shareholder of the new company whilst he considered the question of an appeal against the financial relief order made in his divorce.

If Andrew is advancing a case that Paul intended to misappropriate over £1,000,000 from PLC in order to acquire sole ownership of Barn Farm then such a case amounts to an allegation of serious fraud and dishonesty that Andrew should properly particularise. Andrew has failed to properly plead the alleged dishonesty on the part of Paul.

Andrew was not kept out of the management of ABF, he had no interest in being involved in its management.

[Reply] Andrew was not told that Barn Farm was to be put into the name of a new company in which shares would be issued in due course in line with the shareholding in ABPT. The purchase of Barn Farm was presented as a fait accompli to Andrew who was not consulted about it.

The purchase of Barn Farm without consultation with Andrew was a breach of the obligation to consult with him and obtain his agreement as a Quasi-Partner and a breach of fiduciary duties owed to PLC. The conduct did undermine the trust and confidence that existed in the Quasi-Partnership and the conduct is to be considered as part of the overall conduct of the affairs of PLC.

No explanation has been given for the transfer of the entire issued share capital of ABF to Paul, from Mr Tomkinson, or the resignation of Mr Tomkinson as director and his replacement by Paul. This was a dishonest breach of duty by Paul for his own purposes.

[Petition] From the 2015/2016 growing season, the Partnership started supplying potatoes to PLC either directly or via ABF.

PLC paid all the costs of labour, cultivation and harvesting.

Paul did not declare his interest to the boards of either PLC or ABF before entering into those arrangements.

Even if potatoes were supplied by the Partnership at market rates this still involved Paul (through the Partnership) making a secret profit.

[Defence] In 2016 ABF and the Partnership agreed to grow potatoes at Home Farm, the agreement was entered into openly and with the knowledge of Andrew and the board of ABF.

The material terms of the cropping agreement were that ABF would pay a ground rent and the cost of cultivating/harvesting at standard rates and PLC would purchase the harvested potatoes from ABF.

If PLC incurred any costs/expenses which ought to have been born by ABF the issue was settled between those companies.

[Petition] From the 2015-2016 growing season, the Partnership started supplying potatoes to PLC directly or via ABF.

Paul used ABF to disguise profits made by the Partnership in two ways: (a) cultivation, husbandry and harvesting undertaken by the Partnership were charged to PLC/ABF in breach of the no conflict rule; and (b) labour, equipment, insurance and consumables were paid for by PLC or ABF.

Paul did not declare his interest in those arrangements to the boards of PLC or ABF before entering into those arrangements.

Even if potatoes supplied by the Partnership were supplied at market rates, this still amounts to a secret profit which Paul is obliged to account to PLC for.

[Defence] ABF was judged to be needed: (a) to preserve Barn Farm from the risk to PLC presented by threats made by the local authority of proceedings for statutory nuisance; and (b) because major customers of PLC, such as large supermarkets take into account the profits of their suppliers in order to push down prices paid to suppliers, it was therefore decided to keep profits from Barn Farm out of PLC.

[Petition] On 21 April 2018 Andrew visited PLC's offices and noticed a completed account opening form for ABF to open an account with Agrovista, signed by Paul with delivery to be made to Home Farm. No reason has been given as to why ABF should pay for services supplied to Home Farm.

[Points of Defence] Agrovista’s business is the supply of technical services and chemical treatments for crops. The Agrovista account opening form was completed on behalf of ABF for technical services and chemical treatments required for ABF’s crops of potatoes. The delivery address was Home Farm because it stored the deliveries for ABF. The Agrovista supplies were therefore for the benefit of ABF and not the Partnership.

Before me: (a) Andrew was represented by Mr Zaman QC and Mr Philip Mantle; and (b) the Respondents were represented by Mr Auld QC (the other respondents to the Petitions, Alan, Ann, JLT, ABPT, BIL and ABF are not represented).

I will summarise the expert evidence relied on by Andrew and the Respondents before summarising the evidence of the witnesses of fact relied on by the parties. It is convenient to deal with the expert evidence before the evidence of the witnesses of fact, because Paul in particular responds, in his second witness statement, to the first report of Andrew’s expert.

Both experts are experts in forensic accountancy and they have prepared reports and made joint statements upon: (a) the accountancy aspects of those matters that Andrew relies upon in saying that the affairs of the Group companies have been conducted in a manner which is unfairly prejudicial to him; and (b) separate reports upon the value of shareholdings in the Group and how they are affected by the matters of which Andrew complains. For the purpose of the issues that I need to determine the evidence of the experts as to the value of shares in Group companies is not relevant and I do not consider those reports in this judgment.

Andrew’s expert is David Bell of Ernst & Young LLP (“Mr Bell”). The Respondent’s expert is Stephen Lewis of Mazars (“Mr Lewis”). Mr Bell has prepared two expert reports on Andrew’s claims dated 1 April 2021 and 7 October 2021. Mr Lewis has prepared two expert reports on Andrew’s claims dated 31 March 2021 and 8 October 2021. Mr Bell and Mr Lewis have prepared two joint statements setting out the matters on which they agree and disagree dated 28 May 2021 and 18 October 2021.

I will at this stage set out the opinions of Mr Bell and Mr Lewis in relation to each of Andrew’s claims as they appeared at trial, following the preparation of both joint reports. In so far as it is necessary to consider what the opinions of Mr Bell and Mr Lewis were before they arrived at their final positions in the second of their joint statements dated 18 October 2021, I will do so later in this judgment.

The experts agree that Mr Tomkinson resigned as director of ABF and transferred the share that he held in ABF to Paul on 13 July 2016, and that Paul was appointed director in place of Mr Tomkinson on the same date.

The experts further agree that a further 99 shares were issued on 6 February 2017 so that the shareholders were, from that date Andrew - 49 shares, Paul - 49 shares, Mr Tomkinson - 1 share and Mr Ellis - 1 share.

The experts agree that it was PLC that entered into the contract with Bi-Products/4R for both Cemex and Biffa and PLC entered into sub-contracts with the Partnership and Gilbert for Cemex and with the Partnership and Prestons for Biffa;

Mr Bell says that, based upon a sample of 13 invoices considered by him, PLC made a profit of £20 per load or 8% on what Gilbert charged it, on Cemex, but only on two occasions did PLC charge 4R more than the Partnership charged PLC in its invoices.

Mr Bell says that the use, by the Partnership of PLC’s drivers and fuel for the Cemex/Biffa contracts further eroded any benefit that PLC obtained from using the Partnership as a sub-contractor. Finally Mr Bell refers to the Partnership invoicing PLC for the use of the Volvo at the rate of £285 per week, with PLC paying the tax and insurance on the Volvo.

Mr Lewis says that his analysis of the Cemex contract shows that the rates charged by the Partnership to PLC were either the same as or less than the rates charged by PLC to 4R and that in some cases the Partnership did not charge PLC for work which PLC charged 4R for. Mr Lewis says that the Partnership charged the same rate of £230 per load for loads carried by its 8 wheel tipper vehicle as Gilbert charged for the same type of vehicle and that Mr Bell’s analysis of 13 invoices is insufficient to conclude that PLC made an 8% profit on its sub-contract with Gilbert transport. Mr Lewis says that according to his calculations, PLC made a profit of £20,889 on services provided by the Partnership to PLC in relation to the Cemex and Biffa contracts.

So far as the vehicle hire charges for the Volvo are concerned, Mr Lewis says that these are not pleaded and that he is instructed not to deal with this issue.

Mr Bell says that he discussed PLC’s fuel management system with Mr Baldwin and Mr Brain (both former transport managers of PLC). Mr Bell says that they confirmed to him that PLC’s fuel management system required someone wanting to draw fuel at Enterprise House to use both a key fob and a pin number. Key fobs were allotted to a particular vehicle and pin numbers to a particular driver. Mr Bell accepted the fob could be used to fill up more than one vehicle, but he understood that the pin numbers should accurately show which driver had drawn fuel from the system.

Mr Lewis says not only could fuel fobs be used for more than one vehicle but pin numbers could be passed, around between drivers or guessed.

Mr Bell has calculated the amount of PLC’s fuel that he considers has been used by the Partnership. He has done so by: (a) identifying fuel used by the pin numbers allocated to Sam and Adam Marczak, from January 2015 who he understood to be employees of PLC that worked for the Partnership. He has then used those figures to calculate likely PLC fuel use by the Partnership from January 2010 to December 2014; and (b) he has identified Partnership vehicles both by reference to the Partnership fixed asset register and agricultural vehicles for which fuel has been drawn on the basis, in the latter case, that only the Partnership used agricultural vehicles. He calculates the value of PLC fuel drawn by the Partnership from January 2010 to the end of March 2020 at £391,865. Mr Bell calculates that the partnership only purchased £118,871 in fuel between 2010 and 2020.

Mr Lewis says that Mr Bell’s analysis is extremely limited, he has significantly underestimated the amount of fuel that the Partnership paid for itself between 2010 and 2020. Mr Bell calculated this fuel use at £118,871, on the basis of two supplies of fuel to the Partnership that Mr Bell had identified. In contrast, Mr Lewis has looked at the Partnership ledger for fuel purchases which gives a figure of £763,157 for fuel purchased during this period. Mr Lewis says that Mr Bell has also assumed that all agricultural vehicles are Partnership vehicles, but he says that is not correct because PLC had agricultural vehicles of its own which are used for the purpose of its business. Finally he says that fuel taken using Sam’s pin number could not be extrapolated back to 2010, because at that time Sam would have only been 12 years old, so he could not have been using PLC’s fuel then.

Mr Bell has provided a range of the cost to PLC of its employees being used for the benefit of the Partnership. The range that he has supplied depends upon the strength of the available evidence that the employee worked for the Partnership and the salary costs applying to that employee in the year in question. Mr Bell notes that, between 6 April 2013 and 5 April 2019, the Partnership had no salary costs and it was only from April 2019 onwards that Sam and William have become employees of the Partnership.

Mr Lewis says there is not sufficient evidence available to quantify the cost to PLC of its employees time that benefited the Partnership and that the method adopted by Mr Bell to provide a range of cost is arbitrary and inappropriate.

The experts agree that Anthony should not be included in the claim. They then analyse the remaining employees of PLC who are mentioned in Andrew’s ABPT Petition as having spent time working for the benefit of the Partnership and set out their respective positions in relation to those employees (including, in the case of Mr Bell, setting out a range of figures (normally between 30% and 70%) of the employee’s salary costs that I may decide should be paid by the Partnership).

Mr Bell includes in his report additional claims for Mr Woolrich, Mr Baldwin, Wojciech Gajda and time which he suggests was spent by PLC’s administrative staff in carrying out administration for the Partnership. Mr Lewis does not respond to these claims, on the basis that the three additional employees and administrative costs are not pleaded.

Mr Bell says that he has identified invoices addressed to PLC for goods which were delivered to, or services performed at Home Farm. Mr Lewis says that his instructions are that some of PLC’s vehicles were located at Home Farm and goods and services being delivered to Home Farm is not indicative of them having been supplied for the benefit of the Partnership.

Mr Bell says that ABF has incurred significant trading losses which PLC has funded and that the Partnership has benefited by making a profit on the planting, cultivating and harvesting services that it has provided. He says that if PLC had purchased potatoes from a third party then it would not have had to fund these losses.

Mr Lewis says that in most cases NAAC rates or Nix pocket-book rates had been used for husbandry work carried out by the Partnership, but overall the Partnership has charged £85,211 less than these rates allow, consistent with the findings of the RSM Report, which found that the charges rendered by the Partnership for planting, cultivating and harvesting potatoes were less than NAAC rates. He says that the trading losses, to which Mr Bell refers are not part of Andrew’s pleaded case.

The experts agree that the £623,000 originally paid by PLC to WPS was repaid, with interest to PLC ( the actual amount transferred in two payments is £623,000). Mr Bell refers to professional costs incurred in setting up WPS of £6,952.

The experts agree that, in addition to the price paid for goods the quality and availability of the goods and standard of service are also relevant when selecting parts suppliers. They also agree that PLC engaged expense reduction specialist to identify savings that could be made in purchasing parts and that PLC implemented their recommendations in December 2017. The experts agree, on this basis, that any losses incurred by PLC from not implementing the purchase of parts from Erik’s (the alternative supplier that Mr Woolrich refers to) should be limited to the period from November 2015 to December 2017 and they agree that the savings to PLC, if Andrew’s position is upheld are £6,250 per month for that period.

The experts agree that there is no evidence that the Telehandler was not appropriately accounted for.

The experts agree that, as the shareholders of BIL and ABPT are the same, the re-allocation of costs between BIL and PLC has no effect on shareholders’ interests.

The experts agree that there is no evidence that costs were not correctly accounted for in relation to purchases from Agrovista.

The experts agree that, based on the available evidence, the diesel generator cannot export electricity to the Grid, in the event of a power failure.

The experts agree that: (a) there is no evidence of revenue being collected for the export of electricity to the Grid; (b) no power purchase agreement (“PPA”) has been entered into with an electricity supplier in relation to the export of electricity to the Grid, other than an agreement for the six-month period 1 April 2018 to 30 September 2018 entered into with E.on; and (c) a maximum of only 50% of all electricity generated by the CHPs can be exported to the grid and in any event no more than 860 kWh.

Mr Bell calculates total electricity exported to the Grid, up to 22 March 2021 as 7, 311,009 kWh, of which 5,171,950 kWh is for the period 18 November 2018 – 22 March 2021. He calculates the loss of revenue from the export of electricity at between £284,457 and £402,105, depending upon whether the electricity exported which it is possible to recover payment for is 5,171,950 or 7,311,009 kWh.

Mr Lewis calculates total electricity exported to the Grid as at 22 March 2021 as 6,856,450 kWh and that the revenue recoverable for that electricity is £338,865.

Mr Bell calculates revenue receivable going forward at £322,496 per annum and Mr Lewis, based upon BIL recovering export FIT payments, at between £127,095 and £132,386.

Mr Bell goes on to calculate the loss that he says that BIL has suffered as a result of it not running the AD Plant at 90% of its capacity in order to maximise revenues. Mr Lewis has not calculated any loss resulting from a failure to run the AD Plant at 90% of maximum capacity, because he says, this claim has not been pleaded by Andrew.

I will now summarise the factual evidence that Andrew and the Respondents rely upon. My summary is not meant to be a comprehensive summary of everything that the relevant witness says in their witness statements, but rather a relatively brief summary of their evidence which deals with the grounds that Andrew relies upon in saying that the affairs of the Group companies have been conducted in a manner unfairly prejudicial to him and the Respondents’ response to those grounds.

Andrew gives evidence, in summary on the following matters:

Matthew Parker (“Mr Parker”) gives evidence of the following:

Mr Bridges gives evidence as to:

Martin Mc Quaide (“Mr McQuaide”) gives evidence that:

Anthony gives evidence that:

Mr Baldwin says:

The witness summary for David Brain (“Mr Brain”) says:

Paul has made two witness statements: (a) a witness statement dated 10 January 2020 in compliance with the order of 15 November 2019 of Insolvency and Companies Judge Jones directing Paul to file and serve a witness statement providing details of his account of credits and debits applied in relation to the matters set out in Schedule 1 to that order (sums credited or debited in relation to transactions between the Partnership and PLC/BIL/ABF); and a witness statement dated 9 September 2021.

In his witness statement of 10 January 2020 Paul says:

I will now set out in summary what Paul says in his witness statement of 9 September 2021 (save in so far as it merely repeats the content of his statement of 10 January 2020) Paul deals with:

Mr Sharratt says that:

Mr Ellis says that:

Mr Tomkinson says:

Mr Whetton says:

Mr Emery says:

Mr Elliott-Dickens says:

Mr Miller says:

Mr Snipe says:

I have set out below the list of issues “agreed” between counsel. Whilst I say that the list is an agreed list of issues there are instances where one side or the other does not agree that the issue identified is one that I need to determine. Where it is not agreed that the issue is one that I need to determine I have indicated where either Andrew or the Respondents do not agree that the relevant issue is one that I need to determine.

Were each, or any, of the following companies Quasi-Partnerships:

Did Andrew have a legitimate expectation (or was he otherwise entitled) to participate in the management of each of the Group companies.

If the answer to (1) above is yes in respect of each or any of the Companies:

Was the termination of Andrew’s employment and directorship in August 2014 with his consent?

Did Andrew have a legitimate expectation of being (or was he otherwise entitled to be) re-appointed to management (as a de jure director or otherwise) after August 2014?

Was Andrew wrongly or unfairly excluded from management (as a de jure director or otherwise) from August 2014?

Did Andrew continue to participate in the management of the Companies after August 2014?

Did Andrew request to be re-appointed to management (whether as a de jure director or otherwise) and if so when and on what basis? (Andrew says that this issue does not arise from the Statements of Case)

Was Andrew’s request refused (and if so on what basis) and if it was, was this wrongful or unfair? (Andrew says that this issue does not arise from the Statements of Case)

Have the Respondents made an offer to acquire Andrew’s shares at full independent value; and if not is his exclusion (arising out of any Quasi-Partnership and legitimate expectation) wrongful or unfair.

What were the reasons for and the circumstances of the incorporation of ABF ?

In what circumstances and on what basis did ABF acquire Barn Farm?

What were the financing arrangements for the acquisition of Barn Farm by ABF and were they on commercial terms as between PLC and ABF?

Did any of the above matters involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Was the contract for removal of lime from the Cemex site between:

What were the terms of the Sub-Contract (or arrangement) between PLC and the Partnership in respect of removal of lime from Cemex?

Did the Sub-Contract (or arrangement) with the Partnership involve any conflict of interest on the part of Paul and if so what conflict?

Did Paul disclose the nature and extent of his interest in the Sub-Contract (or arrangement) to the directors of PLC?

Did the Sub-Contract (or arrangement) involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Was the contract for the removal of waste and spreading from Biffa, Rugby between:

What were the terms of the Sub-Contract (or arrangement) between PLC and the Partnership in respect of removal of waste and spreading from Biffa?

Did the Sub-Contract (or arrangement) with the Partnership involve any conflict of interest on the part of Paul and if so what conflict?

Did Paul disclose the nature and extent of his interest in the Sub-Contract (or arrangement) to the directors of PLC?

Did the Sub-Contract (or arrangement) involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Did employees of PLC work for the Partnership and if so, which employees, what work and over what period?

Did the Partnership use equipment from PLC and/or have maintenance or repair of its own equipment undertaken by, or at the cost of PLC and if so, over what period?

Did the Partnership use fuel from PLC and if so, over what period?

If the answer to any of the above is yes, was it recharged correctly as between PLC and the Partnership?

Did any of the matters referred to above involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or(b) Mr Tomkinson and/or (c) Mr Ellis?

What were the arrangements for the supply or cultivation of potatoes between PLC, ABF and the Partnership?

Did the arrangement with the Partnership involve any conflict of interest on the part of Paul and if so what conflict?

Did Paul disclose the nature and extent of his interest in the arrangement to the directors of PLC and ABF?

Did the arrangement involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Was the incorporation of WPS and subsequent transfer of funds from PLC to WPS in breach of fiduciary duty, or duty under the Companies Act 2006?

Was there any conflict of interest on the part of Paul and if so, did Paul disclose the nature and extent of his interest in the arrangement to the directors?

Were costs savings on monthly expenditure for mechanical and electrical maintenance identified and drawn to the attention of Paul and Mr Sharratt and not acted on?

If yes, does this involve any breach of fiduciary duty, or duty under the Companies Act 2006, or amount to gross mismanagement by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Did PLC in June 2017 retain analysts to undertake a costs reduction analysis which was implemented in 2018? (Andrew says that this issue does not arise from the Statements of Case).

Did Paul procure the hire of the Telehandler for the use of the Partnership and paid for by BIL?

Were charges in relation to the Telehandler appropriately accounted for?

Did this involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Have management charges been applied to BIL from 2017;

If so, did any of the matters above involve any breach of fiduciary duty, or statutory duty by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Did ABF pay for goods/services provided by Agrovista to the Partnership at Home Farm?

Were any services provided by Agrovista correctly accounted for? (The Respondents say this issue does not arise for determination)

Did any of the matters above involve any breach of fiduciary duty, or duty under the Companies Act 2006 by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Can electricity be exported from the Diesel Generator to the Grid?

Were there any steps which could have been taken to pursue revenue or have it accounted for in these circumstances and if so what steps?

Was there a failure to collect and pursue revenue from the provision of reserve electricity supply to the National Grid? (The Respondents say that this issue does not arise for determination)

Did any of the matters above involve any breach of fiduciary duty or gross mismanagement by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

Was there a failure to collect and/or to maximise revenue from the renewable energy projects and if so a failure by whom?

Did any of the matters in (1) above involve any breach of fiduciary duty or gross mismanagement by (a) Paul and/or (b) Mr Tomkinson and/or (c) Mr Ellis?

In respect of such findings as the court makes in respect of each of the issues set out above:

In relation to Section 994 of the Companies Act, on the basis of the findings of fact made by the Court at the trial of liability:

Was any knowledge or conduct of Andrew including in relation to the matters referred to in paragraphs 1 to 52 above relevant to the issues in paragraph 54 above. (Andrew says that this issue does not arise from the Statements of Case)

Before turning to consider the credibility and honesty of the factual witnesses, I will refer to the comments of Mr Justice Leggatt (as he then was) in Gestmin SGPS S.A, v Credit Suisse UK Limited and others [2013] EWHC 3560 (comm).

Mr Justice Leggatt’s comments concern oral evidence and the fallibility of witnesses memories and how their recollection can be affected by their recalling past events as part of the litigation process, particularly if they have a vested interest in the result.

The comments are pertinent in this case where the relevant events happened up to 13 years ago and where the principal protagonists are brothers (Andrew and Paul) so that the family dimensions of the dispute add an extra element of emotional attachment to the subject matter of the proceedings, as do the fact that Andrew accuses his brother, Paul of acting fraudulently.

In paragraphs 15-21 of his judgment Leggatt J said as follows:

While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.

Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called ‘flashbulb’ memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description ‘flashbulb’ memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory).

Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.

Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been “refreshed” by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.

It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.

In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”

In Painter v Hutchinson [2007] EWHC 758 (Ch) at paragraph 3, Lewison J (as he then was) identified a number of issues in that case which made the evidence of Mr Hutchison unsatisfactory and evidence which he said (in paragraph 6) could not be relied upon unless it was corroborated by indisputable and contemporaneous documents. Where it conflicted with the evidence of Mr Painter, in spite of there being issues about Mr Painter acting dishonestly in the past, Lewison J said he had no hesitation in preferring Mr Painter's evidence. The matters that Lewison J said indicated that Mr Hutchison had given unsatisfactory evidence justifying his approach to Mr Hutchinson’s evidence, were:

Witnesses can however lie for different reasons. Lies in themselves do not necessarily mean that the entirety of the evidence of a witness should be rejected. A witness may lie in an attempt to bolster a case, but the actual case nevertheless remains good irrespective of the lie.

Andrew started off his cross examination in a combative style and in a way that avoided answering the questions that he was asked and instead involved him making the points that he wanted to make. In particular, he asked questions of Mr Auld and made his own points, rather than answering the question that he was asked by Mr Auld. I told Andrew on a number of occasions that he must answer the question that was put to him rather than taking the opportunity to make the points that he wished to make. In spite of this, Andrew continued to deal with questions that were asked of him in the same way for more or less the whole of his cross examination which lasted for two and a half days. In my judgment Andrew thereby, gave evasive and argumentative answers and tangential speeches that avoided answering the questions, the first two indicators of unsatisfactory evidence identified by Lewison J in Painter v Hutchinson.

For reasons I will explain next I do not consider that the evidence Andrew gave on the following topics was evidence that represented his true recollection of events:

I also consider that: (a) Andrew was too willing to assert that Fraud had been committed or that people had acted dishonestly when there was no evidence to support either of those conclusions; and (b) there are inconsistencies between the evidence that Andrew gave in the financial remedy proceedings in his divorce and the evidence that he has given in these proceedings.

Andrew suggested that two emails that were sent to his parents’ email address were not sent for his attention, for him to see, but rather for his parents’ attention, both emails concerned Andrew’s divorce and were sent by Mr Sharratt. The first was an email dated 13 May 2013 sent by Mr Sharratt to Andrew’s parents’ email address and marked “FAO Andrew”. By marking the email “FAO Andrew” it is clear to me that Mr Sharratt was expecting Andrew to receive the email at that email address, otherwise he would not have marked the email in that way. The second email is dated 21 June 2013, this time it was sent by Mr Sharratt to Kim Fellows (“Ms Fellows”) the solicitor acting for Andrew in his divorce and was copied to Andrew at Andrew’s parents email address.

The email of 21 June enclosed a copy of the Baker Tilly report on directors’ remuneration. Andrew did not suggest a reason why Mr Sharratt would be sending an email to his divorce solicitor but copying it to his parents, rather than copying it to Andrew’s parents email address for Andrew to see. Rather than explain that, Andrew said that he had had to throw his parents out of his house when they were staying there because they were terrorising his ex-wife. He appeared to suggest this as a reason why he would not have been using his parents’ email address for communications with Mr Sharratt, but it still does not explain why Mr Sharratt would be sending those emails to Andrew’s parents rather than Andrew and Andrew’s complaint about his parents’ behaviour seemed to me to be aimed at distracting attention from the obvious conclusion that Mr Sharratt was sending the emails to Andrew’s parents’ email address because Andrew had asked him to do so, in order to enable Andrew to receive the emails.

Earlier in his evidence Andrew had said that the two options which are set out in the Baker Tilly report for Andrew, namely: (a) for him to return full time as managing director; or (b) for Andrew to remain as non-executive chairman, but directors’ remuneration to be reallocated away from Andrew, was not communicated to Andrew at the time that report was issued, but the emails of 13 May and 21 June 2013 contradict that evidence and in my judgment Andrew tried to avoid that contradiction by saying that he did not receive the emails of 13 May 2013 and 21 June 2013 when, in my judgment, it is quite clear that he did.

Andrew was taken to: (a) an email dated 3 October 2013 from Mr Sharratt to Ms Fellows which says that proposals for Andrew’s continuing association as an officer of PLC were being drafted by PLC's advisors and would refer to two options: (i) that Andrew would remain as a non-executive director and be paid £15,000 per annum plus a car; or (ii) he would lose his office and receive a payment of £80,000 in compensation; and (b) an email of 16 November 2013 from Mr Sharratt to Ms Fellows copied to Andrew at two of Andrew’s email addresses which says that PLC's advisers were finalising the paperwork for the two options. Andrew said that the two options set out in the email of 3 October were not communicated to him either. It is very unlikely that Andrew's solicitor, Ms Fellows would not have forwarded to him the email of 3 October 2013 or made him aware of its contents. It is even less likely that the email of 16 November 2013 which was sent to Ms Fellows and copied to Andrew at both his personal and parliamentary email address would not be seen by Andrew and I find that Andrew did see both of them.

Andrew agreed that he had asked Paul on 18 January 2014 to write him a letter for the purpose of his divorce proceedings setting out the position of the board of PLC in relation to Andrew’s employment. Andrew agreed that the letter of 20 January 2014 written by Paul was the letter that he had asked for and Andrew said that he had thanked Paul for writing it. Andrew was then asked if the letter was true, to which he responded that it was a version of the truth and then that it was true that Paul had written it. These answers were evasive. It is clear that Andrew presented Paul's letter in his divorce proceedings as a true representation of the position of the board of PLC in relation to his employment by PLC, so if, as he now says there was no expectation at all that PLC would actually make him redundant and nor did he want this to happen, then he misrepresented the position to the divorce court in that Paul's witness statement said that redundancy for Andrew was being considered and Andrew’s counsel, at the divorce hearing said that Andrew being made redundant was a real possibility.

Andrew said that once Mr Large’s employment as Managing Director of PLC was terminated, he recognised that, consistent with the Baker Tilly report (which he said that he had decided should be commissioned) that it was not “fair” that he should be the highest paid director in spite of only working part time as non-executive Chairman. I do not accept Andrew’s evidence that he did not think it was fair for him to be paid more than any other director given that: (a) Andrew claims that he was solely or almost solely responsible for turning the business of PLC from a small scale marginally profitable business into a large scale highly profitable business; and (b) in the years running up to Andrew’s divorce and thereafter Andrew has been keen to extract as much money out of the business for his personal use in dividends, loans, compensation for loss of employment, or otherwise as possible. For example, on 10 October 2014 Andrew texted Mr Sharratt to ask about available distributable profits in PLC and the possibility of a dividend being paid and what the maximum tax free sum he could receive as compensation for his redundancy was. Further, I accept the evidence of the other shareholders, that, in 2015, Andrew suggested that due to lack of available cash/distributable reserves and Andrew’s need for cash, Andrew should receive a dividend from PLC but all the other shareholders should waive their entitlement to receive a dividend in order to ensure that he could receive the maximum amount. I find it highly unlikely, in those circumstances that Andrew would regard it as unfair that he should be paid more than any other director in spite of only working part time as a non-executive Chairman. Andrew’s salary and benefits were, in my judgment, merely a means by which Andrew extracted money from the business which is something he was particularly keen to do during his divorce and after the financial relief hearing and in my judgment, having heard Andrew give evidence, I consider that he felt he was entitled to receive more money from PLC than anyone else, because of what he considered to be his role in making PLC a large and profitable company.

Importantly, Andrew was taken to an email dated 1 September 2014 sent by Mr Sharratt to Andrew at his parliamentary email address. This email says that it is enclosing a draft letter for Andrew’s attention. It was suggested to Andrew, by Mr Auld that the draft letter sent to him on 1 September 2014 was a draft of the letter which was sent in final form to him by Mr Sharratt on 2 September 2014 confirming the board's decision to terminate Andrew’s employment (following the receipt of Andrew’s letter of 8 August 2014 in which he asked the board to reconsider its decision communicated to Andrew in Mr Sharratt’s letter of August 2014, to terminate his employment). Andrew denied ever receiving a draft of the letter of 2 September 2014. The question of whether Andrew received a draft of the letter of 2 September 2014 is important, because the covering email asked Andrew to approve it and this would strongly suggest that the termination of Andrew’s employment by PLC and his office as director of PLC confirmed in the letter of 2 September 2014 was consensual, which Andrew denies.

I am satisfied that the email of 1 September 2014 was sent by Mr Sharratt to Andrew's parliamentary email box and received in that email box at 20:28 September 2014. I am satisfied of that, because the email is shown as having been sent to and received at that email address at that date and time.

I am satisfied that what was enclosed with that email was a draft of the letter which was subsequently sent to Andrew on 2 September 2014, confirming Andrew’s dismissal as an employee of PLC. I am also satisfied that Andrew read the draft letter and made a minor amendment to it and that his minor amendment was taken into account in the final signed version of the letter sent to him on 2 September 2014. I have come to those conclusions for the following reasons:

Andrew says that he did not want to be made redundant in August/September 2014, but he accepts that he did not object when it happened. Andrew says that he did not object, because his divorce had destroyed him, he had been stopped from seeing his children, he had no home or car and he had to pay his wife more in maintenance than he received in income, for those reasons he said he had no fight left in him and that was why he did not object. I do not accept that Andrew failed to object to being made redundant for those reasons, rather I find that he did not object to being made redundant because the termination of his employment was something that he asked Mr Sharratt to organise. I come to this conclusion for the following reasons:

I conclude for all those reasons that Andrew did not object to the termination of his position as employee/director of PLC, but instead that he instigated and directed the process of his being made redundant and he resigned from his position as director of PLC. He tried to make it appear to be a step that the board was taking without his consent, in the hope that this may reduce the financial settlement that he had to pay to his wife in his divorce. I make this finding, notwithstanding that the financial relief hearing took place on 9 and 10 July 2014 before Andrew’s employment/directorship was terminated (judgment being handed down on 22 September 2014 after Andrew’s employment/directorship was terminated). I accept the evidence of Mr Sharratt that Andrew told him that he thought that the judge at the financial remedies hearing had not believed it, when it had been submitted on Andrew’s behalf that there was a real danger that his employment would be terminated by PLC (when judgment was handed down on 22 September 2014 the judge made it clear that he did not think that this was a realistic possibility). Andrew may have hoped that the actual termination of his employment and directorship may have influenced the judgment that had not yet been handed down or that he could apply to vary any financial order made, as a result of his employment/directorship being terminated.

The context in which Andrew reported a fraud to the police, KPMG and Lloyds was that Andrew had told the other shareholders that he wanted to return as non-executive Chairman, but the directors and other shareholders of ABPT (the shareholder of PLC) had not supported his reappointment. There followed a series of meetings at which Andrew pressed for his re-appointment without success and he then started to suggest that Paul had wrongly benefitted at the expense of PLC and the other directors/shareholders had colluded with Paul. Andrew sent the letter on 1 September 2017 to Paul to which I have already referred, threatening proceedings under Section 994 of CA 2006 unless Andrew was reappointed as a director, the Group was split (with Andrew taking BIL and Paul the remainder of the Group) or that an ADR process be entered into to try to resolve the dispute.

Andrew was taken to an email sent by Inspector Bhatka to her colleague, Anthony Fenwick dated 16 October 2017. The email says “As NPT commander I have regular contact with Andrew Bridgen over constituent matters. Today he asked that I call him. On doing so he informed me that he suspects his brother is committing fraud and is considering making a formal allegation. He asked whether the following is a civil or criminal matter. Frankly I don’t know and require your expertise to advise him accordingly.” The email then goes on to refer to Andrew saying that he had learnt that his brother, without consulting him bought a farm and was going to set up a separate company. He later learned his brother had set up a company called AB Farms in his own name 18 months ago using an overdraft facility of PLC’s. His brother had now made Andrew 49% shareholder of the company but has not addressed his other issues. Inspector Bhatka asked that Mr Fenwick to contact Andrew to discuss the matter.

Andrew said that he had not made any report of fraud to Inspector Bhatka nor had he talked to her about any fraud. Andrew said that instead, he had made his report to Leicestershire Police fraud squad. Andrew said it would not have been proper for him to make a report of fraud, of which he was the victim, to Inspector Bhatka because she was the officer in charge of the area of North Leicestershire which included his constituency. The email however makes it clear on its face that Andrew had spoken to Inspector Butkha that day and had informed her at least about something that Andrew was describing as a fraud. The email is a contemporaneous document confirming the conversation to which Inspector Bhatka refers and I prefer that contemporaneous evidence over Andrew's denials that he spoke to Inspector Bhatka about a possible fraud. I do not consider it likely that Andrew forgot that he had had the conversation with Inspector Bhatka, to which the email refers, rather I consider that Andrew realised that it was inappropriate for him to have discussed an alleged fraud of which he was the victim with the police officer covering the area of his constituency and he therefore denied making such a report to her. The email, however, is clear evidence that he did.

On 26 February 2018 Andrew wrote to the Lloyds' relationship manager for the Group. In that email Andrew alleged that the Group had been subject to a £15-£20m fraud and he said that he had a small management team of himself and former directors, Martin McQuaide and Alan Parker ready to take over, he suggested that the auditors were supportive of him doing so and he asked whether Lloyds would support him taking over. Andrew’s estimate of a fraud of £15m-£20m, even on his best case is, in my judgment a gross exaggeration aimed at impressing Lloyds. Alan Parker did not provide a witness statement for either party, but Mr McQuaide did give a witness statement to Andrew and attended trial for cross examination. Mr McQuaide was asked whether Andrew had approached him to see whether he would be prepared to take part in the management of PLC/the Group in 2018. Mr McQuaide was very clear that Andrew had never asked him and had he been asked he would have refused to do so. I am satisfied that Mr McQuaide was telling the truth and that therefore, Andrew misrepresented the position to Lloyds, when he said he had a management team ready to take over, including Mr McQuaide.

It was put to Andrew in cross examination that, having threatened legal proceedings on 1 September 2017 and not having got what he wanted, he made reports to the police/KPMG/Lloyds to maximise the pressure on the other shareholders to get what he wanted, rather than pursuing the legal proceedings threatened in his letter of 1 September 2017 and that he ruthlessly pursued his own interests regardless of the consequences that his reports of fraud had for the financial position of the Group. Andrew asserted that he made the reports for the right reasons and he talked about having a duty to report the fraud and to his reports being in the interests of the employees of PLC.

I am satisfied that Andrew’s motive, in reporting a fraud to the police/KPMG/Lloyds was to bring the maximum pressure to bear upon the directors/shareholders of the Group, rather than out of any sense of duty to report a fraud. I am satisfied because:

Andrew is entitled to pursue his own financial interests and if he believes that a fraud has been committed, to report it to the police/KPMG/Lloyds. I merely note that, in my judgment, in cross examination I do not consider that Andrew was honest when he gave evidence as to his motives for reporting a fraud.

In my judgment Andrew has been too willing to make accusations of fraud, where there is little or no evidence to support such allegations. Instances of this are:

There were a series of concessions that Andrew ought to have made in relation WPS and the transfer of £623,500 by PLC:

There are inconsistencies between the evidence given by Andrew in the financial remedy proceedings in his divorce and the evidence that he has given in these proceedings. These include:

Given my findings as to the unsatisfactory nature of Andrew’s evidence and in particular what I find to be the dishonest answers that he gave to questions about: (a) the termination of his employment by and office as director of PLC; (b) his report to Inspector Bhatka of what he presented as a fraud; (c) his report to Lloyds Bank that he had a small management team in place to take over the Group; (d) his motives for reporting fraud to the police/auditors/Lloyds Bank; and (e) the propensity for Andrew to allege that a fraud has occurred, where there is little or no evidence to support such an assertion, I approach Andrew’s evidence with a degree of caution. Whilst I do not say that these issues are of the same scale as the issues identified by Lewison J in Painter v Hutchinson with Mr Hutchinson’s evidence, I will also look for Andrew’s evidence, where contested to be corroborated by documents (of which, in this case there are a great number) or by other witnesses before I will easily accept the evidence, where it is disputed, that he puts forward and in particular his allegations of fraud. Having said that, in some cases, acceptance or rejection of Andrew’s allegations that there has been conduct which is unfairly prejudicial to him as a member of a Group company, depends, not on the evidence of Andrew, but on the evidence to be gleaned from the documents and the evidence of other witnesses.

I consider that Mr Woolrich was an honest and reliable witness seeking to provide his evidence to the best of his recollection.

I consider that Mr Parker was an honest and reliable witness seeking to provide his evidence to the best of his recollection.

Mr Parker answered questions directly and I detected no hint of him tailoring his answers in favour of Andrew’s case. He made appropriate concessions, such as that Mr Snipe (the Respondent’s witness) had more expertise in electrical installations and dealing with WPD than he did, which is why he brought in Mr Snipe to provide his support to persuade WPD to enter into an agreement for the AD Plant to supply electricity to the Grid.

I am not satisfied with Mr Bridges’ evidence that BIL paid for the hire of a telehandler that was used by Paul at Home Farm was reliable or represented his true recollection of events and I reject it:

Mr Bridges evidence that BIL paid for the hire of the Telehandler was unreliable and in my judgment untruthful, because: (a) he has never produced an invoice addressed to BIL for the hire of a telehandler, nor has he been able to point to any item in the final account he sent to BIL, for the hire of the Telehandler, or any mention of it in any document; (b) he does not mention in his witness statement that he was initially told that Paul would pay for the hire of the Telehandler or any meeting with Mr Sharratt and Paul when he was then told to include the costs of hire of the Telehandler in the final account submitted to BIL. This evidence is critical to Mr Bridges’ evidence that BIL paid for the hire of the Telehandler, because, on his evidence given at trial for the first time, it was only because, Mr Sharratt and Paul told him at a meeting taking place shortly before he submitted his final account, to include the hire of the Telehandler in the final account, that BIL paid for the hire of the Telehandler, of which payment there is no evidence; and (c) it seemed to me that Mr Bridges, during his cross examination, was making up evidence to deal with problems arising from previous answers he had given in cross examination (why the Telehandler was not included in the email correspondence giving a breakdown of the final sums outstanding, but was then, on his evidence, included in the final account).

I am satisfied that Mr McQuaide was an honest witness, albeit that he seems to have been too willing to attribute impropriety to the actions of Paul from what he was told or witnessed happening.

He accepted that he may have been wrong about the turnover figures he quoted for PLC's business at the date when he joined and left PLC’s employment (not of any material relevance to the issues that I have to decide, but evidence of his willingness to make appropriate concessions).

Mr McQuaide gives evidence in his witness statement of what he presents as wrongdoing on the part of Paul, by which, he believes, Paul obtained personal financial benefit at the expense of PLC, however this comes down to what Mr McQuaide was told by others and what he could see of what was happening. Mr McQuaide accepted that if, what he considered to be benefits obtained by Paul and the Partnership at the expense of PLC, had been properly accounted for, as between PLC and Paul/the Partnership, of which he accepted he had no personal knowledge, then there was no impropriety.

My impression of Anthony as a witness was that, whilst he was not deliberately dishonest in giving his evidence, his evidence was heavily tainted by his belief that he has been badly treated both by his father, Alan and by Paul and he now finds himself on the same side as Andrew in a family dispute between Andrew on the one hand and Paul, Alan and Ann on the other.

As to his treatment by his father, Anthony in his witness statement says:

Anthony says that he was never offered a shareholding in the family business or an opportunity to earn a lot of money, but he was happy with what he earned himself, he was the only son who worked away from the family business. I do not accept that evidence, rather, for reasons I will describe shortly I consider that Anthony is resentful, understandably of the substantial sums that Alan/Ann/Paul/Andrew have earned from the family business, which financial benefits he has been excluded from.

As to his treatment by Paul, Anthony says:

Whilst Anthony says in his witness statement that he is not resentful of Paul and Andrew being directors and shareholders of the family business and receiving substantial money from it, in paragraph 47 of his witness statement, he relates an incident when the then Transport Manager, James Finley said “why are your parents rich, your brothers rich and you are poor”. Anthony said that he shouted at him and thereafter Mr Finley made him drive lorries down to the London area, which Mr Finley knew Anthony would not like doing. If Anthony was as comfortable as he suggests with not receiving the financial rewards from the family business that his parents and brothers have received, then I think it unlikely that he would have shouted at Mr Finley, in a way that he says caused Mr Finley to retaliate by sending him on driving jobs in the London area.

That Anthony's evidence is tainted by his feelings of ill will towards his father and Paul and is more sympathetic to Andrew's position is illustrated, in my judgment by the following:

Anthony accepted in cross examination that he had a poor memory of a number of matters including:

In light of what I find to be: (a) Anthony’s resentment of Paul and aligning himself with Andrew in the family dispute and the way in which I find this has tainted his evidence in favour of Andrew and against Paul; and (b) Anthony’s own acceptance that he has a poor recollection of events, I approach Anthony’s evidence with a degree of caution because, whilst I do not say that his evidence was deliberately dishonest his poor recollection of events is apt to have been “overwritten” (as Leggatt J put it, in Gestmin) by his antipathy towards Paul and his father and his resentment at the way in which he clearly considers that he has been treated by them.

I accept that Mr Baldwin was an honest witness doing his best to assist the court, who made appropriate concessions.

Mr Baldwin accepted that he had put the tipper lorries (which turned out to be owned by the Partnership) on PLC's Operator’s Licence, and had maintained and repaired them, not because he could recall specifically having been told by Paul that they were PLC's vehicles, but because, Paul not having told him otherwise, he assumed that they were PLC's vehicles.

Mr Baldwin, in his witness statement refers to each PLC vehicle having a fob allocated to it so that it could fill up on fuel and each PLC driver having a pin number allocated to them which they had to input with the fob for their vehicle in order to draw fuel at Enterprise House, fobs could be swapped from one vehicle to another and pin numbers might be disclosed by drivers or guessed, he conceded.

The main problem with Mr Baldwin’s evidence as to use of PLC assets by the Partnership was that he had no idea how that use was accounted for, as between PLC and the Partnership.

A witness summary was produced for Mr Brain because he did not sign a witness statement that had been prepared for him by Andrew’s solicitor. In the event he confirmed the truth of the witness summary, which it appears was based on a draft witness statement which was prepared for him, but which he did not sign.

Mr Brain’s evidence, in the main, concerns the Partnership using fuel from Enterprise House, but it also refers to Mr Miller working for the Partnership and the use of PLC’s vehicles for the benefit of the Partnership.

Mr Auld challenged Mr Brain about information which he had sent from PLC’s fuel management system to his home email address before he left PLC, providing information as to fuel usage by fob and pin number:

It appears that Mr Sharratt contacted Mr Brain by telephone, around two weeks prior to the start of the trial and made him aware that Mr Sharratt knew that he had possession of PLC's fuel records. I will deal with this in further detail when dealing with Mr Sharratt's evidence, however for present purposes I accept, as Mr Brain said, that he felt intimidated by Mr Sharratt's reference to his having possession of PLC’s fuel records. It is not surprising, in those circumstances, that Mr Brain was sensitive about questions he was asked concerning the sending of PLC's fuel records to his home email address and wanted to try to minimise the extent to which he had done this and try to suggest it was done for some legitimate purpose connected with PLC’s business. In my judgment, he sent the fuel records to his home email address, because he considered that he may be able to make some use of that information following his resignation which took place shortly after he sent this information to his home email address.

I also consider that Mr Brain did know, before he was shown further emails sent to his home email address, with fuel records attached, that he had sent more fuel records than just those relating to Sam’s pin number to his home email address and that, when he said that the fuel records relating to Sam’s fuel number were the only fuel records which he sent to his home email address, he knew this to be untrue and he said it hoping that Mr Auld would not be able to show otherwise.

I treat Mr Brain’s evidence with some caution, in light of my finding that he was not honest about the PLC fuel records that he sent to his home email address, but in general, notwithstanding that point, I consider that he gave honest evidence.

My overall impression of Paul, as a witness was that, at least in so far as he gave evidence at trial he generally gave honest evidence, to the best of his recollection. I say this, notwithstanding the substantial number of criticisms that I will now make regarding the credibility and reliability of his evidence in these proceedings and, in certain respects, his lack of business probity and honesty.

The difficulties with Paul’s evidence, in summary were:

Paul accepted that the Partnership had a restricted operator’s licence in 2010 but PLC had a standard operator’s licence. The difference is that the holder of a standard operator’s licence can transport goods for others for reward whereas the holder of a restricted Licence can only carry their own goods. In order to legally transport the Cemex waste the lorries which would carry the waste needed to be registered on a standard operator’s licence. Paul accepts that vehicles owned by the Partnership and to be used by it to carry Cemex waste (which Paul says was the role of the Partnership under its sub-contract with PLC under the Cemex contract) were registered at that time on PLC’s Operator’s Licence. I gave Paul a warning that he was not obliged to answer question if his answer may tend to incriminate him. Paul declined to answer questions about: (a) whether he knew that only vehicles operated by the holder of a standard operator’s licence could be included on that operator’s licence; and (b) what he told Mr Baldwin about the ownership of the Partnership vehicles which were placed on PLC’s Operator’s Licence.

I cannot say that Paul answered any question in relation to Partnership vehicles being registered under PLC’s Operator’s Licence untruthfully, because he declined to answer the questions, but I am satisfied that Paul did know that only vehicles operated by PLC could lawfully be included on PLC’s Operator’s Licence and as the terms of the sub-contract, between PLC and the Partnership were that the Partnership would transport the Cemex waste in Partnership vehicles, I find that Paul caused Partnership vehicles to be included on PLC’s Operator’s Licence and that he knew that they should not have been, which was dishonest.

I am satisfied that Paul caused Mr Baldwin, PLC’s then transport manager to include Partnership vehicles on PLC’s Operator’s Licence because: (a) in Paul’s first witness statement he confirmed that Partnership vehicles were put on PLC’s Operator’s Licence “as a matter of convenience at no cost to PLC” he did not suggest this may have happened inadvertently; (b) whilst Mr Baldwin could not specifically recall Paul having told him that the Partnership vehicles that he put on PLC's Operator’s Licence were owned by PLC, or being operated by it, Mr Baldwin was clear that he does understand that only vehicles operated by PLC should have been included on PLC’s Operator’s Licence and therefore I am satisfied that Paul either told Mr Baldwin to put the Partnership vehicles on PLC's Operator’s Licence without telling him that the vehicles were not to be operated by PLC, or told Mr Baldwin or led him to believe that the Partnership lorries were to be operated by PLC; (c) Paul did not put the Partnership vehicles involved in the Cemex contract on the Partnership's Operator’s Licence and therefore he must have known, at or around the time that the Cemex contract started, that they had been placed on PLC’s Operator’s Licence; and (d) Paul was asked questions about whether he caused the Partnership vehicles to be added to PLC’s Operator’s Licence but declined to answer those questions on the grounds he may incriminate himself, only if he caused the Partnership vehicles to be added to PLC’s Operator’s Licence could his answers tend to incriminate him.

I am satisfied that Paul knew, when he caused the Partnership vehicles to be added to PLC's Operator’s Licence that they should not have been added to that Licence because they were not to be operated by PLC: (a) in paragraph 17 of his first witness statement, Paul says that, in 2009 the Partnership held a restricted operator’s licence allowing it to transport its own goods only, but he passed his CPC exams in 2011 which enabled the Partnership to get a standard Operator’s Licence. So I am satisfied that Paul knew the difference, in 2010 between the two types of Licences and I am satisfied that he would have known that only vehicles operated by PLC should have been included on PLC’s Operator’s Licence; (b) I find it inconceivable that Paul could really believe that it was lawful for him to cause Partnership owned and operating vehicles to be added to PLC's Operator’s Licence as a way of circumventing the restrictions contained in the restricted operator’s licence that the Partnership held, at the time (namely that the Partnership could only transport the Partnership’s own goods); and (c) Paul was asked questions about whether he knew that adding Partnership vehicles to the PLC Operator’s Licence was unlawful and he refused to answer those questions on the grounds that he may incriminate himself. Only if Paul did understand, or at least suspected that Partnership owned and operated vehicles should not be added to PLC’s Operator’s Licence, would his answers tend to incriminate him.at we have

Paul presented his offer to the board of PLC of the opportunity for PLC to enter into the Cemex contract, rather than carrying out the Cemex contract, through the Partnership alone, as an attempt by him to act fairly in relation to PLC by allowing it to enter into the contract with Cemex and share part of the profit from the Cemex contract with the Partnership. I am satisfied, however, that Paul caused PLC to enter into the Cemex contract, principally because he was searching for ways to move the Partnership from making substantial losses to profit and the Partnership could not have undertaken any of the work under the Cemex contract without involving PLC because:

I find that there were the following inconsistencies between: the Defences to the Petitions and/or the Further Particulars of those Defences and/or Paul’s witness statements and/or the evidence given by Paul at trial:

There are two instances where Mr Zaman asserts that Paul was dishonest or gave dishonest evidence where I am not satisfied that he was dishonest/gave dishonest evidence.

The first instance concerned Paul’s evidence that he was not interested in politics and that the donations made to the Conservative party by PLC were made to advance Andrew’s political career alone and not Paul’s. The second was the signing by Paul of a loan agreement between PLC and ABF for the monies that were transferred by PLC to complete the purchase of Barn Farm, Mr Zaman asserted that Paul dishonestly signed the loan agreement, in November 2016, knowing it had been backdated to 14 September 2015.

In paragraph 19 of his witness statement Paul says that Andrew asked him whether he wanted to come into politics with him and Paul said that it was not for him. Paul accepted however that he had joined the Conservative party himself, but could not recall when and that he had stood for election as a Conservative councillor on three occasions, unsuccessfully, in 2007, 2011 and 2015. Paul said that he had joined the Conservative party and sought election as a Conservative councillor at Andrew’s suggestion, to help Andrew and that he had never canvassed for support in any of the council elections. Paul was unable to explain why his election as a councillor would help Andrew’s political career, nonetheless I accept the broad thrust of Paul’s evidence, that he was not really interested in politics or in becoming a councillor and that it was something that Andrew had encouraged him to do.

Paul was taken to a written resolution of ABF and a loan agreement between PLC and ABF both of which purport to be dated 14 September 2015. The written resolution is signed by Mr Sharratt, purportedly as sole director of ABF and the loan agreement has been signed by Mr Sharratt on behalf of ABF and by Paul on behalf of PLC. Mr Zaman made it clear that he was going to assert that both documents had been back dated and I gave Paul a warning that he could refuse to answer questions on the basis that those answers may incriminate him. Paul refused to answer the questions that were put to him about signing the loan agreement.

It is clear that both the resolution and the loan agreement were created on 22 November 2016, because the metadata for those documents show them to have been created on that date. It is also obvious because the name of ABF on the resolution and loan agreements is AB Farms Limited but that was not the name of ABF on 14 September 2015 and Mr Sharratt was not the sole director of ABF (as the written resolution says) on the 14th of September 2015. In his cross examination Mr Sharratt accepted that he created both the resolution and the loan agreement by copying across documents from a loan which had been made by PLC to BIL and he accepted that both documents were created in November 2016. Mr Sharratt said however that he considered that the documents reflected what had been agreed orally by the directors of ABF/PLC in September 2015 and he did not regard the backdating of the documents to reflect that oral agreement as dishonest. I will deal with the question of whether Mr Sharratt acted dishonestly when dealing with his credibility and honesty. So far as Paul is concerned, I am not satisfied, in spite of him refusing to answer questions about the backdating of the loan agreement, on the grounds that those answers may incriminate him, that Paul acted dishonestly in signing the back dated loan agreement. It seems to me that Paul signed what was put in front of him to sign by Mr Sharratt and I am not satisfied that he would understand that signing the loan document with a date on it which predated the date on which he applied his signature to it, but matched the date on which PLC had transferred the funds to purchase Barn Farm, was a dishonest thing for him to have done. Mr Tomkinson says that paperwork is not one of Paul’s strong points and having noted the complete failure of Paul to ensure that the Partnership’s use of PLC’s resources has been properly documented, I accept that assessment of Paul, which tends to support my conclusion that he would not have overly concerned himself with the question of whether it was proper for him to sign a document put in front of him by Mr Sharratt, in November 2016, dated 14 September 2015, recording the terms of a loan made by PLC to ABF for the purchase of Barn Farm, completed in September 2015.

Having said all that, in summary: (a) in the Respondents’ Defences, Further Particulars and in Paul’s own witness statements blanket assertions have been made about Paul disclosing information to other directors which he had to concede in cross examination were untrue; (b) in managing the business of the Partnership and PLC, Paul has caused the Partnership to use the assets and resources of PLC, without keeping any proper record of what assets of PLC the Partnership was using, when and for what purpose and what the value of those assets was. Paul’s evidence as to what assets of PLC have been used for the benefit of the Partnership is therefore unreliable; (c) Paul has, on his evidence, provided compensation or credits to PLC for the Partnership’s use of PLC’s assets by cheque, credit on the PLC Purchase Ledger, credit on the Partnership Sales Ledger, credit to a recharge account and by charging PLC less than market rates for work on the Biffa contract and at less than NAAC rates for planting, cultivating and harvesting work carried out for ABF/PLC. Paul’s evidence as to what credits in one form or another, have been given to PLC specifically to compensate PLC for the use of its assets by the Partnership is also unreliable; and (d) in causing Partnership vehicles to be put on PLC’s Operator’s Licence, when he knew that he should not have done so, on my findings, out of a desire to reduce the Partnership’s losses, Paul has failed to act honestly and with commercial probity.

Mr Sharatt had a much better memory of events than Paul had and a better grasp of the reasons why he said certain things were done (or at least he said he did). I am satisfied that Mr Sharratt gave broadly honest evidence, but there were instances where I consider that he: (a) was not honest, in cross examination, about the reasons why he did things or why things were done and he sought to provide justifications which did not stand up to scrutiny; (b) was not honest, in some cases, about things he had done; (c) did not make appropriate concessions; and (d) suggested meanings for words which were untenable.

I will also explain why I am not satisfied that Mr Sharratt lied in the evidence given by him in cross examination on two occasions when Mr Zaman asserted that he had lied and I will explain why I am not satisfied that he acted dishonestly (save in one respect which I will identify) in backdating the ABF/PLC loan agreement and resolution in November 2016 to which I have just referred (in commenting upon Paul’s credibility/honesty).

Mr Sharratt was asked about the evidence that Mr Brain gave that Mr Sharratt had contacted him about 2 weeks before the start of the trial and that Mr Brain felt intimidated by what Mr Sharratt said to him.

Mr Sharratt said that he had contacted Mr Brain because he was concerned for Mr Brain’s welfare because of how upset Mr Brain was when he left PLC and because he had heard that Mr Brain had refused or failed to sign a witness statement for Andrew. Mr Brain said he was having a general conversation with Mr Sharratt, towards the end of which Mr Sharratt said that he would send him details of the Respondents’ solicitor and then, Mr Sharratt said that he was aware that Mr Brain had taken some data from PLC and Mr Brain felt intimidated by this final comment. Mr Sharratt denied referring to Mr Brain taking PLC’s data and attempting to intimidate Mr Brain, he said that Mr Brain told him that his solicitor was on holiday and he told Mr Brain that he could speak to the Respondents’ solicitor and he would text him the details which he subsequently did. Mr Sharratt said that he wanted to give Mr Brain the opportunity to sign a witness statement which Mr Brain was happy to sign.

I am satisfied that Mr Sharratt’s purpose in contacting Mr Brain was not, as he suggested out of concern for Mr Brain’s welfare, but in an attempt to promote the Respondents’ case in these proceedings, perhaps by persuading Mr Brain to make a witness statement for the Respondents which was favourable to their case, or at least to try to dissuade Mr Brain from signing the witness statement produced by Andrew’s solicitors which he understood Mr Brain was, at that point refusing to sign. I am also satisfied, having heard from Mr Brain and Mr Sharratt that, on the balance of probabilities, Mr Sharratt did mention to Mr Brain that he knew that Mr Brain had taken some of PLC’s data, which was true and Mr Sharratt knew it was true, because: the Respondents disclosed the emails sent by Mr Brain to his home email address attaching copies of some of PLC’s fuel records and the witness summary prepared for Mr Brain referring to those records had been served on the Respondents’ solicitors.

Mr Sharratt was asked whether he recalled the Partnership sub-contract on Cemex being disclosed to the board of PLC at a board meeting, in light of Paul’s evidence that he could not say that there was a board meeting which approved the entry by the Partnership into a sub-contract with PLC to remove waste from the Cemex Site. Mr Sharratt said that he believed that there was such a board meeting. It was then put to Mr Sharratt that Paul/Mr Tomkinson/Mr Ellis/Mr McQuaide could not recall such a board meeting and it was surprising that he could. Mr Sharratt was then asked who attended the board meeting. Mr Sharratt said, all of the directors but probably not Andrew. When asked about what was discussed at the board meeting, Mr Sharratt said that no specifics of the contract would have been discussed, but he then said that he thought that there would have been a discussion of the rates that the Partnership would charge, because Paul was good at saying what would happen. I am not satisfied that Mr Sharratt has any recollection of there being such a board meeting, he seemed anxious to provide evidence that would support the Respondents’ case, rather than providing the court with his honest recollection of events.

Mr Sharratt was asked which of the directors of PLC sat in upon the interviews by RSM of PLC’s employees. Mr Sharratt said none to his knowledge. It was then put to Mr Sharratt that he had sat in on the interviews, but Mr Sharratt said that he could not recall having done so and he maintained this position after Mr Zaman said that those employees would be giving evidence later and would be asked whether Mr Sharratt sat in on their interviews with RSM. Mr Whetton and Mr Miller subsequently confirmed that they were interviewed by RSM and that Mr Sharratt did sit in on their interviews with RSM. I am satisfied that Mr Sharratt sat in on the interviews by RSM of Mr Whetton and Mr Miller and I am satisfied, on the balance of probabilities that Mr Sharratt recalls having doing so and that he was therefore not honest in saying that he could not recall whether he had sat in on the interviews, by RSM, of PLC employees.

Mr Sharratt was taken, by Mr Zaman to an email he sent to Paul/Mr Ellis/Mr Tomkinson on 2 March 2018 in which he provided draft details of all the directors’ related party transactions with the intention that these would be forwarded to the auditors for the purposes of the 2017 accounts for PLC. This included a statement that AB Group had engaged the Partnership and “…all transactions are on an arm-length basis and subject to formal documentation between the parties”.

Mr Sharratt was asked whether he really thought that the transactions between the Partnership and the Group could be described as “arms-length” given that Paul decided what rates the Partnership would charge ABF/PLC for cultivating potatoes. Mr Sharratt said that he thought that describing the transactions as arms-length was a fair description.

Mr Sharratt was then asked if he thought the inter party transactions between the Group and the Partnership could fairly be described “subject to formal documentation” between the parties when he accepted there was no written agreement and no document(s) setting out the terms of any agreement between ABF/PLC and the Partnership for the cultivation services provided by the Partnership. Mr Sharratt suggested that “formal documentation” may mean the invoices which were sent to either PLC or ABF.

I am prepared to accept (just) that Mr Sharratt may have genuinely believed, in March 2018, that the arrangements for the Partnership to plant, cultivate and harvest potatoes, were arms-length because he appears to have thought that Mr Ellis was exercising some sort of control over the rates that the Partnership was charging for the cultivation services that it was providing to Group companies (although in reality he was not) but I do not accept that Mr Sharratt can genuinely believe, or have believed in March 2018, that invoices sent by the Partnership to ABF/PLC could answer the description that transactions between the Partnership and the Group were subject to “formal documentation”. I consider that Mr Sharratt was well aware that the wording could only amount to a representation that there was a written contract or at least a written memorandum setting out the terms agreed and there are none and never have been any. Mr Sharratt failed therefore to make an appropriate concession, that the description, in the 2 March 2018 letter at least of the Partnerships transactions with the Group being subject to “formal documentation” was inaccurate.

Mr Sharratt was taken to paragraph 194 of his witness statement, in which he describes his understanding of what a “Quasi-Partnership” is. Mr Zaman pointed out that the paragraph is identical or nearly identical to paragraphs appearing in the witness statements of Mr Ellis and Mr Tomkinson, in which they describe their understanding of what a Quasi-Partnership is. Mr Zaman asked Mr Sharratt whether this was because: (a) he had discussed his understanding of what a Quasi-Partnership is with Mr Ellis and Mr Tomkinson; or (b) the paragraph was not in his words. Mr Sharratt said that he had not discussed his understanding of Quasi-Partnership with Mr Ellis and Mr Tomkinson, but also that the words in the paragraph were his words. I do not consider it plausible that both of these answers can be correct, given that identical or near identical paragraphs are contained in Mr Ellis and Mr Tomkinson’s witness statements. I consider it most likely that the Respondents’ solicitors provided the wording and Mr Sharratt accepted it. Mr Sharratt should have conceded that this was the case rather than suggesting that the words were his own.

In paragraph 58 of his witness statement, Mr Sharratt says that Andrew instructed Hawkins and Harrison, surveyors to prepare a valuation of the Old Vicarage. Mr Zaman took Mr Sharratt to the Hawkins and Harrison valuation dated 8th December 2011 which is addressed to BIL “FAO Mr Sharratt”. Mr Sharratt accepted that the valuation refers to “your instructions” but he maintained that Andrew had nonetheless instructed Hawkins and Harrison to prepare the valuation. In my judgment, whilst the valuation does say “in accordance with your instructions” it is addressed to BIL (albeit for the attention of Mr Sharratt) and is not therefore necessarily referring to Mr Sharratt having instructed Hawkins and Harrison, as opposed to any other individual on behalf of BIL. I am not satisfied therefore that Mr Sharratt was not telling the truth, in paragraph 58 of his witness statement, when he said that Andrew had instructed Hawkins and Harrison.

I gave a similar warning to Mr Sharratt as I gave to Paul in relation to the backdating (to 14 September 2015) of the ABF resolution and the loan agreement between ABF and PLC, namely that Mr Sharratt could choose not to answer questions asked of him about this, on the ground that the answers he gave may incriminate him. Unlike Paul, Mr Sharratt chose to answer the questions that were put to him.

Mr Sharratt accepted that: (a) The resolution and the loan agreement quoted the wrong name of ABF as at 14 September 2015 (AB Farms Limited, whereas ABF’s name, in September 2015 was a AB Farms Developments Limited); (b) he was not the sole director of ABF on 14 September 2015 (the two directors were Mr Tomkinson and Mr Sharratt); and (c) both documents were created on 22nd or 23rd November 2016.

Mr Sharratt said that he did not act dishonestly in backdating the resolution and the loan agreement to 14 September 2015. I gave Mr Sharratt the opportunity to explain why he claimed that he was not acting dishonestly. Mr Sharratt’s explanation was as follows: (a) the auditors of PLC asked for a copy of the agreement relating to the loan made by PLC to ABF, but at that stage the agreement was only an oral agreement; (b) Mr Sharratt used documents that Shoosmiths had produced for the loan made by PLC to be BIL in May 2010 to create a resolution and a loan agreement for the loan between PLC and ABF; (c) in creating the written documents he was merely formalising the existing oral agreement of September 2015 which he believed was that, the loan from PLC to ABF would be on the same terms as the PLC loan to BIL; (d) he was the sole director of BIL in May 2010, when the PLC loan to BIL was documented and in error, he copied across the sole director resolution from that loan and used it for the PLC loan to ABF (even though he was not the sole director of ABF in September 2015); (e) he made a further error in using the ABF company name as at November 2016 rather than its name as at September 2015; and (f) he thought that it was not dishonest but instead appropriate to date the documents with the same date as that upon which the oral agreement was made.

Save in one important respect, I accept Mr Sharratt’s explanation of the reasons why he backdated the resolution and loan agreement to 14 September 2015. My reasons are as follows: (a) it is undoubtedly true that the PLC’s loan to BIL, in May 2010 was properly documented, in fact Mr Zaman took Mr Sharratt to the board minute approving that loan in order to show that Mr Sharratt knew how a disclosure under section 177 of CA 2006 of a directors interest in a transaction should be made to the board of PLC. I accept Mr Sharratt's evidence that the board minute and loan agreement for the PLC loan to BIL were prepared by Shoosmiths, solicitors; (b) I also accept that PLC's auditors were pressing for a copy of the agreement documenting the loan between PLC and ABF because Mr Sharratt sent the loan agreement to KPMG on 23 November 2016 very promptly after it was executed; (c) use of the resolution from the BIL loan would also explain why Mr Sharratt signed a resolution, purportedly as sole director of ABF when in fact he was only one of the two directors (both in September 2015 and November 2016); and (d) although Mr Zaman suggested that backdating the resolution and loan agreement was part of some plan to deprive Andrew of the benefit of Barn Farm, Mr Zaman was not able to explain how documenting the loan between PLC and ABF and then forwarding this to the auditors of PLC would further that purpose, particularly in circumstances where: (i) Andrew accepted that he was told by Paul almost immediately after the auction that “we have bought a farm” and that it would be put in a new company; (ii) ABF was incorporated in September 2015, shortly after the acquisition of Barn Farm and Barn Farm transferred to ABF; (iii) it is not disputed that the cash reserves of PLC were used to pay the purchase price for Barn Farm; and (iv) it is tolerably clear that the auditors of PLC had already been told that PLC had made a loan to ABF, otherwise Mr Sharratt would not be sending them a copy of the loan agreement on 23 November 2010 shortly after it was executed, without explanation.

The respect in which I do not accept Mr Sharratt’s evidence, is that he suggested that there was an oral agreement in September 2014 that the loan from PLC to ABF would be on the same terms as the PLC loan to BIL. Mr Tomkinson, the other director of ABF in September 2014 said that he had no recollection of any such oral agreement. On the balance of probabilities I find that there was no oral agreement in September 2014, that the terms on which PLC transferred £1,006,000 to fund the purchase of Barn Farm (acquired in ABF’s name) would be that PLC would lend that money to ABF on the same terms as those upon which PLC lent monies to BIL or as to the terms of the loan at all.

Mr Zaman asked Mr Sharratt whether he had inadvertently transferred £623,500 from PLC to WPS. Mr Sharratt said that he had not inadvertently transferred the money. Mr Zaman then said that Mr Sharatt was lying. I was surprised that Mr Zaman appeared to be asserting that Mr Sharratt had lied in saying that he had not “inadvertently” transferred £623,500 from PLC to WPS. I asked Mr Zaman to confirm that that was what he was asserting, Mr Zaman confirmed that it was.

Mr Zaman then took Mr Sharratt to an email sent by Mr Sharratt to Elizabeth Doyle at Lloyds Bank on 14 September 2014. In that email Mr Sharratt asked Ms Doyle to transfer the £623,500 back from WPS to PLC, plus interest which had been earned on it. In the email Mr Sharratt says that the £623,500 was inadvertently transferred to the new WPS account.

Mr Sharratt said that the £623,500 was transferred from PLC to WPS, when it was transferred, because Andrew was, as he put it, paranoid about PLC not having large amounts of cash in it which his then wife could point to as a source of money which could be paid to her as part of the financial settlement in their divorce and that this was why the £623,500 was transferred when it had still not finally been decided to use WPS to carry out the AD Plant project. In re-examination Mr Sharratt said that the £623,500, having been transferred to a new company but never having been used put the Group, in what he considered, to be in a delicate position with the bank. I can see that transferring £623,500 to WPS, never using a penny of it and then transferring it back to PLC, almost 4 months later might appear somewhat odd and that Mr Sharratt therefore may have felt compelled to provide some explanation for it. Perhaps, as Mr Sharratt appeared to suggest, inadvertence was the best explanation he could come up with at the time, he could hardly have told Ms Doyle that the reason that the money was transferred in May 2014 was to reduce the liquidity of PLC, because Andrew thought this was to his advantage in his divorce proceedings (which is what Mr Sharratt says was the real reason for its transfer at that time). Perhaps it would have been better if he had simply instructed Ms Doyle to make the transfer without comment, but I am not satisfied that Mr Sharratt did transfer the £623,500 “inadvertently”, simply because this is what he said in his email to Ms Doyle, and that he was lying, when he denied that he had transferred the £623,500 “inadvertently”, as Mr Zaman asserted.

I found Mr Ellis to be an honest and credible witness who I consider gave his evidence in a balanced way, making appropriate concessions.

Although Mr Ellis is an executive director of the Group companies, he accepted that his job of purchasing for PLC has kept him very busy throughout his employment by PLC and in consequence of this he has not, he says, had a significant involvement in day to day issues arising in other parts of the business or in taking executive management decisions concerning other parts of the business such as: (a) decisions about the Group structure including which company should own and operate Barn Farm and the AD Plant; (b) the use of PLC's employees and assets by the Partnership or how their use has been accounted for; and (c) the installation of and operation of the AD Plant and steps taken to try to recover payment for the export of electricity by the AD Plant; and (d) the terms on which Mr Bridges made the Telehandler available to Paul.

Mr Ellis was involved in: (a) the decision of the board of PLC, to purchase Barn Farm; (b) discussions about the Group growing potatoes; (c) determining the price at which PLC would purchase potatoes form ABF; (d) checking some invoices submitted by the Partnership to ABF/PLC for the planting cultivation and harvesting of potatoes; and (e) meetings of the board of PLC/shareholders of the Group in 2017 at which Andrew sought support for his return as non-executive chairman of PLC.

I am satisfied that Mr Tomkinson was an honest and reliable witness, concerned to do his best to assist the court. He made appropriate concessions, for example: (a) that there was a strong possibility that either PLC or ABF could have dealt with the cultivation of potatoes themselves, rather than engaging the Partnership to do so; (b) that it was his responsibility to ensure that appropriate entries were made in the Group companies accounts of the Partnership’s involvement in the Cemex/Biffa contracts and in planting, cultivating and harvesting potatoes and that he had failed to ensure that that had happened; and (c) there were mitigating circumstances as to why there had been a substantial delay in preparing audited and unaudited accounts for Group companies, but those circumstances did not excuse that substantial delay.

There is only one matter in respect of which the honesty of Mr Tomkinson was brought into question by Mr Zaman. Mr Zaman took Mr Tomkinson to a text message from Andrew to Mr Tomkinson dated 14 September 2017, in which Andrew said “…. What do you know about Water Purification Services Ltd, another company Paul has set up….”. Mr Tomkinson replied the same day “… Don’t know anything about another company Paul has set up…”

Given that Mr Tomkinson (or his firm Tomkinson Teal, at his direction) had been responsible for incorporating WPS and arranging for its subsequent dissolution, Mr Tomkinson’s reply, on the face of it is surprising because Mr Tomkinson knew all about WPS. Mr Zaman asked Mr Tomkinson why he had said that he knew nothing about WPS. Mr Tomkinson accepted that he had arranged for the incorporation and subsequent dissolution of WPS, but he said that, when he received Andrew’s text, he thought Andrew was talking about a company which had been recently set up and still existed in September 2017, not one that had ceased to exist well before that date.

Whilst I find it surprising that Mr Tomkinson did not reply to Andrew’s text, by saying that he had been involved in setting up WPS and dissolving it sometime previously, I am not satisfied that Mr Tomkinson’s text was a deliberate attempt to mislead Andrew and I accept Mr Tomkinson’s explanation that he thought that Andrew’s text was referring to a “live company” which had recently been set up and not to WPS which had already been dissolved.

There was also one matter, where I consider that Mr Tomkinson was too keen to provide a justification for what Paul had done. This related to the renting by the Partnership to PLC of the Volvo at an annual rent equivalent to its purchase price. Mr Tomkinson said that, knowing Paul’s engineering background as he did, he thought it was likely that Paul had improved the condition of the Volvo after he purchased it and before renting it to PLC. I consider that to be unjustified speculation on the part of Mr Tomkinson which seemed to be aimed at providing some justification for the rent charged to PLC for the Volvo compared to its purchase price.

The real difficulty with Mr Tomkinson’s evidence is that, as a non-executive director of the Group companies he is not involved in the day-to-day management of the Group, nor in day-to-day discussions taking place between the executive directors. His direct evidence of matters relevant to these proceedings is therefore really restricted to those issues which were discussed at board meetings and, as I have already noted, for example, Mr Tomkinson said that he does not recall there being any discussion at a board meeting, of the Cemex or Biffa sub-contracts between PLC and the Partnership.

Messrs Elliott-Dickens, Emery, Whetton and Miller are all employees of PLC. They are all lorry drivers except Mr Emery whose principal job is transport supervisor, although he says he does some driving for PLC, when necessary.

I propose to consider all three together because their evidence was principally aimed at the extent to which they (in the case of Messrs Elliott-Dickens, Whetton and Miller) drove for the Partnership and were, in each case, aware of others having done so. I am satisfied that each of them gave honest and credible evidence to the court, doing the best they could to assist the court.

Of the four employees, Mr Zaman only challenged the credibility of Mr Elliott-Dicken’s evidence, he did so on the basis that Mr Elliott-Dickens was only re-employed by PLC on 21 June 2021, having resigned in April 2015 and that, in April 2015, Mr Elliott-Dickens wrote a resignation letter which was critical of Paul’s involvement in a disciplinary investigation of which Mr Elliott-Dickens was the subject, before he resigned, including a suggestion, in the letter, that Paul may have misled that investigation.

Mr Zaman asked Mr Elliott-Dickens questions about whether he stood by the criticisms of Paul that he made in his resignation latter and whether Mr Elliott-Dickens had been re-employed by PLC in order to obtain a witness statement from him to support the Respondents’ case in these proceedings.

Mr Elliott-Dickens said that what led to his resignation was a change from PLC’s drivers being paid on an hourly basis to being paid at a day rate, which Mr Elliott-Dickens explained he was not happy with, because he worked very long hours and the change would cause him to lose money. Mr Elliott-Dickens said that his father had drafted his resignation letter for him to sign and that he was probably being stubborn and immature in resigning over that issue.

As for his re-employment by PLC, Mr Elliott Dickens said that he was a good friend of Mr Emery, PLC’s transport supervisor, who had agreed to his working part-time for PLC from around Christmas 2020 onwards and that he became a full-time employee of PLC, in June this year, after apologising to Paul for his behaviour in 2015.

I am not satisfied that Mr Elliott Dickens was re-employed by PLC in order to obtain a witness statement for the Respondents in these proceedings, nor am I satisfied that there is anything relevant in Mr Elliott-Dickens’ resignation letter from 2015, which I should take into account in these proceedings.

Whilst I accept the evidence of Messrs Elliott-Dickens, Emery, Whetton and Miller as to what vehicles they and others drove, their evidence that they considered that they were driving for PLC and not the Partnership is to an extent undermined by the fact that, when they drove Partnership vehicles, namely the Scania and Volvo, they assumed (as did Mr Baldwin in putting those vehicles on PLC’s Operator’s Licence) that those vehicles were owned and operated by PLC and not by the Partnership.

ABPT;

BIL; and

ABF

I will deal first with general guidance that has been given as to the circumstances in which the courts will find that the relationship between the shareholders of a company is such that it would be inequitable for the court to allow the majority shareholders to rely on their strict legal rights. Where these circumstances are present the relationship has been described as a “Quasi-Partnership”.

The phrase, Quasi-Partnership and the first attempt to provide guidance as to those circumstances in which one will arise was provided by Lord Wilberforce in Ebrahimi v Westbourne Galleries Ltd [1973] A.C. 360, Lord Wilberforce said this (at 379):

In Croly v Good [2010] EWHC 1 (Ch) HHJ David Cooke noted:

In Waldron v Waldron [2019] EWHC 115, (Ch) HHJ Eyre QC (as he then was) summarised some of the more relevant propositions including:

I am approaching issue 1 on the basis that what I am being asked is whether any of the three named group companies have ever been Quasi-Partnerships (issue 3 (b) asks that, if the answer to issue 1 is a yes, when did the three named companies cease to be Quasi-Partnerships).

I also note that I am not asked to say whether PLC has ever been a Quasi-Partnership. However, given that PLC is a wholly-owned subsidiary of ABPT, that the only business of ABPT is that it holds the share capital of PLC, and that the shareholders of PLC, immediately before ABPT acquired PLC’s shares, I consider it necessary to decide whether PLC was, at the time that its shares were acquired by ABPT, a Quasi-Partnership, before I can decide whether ABPT itself became a Quasi Partnership, when it acquired PLC’s shares.

In 1969, Alan and Ann acquired a smallholding at Woolstitch Farm and Alan carried on business as a supplier of fruit and vegetables, some of which he grew at the smallholding. From 1983, Paul joined Alan in the business and from around 1986, Paul became a partner in the business, with a partnership agreement being executed between Alan and Paul in 1987. Andrew came to work for the partnership business shortly thereafter.

PLC (then known as AB Produce Limited) was incorporated on 6 April 1988 and the business and assets of the partnership between Alan and Paul were transferred to PLC. On incorporation the 1,000 issued shares in PLC were held by Alan - 500 shares, Ann - 100 shares, Andrew - 200 shares and Paul - 200 shares. All four shareholders were appointed directors of PLC.

Mr Auld does not dispute that in the early years after the incorporation of PLC, its business was conducted as a Quasi-Partnership and I am satisfied that at that point PLC was a Quasi- Partnership in that: (a) it had taken over the business of a partnership between Alan and Paul; (b) the relationship between all the shareholders was a family relationship between parents and two of their sons which I find was based upon mutual trust and confidence between the shareholders; (c) given that all the shareholders were also directors of PLC, it appears that they will all have participated in management decisions and have had a reasonable expectation that they would continue to do so ; and (d) at all material times there have been restrictions in PLC’s Articles on the transfer of shares by its shareholders.

In May 1996 Mr Ellis (purchasing director) and Sidney Gray (“Mr Gray”) (non-executive director) were appointed to the board of directors of PLC and in 1997 Alan and Ann resigned as directors and, in Ann’s case also as company secretary of PLC. It is common ground that Alan and Ann were spending most of their time in Spain from before 1996, when Mr Ellis and Mr Gray were appointed directors of PLC and had therefore largely retired from participation in the management of PLC, before 1996.

As at 7 April 1997 the issued shares in PLC were recorded as: 37,000 shares held by Andrew, 37,000 shares held by Paul and 36,000 shares held by the ABP Pension fund (Alan/Ann’s pension fund).

I do not consider that the addition of Mr Ellis and Mr Gray to the board of PLC, in 1996 or the resignation of Alan/Ann as officers of the PLC, brought an end to the Quasi-Partnership, between the shareholders of PLC: (a) although the makeup of the board of PLC altered in 1996, in that the directors now included people who were not shareholders, on the evidence it appears that it was Andrew who now took on the leading role in managing the business of PLC occupying the position of Managing Director, with Paul managing the transport function of PLC. Paul has accepted that at this point he had trust and confidence in Andrew’s ability to manage the business and make the important decisions; (b) Mr Ellis has accepted that, from the start of his employment by PLC and even after he was appointed purchasing director, he had very little involvement in making decisions about any aspect of PLC’s business, other than purchasing; (c) no one has suggested that Mr Gray took on any material role in management decisions; (d) all of the shareholders of PLC remained family members (Alan, Ann, Andrew and Paul until April 1997 and then Andrew, Paul and the ABP Pension fund which was a pension fund for the benefit of Alan and Ann) and in my judgment the basis of the relationship between those family shareholders remained one of mutual trust and confidence; and (e) given that Alan/Ann had resigned as officers of PLC, in 1997 and had, for some years prior to that, played little role in its management it is clear that there was no expectation that they would continue to be involved in the management of PLCs business, however Lord Wilberforce in Ebrahimi acknowledged that shareholders in a Quasi-Partnership may be or may take on the role of “sleeping partners” so the fact that Alan and Ann were no longer involved in and did not have an expectation that they would be involved in the management of PLC, does not prevent it from being a Quasi Partnership after they retired and resigned from their positions as officers of PLC and there was no expectation that they would be involved in the management of PLC.

In late 1998 Alan Parker, (executive Finance Director) and Mr Tomkinson (non-executive director) were appointed directors of PLC.

As at 9 September 1998 the issued shares in PLC appear to have changed to: Andrew 36,632 shares; Paul 36,632; and 27,742 held by a trust known as the Havelet Trust established for the benefit of Alan and Ann (“the Trust”).

On 30 October 1998, PLC was re-registered as a public limited company. It appears that at that time, the possibility of floating PLC on the AIM market was being explored and re-registering PLC as a public limited company was associated with the possibility of PLC being floated on AIM.

On 27 November 1998 the Investment Agreement was entered into between the then shareholders of PLC. At that date the shareholdings were: Andrew 37,000 shares; Paul 37,000 shares; a Retirement Scheme SSAS (“the SSAS”) 23,833 shares; Mr Ellis 500 shares; Mr Tomkinson 667 shares and Alan Parker 1,000 shares (Alan and Ann were beneficiaries, along with Andrew and Paul of the SSAS). The terms of the Investment Agreement included: (a) a requirement that Andrew and Paul would not resign as employees or directors of PLC, nor transfer their shares and would dedicate all their time, to the business of PLC; (b) a requirement that the business of PLC should be carried on in accordance with the policies and directions of its board of directors. There were also terms that enabled Alan Parker, Mr Tomkinson and Mr Ellis, to serve notice on PLC to require it to purchase their shares at a price fixed in accordance with a formula set out in the Investment Agreement.

Although the addition of Alan Parker and Mr Tomkinson as directors of PLC meant that the majority of the directors of PLC were no longer family members that did not, in my judgment, lead to the ending of the Quasi Partnership. I come to this conclusion, for the same reasons as I concluded that the addition of Mr Ellis and Mr Gray as directors of PLC, in 1996 did not lead to the ending of the Quasi Partnership namely: (a) that this in itself did not alter the fact that, initially all of the shares in PLC were held by family members (namely Andrew, Paul and Pension schemes or trusts for the benefit of Alan and Ann); and (b) on the available evidence the business of PLC continued to be managed by Andrew in whom Paul (and I have no reason to suppose Alan and Ann too as beneficiaries of the Trust) had trust and confidence. I do accept that as family members, Andrew and Paul, only constituted a minority of the Board of Directors, and therefore their control over the day to day management of the business of PLC had been weakened, however family members still held all the shares in PLC at least up until 30 October 1998.

The issue of shares to non-family members and in particular the entry by all shareholders into the Investment Agreement poses a greater threat to the status of PLC as a Quasi Partnership, than the appointment of two more non-family members to the board in two ways: (a) because 3 new non-family shareholders were being added to the 3 “family” shareholders (Andrew, Paul and the SSAS) meaning that for the first time there were non-family shareholders to be taken into account in deciding whether a Quasi Partnership continued to exist between shareholders and if so which shareholders; and (b) the Investment Agreement regulated, to an extent the relationship between shareholders (in particular the relationship between Paul and Andrew and the 3 none family shareholders).

In Waldron, HHJ Eyre (as he then was) was faced with a section 994 petition presented by three siblings against their brother, the respondent, who was the largest shareholder and managing director of the company. The company was initially established by the siblings' parents and HHJ Eyre had no difficulty in concluding that there were equitable constraints upon the exercise by the siblings (and in particular the respondent) of their legal rights as shareholders until 2009. In 2009 the company entered into: (a) a creditors voluntary arrangement (“CVA”) with its creditors; and (b) a subscription agreement under which a subsidiary of its bank took a minority shareholding in the company, as part of a restructuring of the debt that the company owed to its bank (“the Subscription Agreement”).

After the CVA and Subscription Agreement were entered into, the respondent dismissed the three petitioners as employees of the company and they brought their petition under section 994 against the respondent on the basis of these dismissals.

The respondent, argued that any equitable considerations that arose, if the company was a Quasi Partnership before the bank’s subsidiary took a shareholding in the company and entered into the Subscription Agreement was thereby destroyed, because the bank’s subsidiary, as a new member had a legitimate expectation and understanding that the affairs of the company would be conducted in accordance with its Articles of Association and the law and any understanding between the family members of the company could not cause there to be some further or other restriction on the conduct of the company’s affairs, because that would be contrary to the understanding of the new member.

HHJ Eyre considered two authorities on the question of whether equitable constraints upon the legal rights of members could operate between some but not all of the members of a company: (a) Re Yung Kee Holdings Limited [2014] 2 H.K.L.R.D 313 (HKCA); and Estera Trust (Jersey) Limited v Singh [2018] EWHC 1715 (Ch.)

In Yung Kee the Hong Kong Court of Appeal upheld the trial judge’s decision that he had no jurisdiction to consider the petition under the Hong Kong equivalent of section 994 but the court then went on to consider, obiter: “whether the existence of third-party shareholders who were not party to the mutual understanding negates the equitable considerations to restrain the exercise of legal rights in accordance with the articles of association of the Company”.

The Hong Kong Court of Appeal concluded that: (a) “as a matter of law there is no absolute bar to prevent the operation of equity … and whether an equitable restraint arises depends primarily on the facts of the case. The court must have regard to the circumstances of each case to determine whether on its factual matrix the exercise of legal rights by a respondent is in contravention of some equitable principles which a petitioner can pray in aid”; (b) the imposition of equitable constraints “rests on a wider basis than the concept of partnership in the guise of a corporation”; and (c) in considering whether equitable constraints extended to companies that could not be regarded as quasi-partnerships “the crucial question is whether there are any equitable considerations arising from the dealings between the shareholders which call for restraints over the exercise of the strict legal rights on the particular facts of the case”.

In Estera Trust , Fancourt J considered again obiter the question of whether a quasi-partnership can exist (and give rise to equitable constraints of the type identified in the authorities) where some only of the shareholders are said to be within the scope of the agreement or understanding about participation in management.

Fancourt J said that he was “very doubtful” that the relevant equitable restraints could arise where there were shareholders who were not parties to the underlying understanding “except perhaps in a case where the shareholders that are not party to the equitable considerations are either a very small minority or are closely connected to the quasi-partners … such that the established quasi- partnership character of the company does not change”.

HHJ Eyre identified three reasons that Fancourt J had given in his judgment for his conclusion that only where the quasi-partnership character of the company is not changed by the addition of new shareholders, could the quasi partnership be said to continue:

HHJ Eyre preferred the views expressed by the Hong Kong Court of Appeal because:

In Waldron HHJ Eyre had to consider whether the entry of the company into a CVA with its creditors, the issue of shares to a subsidiary of its bank and entry into the Subscription Agreement brought an end to the quasi-partnership (or equitable constraints on exercise of the respondent’s powers) that he found had previously existed. HHJ Eyre found that the issue of shares to the bank’s subsidiary and entry into the Subscription Agreement were akin to the grant of security to the bank. The Subscription Agreement regulated the conduct of the company with the outside world (for example restricting its ability to dispose of or acquire assets above a certain value). Neither the issuing of shares to the bank’s subsidiary nor entry into the Subscription Agreement were, in his judgment inconsistent with the continuation of the understanding between the family shareholders. It is clear therefore that HHJ Eyre’s findings as to the principles that should be applied in deciding whether or not a quasi-partnership continues, following the introduction of new shareholders form part of the ratio of his decision.

As HHJ Eyre was at the time of his judgment, a judge of parallel jurisdiction to my own, I should not depart from the principles set out in his judgment unless I consider that they are clearly wrong. I am of the view that HHJ Eyre was right to emphasise that the question of whether or not the court will impose constraints upon the legal rights of shareholders, pursuant to its equitable jurisdiction, depends upon whether there is a relevant understanding between shareholders which would make it inequitable or unconscionable for them to exercise their strict legal rights, the status of the company may be relevant to that question but is not determinative of it. I propose therefore to apply the principles set out by HHJ Eyre in Waldron in deciding whether or not the issue of shares, in November 1998, to non-family members and entry into the Investment Agreement, resulted in the equitable constraints, which I have found existed up to that point, on the members’ exercise of their strict legal rights in relation to PLC, continued to apply and if so to which members.

I am satisfied that equitable constraints on the exercise of Paul, Andrew and the SSAS’s rights as shareholders did continue after shares were issued to three new non-family shareholders and after the Investment Agreement was entered into on 27 November 1998. I am satisfied of this for the following reasons:

Mr Auld says that the Investment Agreement specifically states that it does not represent a partnership between the parties to it and that this therefore rules out the possibility of PLC being a Quasi Partnership thereafter. Clause 11 of the Investment Agreement provides “Nothing in this agreement shall constitute or be deemed to constitute a partnership between any of the parties hereto and none of them shall have any authority to bind the others in any way.” This is a standard “boiler plate” clause, included in many commercial agreements, the effect of which, in my judgment is to exclude any argument that the Investment Agreement constitutes a separate partnership between the parties to it. It does not exclude the possibility that the relationship between the shareholders who are a party to that agreement is built upon mutual trust and confidence, such as to give rise to a Quasi Partnership.

Mr Auld also says that there is authority for the proposition that merely preparing to sell the business of a company can bring an end to any existing Quasi-Partnership, even if the sale does not go through. So, says Mr Auld the preparations made to float PLC on the AIM Market by re-registering PLC as a public limited company, bringing in external non-family shareholders and entering into the Investment Agreement, resulted in PLC ceasing to be a Quasi Partnership, even though, ultimately no attempt was made to float PLC on the AIM market. I was not referred to any authority to support that proposition and in the absence of such an authority, I do not consider that mere preparations to float PLC on the AIM market of itself (rather than analysing the effect of the individual preparatory steps as I have already done) resulted in PLC no longer being a Quasi-Partnership.

On 22 April 2003 the SSAS (a scheme for the benefit of Alan, Ann, Andrew and Paul) purchased the freehold of Enterprise House, and PLC entered into a 50 year lease with the SSAS. PLC then moved its business from Woolstitch Farm to Enterprise House.

On 10 October 2005 PLC carried out a buyback of Alan Parker’s shares, from that point the only remaining non-family shareholders in PLC were Mr Ellis and Mr Tomkinson.

Mr McQuaide was appointed as a director of PLC in 2002 (Operations Director) and Mr Sharratt was appointed a director (Finance Director replacing Alan Parker) in 2006 neither of them became shareholders.

In December 2006: (a) ABPT was incorporated and the shares in PLC transferred to it; (b) BIL was incorporated and the 50 year lease that PLC held from the SSAS upon Enterprise House was transferred by PLC to BIL and BIL entered into a sub-lease with PLC to lease Enterprise House to it; (c) Andrew was appointed sole director of both BIL and ABPT and Paul was appointed Company Secretary of ABPT and BIL.

On incorporation, the shares in ABPT and BIL were held, as to 37,000 shares by Andrew, 37,000 shares by Paul, 500 shares by Mr Ellis, 667 shares by Mr Tomkinson and 8,815 shares by the SSAS. The Articles of ABPT contained restrictions upon the transfer of shares by its members similar to those contained in PLC’s Articles immediately before PLC’s shares were transferred to ABPT.

As I have already noted the Investment Agreement was abrogated by PLC becoming a wholly owned subsidiary of ABPT and no replacement investment agreement was entered into between the shareholders of ABPT. Mr Auld suggests that this destroyed trust and confidence between the shareholders because Mr Ellis and Mr Tomkinson were deprived of the benefits of the Investment Agreement which included the obligations placed on Andrew and Paul to continue to be shareholders and directors of PLC and to dedicate all their time to its business and Mr Ellis and Mr Tomkinson were deprived of the opportunity to require PLC to acquire their shares at a price determined in accordance with a formula set out in the Investment Agreement.

I have found that, from the date of the Investment Agreement (27 November 1998) the rights of Andrew, Paul and the SSAS, as shareholders of PLC were subject to equitable constraints (but not the rights of Alan Parker, Mr Ellis and Mr Tomkinson as shareholders). Unless that remained the position immediately before ABPT acquired the entire issued share capital of PLC then, in my judgment it is highly unlikely that any of the shareholders in ABPT (which mirrored the shareholdings in PLC, immediately before PLC became a wholly owned subsidiary of ABPT) would be subject to equitable constraints on their rights.

I am satisfied that, immediately before it became a wholly owned subsidiary of ABPT there was a relationship of trust and confidence between the family shareholders in PLC (Andrew, Paul and the SSAS). I have come to this conclusion because: (a) there was a relationship of trust and confidence between the family shareholders in PLC (Andrew, Paul and SSAS) at the start of 1999, for the reasons I have already given; (b) I do not consider that the appointment of Mr McQuaide and Mr Sharratt as directors (in the case of Mr Sharratt replacing Alan Parker) had any material effect upon that position, the majority of the board were not family shareholders but the vast majority of the shares of PLC were in the hands of the family, in fact the purchase back of Alan Parker’s shares consolidated the position of the family shareholders and Andrew and Paul, in particular as overwhelmingly the largest shareholders in PLC; and (c) there is no evidence that the mutual trust and confidence between Paul and Andrew did not continue during this period.

I consider that, when ABPT acquired the entire issued share capital of PLC, the relationship of trust and confidence between the family shareholders of ABPT (Andrew, Paul and the SSAS) continued, such that they were subject to equitable constraints on their rights as shareholders of ABPT because: (a) Andrew and Paul held a significant majority of the shares in ABPT, just as they had in PLC, before PLC became ABPT’s wholly owned subsidiary; (b) there continued to be mutual trust and confidence between Andrew and Paul and the SSAS (in which Andrew, Paul, Alan and Ann were the beneficiaries); (c) Andrew was the sole director of ABPT and so he controlled the board of ABPT (unlike the board of PLC where the majority of the directors were not members of the Bridgen family); and (d) the business of PLC continued to be managed in the same way as it had been before the restructuring with Andrew making the majority of the decisions and Andrew and Paul ultimately having control of PLC through their shares in ABPT and Andrew’s sole directorship of ABPT.

As for Mr Auld’s point that the abrogation of the Investment Agreement led to a breakdown in the trust and confidence that Mr Ellis and Mr Tomkinson had in Andrew, who was responsible for organising the restructuring, I have found that the relationships which gave rise to equitable constraints and the equitable constraints themselves only applied to the “family” shareholders and not to Mr Ellis or Mr Tomkinson. In those circumstances any breakdown in trust and confidence between Andrew and Mr Ellis/Mr Tomkinson would have no effect upon the trust and confidence and understanding between the family members that their legal rights as shareholders would be subject to equitable constraints. Mr Ellis and Mr Tomkinson were, as shareholders of ABPT, subject to the same restrictions, in ABPT’s articles, upon their transferring their shares as the family shareholders (in spite of previously having been able to call upon PLC to purchase their shares, when they were shareholders of PLC). However, I do not consider that this made them Quasi-Partners, subject to equitable constraints on the exercise of their rights as shareholders of ABPT, particularly when it appears that they did not realise that, as a result of the restructuring, they lost the right to have their shares purchased by the company of which they were shareholders.

The purpose of the restructuring was to explore the possibility of selling either PLC or its business. For the same reason as I did not accept Mr Auld’s submission that the steps taken to prepare to float PLC on the AIM market did not result in PLC no longer being a Quasi Partnership, I do not accept that the restructuring of PLC’s shareholdings carried out in December 2006 to prepare it or its business for a possible sale (which sale did not occur) resulted in the destruction of the relationship of trust and confidence between the family shareholders in PLC, immediately before its shares were transferred to ABPT, or prevented that relationship of trust and confidence from passing into the family shareholdings issued in ABPT. The various changes in the shareholdings in PLC and other changes I have noted above, since it was first incorporated in April 1988, resulted, in my judgment, in an erosion of the relationship of trust and confidence and mutual understanding that existed between family members in 1988, but not to the point at which a relationship of trust and confidence no longer existed between Paul, Andrew and the SSAS.

BIL was incorporated in December 2006 as part of the restructuring of the Group that also included the incorporation of ABPT and PLC becoming ABPT’s wholly owned subsidiary. The shares in BIL were held by the same shareholders and in the same proportions as those in ABPT. That is: 37,000 shares held by Andrew, 37,000 shares held by Paul, 500 shares held by Mr Ellis, 667 shares held by Mr Tomkinson and 8,185 shares held by the SSAS. On incorporation, the sole director of BIL was Andrew and the company secretary was Paul. BIL, unlike ABPT had no subsidiary.

I have concluded that, on its incorporation, the family shareholders in ABPT were subject to equitable constraints on the exercise of their legal rights as shareholders. The shareholders and officers of BIL, on its incorporation, were the same as the shareholders and officers of ABPT. The purpose of incorporating BIL was to transfer the lease upon Enterprise House from PLC to BIL and to cause BIL to sublet Enterprise House to PLC. I consider that the same relationship of trust and confidence existed between the family shareholders of the BIL as existed between the family shareholders of ABPT, incorporated in the same month. The articles of BIL also contain a restriction on the disposal of its shares by its shareholders and it follows that, for the same reasons as I have found that the family shareholders of ABPT were subject to equitable constraints upon the exercise of their legal rights as shareholders, the family shareholders of BIL were subject to equitable constraints on their legal rights as shareholders in BIL (and for the same reasons, Mr Ellis and Mr Tomkinson were not).

ABF is in a different position to ABPT and BIL, because it was incorporated on 28 August 2015, over 8 ½ years after ABPT and BIL were incorporated. During that intervening 8 ½ year period, Andrew had been elected as an MP and had resigned as a director of ABPT and BIL (May 2010), Mr Large had been appointed as Managing Director of PLC, but later removed (March 2010 and July 2012 respectively), Paul took over as Managing Director of PLC (around August 2012) and Andrew, on my findings, had engineered his own removal as employee and as non-executive chairman and director of PLC (his last directorship of a Group company) (August 2014). In dealing with issue 3 for PLC (see below) I have concluded that Andrew excluded himself substantially from all further involvement with the management of the Group from the moment that he was appointed as an MP on 6 May 2010 (save for the period from the beginning of 2012 to July 2012 when Andrew involved himself in the process of terminating Mr Large’s employment as Managing Director of PLC). The question of whether ABF was a Quasi-Partnership on its incorporation therefore takes place in the context of Andrew not having been a director of or involved in the management of any of the other Group companies, for over 4 years prior to the incorporation of ABF in August 2015.

I find that, on its incorporation, none of the shareholders of ABF were subject to equitable constraints upon their legal rights as shareholders and none of ABF’s shareholders ever have been subject to such constraints. I have come to this conclusion for the following reasons:

In Ebrahimi, Lord Wilberforce indicates that one of the three characteristics of a quasi-partnership is that there is an agreement or understanding that all, or some of the shareholders will participate in the management of the business.

I conclude therefore that, Andrew never has had any legitimate expectation (nor is he otherwise entitled) to participate in the management of ABF.

Andrew had a legitimate expectation that those shareholders of ABPT who were subject to equitable constraints upon the exercise of their legal rights (Paul and the SSAS) would support Andrew’s participation in the management of ABPT and PLC and those shareholders of BIL who were subject to constraints on the exercise of their legal rights as shareholders (again Paul and the SSAS) would support Andrew’s participation in the management of BIL.

who were the parties to the Quasi Partnership; and

when (if at all) did they cease to be Quasi Partnerships?

Based upon my findings in relation to Issue 1 above, the shareholders bound by equitable constraints to support Andrew’s participation in the management of the relevant Group company were:

ABPT-from incorporation, Andrew, Paul and the SSAS;

BIL-from incorporation, Andrew, Paul and the SSAS;

ABF- none.

Having decided that ABPT was, on its incorporation in December 2006 a Quasi Partnership (in the sense that the family shareholders were subject to equitable constraints upon the exercise of their legal rights as shareholders) I now need to decide whether that has remained the position. In doing so I will again analyse relevant events happening in specified periods.

It is common ground that, from 2008 both Andrew and Paul spent significantly less time in managing the business of PLC, the wholly-owned subsidiary of ABPT, than they had up to that point. Andrew was pursuing his political career and in December 2008, Paul purchased a 50 year lease on Home Farm. Andrew however remained executive Managing Director and Paul Transport Director during this period. Whilst the involvement of Andrew and Paul in the management of PLC declined, such that the remaining executive directors of PLC would have taken on a greater role in managing PLC, I am not satisfied that this meant that the relationship between the family shareholders of PLC was not still one which operated on the basis of mutual trust and confidence, such as to impose equitable constraints on the exercise of their legal rights as shareholders. The position remained that Paul and Andrew between them held nearly 89% of ABPT’s shares with the SSAS holding just under 10% and Mr Ellis and Mr Tomkinson just over 1%. Paul and Andrew had mutual trust and confidence in each other and there is nothing to suggest that Alan and Ann (as beneficiaries of the SSAS alongside Andrew and Paul) did not also continue to have (as “sleeping partners”) trust and confidence in Andrew and Paul at this time.

This period started with the appointment of Mr Large as Managing Director PLC on 10 March 2010. Mr Zaman suggests that, notwithstanding the appointment of Mr Large as Managing Director and (what he accepts to be) at least the substantial withdrawal of Paul and Andrew from any role in the management of PLC thereafter, there was still an expectation on the part of the shareholders of ABPT that Andrew/Paul could return to take up more substantial positions in the management of PLC/ABPT at any point thereafter.

I am satisfied that Mr Large’s appointment was intended to be permanent, regardless of whether or not Andrew was elected as an MP at the election on 6 May 2010 and was carried out to facilitate the withdrawal of both Andrew and Paul from material involvement in management of the Group (including ABPT and PLC) with no expectation that either Andrew or Paul would return to any material involvement in the management of either PLC or ABPT. I make these findings because Mr Large was employed as a permanent employee, not on some form of temporary contract. In his witness statement made in the divorce proceedings in June 2014, at paragraph 23 Andrew said “as far as they (the other shareholders) were concerned the decision had been made to appoint an external managing director to manage the business without any interference by the shareholders and we should leave him to do the job”.

On 6 May 2010 Andrew was elected as an MP and the following day he resigned as director of BIL and ABPT and became non-executive Chairman of PLC (remaining a statutory director of PLC). Mr Sharratt was appointed sole director of BIL and ABPT in Andrew’s place.

I am satisfied that, between July and December 2010, Andrew attended none of the monthly Board Meetings of ABPT/PLC. Andrew did attend a board meeting in January 2011, but according to paragraph 24 of Andrew’s June 2014 divorce witness statement, in March 2011 the board supported Mr Large's recommendation that PLC should forward purchase potatoes as a hedge which Andrew objected to and… “these discussions caused considerable difficulties between myself and the other shareholders at the time in this regard, the court should be aware that I have not attended a formal board meeting since the decision was made in March 2011. The only duties I have performed for the company since this date is in connection with the eventual and much belated dismissal of Paul Large and attendance at the subsequent employment tribunal.”

I am not satisfied that the family shareholders remained subject to equitable constraints on the exercise of their legal rights as shareholders from March 2010, which required them to support the participation of Andrew and Paul in the management of ABPT/PLC until the departure of Mr Large as Managing Director in July 2012. I come to this conclusion for the following reasons:

During this period, following the removal of Mr Large as Managing Director, Paul took up the position of Managing Director. I am satisfied (this is Paul’s evidence, not disputed by Andrew) that Paul asked Andrew to return and take up the role of Managing Director, but Andrew told Paul that he was not prepared to do so and that Paul would have to do the job and that reluctantly Paul agreed to do so.

This period ends immediately before the termination of Andrew’s employment and remaining office as non-executive director and chairman of PLC.

I am satisfied that from around August 2012 Paul was responsible, together with Mr Sharratt for most of the day-to-day decisions made concerning the business of PLC and that whilst Paul kept Andrew informed from time to time as to what was going on, Andrew left Paul to manage PLC and the Group more generally with very little input from Andrew. I make these findings because, although Andrew suggests that he made material input into management decisions during this period, I prefer the evidence of Paul/Mr Ellis/Mr Tomkinson/Mr Sharratt that during this period Andrew was not materially involved in the management of PLC/ABPT. I note that this conclusion is also consistent with the evidence set out in the witness statement made by Andrew in his divorce proceedings.

As to the understanding or agreement between the family shareholders, clearly that changed after Mr Large’s departure in that Andrew and Paul (reluctantly in the latter case) agreed that Paul would become Managing Director of PLC. Andrew was thereby reposing trust and confidence in Paul to take control of the management of ABPT/PLC and I have no reason to suppose that Alan/Ann (as beneficiaries alongside Andrew/Paul in the SSAS) did not also agree to Paul’s appointment and repose their trust and confidence in Paul. Inevitably there was an expectation that Paul would take part in (and indeed lead) the management of PLC, Andrew played no material role in the management of PLC/ABPT, having refused Paul’s request that he return as Managing Director, and I am not satisfied that there was any expectation that Andrew would return to any material management role in ABPT/PLC, beyond holding office as non-executive Chairman of PLC or that the family shareholders were bound to support the return of Andrew to a substantive management role.

During this period Andrew issued a divorce petition against his then wife, Jackie in January 2013. In May 2013 Andrew (on his own evidence) instigated the instruction of Baker Tilly to review directors remuneration packages. I find that he did so in the expectation that Baker Tilly would find that his remuneration package was excessive when compared to the other directors, because he was the highest-paid director, notwithstanding that he was non-executive chairman and had very little involvement in the management of PLC. I find that Andrew instigated the review in the hope that it may be of some benefit to him in seeking to reduce his liability to pay money to Jackie.

In June 2013 Andrew issued Form A in his divorce proceedings which is an application for a financial remedy order. In the same month Baker Tilly concluded that Andrew was over remunerated compared to other directors (as I have found Andrew expected them to say).

The financial relief hearing in Andrew’s divorce took place on 9 and 10 July 2014. Andrew presented evidence to the court and his counsel submitted that there was a real possibility of Andrew being made redundant from his role as non-executive chairman and employee of PLC.

Between 4 August 2014 and 2 September 2014 correspondence was exchanged between Mr Sharratt, acting for PLC and Andrew, dealing with the termination of Andrew’s employment by, and his appointment as non-executive director of PLC. I have found that Andrew orchestrated that correspondence to give the impression that it was the decision of the board of PLC that his employment/directorship should be terminated when in fact Andrew wanted his employment and directorship to be terminated because he considered that this may assist him to reduce his liability to pay money to Jackie.

I am satisfied that any agreement or understanding amongst the family shareholders that Andrew would be involved in the management of ABPT/PLC going forward ceased when Andrew agreed to the termination of his employment by PLC and, on my findings, resigned as non-executive chairman of PLC, because: (a) after 1 August 2014 Andrew continued to have no material involvement or engagement in the affairs/management of PLC/ABPT); and (b) Andrew, having brought about the termination of his own employment/directorship of PLC (and having accepted substantial compensation for termination of his employment with no agreement that he even act as a consultant (a possibility which was mooted but not pursued)) could have no expectation that Paul and the SSAS would support his return in a management/director role.

Mr Zaman suggests that, even if Andrew resigned as de jure director of PLC, he still remained a de facto director. Mr Zaman asserts that (a) Andrew returned before Christmas 2015 when there was a crisis at PLC in its preparations for Christmas, in order to help resolve that crisis; and (b) Paul sent a text to Andrew on 14 January 2016 apologising for the problems over the Christmas period and promising that it would not happen again. Andrew has produced communications between him and the Conservative Party whips’ office about him taking time off before Christmas 2015 and suggests that this is evidence that Andrew came back to Enterprise House before Christmas 2015 to help resolve the crisis. Paul, in contrast, says that Andrew refused to come back to help and offered only moral support via a few text messages which have been disclosed, for the issues that Paul was dealing with.

I prefer Paul’s evidence and find that Andrew did not return to Enterprise House to help resolve the crisis and instead confined himself to exchanging a few text messages with Paul, containing general words of encouragement. I find this because I believed Paul’s evidence on this point, rather than Andrew’s and because I would expect Andrew to be able to produce more than simply a request to the Whips office for time off to support his case and none of the short text messages passing between Andrew and Paul refer to or imply that Andrew did attend Enterprise House in person before Christmas 2015 to help resolve the crisis. If he had done so, I would expect there to be some mention of it in those text messages, but there is none. Far from showing engagement by Andrew with PLC’s business, in the period from Andrew’s resignation up to the end of 2016, on my findings, Andrew’s failure to return to help with a crisis, before Christmas 2015, even for a short period of time and the existence of only a few short texts passing between Andrew and Paul at the end of 2015/beginning of 2016 with general words of encouragement from Andrew to Paul in relation to that crisis (in a case in which a very substantial number of texts/emails have been disclosed) tends to support my conclusion that Andrew did not engage with PLC/ABPT’s affairs from August 2014 to the end of 2016 and certainly could not be said to have acted as a de facto director of PLC, as Mr Zaman suggests.

If I am wrong and there remained an understanding between the family shareholders that Andrew was entitled to expect them to support his return to take part in the management of ABPT/PLC and/or to be appointed as a director of one or both of them, then I am satisfied that that understanding ended when Andrew actually sought re-appointment as non-executive director and Chairman of the Group companies from the beginning of 2017.

I accept the evidence of Paul/Mr Ellis/Mr Tomkinson/Mr Sharratt (not challenged by Mr Zaman, other than in the case of Paul and not denied by Andrew) that when Andrew sought the support of shareholders of ABPT for his reappointment as non-executive Chairman of PLC he acted in an aggressive and arrogant manner, calling the other directors and shareholders “a bunch of wankers”, “liars and thieves” and suggesting to Mr Ellis that his mouth had been “stuffed with silver” by Paul. I am also satisfied that Paul/Mr Ellis/Mr Tomkinson, as shareholders of ABPT/BIL/ABF and the directors of a ABPT/PLC/BIL/ABF, acting bone fide, genuinely formed the view: (a) that Andrew was only interested in promoting his own financial interests rather than those of the Group companies; (b) the executive directors would be unable to work with Andrew given his behaviour; and (c) it would in those circumstances not be in the interests of the Group companies for Andrew to be reappointed as a director of them. All of that leads me to the conclude that even if (contrary to my finding) there was a continuing understanding amongst the family shareholders (Andrew, Paul and the SSAS) and/or the non-family shareholders (Mr Ellis and Mr Tomkinson) that Andrew was entitled to their support for him to return and take part in the management of PLC and be appointed as a director of it, then that understanding and the trust and confidence on which it was based, was destroyed as a result of Andrew’s behaviour.

It was reasonable for the shareholders to conclude that the executive directors would be unable to work with Andrew because this was obvious from the way in which Andrew spoke to them in 2017.

It was reasonable for the shareholders to form the view that Andrew was only interested in promoting his own financial interests because:

Mr Zaman suggests that the trust and confidence between shareholders was lost as a result of the unfairly prejudicial conduct of which Andrew complains in his ABPT Petition, before Andrew’s behaviour, from early 2017 onwards occurred. Therefore, says Mr Zaman, as the catalyst for the break down in trust and confidence was Paul’s behaviour, rather than Andrew’s, there was a continuing expectation that Andrew would be entitled to take part in the management of PLC.

I do not accept Mr Zaman’s submission. In his letter of 1 September 2017, addressed to Paul, Andrew asserted that the affairs of the Group companies had been conducted in a manner unfairly prejudicial to Andrew. Andrew’s complaints centred upon his exclusion from the management of the company and from financial benefits in the form of remuneration and dividends. Other than that Andrew only refers to conflicts of interest between Paul’s Partnership and PLC’s business and the use of William and Sam’s time, as employees of PLC, for the benefit of the Partnership. I am satisfied that those complaints would not justify Andrew (or the SSAS) losing trust and confidence in Paul because:

Andrew resigned as sole director of BIL and was replaced by Mr Sharratt on 7 May 2010, the day after Andrew was elected an MP. I am satisfied that Andrew played no material part in the management of the BIL after that date, although he did persuade Paul to persuade Mr Sharratt (sole director of BIL at the time) to cause BIL to purchase the Old Vicarage from Andrew, in December 2011 for £1.5 million.

The main project that has been undertaken by BIL, is the acquisition of the AD Plant. Until at least September 2014 it was anticipated that WPS may acquire the AD Plant but, in that month the decision appears to have been taken that WPS would not acquire the AD Plant and instead BIL would do so. Andrew played no part in that decision. A number of loans were made by BIL to Andrew at his request (including a loan of £60,000 on 23 December 2014) as the counter party to those loans, Andrew played no part in the decisions that BIL would make those loans to him.

In my judgment, the equitable constraints upon the family shareholders of BIL, which existed at the date of its incorporation, creating an understanding that the family shareholders would support Andrew’s involvement in the management of BIL ceased on 7 May 2010, when Andrew resigned as its sole director because: (a) Andrew was replaced as sole director by Mr Sharratt, who was not a shareholder in BIL; (b) the evidence, in my judgment demonstrates that, after Andrew resigned as director of BIL and was replaced by Mr Sharratt, Mr Sharratt made all the management decisions for BIL, in conjunction with Paul. For example that BIL, rather than WPS would acquire the AD Plant, that BIL should purchase the Old Vicarage from Andrew, which Mr Sharratt says he was reluctant to do but was persuaded to do by Paul. There is no evidence that Mr Sharratt consulted either Mr Ellis or Mr Tomkinson in relation to these decisions and they deny that they were involved in making them; (d) for those reasons I consider that following Andrew’s resignation, the management of BIL was no longer carried out on the basis of mutual trust and confidence between the family shareholders generally, but rather between Mr Sharratt, as sole director and non-shareholder and Paul, one of the family shareholders; and (e) there was no expectation amongst the family shareholders that Andrew would take part in the management of BIL again and that they would therefore support him doing so.

If I am wrong and the understanding of the family shareholders that Andrew would be entitled to their support in returning to take part in the management of BIL somehow survived his resignation as director of BIL and his failure to participate in its management thereafter, then the trust and confidence upon which that understanding was based was destroyed by Andrew’s conduct from the beginning of 2017, in the same way as it was for ABPT (ending any understanding the Andrew would be entitled to participate in the management of PLC) (see paragraphs 399-401 above).

It is convenient to deal with the issues under this heading, other than in the order in which they appear in the agreed list of issues (because for example it makes sense to answer the questions, did Andrew request to be appointed as a director and was that request refused, before answering the question was Andrew wrongly or unfairly excluded from management). I will however retain the numbering of each issue as they are set out in the agreed list of issues.

I have already found (paragraphs 227-237) in considering the credibility and honesty of Andrew, that he not only consented to his removal as an employee of PLC (and resigned as non-executive director/chairman of PLC) but he also orchestrated his correspondence with Mr Sharratt in an attempt give the false impression that he was not consenting to the termination of his employment and resigning as director of PLC.

I have already found that the non-family shareholders of ABPT were never subject to equitable constraints affecting the exercise of their rights as shareholders and equitable constraints that affected the exercise by the family shareholders of ABPT of their legal rights, as shareholders (based upon an understanding that Andrew would be entitled to participate in the management of ABPT/PLC) such that they were bound to support Andrew’s participation in the management of ABPT/PLC, ended:

It follows that Andrew's legitimate expectation of being (or being otherwise entitled to be) appointed to the management of ABPT/PLC (as de jure director or otherwise) ended on one of those 3 dates.

I have found that the non-family shareholders of ABPT were never subject to equitable constraints affecting the exercise of their rights as shareholders and the equitable constraints that affected the exercise by the family shareholders of BIL of their legal rights, as shareholders (based upon an understanding that Andrew would be entitled to participate in the management of BIL) such that they were bound to support Andrew’s participation in the management of BIL, ended when Andrew resigned as sole director of BIL and was replaced by Mr Sharratt on 7 May 2010 (and thereafter did not participate in the management of BIL). It follows that Andrew's legitimate expectation of being (or being otherwise entitled to be) appointed to the management of BIL (as de jure director or otherwise) ended on 7 May 2010.

I have found that Andrew never was involved in the management of ABF and there was never any expectation that he would be involved in its management.

Mr Zaman says that this issue does not arise upon the pleadings, however, if Andrew did not request to be re-appointed to management, then this is at least relevant to the question of whether Andrew was wrongly or unfairly excluded from management, from August 2014, which is an agreed issue (Issue 6).

It is part of Andrew’s case that he initially raised the question of his returning to take part in the management of the Group by suggesting to Paul, at around Christmas 2015 that he would not seek re-election as an MP at the next election, and return to manage the Group, but he says that his parents then visited him and told him that there was no place for him at the business. I do not accept that evidence: (a) there are no documents referring to this, either contemporaneous or near contemporaneous referring to the asserted request or response of Andrew’s parents; (b) given Andrew’s forceful character and his view of his own value to the business, I think it highly unlikely that he would be put off seeking his re-appointment, simply because his parents told him that there was no place for him; and (c) Paul denies it and I prefer the evidence of Paul on this point.

The first document in which Andrew refers to his request to be appointed as a director is his text to Mr Tomkinson of 14 January 2017. This text says “Derek, I think I have to return to the company as chairman, what are your thoughts? Can we speak at lunchtime today to discuss? Andrew“. Paul then sent a text to Andrew on 30 January 2017 which says “I understand you are coming back to AB as Chairman” to which Andrew responds “Yes Paul I wish I didn’t have to”.

On 5 February 2017 Andrew sent to each of the shareholders of ABPT/BIL and to Mr Sharratt an email in which he set out his request to return as non-executive director/Chairman and set out details of what he would contribute towards and do, if appointed. Where relevant, that email said “I write to request support from shareholders to my return as chairman of AB Produce…. I would stress that I do not wish to take over the day-to-day running of the business. I am well aware that serving as the MD requires a full attendance and immersion in the business in order for it to be successful…”. Andrew then goes on to say (amongst other things) that he wishes to ensure that there are board meetings on a bimonthly basis for PLC, BIL and ABF and wishes to work with the managing director and executive directors to develop a clear strategy for each of the businesses.

In my judgment Andrew was proposing that he should return as non-executive chairman of all the Group companies. Whilst the email refers only to “returning as chairman of AB produce” and Andrew had resigned as a director of ABPT and BIL as long ago as 2010 (but only as non-executive chairman of PLC, in August 2014) Andrew’s reference to wishing to ensure that there were full board meetings on a bimonthly basis for all three trading companies (PLC, BIL and ABF) was only something that Andrew could realistically have ensured happened if he was a director of all three trading companies and I consider it likely that Andrew, in referring to returning as chairman of AB Produce meant ABPT and all three trading companies.

Andrew says that this issue also does not arise on the pleadings, but I consider that the question, “was Andrew’s request refused?”, has to be answered either separately, or as part of Issue 6. The remainder of Issue 9 however appears to be a duplication of Issue 6 and I will deal with the basis upon which Andrew’s request was refused and whether the refusal was unfair as part of Issue 6.

Andrew’s request, as I have found it to be, to be appointed non-executive chairman of all the Group companies was refused by those shareholders of ABPT/BIL/ABF who participated in the meetings in 2017 when Andrew pressed his request, namely Paul, Mr Ellis and Mr Tomkinson. The SSAS does not appear to have been represented at any of those meetings. Andrew appears to have accepted that the votes of Paul, Mr Ellis and Mr Tomkinson against his re-appointment as non-executive Chairman of the Group companies were sufficient to vote down his request at each of those meetings, it is not disputed by either party that they were not sufficient to vote it down and I therefore find that Andrew’s request to be re-appointed as non-executive Chairman of the Group companies was refused.

I have already found that Andrew was not involved in any material way in the management of PLC in the period between August 2014 and the end of 2016.

In paragraph 188 of his witness statement, Andrew says that, in spite of the shareholders refusing to agree to his proposal that he be re-appointed non-executive chairman he still assisted the Group in 2017 and 2018 in the following ways:

It is perhaps surprising that, after Andrew’s request to return as non-executive chairman of the Group was refused, and Andrew had sent a letter to Paul on 1 September 2017, threatening the commencement of Section 994 proceedings, that Andrew was involved with any issues relating to the Group’s businesses at all. I do not however regard the matters to which Andrew refers as amounting to material participation in the management of the Group for two reasons: (a) over a 2 year period the amount of Andrew’s involvement, on his case in matters relating to the businesses of the Group is relatively small and amongst the vast amount of disclosure in this case communications with Andrew on only 2 dates (17 January 2018 and 2 March 2018) have been produced); and (b) none of the matters to which Andrew refers in paragraph 188 of his witness statement persuade me that he was materially involved in making or implementing management decisions as opposed to being asked to assist with or involving himself in a small number of specific issues. I note also that none of the issues relate to the business of ABF.

I find that Andrew was not wrongfully excluded from the management of ABPT/BIL/PLC, after August 2014, for the following reasons:

It is common ground that the Respondents have not made such an offer. Andrew’s exclusion from the management of PLC is not wrongful or unfair for the reasons set out in paragraph 423 above.

For convenience I will deal with issues 11 and 12 together.

The simple answer to the question of why ABF was incorporated, on 28 August 2015, is that it was incorporated in order to complete, in its name, the acquisition of Barn Farm, which Mr Ellis had successfully bid for at the auction which took place on 15 August 2015. However, two competing reasons are put forward as to why Barn Farm was acquired in ABF’s name, rather than in the name of PLC (given that it was PLC’s money that was used to fund the purchase):

Andrew’s ABPT Petition asserts that:

In their Defence, the Respondents say that Andrew was told that Barn Farm would be put into the name of a new company in which shares would be issued in line with the shares which had been issued in ABPT and at paragraph 39.2, the Respondents say that Andrew “appears to advance a case that Paul intended to misappropriate over £1 million from PLC in order to acquire sole ownership of Barn Farm.

In Andrew’s Reply, at paragraphs 2(1) he states that Paul did not tell him that Barn Farm was to be put in the name of a new company, in which shares would be issued in line with the shares in ABPT and at paragraph 4 (7) of his Reply, Andrew makes it clear that he is asserting that Paul intended to misappropriate £1 million from PLC by acquiring sole ownership of Barn Farm.

Mr Zaman says that the following matters support Andrew’s case:

I reject Andrew’s case that the incorporation of ABF, ABF’s acquisition of Barn Farm and/or the transfer of the subscriber share in ABF from Mr Tomkinson to Paul were part of a scheme aimed at enabling Paul to benefit personally from the acquisition of Barn Farm.

I accept that a new company was established (ABF) to acquire Barn Farm because Mr Sharratt and Paul considered that there was at least a potential benefit in separating the business of PLC from any profit made as a result of the acquisition of Barn Farm (that benefit, for PLC being that customers of PLC would not be able to use any profits made by PLC, following the acquisition of Barn Farm, if it was acquired in PLC’s name, as a justification for seeking a price reduction for the supply to them of product by PLC). So far as Mr Tomkinson and Mr Ellis are concerned, I am satisfied that they supported that strategy: (a) Mr Tomkinson was clearly aware (as initially the holder of the subscriber share and as a director of ABF) that ABF had been incorporated and had acquired Barn Farm, he said he was supportive of the rationale for not holding Barn Farm in PLC, but instead incorporating a separate company to acquire it; and (b) Mr Ellis says that he does not recall it being decided, before the auction how the purchase of Barn Farm would be structured, but he and the other directors relied on Mr Sharratt to advise on how to structure it, he also said that many other food processors grow food using separate companies to do so and that the storage facilities for potatoes at Barn Farm and potential to grow food there were two of the reasons (apart from development potential) discussed by the board of PLC for purchasing Barn Farm.

In his witness statement, at paragraphs 165-166, Andrew says that Paul told him in around September 2015 that we have purchased a farm, it had cost over £1 million, PLC had funded the purchase and Paul was going to set up a new company to purchase Barn Farm. This last point is inconsistent with Andrew’s PLC Petition, which says that he understood Barn Farm was to be purchased by PLC and directly contradicts the first part of paragraph 2(1) of Andrew’s Reply, in which Andrew says that Paul did not tell him that Barn Farm was to be put in the name of a new company.

I have already said, in considering the credibility and honesty of Andrew as a witness, that, given that all of the directors of PLC and Andrew were aware, well before Barn farm was transferred to ABF, on 14 September 2015, that PLC was providing the purchase price to acquire Barn Farm, but it was to be transferred into the name of a new company (in the event ABF) it seems highly unlikely that there could have been any intention by Paul (with or without the assistance of other directors of PLC and with or without the assistance of the directors of ABF) that Paul would acquire the benefit of Barn Farm for himself. I put it to Andrew that, given that he accepted (as he did) in cross examination, that Paul had told him the day after Mr Ellis had successfully bid for Barn Farm at the auction, that: (a) “we have bought a farm”; (b) PLC was providing the money to buy the farm; and (c) it was intended to set up a new company to which Barn Farm would be transferred, this hardly seemed like the prelude to any attempt on behalf of Paul to fraudulently obtain Barn Farm for his own benefit. Andrew responded that Paul was attempting a distinctly different type of fraud to that set out in Andrew’s ABPT Petition. Andrew asserted that what Paul was attempting to do was to sell Barn Farm quickly, repay the debt owed to PLC and pocket the profit. In my judgment Andrew made that suggestion (which is not mentioned in his PLC Petition, his witness statement, for which there is no evidence and which is inconsistent with the facts that Barn Farm has not been sold and no part of the debt owed to PLC has been repaid) in response to my question, because he saw the difficulty in maintaining that there could have been any intention on Paul’s part to obtain Barn Farm for his own benefit, in August 2015, given all that Andrew accepted that Paul had told him on 16 August 2015, the day after the auction.

I start with the position therefore that I find that it is highly unlikely that Paul would have told Andrew, on 15 or 16 August 2015 about the successful auction bid the previous day, that PLC would fund the purchase of Barn Farm and that a new company would be set up to buy Barn Farm (all of which had already happened or did happen) if he intended to commit the fraud alleged in the ABPT Petition.

I am satisfied that there has been no attempt by Paul to obtain any benefit from the acquisition of Barn Farm by ABF for himself, other than in his capacity as 49% shareholder of ABF. I come to this conclusion for the following reasons:

I have already found that: (a) the resolution of Mr Sharratt, purportedly as sole director of ABF; and (b) the PLC/ABF Loan Agreement, between PLC and ABF, purportedly dated 14 September 2015, were created by Mr Sharratt on 22 or 23 November 2016 and sent by him to KPMG as an agreement reflecting the terms upon which PLC agreed to lend £1,006,000 to ABF to purchase Barn Farm. I have also rejected Mr Sharratt’s evidence that the directors of PLC/ABF agreed orally the terms of a loan from PLC to ABF on 14 September 2015 (or around that date) and that the loan agreement, backdated to 14 September 2015, simply reflected the terms of that oral agreement. Notwithstanding those findings, it is common ground that Barn Farm was purchased using money from PLC’s bank account and that it was purchased in the name of ABF. I accept the evidence of all of the directors of PLC and ABF, as at 14 September 2015 (Paul, Mr Sharratt, Mr Ellis and Mr Tomkinson) that they were aware that PLC’s funds were being used to purchase Barn Farm and that Barn Farm was purchased in the name of ABF (it is also Andrew’s evidence that he was told by Paul, on 16 August 2015 that PLC’s money was being used to purchase Barn Farm and that it would be purchased in the name of a new company).

Whilst I am not satisfied that the directors of PLC/ABF ever discussed the terms of such a loan from PLC to ABF, I am satisfied that they can only (acting bona fide in the interests of PLC) have agreed to the loan being made upon “commercial terms” and I am satisfied that the best evidence of what “commercial terms” might reasonably be expected to have been, in September 2015, were the terms upon which PLC lent money to BIL in May 2010 (2.5 % above Lloyds TSB Banks base rate) which are the terms which Mr Sharratt “copied across” from the PLC/BIL loan to the PLC/ABF loan and I find that those are the terms on which the PLC/ABF loan was made. In short I find those terms to be appropriate because: (a) they provide for a margin to be made by PLC over and above the rate of interest paid by PLC on monies borrowed by PLC from its bank (although PLC did not need to borrow money to advance the £1,006,000 to ABF (PLC did borrow from its bank to lend money to BIL, in May 2010) because it came out of PLC’s cash reserves I am still satisfied that that rate is still an appropriate commercial rate); and (b) professional advice was taken upon the PLC/ABF loan and the rate of interest determined after taking that advice into account.

My answers to issues 11-13 do not support any of the allegations in the ABPT Petition which are clearly allegations that Paul attempted to commit a fraud, for his own personal benefit, in connection with the acquisition of Barn Farm by ABF, using the funds of PLC. Issue 14 is not however confined to pleaded breaches of duty and I find that there have been the following un-pleaded breaches of duty, in relation to the matters I have dealt with in Issues 11-13: (a) a failure by all the directors of PLC/ABF to declare their interests, as shareholders of ABF and PLC, in the PLC loan to ABF under Section 177 CA 2006 (as the directors of PLC/BIL had done in relation to the PLC loan to BIL); (b) a failure by all the directors of PLC/ABF to comply with their duty under Section 174 CA 2006, to act with reasonable skill and care, by not agreeing the terms upon which PLC lent £1,006,000 to ABF, on or before 14 September 2015 and a failure to document that loan properly at the time (as the loan by PLC to BIL had been); and (c) the backdating of the ABF resolution and the PLC/ABF Loan Agreement to 14 September 2015 was a breach of fiduciary duty, principally by Mr Sharratt who I find orchestrated the backdating and execution of those documents, but also by Paul who signed the PLC/ABF Loan Agreement on behalf of PLC without questioning whether it was right to backdate it (I am not satisfied that Mr Tomkinson or Mr Ellis were aware of the backdating of those documents (they denied it and they were not challenged on those denials by Mr Zaman) but as I have said I am not satisfied, for the reasons already explained that the backdating of the resolutions and loan document was dishonest. No loss has been suffered by PLC/ABF as a result of the failure of the directors of PLC/ABF to agree and document the terms of the loan in September 2015, because I am satisfied that the PLC/ABF Loan Agreement does represent a proper commercial basis for the loan, and I have found its terms to be the terms of the loan.

PLC and 4R; or

the Partnership and 4R

Both experts and Mr Zaman and Mr Auld agree that the contract for the removal of lime from the Cemex Site was between PLC and 4R (or rather PLC and Bi-Product and then PLC and 4R) and I so find.

Paul accepts that he determined what rates the Partnership should charge PLC for transporting waste from the Cemex Site. In paragraph 46 of his second witness statement, Paul says that the Partnership charged Bi-Products/4R £230 plus VAT for loads transported from the Cemex Site, the same as Gilbert, the other sub-contractor employed by PLC and at paragraph 50 that, notwithstanding that Mr Bell has concluded that: (a) PLC made a profit of 8% on the difference between what Gilbert charged PLC to transport waste from the Cemex Site and what PLC charged Bi-Products/4R; but that (b) PLC did not make a similar profit on the transport work invoiced by the Partnership to PLC, PLC made the same margin on the same work carried out by the Partnership/Gilbert. I conclude that the terms of the sub-contract between the Partnership and PLC were that the Partnership would charge the same rates as Gilbert, for the same haulage work because it would only be possible for PLC to make the same margin on the same work carried out by the Partnership and Gilbert if they both charged the same amount for the same work. For the avoidance of doubt, as Paul, in paragraph 50 of his second witness statement asserts that PLC made the same margin on the same transport work sub-contracted to and carried out by the Partnership as it made on transport work sub-contracted to and carried out by Gilbert, I find that it was not a term of the sub-contract between PLC and the Partnership that PLC would bear any of the Partnership’s costs of providing the transport services, in addition to paying the Partnership’s invoices (for example the driver’s wages or the costs of running and maintaining the Partnership vehicles used by the Partnership to transport the Cemex waste).

There was a clear conflict of interest between Paul’s position as a partner in the Partnership and his position as a director of PLC. The conflict was that: (a) in deciding whether PLC should enter into a sub-contract with the Partnership and if so, on the terms of that sub-contract, Paul’s personal interests, as a partner in the Partnership lay with PLC agreeing to enter into a sub-contract with the Partnership so that the Partnership could make a profit out of the sub-contract and for the terms of the sub-contract to be as risk free and lucrative as possible for the Partnership (as he had a 50% interest in the Partnership and his wife held the remaining 50% interest); and (b) as director of PLC it was Paul’s duty to ensure that PLC only entered into a contract with the Partnership if it was in the interests of PLC to do so and if it was, to ensure that the terms of the sub-contract were as risk free and lucrative as possible for PLC.

Mr Auld and Mr Zaman agree, consistent with the judgment of David Richards J (as he then was) in Re Corain Limited 2012 EWHC 2343 (Ch) at paragraph 583, that Section 175 CA 2006 (duty to avoid conflicts of interest) and Section 177 CA 2006 (duty to declare interest in proposed transactions or arrangements) are mutually exclusive, by virtue of section 175 (3) CA 2006 which provides “This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company”.

Here, the sub-contract between the Partnership and PLC, for the Partnership to transport waste from the Cemex site, is a transaction or arrangement with PLC and therefore the provisions of Section 177 apply to it and not the provisions of Section 175.

Section 177 CA 2006, where relevant provides as follows:

If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors.

the declaration may (but need not) be made:

at a meeting of the directors, or

by notice to the directors in accordance with: (i) section 184 (notice in writing), or (ii) Section 185 (general notice).

if a declaration of interest under this section proves to be, or becomes, inaccurate or incomplete, a further declaration must be made.

any declaration required by this Section must be made before the company enters into the transaction or arrangement.

a director need not declare an interest:

if it cannot reasonably be regarded as likely to give rise to a conflict of interest;

if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware…..”:

In Gwembe Valley Developments Co Limited v Koshy [2003] EWCA Civ 1048 Lord Justice Mummery at paragraph 65 of his judgment said, in describing what disclosure a director must provide to shareholders, in order to comply with his duty not to make an unauthorised profit from his position said ”Disclosure requirements are not confined to the nature of the director’s interest: they extend to disclosure of its extent, including the source and scale of the profit made from his position so as to ensure that the shareholders are “fully informed of the real state of things” …”. Although Gwembe was concerned with director’s common-law duties, prior to the enactment of the CA 2006 (and dealt with a duty to disclose to shareholders rather than directors) Chapter 2 of the CA 2006, which sets out the general duties of directors of which Section 177 forms part was predominantly a codification of director’s existing common-law duties. I find Gwembe helpful, for those reasons, in illustrating one aspect of what the obligation of a director under Section 177 CA 2006 to provide disclosure of the nature and extent of their interest in a contract with the company entails.

In my judgment, the purpose of Section 177 CA 2006 is to ensure that the other directors of a company have sufficient information about the contract in which the relevant director is interested to enable them to decide whether or not it is in the interests of the company to enter into that contract and if so on what terms. The likely profit that the other contracting party will derive from the contract (in which the director is interested) is one aspect of the disclosure that I consider the relevant director must make, as will be the terms of the contract and the profit that the index company is likely to make as a result of entering into the contract and any known risks, for the company, associated with entering into that contract. This will enable the other directors to decide: (a) whether it is in the interests of the company to enter into a contract of the type proposed; (b) if so, whether to enter into that contract with the other director or party in which the director has an interest; and (c) if so, on what terms the company should enter into the contract.

As to whether Paul complied with his duties under Section 177, I find as follows:

I will set out in the paragraphs that follow, the reasons why I have made the findings I have made, in paragraph 449.

In the Respondent’s Defence to the PLC Petition, at paragraph 45.10 it is asserted that “Mr Paul Bridgen made full and frank disclosure to the board of [PLC] and the petitioner [Andrew] was aware of Mr Paul Bridgen’s said interest in the contract.” The Respondents’ Part 18 Replies state that the disclosure was made in a Board Meeting, however the Respondents’ witnesses, in their witness statements (other than Mr Sharratt) do not support the assertion that Paul made any relevant disclosure of the Partnership’s Cemex sub-contract, in a Board Meeting of PLC.

Mr Ellis and Mr Tomkinson in their witness statements say that they do not recall discussing the Cemex contract “at board level”. Mr Tomkinson maintained that position in cross examination. Mr Ellis, in cross examination, said that now that he had had his memory refreshed by looking at board minutes, he believed that the Cemex contract had been disclosed at a board meeting. Mr Ellis’s memory appears to have been refreshed by seeing Board Minutes dated 7 September, 5 October and 2 November 2010. These board minutes refer to the results for PLC of its participation in its contract with Bi-Products/4R and not to the sub-contract between the Partnership and PLC and do not suggest that there was any discussion of that sub-contract. In cross examination, Mr Ellis said that he could not recall the content of the meeting, at which he thought that Cemex had been discussed. It seems to me that Mr Ellis did not have any true recollection now of there being a discussion of any Cemex contract at all, and even if there was a discussion, the Board Minutes suggest (and I find) that any discussion was confined to what PLC was making out of its contract with Bi-Product and did not concern any detail of the Partnership sub-contract with PLC.

In Paul’s second witness statement, at paragraph 43 he says that he is sure that Andrew, Mr McQuaide, Mr Ellis, Mr Tomkinson and Mr Sharratt all knew about the PLC Cemex contract and that some of the work was being sub-contracted to the Partnership by PLC. Paul refers to the turnover from the Cemex contract having been included in PLC’s figures which were sent to Andrew. In his cross-examination, Paul said he was 100% sure that all the directors knew about the Cemex contract but he could not say that their knowledge was as a result of a board meeting and that he was a 100% sure that he spoke to all the directors before the contract started. When Mr Zaman asked Paul about what he had told particular directors he said that: (a) he thought he would have told Mr Ellis that PLC’s contract was with Bi-Products and the Partnership was transporting the waste; (b) he would not have told Mr Tomkinson as much as he told Mr Ellis; (c) he was not sure what Mr McQuaide knew; and (d) he thought he would have discussed it with Mr Large more extensively than anyone else. Paul accepted that he would not have given to any of the directors any profit forecasts for the Partnership and that he decided what the Partnership should charge PLC, with no input from any other director of PLC and nor did he tell the directors what the terms were.

In paragraph 47 of his witness statement, Mr Sharratt maintained that he recalled a board meeting of PLC at which Paul had mentioned the Cemex opportunity, and Paul suggested, at that meeting, there would be a bit of the margin in it for PLC, which might represent a useful income stream for PLC. Mr Sharratt said it was agreed, by the directors that, on the basis that there was minimal capital expenditure for PLC and some margin potential for PLC, that Paul should take it forward for PLC. In cross examination Mr Sharratt was unable to provide any detail of the board meeting that he said had taken place, at which the Cemex opportunity was discussed.

Mr McQuaide, in his witness statement (paragraphs 48, 56 and 59) says that he first learnt about the existence of the Cemex contract as a result of discussions that he had with the PLC drivers that were involved in the contract and not at a board meeting or through any discussions with other directors. He says he asked Paul about what the profit or loss was for Cemex and Paul told him that Paul would discuss it with Mr Sharratt “off-line”. Mr McQuaide maintained that position during his cross examination and I accept his evidence.

As for Andrew, he says he had no knowledge of the Cemex contract. In paragraph 55 of his witness statement, Mr McQuaide says that he asked both Paul and Andrew about the Cemex contract, Paul said it was a private matter and Andrew did not question it so he thought it was to do with BIL rather than PLC. Andrew was asked about his knowledge of Cemex in cross examination, Andrew said that Paul did not tell him about it and when he saw old lorries in the yard at Enterprise House (which he complained to Paul about because they were old and battered and detracted from the image he considered PLC was trying to portray) Paul told Andrew that it was a private matter.

I am satisfied that all of the directors of PLC, except Mr McQuaide (but including Andrew) knew about the involvement of PLC in the contract with Bi-Products, at around the time the contract started because Paul mentioned it to them individually (with the exception of Mr McQuaide) but not at a board meeting. I find this because:

I am however satisfied that Paul did no more than make those directors that he did tell about Cemex aware that it involved PLC contracting with Bi-Product and the Partnership becoming a sub-contractor to PLC, in order to transport the waste from the Cemex Site. There was no disclosure of what the Partnership would charge PLC for its services, what margin PLC would make on the transport services provided by the Partnership, PLC’s expected profit from the contract as a whole, what profit the Partnership was expected to make before the sub-contract started or at any point thereafter or what profit the Partnership was actually making. The directors of PLC were also unaware that Paul had arranged to place Partnership vehicles used on the Cemex sub-contract on the PLC’s Operator’s Licence, or that the Partnership did not have its own operator’s licence which would have allowed it to transport the Cemex waste.

Andrew asserts in the ABPT Petition that PLC's resources (employees, fuel, and repair and maintenance services) have been used by the Partnership and that PLC paid for road tax and insurance for Partnership vehicles without PLC being properly compensated for that use: (a) in connection with the Partnership performing the Cemex sub-contract (paragraph 58.2) and Biffa subcontracts (paragraph 54); and (b) generally (under the heading of “Home Farm”) (paragraphs 55-58). Andrew says that, in each case the Respondents caused or allowed such use of PLC’s resources by the Partnership to occur and that, in each case, this amounts to a breach of duty by the Respondents. Issues 15-18 for the Cemex sub-contract and issues 20-23 for the Biffa sub-contract do not however ask what use the Partnership made of PLC's resources, for the purpose of carrying out those sub-contracts, but issues 25-27 do ask what assets of PLC have been used by the Partnership (and issue 28 asked whether the Partnership has been recharged by PLC properly for that use). I have therefore dealt with, as part of issues 25-27 the question of what resources of PLC have been used by the Partnership (including in connection with the Partnership’s performance of the Cemex and Biffa sub-contracts) and I have summarised below what findings I have made, in answering issues 25-27 below, in respect of the use of PLC's resources by the Partnership to assist it in performing the Cemex sub-contract.

In summary, so far as the Cemex sub-contract is concerned, I have found (in answering issues 25-29 below) that:

As to whether the Respondents breached the duties that they owed to PLC, by causing or allowing the Partnership to use PLC's resources for the purpose of the Partnership’s Cemex sub-contract (as summarised above):

In the ABPT Petition, Andrew asserts that Paul breached his duty to PLC by not declaring the nature and extent of his interest in the Cemex sub-contract and his fiduciary duties to PLC by causing PLC employees and sub-contractors to carry out part of the Partnership’s obligations under the sub-contract, causing Partnership vehicles to be added to PLC Operator’s Licence and to be maintained, fuelled, taxed, insured and repaired at the expense of PLC. As for the use of PLC’s employees and fuel and causing PLC to repair and maintain, tax and insure Partnership vehicles used on the Cemex sub-contract I will consider this point separately as part of the allegation that Paul caused PLC resources to be used for the benefit of the Partnership (to avoid double counting). As to the remaining points, I am satisfied that Paul has breached his duties as a director of PLC in the following ways:

Section 173 (1) CA 2006 provides: “A director of a company must exercise independent judgment.” I find that Mr Ellis and Mr Tomkinson breached their duties under Section 173 CA 2006 for the reasons that follow.

At paragraph 47 of his witness statement, Mr Tomkinson says “I have no recollection of the Cemex or Biffa contracts being discussed at board meetings. To my mind if everything was undertaken with the full knowledge of the executive directors it didn’t necessarily need to have been mentioned at board meetings. Because of the relationship between PLC and the Partnership there could possibly have been a conflict of interest. However as far as I was concerned, Paul had always operated on the basis that he made sure that he fully took the company’s interest into consideration.”

Mr Tomkinson is and was in 2010, a non-executive director of PLC, as such it is not reasonable to expect that he would exercise the sort of control over the affairs of PLC that can reasonably be expected of an executive director. Nonetheless, whilst I have accepted that Paul did not disclose the sub-contract between the Partnership and PLC at a board meeting of PLC, which Mr Tomkinson, as non-executive director could be expected to have attended, I am satisfied that Mr Tomkinson knew in general terms at or about the time that the sub-contract was entered into, that a sub-contract had been entered into between the Partnership and PLC and he knew that Paul was a partner in the Partnership.

There are three problems, with paragraph 47 of Mr Tomkinson’s witness statement, so far as him fulfilling his duties under section 173 (1) are concerned:

As for Mr Ellis he is and was an executive director (although he refers, in paragraph 5 of his witness statement, to being engaged fully in his own role as purchasing director and having very little time available to become involved in such matters as the Biffa and Cemex contracts).

In paragraph 51 of his witness statement, Mr Ellis says “Whilst I played virtually no role in the matters relating to the Cemex and Biffa contracts, I was aware through conversations with Paul Bridgen that these contracts had been acquired by PLC and that some of the work in distributing and land spreading the waste products from these companies was being done by the Partnership. I had trust and confidence in Paul and could not see any damage to the business coming out of this arrangement…”.

The position for Mr Ellis is therefore similar to that for Mr Tomkinson and that is that he was aware that PLC had entered into contracts with the Partnership, but he took no interest in the detail of the contracts or in ensuring that either PLC’s contracts with Bi-Products/4R or PLC’s sub-contracts with the Partnership were contracts which it was in the interests PLC to enter into or in the terms on which it did so. Mr Ellis simply trusted Paul to ensure that the contract was fair to PLC. I am afraid that that also is an abdication of Mr Ellis’s responsibility to act independently under Section 173.

I think that I should mention, in fairness to Mr Tomkinson and Mr Ellis that, based upon my findings that all of the directors of PLC (including Andrew, but excluding Mr McQuaide) knew about the Cemex sub-contract with the Partnership before or shortly after it started and all of the directors (with the exception of Mr McQuaide) simply left Paul to it, they all, in my judgment equally breached their duties under Section 173 to act independently.

The issues for the Biffa sub-contract are identical to the issues for the Cemex sub-contract and the answers to those issues are, in most cases the same. In dealing with the Biffa issues (20-24) I will indicate whether the answer is different to that given by me for the identical Cemex issue and if so why. If my answer is different, then I will set out my reasons for that answer in full.

PLC and 4R; or

the Partnership and 4R

The answer to this issue is the same as for issue 16 in relation to Cemex and that is that, both experts and both counsel agree that the evidence shows that the contract with 4R for the Biffa Site was between 4R and PLC.

I accept the evidence that Paul gives in paragraph 78 of his second witness statement as to the terms of the Partnerships sub-contracts with PLC for the transport/spreading of waste from the Biffa Site.

Paul says at paragraph 78 of his second witness statement and I accept that, initially the contract between PLC and 4R for the Biffa Site was for the transport of solid waste and PLC sub-contracted the transport of the solid waste to the Partnership and the Partnership in turn sub-contracted the transport of the solid waste to a third party at “little or no margin”. That evidence is imprecise, as Paul does not suggest that there was any formula for the Partnership to charge PLC more than what it was charged by the third party. In those circumstances I find that the agreement was that the Partnership would simply charge PLC the same amount as it was charged by the third party, I do so because Paul has not provided evidence that the terms were more advantageous to the Partnership than that.

Paul says (paragraph 78 of his second witness statement) that, from 2013, the contract with 4R for the disposal of waste from the Biffa Site involved the removal and spreading of liquid waste and 4R employed PLC and another contractor to do that. PLC transported the liquid waste which it collected from the Biffa Site either to lagoons, or to Prestons which acted as sub-contractor to PLC in spreading it on farm land. From late 2014, the other contractor dropped out of the contract with 4R and from that point PLC was responsible for collecting all the liquid waste from the Biffa Site and spreading it. Prestons and the Partnership were then employed by PLC to spread the liquid waste on land. If the land on which it was to be spread was close to the Biffa Site, Prestons/the Partnership would collect it direct from the Biffa Site, or if not, it was delivered by PLC’s vehicles to Prestons/the Partnership for spreading. To do this the Partnership used its own tractors, but PLC’s tankers and 15 metre boom. The Partnership charged £7-£8.50 per tonne for the liquid waste which it spread on farm land which Paul says took account of the fact that the Partnership was using PLC’s tankers and 15 metre boom, to spread the liquid waste. Paul accepts that he alone decided what the Partnership would charge PLC.

I find that the same conflicts of interest arise in relation to the Partnership’s sub-contracts with PLC in relation to transport and disposal of waste from the Biffa Site as arose in relation to the sub-contract between PLC and the Partnership for transport of waste from the Cemex site, (and for the same reasons) in circumstances where Paul determined for both the Partnership and PLC what the Partnership would charge PLC and upon the other terms of the sub-contracts.

The relevant section of CA 2006, as for Cemex, is Section 177 and the nature and the extent of the disclosure which Paul was required to make to the Board of Directors of PLC is the same as I have set out in answering Issue 18.

The 4R contract with PLC for the Biffa site, from the end of 2012 was for the disposal of solid waste only. PLC entered into a sub-contract with the Partnership, and in turn, the Partnership entered into a sub-contract with a third party to transport the waste. The directors of PLC at the end of 2012 were Andrew, Paul, Mr Tomkinson, Mr Ellis and Mr Sharratt (Mr Large having been dismissed in July 2012 and Mr McQuaide having left in 2011).

I am satisfied, for the reasons that follow, that: (a) there was no discussion amongst the directors of PLC at a board meeting of either the PLC contract with 4R for the removal of solid waste from the Biffa Site, or of the sub-contract between PLC and the Partnership to transport that solid waste; (b) Paul did tell Mr Ellis, Mr Tomkinson and Mr Sharratt (but not Andrew) that PLC was entering into or had entered into the contract with 4R to remove waste from the Biffa Site and that PLC would be sub-contracting to the Partnership transport work on the contract; and (c) Paul did not tell any of the PLC directors what the Partnership would charge PLC for the work it would carry out, what profit the Partnership expected to make, or in due course, what profit it was making, nor did he tell the directors that the Partnership was itself sub-contracting the transport work to a third party or the identity of that third party.

It was the evidence of Mr Ellis and Mr Tomkinson that they could not recall being told about the 4R contract for the Biffa Site, at a board meeting. They both say that Paul told them about it, but neither of them suggest that they were provided, by Paul, with any of the details that I have found they were not provided with. I accept their evidence.

Mr Sharratt, in his witness statement, says that Paul told the directors of PLC, at a board meeting, about PLC’s Biffa contract and the Partnership’s sub-contract and that the board were happy with the arrangement to proceed. However I am not satisfied that that is correct: (a) it is contrary to the evidence of Mr Ellis and Mr Tomkinson both of whom say they have no recollection of there being any such discussion at a Board Meeting; (b) there are no board minutes recording any discussion about the removal of waste from the Biffa site (and unlike Cemex no board meetings referring to the revenue and profit that PLC was generating from the Biffa contract); and (c) I have rejected Mr Sharratt’s evidence that there was a discussion, at a board meeting of the contract to remove waste from the Cemex Site for similar reasons and this undermines the reliability of his evidence that the removal of solid waste from the Biffa Site was discussed at a board meeting.

As for Andrew, whilst I have found that Andrew knew about the removal of waste from the Cemex Site, I am not satisfied that he knew about removal of waste from the Biffa Site because: (a) for Cemex, I have accepted the evidence of Mr McQuaide that he told Andrew about Cemex, but Mr McQuaide had left before PLC entered into a contract with 4R in relation to the Biffa Site, so Mr McQuaide could not have told Andrew about Biffa; (b) PLC’s turnover and profit relating to the Cemex site are referred to in the minutes of the board meetings on 7 September, 5 October 2 November 2010 which I am satisfied Andrew would have seen, however there are no board minutes referring to Biffa; and (c) by the end of 2012, Andrew had become increasingly detached from the affairs of the Group companies (having dealt with the termination of Mr Large’s employment in July 2012 and having persuaded Paul to take on the role of Managing Director) so it is less likely that Paul will have told Andrew about Biffa.

Neither Paul nor Messrs Sharratt, Ellis or Tomkinson suggest that Paul gave any of them details of what the Partnership would charge PLC for arranging to transport the solid waste, or what profit the Partnership was likely to make, or in due course what the Partnership had made from arranging to transport solid waste from the Biffa Site.

From the end of 2014, the Partnership started to spread liquid waste, from the Biffa site, as a sub-contractor to PLC. At that point the directors of PLC were Paul, Mr Sharratt, Mr Ellis and Mr Tomkinson (Andrew having resigned, on my findings, as a director of PLC in August 2014). I am satisfied that Paul will have told Mr Sharratt in general terms about the Partnership starting to spread liquid waste from the end of 2014, under the terms of a sub-contract with PLC. I am not satisfied that Paul mentioned this to either Mr Ellis or Mr Tomkinson at all. I am not satisfied that Paul told Mr Sharratt what the terms of the sub-contract were or what profit the Partnership was likely to make or in due course what profit the Partnership was making from this sub-contract. My reasons are as follows:

As already noted, issues 20-23 which refer to the Biffa sub-contracts do not ask what use the Partnership made of PLC’s resources to assist it in performing the Biffa sub-contracts, but issues 25-27 (below) do ask more generally what resources of PLC have been utilised by the Partnership.

I have concluded, in answering issues 25-27 (below) that: (a) I am not satisfied that any employees of PLC were used by the Partnership to assist it in performing its role under the Biffa sub-contracts (paragraphs 501-531); (b) the Partnership did not use PLC's equipment or repair or maintenance services for its vehicles involved in the Biffa sub-contracts (paragraph 536 (c)); but (c) that the Partnership did use PLC fuel for the tractors which were involved in spreading liquid waste on the second Biffa sub-contract (paragraph 539 (b)). I am not satisfied that PLC taxed or insured any Partnership vehicles involved in the Biffa sub-contracts, because Partnership vehicles were not involved in the Biffa sub-contracts until 2014, which is well after Partnership vehicles ceased to be included on PLC's Operator’s Licence and it was the inclusion of Partnership vehicles on PLC’s Operator’s Licence which led to them being taxed and insured at PLC’s expense (the Partnership vehicles involved in spreading liquid waste were in any event tractors and not lorries which had been previously included on PLC's Operator’s Licence).

As to whether the Respondents breached their duties to PLC, by causing or allowing the Partnership to use PLC's fuel for the Partnership tractors engaged in spreading liquid waste from the Biffa Site:

In the ABPT Petition, Andrew asserts that Paul breached his duty to PLC by not declaring the nature and extent of his interest in the Biffa sub-contracts and his fiduciary duties to PLC by causing PLC employees and sub-contractors to carry out part of the Partnerships obligations under the sub-contracts, causing Partnership vehicles used on the Biffa sub-contracts to be added to PLC Operator’s Licence and to be maintained, fuelled, taxed, insured and repaired at the expense of PLC. As for the use of PLC’s employees and fuel and causing PLC to repair and maintain, tax and insure Partnership vehicles used on the Biffa sub-contracts I will consider this point separately as part of the allegation that Paul caused PLC resources to be used for the benefit of the Partnership (to avoid double counting). As to the remaining points, on my findings:

I note, in passing that although Mr Sharratt is not a respondent to the ABPT Petition (because he is not a shareholder of ABPT) he breached his duties under Section 173, in relation to both the first and the second sub-contracts between PLC and the Partnership relating to the Biffa Site, because, on my findings, he was aware of both sub-contracts and, just like Mr Ellis and Mr Tomkinson simply trusted Paul to do the right thing in agreeing those contracts for both PLC and the Partnership. I am not satisfied that Andrew (who was a director PLC when the first Biffa sub-contract between PLC and the Partnership for the transport of solid waste was entered into) breached his duties under section 173 CA 2006, in relation to the first Biffa sub-contract, because I have found that he was not told about that sub-contract.

In his oral closing argument, Mr Auld said that I should not attempt to resolve the precise amount of time for which PLC employees worked for the Partnership or the precise value of PLC’s assets used by the Partnership. Mr Auld says that the onus is on Andrew to prove that there has been a failure by PLC to recharge the Partnership enough to compensate PLC for the use of its employees and assets by the Partnership and he has not proved it.

Mr Zaman refers me (in relation to Issues 25-29 generally to the decision of the Supreme Court in Sainsbury’s Supermarkets Ltd v Visa Europe Services LLC and MasterCard Inc [2020] UKSC 24 in support of his proposition that I should take a “broad axe” approach to estimating the amount of PLC employee time and PLC resources consumed by the Partnership. At paragraph 217 and 218 of the judgment of the Supreme Court, in Sainsbury’s, the Supreme Court said:

The court in applying the compensatory principle is charged with avoiding under-compensation and also overcompensation. Justice is not achieved if a claimant receives less or more than its actual loss. But in applying the principle the court must also have regard to another principle, enshrined in the overriding objective of the CPR, legal disputes should be dealt with at a proportionate cost. The court and the parties may have to forego precision, even where it is possible, if the cost of achieving that precision is disproportionate, and rely on estimates. Common law takes a pragmatic view of the degree of certainty with which damages must be pleaded and proved…

The particular point that the Supreme Court was dealing with in the Sainsbury’s case was that, if the cost of establishing the precise level of loss is disproportionate, then the court may rely on estimates of that loss. The situation here is different, in that, at this stage I am not concerned with precisely calculating the cost to PLC of supplying its employees for use by the Partnership or the precise value of PLC’s assets used by the Partnership. Instead I have to decide whether the affairs of PLC have been conducted in a manner which is unfairly prejudicial to Andrew as a member of ABPT. For that purpose, a precise calculation of the loss to PLC, caused by the Partnership using its employees and assets is not necessary, an estimate will suffice provided it is accurate enough to enable me to answer issue 28 which is whether PLC has been properly compensated for the use of its employees and assets by the Partnership by recharges made by PLC to the Partnership.

I have considered Mr Auld’s submission that, if Andrew cannot show what resources of PLC have been used by the Partnership, then he has not proved his case, that PLC has not been compensated for that use by recharges made by PLC to the Partnership. However, as will become apparent, when I deal with the Partnership’s use of particular PLC resources, the principal reason why I cannot say precisely what PLC resources have been used by the Partnership is attributable to Paul not keeping or ensuring that a proper record has been kept of that use and in some cases and to an extent, because the Respondents have not produced evidence from witnesses directly involved in the use of those resources (principally Paul’s sons Sam and William). I will therefore take a “broad axe” approach at this stage to estimating the Partnership’s use of PLC’s assets in order in order to determine issue 28 (whether PLC has been properly compensated for the use of those assets) and I will also use that approach in making findings as to the use of those employees/assets, to hopefully enable the experts to provide some estimates of the value of that use for consideration at any remedies hearing.

Paul accepts that employees of PLC did work for the Partnership, so that point is not in dispute, but which employees, doing what work and for what period is in dispute.

The first point I will make is that it is common ground that no records have been kept of what work was carried out, over what period and by which PLC employees, for the Partnership.

The current directors of PLC (other than Paul) provide no information to assist me in answering Issue 25: (a) Mr Sharratt at paragraph 150 of his witness statement says “ I was aware anecdotally from time to time that employees were involved in off-site activities…”and he was aware that Mr Miller was driving a harvester; (b) Mr Ellis, at paragraph 47 of his witness statement says “I was also aware that drivers and others employed by PLC from time to time did work at Home Farm but what they were doing, who it was for and who was paying for it I didn’t know. I trusted Paul to ensure that all necessary credit was given.”; and (c) Mr Tomkinson does not deal with the point in his witness statement at all.

As for Andrew’s witnesses:

The best source of information on this issue ought to be Paul, because he is the person, on whose instructions PLC employees will have been allocated to do work for the Partnership, but he was providing information from his memory, and as I will mention shortly his evidence on this issue has changed, at least in certain respects over time. The other potentially reliable sources of the evidence are those PLC employees who were actually involved in working for the Partnership (at least as to the work they did). Those employees who gave evidence on this are all witnesses relied on by the Respondents and are: (a) Mr Whetton; (b) Mr Emery; (c) Mr Elliott-Dickens; and (d) Mr Miller, but their evidence is of more limited use than it might be expected to be, because in some cases, the employees themselves were not always aware of whether what they were doing was for PLC or the Partnership.

Eight employees of PLC are named in the ABPT Petition as having worked for the Partnership. In addition to these nine employees, Mr Zaman refers to Mr Parker and Mr McCabe, as employees of PLC who have worked for the Partnership. In advancing a claim for those two additional employees, Mr Zaman relies upon the fact that the ABPT Petition says that other employees of PLC, whose identities will be ascertained on disclosure and inspection of the PLC’s books and records) worked for the Partnership. In my judgment, Andrew is confined to those nine employees who are mentioned in the ABPT Petition, it was open to him after inspection, to have amended his ABPT Petition to include Mr Parker and Mr McCabe as additional PLC employees who he wished to allege were engaged in working for the Partnership. He did not do so and therefore, I will only consider the nine employees mentioned in the ABPT Petition.

I will now consider each of those 8 employees in turn, in doing so I will not only make findings as to the work that they did for the Partnership and over what period, but also the amount of time spent by them during that period in working for the Partnership, rather than PLC (in order that I can answer issue 28, whether the use of those employees time was correctly recharged by PLC to the Partnership).

Anthony refers, in his witness statement, to working on the Cemex contract while being paid by PLC, but it is clear, from his witness statement, that the work that he was doing on the Cemex contract was loading lorries overnight with waste at the Cemex site, which is the part of the Cemex contract performed by PLC and not by the Partnership, under its sub-contract with PLC. Anthony was not therefore working for the Partnership on the Cemex contract.

Anthony also says, in paragraph 26 of his witness statement, that he did general work for Paul at Home Farm, collecting potatoes which could not be sold for human consumption and delivering them to farms for animal feed. He says that both he and Mr Elliott-Dickens were given Partnership ticket books for recording the deliveries to farms, and for that reason he believes that when he made those deliveries he was working for the Partnership. Anthony then goes on to say, in paragraph 34 of his witness statement, that PLC paid for most of the work that he did and at paragraph 35 that he only received three or four cheques from the Partnership during the time that he was working for “Paul”.

I am not satisfied that Anthony worked at Home Farm for the benefit of the Partnership, whilst being paid by PLC because:

Andrew says that Mr Whetton drove lorries on the Cemex and Biffa contracts and worked at Home Farm for the Partnership.

In his first witness statement at paragraph 53.2, Paul said that he had found no evidence that Mr Whetton worked at Home Farm. However, whilst in paragraph 248.1, of his second witness statement, Paul said that he had spoken to Mr Whetton and Mr Whetton could not recall having worked at Home Farm, Paul went on to say at paragraph 248.2, that Mr Whetton had driven Partnership lorries for 4 days in 2013, but he does not say doing what.

In his witness statement, Anthony identifies Mr Whetton as one of the PLC employees who work at Home Farm.

In his witness statement, Mr Whetton says: (a) at paragraph 4 that he worked on Cemex loading lorries at night for around a year or so, and occasionally took out a lorry to a farm field or to Broughton; (b) at paragraph 10 that he drove on the Biffa contract pulling a road tanker, but never spread any liquid digestate; and (c) that he had done a couple of days at Home Farm, one of which was not a working day and one day at Home Farm, welding machinery.

In their cross examinations, both Mr Emery and Mr Elliott-Dickens confirmed that Mr Whetton had worked on the Cemex contract. In his cross-examination, Mr Whetton said that, at the time he drove the Scania and Volvo lorries (which are owned by the Partnership) he thought that they were owned by PLC and that he was driving for PLC. This appears however to make no difference to his evidence that he only took a lorry out on the Cemex contract occasionally.

I find that Mr Whetton:

At paragraph 53.3 of Paul’s first witness statement he says that he spent some Sundays at Home Farm, training Mr Elliott-Dickens particularly in welding until 2011 and that sometimes Mr Elliott Dickens was paid by PLC and sometimes by the Partnership. Paul says that he accepts that when he was training Mr Elliott-Dickens, Mr Elliott-Dickens would have done some things that benefited the Partnership. He says there are no records of these occasions and an appropriate credit will be no more than £1,600.

In Paul’s second witness statement, at paragraph 249.2, he accepts that Mr Elliott- Dickens worked for the Partnership for a few months at the end of the Cemex contract.

In Mr Elliott-Dickens’ witness statement he says that: (a) he did not work much at Home Farm, he did one day on a potato harvester with Tim Gilbert and a couple of days spreading dredgings from the PLC lagoons; (b) he drove the Partnership lorries on the Cemex contract, he can’t remember how long he did that for, it could have been half a year or longer; (c) he also worked on the Biffa contract on a handful of occasions driving the Partnership’s 8 wheeler tipper truck taking sludge to fields; (d) he spent a longer period of time driving Volvo lorries pulling road tankers of liquid waste on the Biffa contract mostly delivering it to lagoons and occasionally to waiting tractors. He never spread any liquid waste on the Biffa contract; (e) he spent a considerable period of time spreading waste water from the lagoons at Enterprise house; and (f) he can’t recall spending time training on welding at Home Farm with Paul.

In his cross-examination, Mr Zaman put it to Mr Elliott Dickens that he had been driving on the Cemex contract for a year, Mr Elliott Dickens said that a year seemed too long when it was put to him it was 9 months he said “maybe”.

A number of other witnesses confirmed Mr Elliott Dickens’s involvement in the Cemex contract but none of them were able to help in determining the period for which he had been involved in driving on this contract.

I find that Mr Elliott-Dickens performed the following work for the Partnership, whilst being employed and paid by PLC:

In his first witness statement, Paul said that he accepted that Mr Miller had driven a harvester for the Partnership for four seasons, driving for no more than six weeks in each season and for no more than 70 hours a week. In his second witness statement, Paul said that he understood that Mr Miller had also been involved in planting potatoes for one season.

In his witness statement, Mr Miller confirmed that he had driven a harvester each year since 2016 and that in a low season he would drive the harvester for as little as four weeks and in a high season, for as much as two months, in each case 12 hours per day on average and 7 days a week. In cross-examination, Mr Miller confirmed that the length of the harvest depended upon how many potatoes had been planted each season and that he worked for 12 – 14 hours a day when harvesting and finally he confirmed that he had been involved in planting potatoes in 2017.

I find that Mr Miller worked for the Partnership, whilst being paid by PLC:

In his first witness statement, Paul said that Mr Ward drove a Partnership vehicle for 3-4 weeks, but he has no record of the occasions upon which this occurred. There is no witness statement from Mr Ward.

In their witness statements, Anthony referred to Mr Ward working at Home Farm at around the same time as the Cemex contract was underway and Mr McQuaide said that Mr Ward drove tractors on the Partnership land but he gives no detail of the amount of time involved.

In his cross-examination, Mr Miller recalled Mr Ward working for PLC but he did not think that he had driven on the Cemex contract.

I find, consistent with Paul’s evidence, that Mr Ward drove for the Partnership, whilst being paid by PLC for 4 weeks, there are no records and there is no reliable evidence to contradict Paul’s estimate.

Paul could not recall whether Mr Emery had worked for the Partnership. In his witness statement, Mr Emery said that he had never worked for the Partnership as far as he was aware, he confirmed that he never worked at Home Farm and never drove on either the Cemex or Biffa contracts and that he had never done any farm work or driven any farm machinery. Mr Emery’s job is transport supervisor, for PLC and his evidence is that he has only driven lorries occasionally, when PLC was suffering driver shortages.

Mr McQuaide and Anthony both referred to Mr Emery as being one of the people who worked at Home Farm.

I accept Mr Emery’s evidence and find that he has not worked for the Partnership whilst being employed by and paid by PLC.

Sam is Paul’s eldest son. In his first witness statement, Paul accepted that Sam had been paid as an employee of PLC, whilst working for the Partnership in overseeing potato growing. In paragraph 256.1 of his second witness statement, Paul said that, since April 2016 Sam had been paid by PLC whilst spending 3-4 weeks at the start of each potato growing season driving tractors, 3-4 weeks at the end of each potato growing season harvesting potatoes with some organisational work in relation to growing potatoes between those dates. When not working on the potato crop, Paul said that Sam worked for PLC, including spreading PLC’s liquid digest from the lagoons at Enterprise House. During his cross-examination, Paul was asked why Sam had not made a witness statement, Paul accepted that there was no reason why Sam could not have made a witness statement.

In their cross-examinations: (a) Mr Emery said that Sam worked mainly on the farm; and (b) Mr Miller answered yes, when Mr Zaman asked him if Sam just worked on the farm.

In respect of Sam, I find:

In his first witness statement, Paul said that he accepted that William had worked more for the Partnership than for PLC. In his second witness statement, at paragraph 257.1, Paul said that William joined PLC in 2016 when he was still in full-time education, he spent almost the entire summer of 2016 carting lagoon waste from the PLC lagoons, he worked in the prep Department of PLC, and William and Sam came to help their grandfather, Alan, produce château potatoes each Christmas and that William carried out other work such as jet washing kit, for PLC.

Mr Emery and Mr Miller’s evidence in cross-examination in relation to William was the same as for Sam, namely, in the case of Mr Emery that William worked mainly at the farm and in the case of Mr Miller, he answered yes, when Mr Zaman asked him if William just worked at the farm.

In respect of William my findings as to when he worked for the Partnership, whilst being employed and paid by PLC are:

There is little direct evidence that the Partnership used equipment or machinery belonging to PLC. Such evidence as there is comes from Mr Brain who says that PLC’s low loader was often used to move agricultural machinery for the Partnership, PLC’s vehicles were used to transport maize grown by the Partnership for use in the AD Plant, Paul demanded that potato seed was collected by PLC’s vehicles and Paul and his “farmhands” often arrived unannounced in the evenings and at weekends and took away articulated vehicles from Enterprise House.

Paul, Mr Woolrich and Mr Baldwin all confirmed that PLC had some of its own agricultural machinery and equipment. This appears to have been used to empty the lagoons at Enterprise House and to dig lagoons elsewhere (including at Home Farm) in order to store waste water from PLC’s production process. Some of the agricultural machinery that Mr Brain refers to as being moved by PLC’s low loader may therefore have been PLC’s own machinery and equipment. Alternatively it could have been the Partnership’s equipment which was being used to empty and spread liquid waste from the lagoons at Enterprise House or to dig lagoons elsewhere for the liquid waste to be stored in. In this scenario the Partnership’s machinery and equipment were being used, at the time, for the benefit of PLC, in which case the use of PLC’s low loader, without charge to transport the Partnership’s machinery and equipment may have been appropriate.

Paul confirmed, during his cross examination that the Partnership sold maize to PLC to be fed into the AD Plant. It is not clear whether those arrangements required the Partnership to transport the maize to Enterprise House, or for PLC to collect the maize, and it is equally unclear whether any of PLC’s articulated lorries collected at night and at the weekend by Paul and his farm hands (assuming that they were PLC’s articulated vehicles) were to be used for purposes connected with PLC’s business or that of the Partnership. As for the collection of potato seed by PLCs vehicles, the potato crop, from 2016 (Mr Brain started his employment with PLC in 2017) belonged to ABF and therefore the benefit of having potato seed transported is likely to have accrued to ABF, rather than the Partnership. I am not satisfied, on the evidence available from Mr Brain, that the Partnership has made any material use of PLC’s machinery and equipment for the purposes of its own business.

The position is different for Andrew’s allegation that Partnership machinery and equipment was repaired and maintained at PLC’s expense. There is much more evidence of such maintenance and repair work being carried out. Given that Paul accepts that at least some maintenance and repair work, may have been carried out to Partnership machinery and equipment at Enterprise House, the question is really one of degree, rather than whether Partnership machinery and equipment was repaired and maintained at the expense of PLC at all:

I make the following findings regarding the repair and maintenance of Partnership machinery and equipment and vehicles by or at the expense of PLC:

The direct factual evidence presented by Andrew, that the Partnership has used fuel purchased by PLC consists of:

Relevant factual evidence of the Respondent’s witnesses consists of:

It follows from the above, that the Partnership has used and does use PLC’s fuel. As for when it has done so, my findings are as follows:

Whilst, during his cross examination, Paul suggested that recharges were made, by PLC to the Partnership, for the use of PLC employees for the benefit of the Partnership, I have not been taken to any documents that demonstrate that any such recharges have been made. It is not asserted that any recharges have been made for PLC fuel used by the Partnership, or for maintenance or repair work that I have found has been carried out to Partnership vehicles, equipment or machinery by PLC or otherwise at its expense. Whilst not included in issues 25-27 Andrew’s ABPT Petition does assert that Partnership vehicles were insured and taxed at the expense of PLC both generally (paragraph 57) and as part of his allegations relating to the Cemex (paragraph 48.2.3) and Biffa sub-contracts (paragraph 52.3). I will deal with it here. I am satisfied that the Partnership vehicles included on PLC’s Operator’s Licence were taxed and insured at PLC’s expense for the period that they were added to that licence. Paul suggested that the Partnership taxed and insured all its own vehicles throughout, whether they were on PLC’s Operator’s Licence or not. It may well have done, but this does not mean that PLC did not also tax and insure them and I accept Mr Baldwin’s evidence that he, as a matter of course would arrange to road tax and finance would arrange to place on PLC’s insurance policy, all vehicles included on PLC’s Operator’s Licence. There is no evidence of those costs being recharged to the Partnership.

I will mention now that Paul does say that allowance has been made for the use of PLC fuel and employees in connection with the husbandry work carried out by the Partnership for ABF, in that the Partnership has charged less than full NAAC rates to ABF, a matter I will mention in greater detail when dealing with Issue 30 below. He has also said that, if the Partnership had used its own fuel when working for PLC, it would have charged PLC for the use of that fuel, but where it used PLC fuel it has not done so.

I am satisfied that Paul breached his duties in the following respects:

I am satisfied that Mr Ellis breached his duty under Section 172 CA 2006 to act in the way that he considered, acting in good faith, would be most likely to promote the success of PLC for the benefit of its members as a whole, alternatively Mr Ellis’s more general fiduciary duty to act in the best interests of PLC and that he breached his duty under Section 173 CA 2006 to exercise independent judgment:

At paragraph 83 of his witness statement, Mr Tomkinson accepts that he knew that PLC vehicles were going to Home Farm for legitimate purposes, such as spreading waste, but he says he had no knowledge of PLC employees working at Home Farm or elsewhere for the Partnership, or of items being purchased by PLC for the Partnership.

I accept the evidence set out in paragraph 83 of Mr Tomkinson’s witness statement as truthful. I am also satisfied that, as a non-Executive Director of PLC, who visited Enterprise House relatively infrequently, unlike the executive directors, Mr Tomkinson cannot be expected to have the same knowledge of the day to day affairs and operation of PLC’s business as the executive directors. For example, unlike Mr Ellis, he had little opportunity to notice that the Partnership’s agricultural vehicles were filling up with fuel at Enterprise House on an almost daily basis. I am not therefore satisfied that Mr Tomkinson ought to have known that the Partnership was using PLC fuel, employees and maintenance and repair services. Absent that knowledge, I am not satisfied that Mr Tomkinson breached any fiduciary or statutory duties that he owed to PLC.

Finally I will, again mentioned Mr Sharratt, who is not a respondent to any of the petitions (because he is not a shareholder of any of the Group companies). Mr Sharratt is and was at all relevant times, the full-time executive finance director of PLC. That role gives him a greater responsibility than any other director of PLC for ensuring that any use of PLC’s assets by a third party is recorded properly and PLC compensated for that use, or if not that it did not happen. As such Mr Sharratt either had or ought to have had more knowledge of what resources of PLC were being used by the Partnership than Mr Ellis and Mr Tomkinson and more responsibility than them, for ensuring that that use was properly recorded and recharged. Instead Mr Sharratt left Paul, who was hopelessly conflicted, to take responsibility for recording the use of PLC’s resources by the Partnership and to decide what should be charged to the Partnership for that use and how and to notify Mr Sharratt’s department what should be charged to the Partnership for that use. Mr Sharratt must have known alternatively ought to have known that Paul was neither recording the use of those resources, nor providing a credit to PLC for their use by the Partnership in a transparent way. As such Mr Sharratt breached his duties under section 175 CA 2006 to PLC and for all those reasons I regard his breach as more serious than that of Mr Ellis who had neither the direct responsibility for ensuring that the use of PLC’s resources were properly accounted for that Mr Sharratt had, nor the visibility that Mr Sharratt had that they were not being accounted for properly.

The terms of the arrangements for the supply and cultivation of potatoes, as between PLC, ABF and the Partnership are not contained in or referred to in any document. Paul accepts that, once it was decided that ABF would grow potatoes, the Partnership would carry out the husbandry work to grow the potatoes and PLC would buy the potatoes, once grown, Paul decided, on behalf of ABF, PLC and the Partnership what the terms of the arrangements between those parties would be (other than the price at which PLC would purchase ABF’s potatoes, which was determined by Mr Ellis).

Mr Ellis says that he understood that the Partnership would charge ABF “standard rates”. Mr Tomkinson says that although he understood who was to do what, as between ABF, PLC and the Partnership, he had no input as to the price that PLC would pay for the potatoes or what the Partnership’s charges for the husbandry work would be.

In paragraph 172 of his witness statement, Andrew says that: “Over that Christmas [2015] Paul informed me that he was going to be growing hundreds of acres of potatoes to supply to [PLC] mostly on rented land. First he told me 200 acres then it increased to 300 acres and I believe that he in fact planted over 500 acres….. Paul informed me that [the Partnership] would be undertaking husbandry (provision of agricultural services including ploughing, cultivating, planting, spraying, irrigating, harvesting etc.)… He told me [the Partnership] would be providing all their services at the UK market rates for contractors to [PLC].”

I accept Paul’s evidence (supported to a certain extent by that of Mr Ellis, Mr Tomkinson and also by what Andrew says Paul told him) that the arrangements between ABF, PLC and the Partnership for the growing and sale of potatoes were as follows:

Paul accepts that he decided, both for the Partnership and ABF, what the Partnership would charge ABF for the husbandry services it provided to ABF. I have accepted that the agreement was that the Partnership would charge published NAAC rates for those husbandry services. Paul made these decisions, for the Partnership and ABF, notwithstanding that he was not a director of ABF until 13 July 2016, and the decision to proceed with the arrangements appears to have been made in February 2016.

Mr Zaman pointed out that the NAAC published rates are simply an average of all rates charged by its members to farmers, for particular husbandry services and as such those average rates are simply a starting point for negotiations between the farmer and contractor about what rates will actually be charged for the work, based upon such variables as soil type and the size of the fields. Mr Ellis, in cross examination accepted that the NAAC rates are simply average rates charged by its members to farmers, but his position appeared to be that farmers and contractors would often assume that the average NAAC rates would be charged for the work carried out by the contractor and then there may be some discussion later, whilst the work was in progress or after it had been completed, about whether there was any good reason to vary those average rates, but that the average rates were the “norm”.

Regardless however of whether the NAAC rates constitute the “norm”, there is a clear conflict between Paul agreeing on behalf of the Partnership and agreeing on behalf of ABF, what the Partnership would charge for its husbandry services. It was in the Partnership’s financial interests to be paid as much as possible and in ABF’s financial interests to pay the Partnership as little as possible.

As for the rent payable by ABF to the Partnership for fields at Home Farm for growing potatoes, there was again a conflict of interest between Paul agreeing on behalf of the Partnership and on behalf of ABF what rent would be paid. The conflict is the same as that in Paul agreeing what rates the Partnership would charge ABF for its husbandry work.

As for sprays and chemicals purchased by the Partnership for use on ABF’s potato crops, (in the early years) I am prepared to accept that there was no more than a theoretical conflict-of interest in Paul agreeing, on behalf of ABF that it would reimburse the Partnership, at cost for the sprays and chemicals purchased on its behalf by the Partnership. The Partnership was merely facilitating the acquisition of these chemicals on credit which ABF could not itself obtain on credit, at that point in time from Agrovista, on credit and charging ABF what it would have paid to Agrovista, had it been able to obtain that credit, the benefit of the arrangement therefore flowed only in ABF’s direction.

The position so far as conflict of interest is concerned with PLC’s interests is more complicated. On the face of it, what the Partnership charged ABF in rent and husbandry charges is of no concern to PLC, given that I have concluded that the price charged by ABF to PLC for its potatoes was not fixed according to the costs incurred by ABF in growing those potatoes. However, in my judgment there was still a conflict of interest between the Partnership (and therefore Paul) and PLC, in that, as part of the arrangements PLC was: (a) in the early years invoiced by the Partnership for rent, husbandry services and sprays and chemicals by the Partnership and paid those invoices (recouping the cost when it later paid for ABF’s potatoes); and (b) agreeing to buy all ABF’s potatoes once harvested. There was a conflict between the Partnership interest (and therefore Paul’s interest) in PLC facilitating the Partnership’s arrangements with ABF (from which the Partnership presumably made a profit) and the question of whether it was in the interests of PLC to facilitate those arrangements.

The directors of PLC, in early 2016, were the Respondents and Mr Sharratt (Andrew having, on my findings, resigned as a director of PLC in August 2014).

The arrangements were that the Partnership would (a) rent fields at Home Farm to ABF; (b) carry out husbandry services for ABF; and (c) recharge the cost of sprays and chemicals to ABF.

I am satisfied that each of the Respondents and Mr Sharratt were aware that Paul was a partner in the Partnership before the arrangements were entered into. I am also satisfied that they each knew of (because Paul disclosed it to them) and approved of the basic arrangements, on behalf of PLC, that: (a) ABF would grow potatoes; (b) the Partnership would plant, cultivate and harvest the potatoes and charge ABF for those services; (c) the Partnership would rent fields at Home Farm to ABF; and (d) ABF would sell the grown potatoes to PLC. I am not satisfied that Paul disclosed to the directors of PLC that the Partnership was paying Agrovista’s invoices for chemicals and sprays supplied for and used by the Partnership on ABF’s potato crops and the Partnership was recharging ABF for their cost, or that in the early years, the Partnership was invoicing PLC for all the costs of husbandry, sprays and chemicals and rent and PLC was setting off what it paid against the price that it paid to ABF for its potatoes (although I am satisfied that Mr Sharratt knew that this was happening, at an early stage because his department was processing the invoices/payments).

In order for Paul to disclose the full nature and extent of his interest, in my judgment, Paul should have disclosed the following to the directors of PLC: -what the Partnership would charge ABF in rent and for its husbandry services; that the Partnership would pay for sprays and chemicals required for ABF’s potato crop and recharge them to PLC/ABF; and what profit the Partnership expected to make from charging rent to, and carrying out husbandry services for ABF. I am not satisfied that Paul disclosed to the directors of PLC any of those details, for the following reasons:

As for ABF, the Partnership had direct arrangements with ABF to rent fields to ABF, carry out husbandry services for ABF and recharge the cost of sprays and chemicals supplied by Agrovista for use on ABF’s potato crops. In February 2016, the only directors of ABF were Mr Tomkinson and Mr Sharratt. I have already confirmed what Mr Tomkinson and Mr Sharratt say in their witness statements they were told about the arrangements and it is clear that they were not told: (a) what the Partnership would charge ABF in rent and for its husbandry services; (b) that the Partnership would pay for sprays and chemicals required for ABF’s potato crop and recharge them to PLC/ABF; or (c) what profit the Partnership expected to make from charging rent to, and carrying out husbandry services for ABF. It follows that Paul did not disclose to the directors of ABF the nature and extent of the Partnership’s interest in the arrangements, in February 2016.

The decision to enter into the arrangements between ABF and the Partnership, to (a) rent fields at Home Farm to ABF; and (b) carry out husbandry services for ABF, appears to have been made in or about February 2016. At that point Paul was not a director of ABF (he only became a director on 13 July 2016). Paul did not therefore owe a duty under Section 177 CA 2006 to disclose the nature and extent of his interest in those arrangements to the directors of ABF (at that point Mr Tomkinson and Mr Sharratt). However, under Section 182 CA 2006, Paul had a duty, when he became a director of ABF, on 13 July 2016 to disclose the nature and extent of the Partnership’s interest in those agreements with ABF to Mr Sharratt who was, at that point in time the only other director of ABF (Mr Tomkinson having resigned as a director of ABF at the same time as Paul was appointed a director of ABF and Mr Ellis not yet having been appointed as a director of ABF). I am satisfied that, by 13 July 2016, Mr Sharratt knew or ought to have known what the Partnership was charging ABF for husbandry services and in rent and that the Partnership was recharging ABF for sprays and chemicals supplied by Agrovista to the Partnership. I am satisfied of this because Mr Sharratt's finance department was responsible for processing Partnership invoices addressed to PLC/ABF. However neither Mr Sharratt, nor Paul suggests that Paul disclosed to Mr Sharratt what profit the Partnership was making and was likely to make going forward from those arrangements (this was not necessary for the recharge of Agrovista invoices because the Partnership was making no profit). The failure of Paul to disclose, to Mr Sharratt, in July 2016, the profit made by the Partnership and that it was likely to make, from what it was charging to ABF for husbandry services and to rent fields at Home Farm was a breach of Section 182 CA 2006, by Paul. Andrew does not however plead, in his ABF Petition that Paul failed to disclose the nature and extent of his interest in the agreement for the Partnership to provide husbandry services and rent land to ABF (rather Andrew pleads that the whole arrangement was a breach of Paul’s fiduciary duties and a breach of the no conflict rule under Section 175 CA 2006).

I find that, Paul’s failure to disclose to the directors of PLC, the nature and extent of the Partnership’s interest in the agreement for it to carry out husbandry services for ABF, to rent fields to ABF and to pay for and then recharge to ABF the cost of chemicals and sprays supplied by Agrovista, was a breach by him of his duties under Section 177 CA 2006, because, although the arrangements were predominantly constituted by agreements between ABF and the Partnership, in the early years the Partnership invoiced PLC and PLC paid the invoices and set what it paid off against what ABF charged PLC for its harvested potatoes and PLC purchased ABF’s potatoes. To that extent therefore PLC was a party to those arrangements.

Paul’s failure to recognise the conflicts of interest identified by me in paragraphs 547-552 above (Issue 31) and agreeing himself, on behalf of the Partnership, ABF and PLC the terms of the arrangements are a breach by Paul of his fiduciary duty to act in the best interests of ABF/PLC by ensuring that independent directors agreed the arrangements between the Partnership and ABF/PLC and between ABF and PLC. I do not find there to be a breach by Paul of his duty under Section 175 CA 2006 to avoid conflicts of interest, because I have found that Paul breached his duties under Sections 182 (ABF) and 177 CA 2006 (PLC) by Paul causing ABF/PLC to enter into the overall arrangements and Section 175(3) CA 2006 makes it clear that the provisions of that section do not apply to a conflict of interest in relation to a transaction or arrangement with the relevant company (see paragraph 445 above, referring to the judgment of David Richards J, as he then was in Re Corain Limited).

I am satisfied that Mr Tomkinson breached his duty under Section 173 CA 2006 to exercise independent judgment, as a director of ABF and PLC, in connection with the husbandry services provided by the Partnership to ABF and the renting of fields by the Partnership to ABF:

Mr Ellis was appointed as a director of ABF, for the first time on 26 May 2017, by this time, the arrangements between ABF and the Partnership for husbandry services and the renting of Partnership land to ABF had already been agreed and had been in place for well over a year. In those circumstances, I am not satisfied that Mr Ellis breached any duty he owed to ABF.

Given Mr Ellis’s position as PLC’s Purchasing Director and his evidence (which I accept) that it was he who determined what price PLC would pay for the potatoes grown by ABF and that he ensured that PLC paid market rates for the potatoes (a point supported (from PLC’s perspective) by Mr Bell’s conclusion that PLC paid ABPT, on average less than the price that it paid to other growers). I am not satisfied that Mr Ellis breached his duty to PLC, under Section 173 CA 2006 by failing to exercise independent judgment in relation to the price charged by ABF to PLC for its potatoes.

As for other issues, where the question of breach of fiduciary or statutory duties of directors is raised, I observe that Mr Sharratt, although not a Respondent (because he is not a shareholder of ABPT or ABF) was at all material times a director of both PLC and ABF and therefore the breaches of duty under Section 173 CA 2006 which I attribute to Mr Tomkinson would also be breaches of duty by Mr Sharratt, given that he also approved the general arrangements on behalf of PLC and ABF, but failed to ensure that someone acting independently on behalf of ABF/PLC negotiated the matters set out in paragraph 558 above.

I am not satisfied, for the reasons that follow, that: (a) the incorporation of WPS; or (b) the transfer by PLC of £623,500, to WPS, on 29 May 2014 were, in either case, a breach of fiduciary duty or of a duty under CA 2006 by any of PLC's directors. Instead I am satisfied that Andrew and all the other directors of PLC were aware and approved of, both the incorporation of WPS and the transfer of £623,500 to WPS by PLC.

In the comments I have already made on the honesty and credibility of Andrew, I have found that:

I am satisfied that, Andrew would not have agreed to Mr Sharratt having the same number of shares in WPS, as Mr Tomkinson held in ABPT, unless Andrew knew what it was that WPS would do (acquire and hold the AD Plant, Andrew has not even suggested what it was that he thought WPS was going to do, if not that).

I accept Mr Sharratt’s evidence that the reason why the £623,500 was transferred to WPS, when it was (before a final decision had been made to acquire and operate the AD Plant through WPS) was that it suited Andrew’s position in the financial relief proceedings in his divorce, for the liquidity of PLC to be depleted by paying away the £623,500 to WPS I accept this because:

Mr Tomkinson, in his cross examination was asked about his text to Andrew of 14 May 2017, in which, responding to a text he received from Andrew asking him if he knew anything about Paul incorporating a new company named Water Purification Services Limited, Mr Tomkinson said that he did not know anything about a new company set up by Paul. In his re-examination, Mr Tomkinson said that he understood that KPMG had advised that the AD Plant project should be carried out through a separate limited company and his understanding was that, because there had been no final financial settlement in his divorce, Andrew did not want any shares to be issued in his name, in that new company, and was supportive of PLC’s cash reserves being depleted ahead of the final hearing in his financial remedy proceedings, by the transfers to WPS. This was, said Mr Tomkinson, his understanding of why no shares in WPS were issued in Andrew’s name and the transfers of £623,500 were made when they were. I am satisfied that that was Mr Tomkinson’s understanding of the position at the relevant times and that (just as for ABF) neither Mr Tomkinson, nor Mr Ellis would have been a party to any arrangements by which cash was transferred from PLC to WPS, or the AD Plant project carried out through WPS, in a way that excluded Andrew from receiving the same benefit from the transfers/AD Plant project as Paul received. In my judgment, their co-operation would be needed to achieve either of those dishonest objectives alleged by Andrew, and they would not have co-operated, and I am satisfied that Paul would have known that they would not co-operate, in achieving any such dishonest object. I prefer the evidence of Paul, Mr Sharratt, Mr Ellis and Mr Tomkinson, to that of Andrew, because, their case is inherently more plausible than Andrew’s case and I have found more reason to doubt the honesty of Andrew’s evidence than that of any of them (and in particular that of Mr Tomkinson and Mr Ellis).

Andrew’s case is that the incorporation of WPS and transfer to it of £623,500 was an attempt to take value out of PLC for Paul's own personal benefit. That case is based upon Andrew not knowing about or supporting the incorporation of WPS, WPS taking on the AD Plant project, the transfers of £623,500 to WPS, by PLC, or that shares in WPS should not initially be issued to him, but I have found that Andrew knew about and supported all that happening.

Given the findings that I have made, in relation to Issue 34, I am satisfied that Andrew did know about the transfers of £623,500 and Mr Sharratt self-evidently did, because he arranged it. I am satisfied also that each of the Respondents knew of and approved of the transfers and that all the directors of PLC (including Andrew knew what the shareholdings in WPS were to be, including that Paul was holding half of the shares issued to him in WPS, on 18 February 2014, on trust for Andrew. Each director of WPS, therefore knew the nature and extent of the interest of every other director in the transfers and approved of the transfers. Under Section 175 of the CA 2006 however, as beneficial shareholders in WPS, at the time of the transfers, on 29 May 2014, Paul, Mr Tomkinson, Mr Ellis and Andrew should each have disclosed the nature and extent of their interests, as such shareholders in WPS to a board meeting of PLC and sought authorisation for the transfers of £623,500, from that board meeting. There is no evidence that any such board meeting took place or that the appropriate approval was given at such a board meeting. There is therefore what I would describe as a technical breach of Section 175.

I accept Mr Woolrich’s evidence that Eriks made a presentation to Paul and Mr Sharratt (also attended by Mr Woolrich) which included, in substance the information and representations set out in the document identified in Mr Woolrich’s witness statement as the document which Eriks handed to him, Paul and Mr Sharratt during that presentation (the Eriks Document”). The Eriks Document included a claim that if PLC made Eriks their sole supplier of mechanical and electrical parts, PLC would make savings of £114,993, on the purchase of electrical and mechanical parts, over 3 years.

In his cross-examination, Mr Woolrich said that Paul and Mr Sharratt listened to Eriks’ presentation and seemed positive about it, but thereafter, nothing happened. Both Paul and Mr Sharratt say that they cannot recall Eriks making any presentation to them. I prefer the evidence of Mr Woolrich, that Erik’s did make a presentation, because:

I find that the costs savings Eriks purported to be able to provide to PLC, in line with the Eriks Document were brought to the attention of Paul and Mr Sharratt and that neither Paul nor Mr Sharratt pursued the matter any further, after listening to Eriks’ presentation. Whether accepting Eriks proposal would have resulted in cost savings for PLC on the purchase of mechanical and electrical parts is another matter which I will address when dealing with issue 37.

I am not satisfied that, what I have found to be, the failure of Paul and Mr Sharratt to act on the Eriks’ presentation, by causing PLC to order all of their mechanical and electrical parts from Eriks was a breach of fiduciary duty, of their duties under CA 2006 or gross mismanagement by any of the Respondents, for the following reasons:

Given my finding on issue 37, it is not strictly necessary for me to answer issue 38 which Mr Zaman says I should not answer in any event, because it is not an issue arising from the parties’ statements of case. I will however briefly deal with Issue 38 because, if I had found that there had been gross mismanagement or a breach of fiduciary or statutory duty by Paul/Mr Sharratt, in not choosing Eriks as PLC’s sole supplier of mechanical/electrical parts, then it would have been relevant to consider whether any cost reductions that PLC implemented after it could have appointed Eriks as sole supplier of mechanical and electrical parts would have reduced any cost saving which I found PLC would have achieved as a result of using Eriks as sole supplier.

I am satisfied that PLC retained Expenses Reduction Analyst (UK) Ltd (“ERA”) to undertake a cost reduction analysis because the Respondents have produced a copy of a signed non-disclosure agreement dated 1 February 2017 between PLC and ERA. I am satisfied that ERA made recommendations to PLC for reducing costs (including prices paid for mechanical and electrical parts) in 2018, as appears to be common ground between Mr Bell and Mr Lewis. In their reports, Mr Bell and Mr Lewis calculate how, if I decided that PLC should have contracted with Eriks to supply all its mechanical and electrical parts, promptly following their presentation, the costs savings of £114,993 claimed in the Eriks Document would have been reduced by PLC implementing the recommendations of ERA. It is unnecessary for me to consider those figures, in light of my finding that Andrew has not proved that Paul/Mr Sharratt’s decision not to take forward Eriks’ proposal that they should supply all of PLC’s mechanical and electrical parts, amounted to gross mismanagement/ breach of duty.

Andrew relies upon the evidence of Mr Bridges to support his case that Paul caused BIL to pay for the hire of the Telehandler, which was used by Partnership for its own purposes. I have rejected Mr Bridge’s evidence, for the reasons set out in paragraphs 253-254 above. Further I note that Mr Lewis and Mr Bell conclude that there is no evidence of BIL paying for the hire of the Telehandler. For those reasons, I conclude that Andrew has not proved that Paul procured that BIL paid for the hire of the Telehandler, which was used by the Partnership for its own purposes.

As just noted, Mr Lewis and Mr Bell conclude that there is no evidence that the charges for the Telehandler were paid by BIL and therefore not appropriately accounted for.

There was no breach of duty

Mr Sharratt says the management charges were charged by PLC to BIL, because PLC was bearing all of the costs of employing management, some of whose time was spent in managing the affairs of BIL and it was considered appropriate therefore to make a reasonable charge to BIL for such management time. Mr Tomkinson says he considers recharging management time between group companies to be standard practice and that the recharges by PLC to BIL are reasonable.

Mr Bell and Mr Lewis agree that management charges levied by PLC to BIL are neutral so far as the shareholders of those companies are concerned because the shareholders hold the shares in ABPT (PLC’s parent company) and BIL in similar proportions.

My understanding is that it is common ground that management charges have been applied by PLC to BIL, from 2017. Mr Bell and Mr Lewis both proceeded to give their opinions on that basis. I am therefore satisfied that PLC applied management charges to BIL from 2017.

I am satisfied that the application of management charges by PLC to the BIL is not a breach of fiduciary or statutory duty by any of the Respondents (or Mr Sharratt) as directors of BIL because:

Agrovista is a supplier of chemicals for crops and it provides advice upon which chemicals should be used for the appropriate crop.

Andrew says that, in late April 2018, he went to Enterprise House on a weekend and he saw, paperwork to open a credit account for ABF with Agrovista. The credit account opening form identifies Home Farm, which is owned and operated by the Partnership, as the address for the delivery of chemicals, by Agrovista. Andrew took a photograph of the credit account application form on his mobile phone, which he produces in these proceedings, as evidence that, on his case, Paul was intending to cause ABF to pay for chemicals which would be used by the Partnership, on the Partnership’s crops.

Paul says that there is a chemical store at Home Farm where chemicals for use on both the Partnership’s cereal crops and ABF’s potato crops are stored. Paul, says that the chemicals delivered by Agrovista to Home Farm and paid for by ABF on its account with Agrovista (opened following submission of the credit account opening form) were for use on ABF’s potato crops and not for use by the Partnership on its cereal crops.

I am not satisfied that the Partnership has used, for its cereal crops, or otherwise, chemicals or services supplied by Agrovista, which were paid for by ABF:

Mr Auld, for the Respondents suggested that this issues does not arise for consideration, on the pleadings. However, given that I am not satisfied that ABF paid for any goods or services supplied by Agrovista, which were used on the Partnership’s cereal crops, it is an easy point to deal with. I am not satisfied that any goods or services ordered by ABF, from Agrovista were not correctly accounted for.

Given my findings on issues 44 and 45, I am not satisfied that there has been any breach of fiduciary duty or statutory duty under CA 2006 by any of the Respondents in respect of the matters addressed in issues 44 and 45.

Prior to the AD Plant being installed at Enterprise House, the Diesel Generator was used by PLC as a back-up generator, to power Enterprise House, in the event that the supply of electricity from the Grid to Enterprise House failed. The Diesel Generator was retained alongside the AD Plant and Andrew’s pleaded case is that, once the AD Plant was up and running, the Diesel Generator should have been used to export electricity to the Grid, when the supply of electricity from the Grid failed, thereby earning revenue for PLC. In Mr Zaman’s closing argument, Andrew’s case shifted somewhat to a case that the Respondents should have used the Diesel Generator to export electricity to the Grid generally (not just when the Grid failed) in order to generate revenue for PLC.

I am satisfied that the Diesel Generator cannot export electricity to the Grid. Both Mr Parker (Andrew’s witness) who was responsible for project managing the installation of the AD Plant, until he resigned in July 2017 and Mr Snipe (the Respondent’s witness) who was employed by BIL to provide technical assistance in making proposals to WPD to connect the AD Plant to the Grid, say that the Diesel Generator can operate only in what they call “Island mode”. That is that the Diesel Generator: (a) cannot export electricity to the Grid, whether or not the Grid is supplying electricity to Enterprise House; and (b) can only operate if the AD Plant is not generating electricity, so it can only operate purely as a back-up generator, to supply electricity for the needs only of Enterprise House, if the AD Plant is not working.

Mr Auld argued that Issue 49 does not arise on Andrew’s pleaded case. It seems to me that, on Andrew’s pleaded case (once the AD Plant was up and running the Diesel Generator should have been used to export electricity to the Grid, when the supply of electricity from the Grid failed, thereby earning revenue for PLC) Issue 48 only arises in relation to steps that could have been taken to pursue revenue for electricity exported to the Grid, when the Grid failed, and not more generally.

I do not consider that any steps could have been taken to pursue revenue from the export of electricity to the Grid, by the Diesel Generator when the Grid failed, because both Mr Parker and Mr Snipe were clear that WPD would not agree to the Diesel Generator exporting electricity to the Grid, when the Grid failed, because this would make it dangerous for engineers to work on the Grid to try to restore power, if the Grid was “live” with electricity exported to it from the Diesel Generator. I accept their evidence.

As Mr Auld did not assert that Issue 48 should be confined in that way (he said it does not arise at all) I will deal with it on the basis that it applies to the Diesel Generator exporting electricity to the Grid, whether or not the Grid has failed although, as I have said that is not Andrew’s pleaded case.

The steps that could have been taken to pursue revenue from the export of electricity, by the Diesel Generator to the Grid were: (a) to review the question of whether PLC should seek WPD’s agreement that the Diesel Generator should be allowed to export electricity to the Grid; (b) if it was thought, on that review that WPD would agree to this and that, if it did agree, PLC stood at least a reasonable chance of earning some material revenue from the Diesel Generator exporting electricity to the Grid, to seek WPD’s agreement to the Diesel Generator exporting electricity to the Grid; and (d) if WPD gave permission and it was still considered (after taking into account any requirements that WPD imposed for allowing the Diesel Generator to export electricity to the Grid) that PLC would earn material revenue from exporting electricity generated by the Diesel Generator to the Grid, net of the costs of complying with any WPD requirements, then to proceed to satisfy those requirements, so that the Diesel Generator could be used to export electricity to the Grid.

Mr Auld does not agree that this issue arises, based upon the content of Andrew’s PLC Petition which, as I have already noted pleads that the Diesel Generator should have been used to export electricity to the Grid, when the supply of electricity from the Grid failed, thereby earning revenue for PLC. On the basis that “provision of reserve electricity to the Grid” means supplying electricity when the Grid is not carrying its own electricity, it appears to me that Issue 49 is a relevant issue, based upon Andrew’s pleaded case.

Mr Zaman says that the Diesel Generator meter shows that it ran for a total of 105 hours in the period up to 8 June 2021, whereas in previous periods it had only run for a much small number of hours. Mr Zaman suggests that this may be evidence of the Diesel Generator exporting electricity to the Grid. Notwithstanding that the Respondents have offered no explanation for the Diesel Generator’s meter showing that it ran for 105 hours in the period up to 8 June 2021, given the very clear evidence of Mr Parker and Mr Snipe that the Diesel Generator cannot export electricity to the Grid under any circumstances (and that WPD would not, for safety reasons, want electricity to be exported to the Grid, if the supply of electricity from the Grid failed) I am not satisfied that the explanation for the Diesel Generator’s meter recording that it had operated 105 hours in the period up to 8 June 2021, is as a result of it exporting electricity to the Grid (the explanation may be that it has been used as a back-up generator to power Enterprise House). I am not therefore satisfied that there has been any failure to collect or pursue revenue for the supply of electricity to the Grid, whether as a reserve supply or otherwise.

It follows from my findings on Issues 47-49 that there has been no breach of fiduciary duty and no gross mismanagement by any of the Respondents in failing to collect revenue for the export of electricity to the Grid, by the Diesel Generator when the Grid failed, which is Andrew’s pleaded case.

Even if Andrew’s pleaded case were taken to extend to a failure to earn revenue from the export of electricity to the Grid by the Diesel Generator, when the Grid had not failed, I find that this would not involve any breach of fiduciary duty or gross mismanagement by any of the Respondents because:

The renewable energy projects are the Solar Panels and the AD Plant/CHPs installed at Enterprise House and owned and operated by BIL, which generate electricity. The AD Plant produces methane from organic waste and the CHP's generate electricity using that methane.

In his report dated 1 April 2021, Mr Bell dealt with an issue which did not, at that point in time, form part of Andrew’s pleaded case in the BIL Petition. The issue was that no revenue had been collected by BIL from the export of electricity to the Grid by the renewable energy projects.

On 25 May 2021, District Judge Rich TD gave permission to Andrew to amend the BIL Petition to include only those allegations set out in the draft amended petition attached to that order which asserted that the failure of BIL to receive revenue for the export of electricity to the Grid for over 6 years was a breach of fiduciary duty by the directors of BIL, alternatively serious mismanagement and that the losses suffered by BIL as a result of those breaches of fiduciary duty/serious mismanagement were as set out in Mr Bell’s report of 1 April 2021 (Mr Bell’s calculation of the revenue that BIL should have received for all the electricity recorded on export meters located at Enterprise House as having been exported to the Grid, from May 2015-November 2018 and from November 2018-March 2021).

In the Respondents’ Amended Defence to the Amended BIL Petition, the Respondents said, amongst other things, that the requirements imposed by WPD, for BIL to be allowed to export electricity to the Grid from its 2 CHPs were not met until 17 November 2018 and BIL was therefore unable to recover any payment for electricity exported to the Grid up to that date. The Respondents also said that BIL had received £1.97 million from Ofgem up to 22 March 2021 in FIT generation payments (for the generation of green energy by the Solar Panels and CHPs) and had saved approximately £1 million on the purchase of electricity by generating its own electricity. It was admitted that no FIT export payments had been received (for the export of green energy to the Grid) but denied that BIL was not entitled to receive those payments. Mr Bell’s calculations of the amount of revenue due to BIL for electricity exported to the Grid was disputed on various grounds, including that it included electricity exported to the Grid before 17 November 2018, which BIL was unable to recover payment for.

In his second report dated 7 October 2021, Mr Bell recalculated his figures for revenue that he said was lost as a result of BIL not recovering payment for the export of electricity to the Grid. He calculated the lost revenue, both for the period May 2015-November 2018 and November 2018 - March 2021, in doing so he included additional revenue that Mr Bell said BIL would have earned, had BIL operated the AD Plant and 2 CHPs at 90% of their maximum capacity. In order to do this, BIL would, Mr Bell conceded, have to purchase organic fuel to be processed by the AD Plant, to supplement the waste product produced from PLC’s production process, which is all (or substantially all) that BIL has been feeding into the AD Plant, to produce methane to fuel the 2 CHPs.

In his report of 8 October 2021, Mr Lewis calculated uncollected revenue from the export of electricity to the Grid, from 17 November 2018 to March 2021 at £338,865, if BIL claimed revenue for exported electricity pursuant to a PPA (direct agreement with an electricity supplier) and at £363,512, if BIL claimed for the electricity exported as a FIT export payment (payment claimed from an electricity supplier, but at least partly funded by Ofgem) based, in both cases, on meter readings. Mr Lewis did not include any calculation of what revenue BIL would have earned, had it operated the AD Plant/2 CHPs at 90% of their capacity.

I will deal firstly with the point made in Mr Bell’s second report that BIL’s AD Plant/CHPs should have been operated at 90% of their full capacity and that BIL has lost revenue as a result of them being operated at a lesser proportion of their full capacity. I find that this part of Andrew’s claim fails for two reasons: (a) this case, is not, in my judgment, pleaded in the amended BIL Petition; and (b) in any event, I am not satisfied that Andrew has proved, on the balance of probabilities, that BIL’s AD Plant and CHPs could have been operated permanently at 90% of their capacity or that if they could, the additional profit that Mr Bell suggests BIL would thereby have earned (or any profit) would have been earned, for reasons that I explain below.

The pleading of Andrew’s claim in respect of recovery of revenue for electricity exported to the Grid is set out at paragraphs 26A – 26L of the Amended BIL Petition:

The reasons why I am not satisfied that Andrew has proved, on the balance of probabilities that the directors of BIL ought to have ensured that the CHPs operated at 90% of their capacity are:

This leaves Andrew’s claim that there has been a failure to collect revenue from the export of electricity to the Grid. It is common ground that electricity has been exported to the Grid which was generated by the solar panels/CHPs owned and operated by BIL at Enterprise House and that no revenue has been received by BIL for the export of that electricity. The answer to this part of issue 51, is therefore that there has been a failure, to date, to collect revenue from the export of electricity to the Grid by the renewable energy projects.

Given my findings that Andrew cannot pursue/prove his claim that there has been a failure to maximise revenue from the renewable energy projects, I will consider only whether there has been a breach of fiduciary duty or gross mismanagement by the Respondents, or any of them, in failing to collect revenue for the actual export of electricity, by the renewable energy projects, to the Grid.

There is no suggestion that any of the Respondents deliberately chose not to pursue the recovery of revenue for the export of electricity to the Grid. Andrew’s case is, in substance that the Respondents ought to have acted sooner and more aggressively than they have done, to recover that revenue and that their failure to do so amounts to a breach of their fiduciary duties to BIL/gross mismanagement.

I do not see that there is a difference, in this case, on this issue, between the pleading of breach of fiduciary duty and gross mismanagement. In my judgment, in order to make out his case, that the Respondents’ failure to pursue the collection of revenue for the export of electricity to the Grid amounts to a breach of the Respondents’ fiduciary duties to BIL or gross mismanagement, Andrew must prove, on the balance of probabilities (per the guidance given by Arden J in Re Macro (see paragraph 579 (h) above) that the failures by the Respondents amount to clear mismanagement by the Respondents, not questions of commercial judgment, which is sufficiently serious to justify my granting Andrew a remedy under Section 996 CA 2006.

Mr Zaman says:

Mr Auld says:

I am not satisfied, on the balance of probabilities, that BIL’s ability to recover revenue for electricity that the renewable energy schemes have exported to the Grid has been permanently lost, for the following reasons:

Notwithstanding that I am not satisfied that recovery of payment for the export of electricity to the Grid by BIL has been permanently lost, it might still be a breach of fiduciary duty/gross mismanagement by the Respondents or some of them not to have acted more swiftly or decisively to recover those payments, which has at least delayed receipt of payment for the export of electricity to the Grid and will have made it more difficult to recover it.

Mr Sharratt accepted that, after Mr Parker left, in July 2017, he took over responsibility for collecting revenue for electricity generated by the renewable energy schemes.

There is no evidence of Mr Sharratt pursuing payment for electricity exported to the Grid, after 17 November 2018 (the date on which I have accepted BIL became entitled to receive payment for electricity exported to the Grid) before he instructed New Stream, in March 2020 (about 16 months after BIL first became entitled to receive payment for exports of electricity to the Grid) to attempt to recover payment for electricity exported to the Grid. Thereafter the relevant chronology of events is as follows:

Given that Mr Sharratt accepts that he took responsibility, after the departure of Mr Parker, for collecting revenue for BIL, earned from the export of electricity to the Grid, on the face of it, Mr Sharratt is primarily responsible for any unreasonable delay in progressing that claim, Mr Sharratt is not a respondent to the BIL Petition. I propose therefore to decide whether any failures on the part of Mr Sharratt to progress the claim involves any gross mismanagement by him, before going on to consider whether there is any gross mismanagement by the Respondents.

I am not satisfied that any failures on the part of Mr Sharratt to pursue the receipt of revenue for the export electricity to the Grid by BIL amounts to gross mismanagement, by Mr Sharratt, for the following reasons:

Directors are entitled to delegate to one of their number responsibility for a particular function or task, provided that they have no reason to believe that the director to whom they delegate that responsibility is incapable of carrying it out competently. The Respondents appear to have delegated to Mr Sharratt responsibility for the collection of revenue for the export of electricity to the Grid by the renewable energy schemes (or at least to have acquiesced in him taking on that responsibility). There is no evidence before me that the Respondents were not entitled to conclude that Mr Sharratt, the Finance Director of BIL and the other Group companies was not capable of carrying out that task. In those circumstances, I am not satisfied that the Respondents were guilty of gross mismanagement in delegating this task to Mr Sharratt.

Having delegated that task to Mr Sharratt, the Respondents were not thereby absolved of all responsibility for the recovery of, what I find to be, export FITs, they had a continuing responsibility to monitor the carrying out of that task by Mr Sharratt and to hold him to account for carrying it out. Breach of that obligation can be regarded as a breach of fiduciary duty or serious mismanagement, or both, it is not a primary responsibility to recover revenue for the export of electricity to the Grid, but a responsibility to monitor and hold Mr Sharratt to account for his performance of that role.

I am not satisfied that, in discharging their continuing obligation to monitor Mr Sharratt’s progress in recovering export FITs and to hold Mr Sharratt to account, the Respondents breached their fiduciary duties to BIL or were guilty of serious mismanagement because:

Have the Companies suffered a loss (which can be quantified now or at a remedies hearing); or

Do the Companies have a right to an account of profits in respect the arrangements with Paul (which can be quantified now or at a remedies hearing).

I have found, in summary, that the Respondents have breached the duties that they owed to PLC and ABF (but not BIL) in the following respects:

Mr Zaman suggests that the assessment of the losses that the Group companies have suffered as a result of the breaches of duty that I have found the Respondents have committed is something that can be left to the remedies hearing. That presupposes of course that I find that the affairs of ABPT and/or ABF (I have not found that there have been any breaches of duty in respect of BIL) have been conducted (as a result of the breaches of duty that I have found that the Respondents have committed) in a manner that is unfairly prejudicial to Andrew as a member of those companies, or one or more of them, because if I do not find that, there will be no remedies hearing. Mr Auld says that, if Andrew cannot show now that the relevant Group company has suffered a loss, he cannot prove that any breaches of duty are unfair and/or prejudicial to Andrew and so he has not proved his case.

I accept that I am unable at this point in time to calculate precisely what losses Group companies have suffered as a result of the breaches of duty that I have found the Respondents have committed (as summarised in paragraph 629 above). However, in order to: (a) decide whether the conduct that amounts to a breach or breaches of duty by the Respondents is unfairly prejudicial to Andrew it may be relevant to come to a view as to the scale of the losses likely to have been suffered, as a result by the relevant company (and in particular whether they are minimal); and (b) whilst, if I find that there is unfairly prejudicial conduct, I can and will ask the experts to provide opinions as to the losses suffered by the relevant company, for the purposes of the remedies hearing, I will need to give them some assistance to do so, by setting out the basis upon which those losses are to be calculated.

I will therefore set out what findings or conclusions I am able to make or come to about the losses that have been suffered and will, if I find there is unfair prejudice to Andrew, provide such guidance as I can to the experts about how the losses are to be calculated. In doing this I will, where necessary (and due to the lack of records it generally is necessary) use the “broad axe” approach advocated in MasterCard Inc.

I have already concluded that no loss has been suffered by PLC as a result of the breaches of duty by the Respondents, because the written loan agreement which was backdated to 14 November 2015 reflects an appropriate commercial basis for the advance of that loan.

Based on a sample of 13 Gilbert (sub-contractor on the Cemex contract) invoices addressed to PLC, PLC, according to Mr Bell, made a greater margin when Gilbert transported waste from the Cemex site (8%) (ie the difference between what Gilbert charged PLC and what PLC charged Bi-Products/4R) than PLC made when the Partnership transported waste from the Cemex Site. Mr Bell suggests, therefore, that PLC could have made more profit by sub-contracting all of the work on both the Cemex and the Biffa contracts to third party contractors, rather than using the Partnership. On an assumed margin of 8% on all invoices sent by the Partnership to PLC, Mr Bell suggests that, if PLC had made a margin of 8% on all the work carried out for it, by the Partnership, PLC would have made an additional profit of £104,183 on Cemex and Biffa. Mr Bell suggests that this profit was lost to PLC as a result of PLC using the Partnership, rather than a third party contractor to carry out the work.

Mr Lewis says that Mr Bell’s analysis of only 13 Gilbert invoices is insufficient to support a conclusion that 8% profit was made by PLC on the work done by Gilbert. Mr Lewis refers to work carried out on the Cemex contract by the Partnership not having been charged for by the Partnership, but PLC having charged Bi-Products/4R for that work, and he says that the Partnership charged, for waste collected from the Cemex site by its 8 wheeler tipper truck, at the same rate as Gilbert charged for its 8 wheeler tipper truck. Mr Lewis goes on to say that PLC made a margin of £20,889, on all invoices sent to it by the Partnership to PLC, for work that the Partnership carried out on the Cemex and Biffa contracts.

Paul says that the Partnership charged Bi-Products/4R £230 plus VAT for loads transported from the Cemex Site, the same as Gilbert and PLC made the same margin on transport work sub-contracted to Gilbert as it did on work sub-contracted to the Partnership. Paul also says that the Partnership did not charge for some of the transport work that it carried out on the Cemex contract, but PLC still charged Bi-Products/4R. Mr Lewis has not set out to calculate the difference, if any, between what Gilbert charged PLC and what the Partnership charged PLC, for transporting waste from the Cemex Site.

Given that Paul breached his duty to PLC by agreeing himself, both on behalf of the Partnership and PLC, what the partnership would charge PLC, for the transport work that it carried out on the Cemex contract, and that Paul suggests that the price that the Partnership was charging PLC to transport waste away from the Cemex Site was the same as the price charged by Gilbert, I consider that it is fair to approach the calculation of any loss that PLC suffered as a result of Paul agreeing the sub-contract for the Partnership and PLC, by seeking to calculate what an independent third party contractor would have charged PLC for the same work (removing waste from the Cemex Site) as the Partnership carried out. This is what Mr Bell purports to have done for both the Cemex and Biffa sub-contracts.

I do not agree that Mr Bell’s approach, of calculating the margin or profit that PLC made when it charged By Products/4R for the transport work carried out by Gilbert as reflected in 13 Gilbert invoices is correct because: (a) I accept Mr Lewis’s point that merely considering 13 Gilbert invoices is insufficient to draw the conclusion that Mr Bell has, as to the level of profit made by PLC (8%) when it invoiced 4R for the transport work that Gilbert had done; and (b) it is difficult to see why it should be assumed that PLC would have made a margin of 8% on the Biffa sub-contracts by employing an independent contractor, even if PLC did make a margin of 8%, when employing Gilbert on the Cemex sub-contract.

In my judgment the correct approach to calculating any loss that PLC suffered as a result of using the Partnership rather than a third party contractor to transport waste away from the Cemex Site is to:

It is open to me to say, as Mr Auld suggests that I should, that Andrew has simply failed to prove that there is a difference between what Gilbert charged PLC and what the Partnership charged PLC, because I have not accepted Mr Bell’s approach to calculating the difference. I have however concluded that there have been breaches of duty by Paul and Mr Ellis (see paragraphs 542 and 547) in connection with the use of PLC’s resources by the Partnership in performing the Cemex sub-contract and I have asked the experts (see paragraphs 646-656 below) to provide further opinions on the loss caused to PLC by the Partnership’s use of PLC’s resources. In those circumstances I consider it appropriate to give the experts a further opportunity to calculate any difference between what Gilbert charged PLC and what the Partnership charged PLC pursuant to their respective sub-contracts in order to assist me in determining whether PLC has suffered an additional loss as a result of the Respondents’ breaches of duty (additional that is to the loss caused by the Partnership using PLC's resources to assist it in performing its Cemex sub-contract). I will invite the experts to calculate, in accordance with the approach outlined by me in paragraph 638 above any loss that PLC may have suffered as a result of using the Partnership, rather than a third party contractor (based on Gilbert’s charges) to transport waste away from the Cemex Site.

Paul says that: (a) the initial part of the sub-contract to remove solid waste from the Biffa site was sub-contracted by the Partnership to a third party and charged on by the Partnership to PLC at little or no margin, for the Partnership; and (b) the second part of the Biffa contract which was to remove liquid waste from the Biffa Site, was carried out by PLC and another contractor. For PLC’s part of the contract, PLC transported the liquid waste away from the Biffa Site and the waste was then spread on fields by Prestons. In 2014, PLC took over the rest of the contract to remove liquid waste from the Biffa site, from which point both Prestons and the Partnership spread the liquid waste.

There seems to me to be no reason why PLC would employ the Partnership to remove solid waste from the Biffa Site, who in turn employed a third party, rather than PLC employing the third party contractor direct (no reason was suggested). Any difference between what the third party charged the Partnership and what the Partnership charged PLC, therefore seems to me to be a loss incurred by PLC in employing the Partnership to remove the solid waste from the Biffa Site and a loss flowing from the Respondents’ breaches of duty. I will invite the experts to calculate that difference (if any) (Paul suggests that there was little or no margin)

As I have already mentioned: (a) Mr Bell suggests that an extra £104,183 in profit would have been made by PLC on both the Cemex and the Biffa contracts if it had contracted with a third party contractor, rather than the Partnership (based on an 8% margin); and (b) Mr Lewis says that Mr Bell’s calculation of an 8% margin is misconceived and that the amount PLC invoiced Bi-Products/4R, on both the Cemex and the Biffa contracts, for transport work carried out by Partnership, was always greater than the amount that the Partnership invoiced to PLC and that PLC made a total profit of £20,889 on work carried out by the Partnership on the Cemex and Biffa contracts.

In line with my approach on the Cemex sub-contract, I will ask the experts to compare what Prestons charged PLC for spreading liquid waste on the Biffa sub-contract with what the Partnership charged PLC. Paul suggests that the Partnership charged PLC less for spreading liquid waste to take into account the fact that the Partnership was using PLC’s tankers and boom, towed behind the Partnership’s tractors to do the spreading. The Partnership should therefore have been charging less than Prestons by a margin. I have found (paragraph 539 (b) above) that the Partnership used PLC's fuel for its tractors which were engaged in spreading liquid waste which came from the Biffa Site and I have asked the experts to calculate the value of that use, for the purposes of the remedies hearing. It is appropriate in my judgment, in those circumstances, to allow the experts an opportunity for the purposes of the remedies hearing to calculate (if they can): (a) any difference between what the third party contractor charged the Partnership to transport solid waste from the Biffa Site and what the Partnership charged PLC; and (b) to compare what the Partnership charged PLC to what Preston's charged PLC for spreading liquid waste which came from the Biffa Site taking into account the matters mentioned by me in paragraph 645 below. No account should be taken of the Volvo which was hired by the Partnership to PLC, for PLC’s use on the Biffa contract because I am not satisfied that the hire agreement between the Partnership and PLC for the Volvo either: (a) forms part of the allegation of unfair prejudice set out in the PLC Petition; or (b) that PLC was overcharged by the Partnership for the hire of the Volvo compared to what it would have had to pay to hire an alternative vehicle from a commercial hirer.

Any amount by which, what the Partnership charged PLC for spreading liquid waste from the Biffa Site exceeded what Prestons charged PLC for spreading liquid digestate from the Biffa Site, taking into account the fact that the Partnership was using PLC’s tankers and boom will be regarded by me as an additional loss suffered by PLC from using the Partnership for this work, rather than an independent third party contractor (additional that is to the value of PLC’s fuel used by the Partnership tractors engaged in spreading liquid waste). I will invite the experts to calculate that figure and if they can, some allowance for the Partnership using PLC’s tankers and boom, to be added to the Partnership charges.

PLC has suffered loss as a result of the Partnership using PLC’s employees, for the Partnership’s benefit. I have assessed, in response to issue 25, which of PLC’s employees were used for the benefit of the Partnership and for what periods. The experts should calculate, at their normal salaries, the cost to PLC of employing each of those employees for the periods specified by me which I consider to be the loss suffered by PLC from the Partnership using its employees.

Paul says that he deliberately made adjustments to the price that the Partnership charged for husbandry work that the Partnership carried out to ABF’s potato crops, in order to make allowance for the fact that the Partnership was using PLC’s fuel for the Partnership vehicles, machinery and equipment engaged in that work and that PLC’s employees sometimes drove the Partnership’s vehicles, when carrying out that husbandry work (paragraph 180 of Paul’s first witness statement). Paul refers to the RSM Report which concluded that the Partnership undercharged against NAAC rates for its husbandry (charging for the area of the fields planted rather than the whole area of the fields as it was entitled to, in accordance with NAAC rates, not charging for irrigation work or carting away (paragraphs 178 and 179 of Paul’s first witness statement)).

The problem, however, is that Paul making allowances in the amount that the Partnership charged ABF for the use of PLC’s assets by the Partnership, does not compensate PLC for that use. It would be different if the arrangements between PLC/ABF/the Partnership were that PLC would pay all of ABF’s costs of growing potatoes (which would then mean that PLC would benefit from any allowances made by the Partnership to ABF). It is clear however that this is not the case because:

for those reasons there should be no deduction from the calculation of the loss suffered by PLC as a result of the Partnership using its employees, to reflect the adjustments that Paul says he made to the price charged by the Partnership to ABF for husbandry work.

I have found (issue 26 paragraph 536 above) that PLC carried out some, but not all of the repair and maintenance work which was required to be carried out to the Partnership’s machinery, equipment and vehicles, from January 2009. There is no material assistance as to what that amount of maintenance and repair work is in the evidence before me. The experts should therefore attempt to estimate the likely cost of maintaining and repairing the Partnerships vehicles, machinery and equipment from January 2009 to date which would not be covered by manufacturers/suppliers warranties . I will then decide what proportion of those costs should be borne by the Partnership. In addition I have found (paragraph 536 (b)) that all trailers used by the Partnership for its Cemex sub-contract were repaired and maintained by PLC. I have also found (paragraph 540) that the Partnership vehicles which were included on PLC’s Operator’s Licence were taxed and insured by PLC whilst they appeared on PLC’s Operator’s Licence and this is also a loss to PLC arising from breach of duty by Paul in allowing that to happen.

In response to issue 27, in paragraph 539 I made findings about the use of PLC’s fuel by the Partnership.

In addition to the use, by Partnership vehicles of PLC fuel on the Cemex and Biffa contracts, I have found that the Partnership used PLC fuel:

The experts have not dealt, in their reports, with the removal of liquid waste from Enterprise House, nor is it pleaded in the PLC Petition, that the arrangements between the Partnership and PLC for the removal of liquid waste from Enterprise House amounts to the affairs of PLC being conducted in a manner which is unfairly prejudicial to Andrew, as a shareholder of PLC. Paul says, at paragraph 163 of his second witness statement that, if a Partnership tractor and tanker carried liquid waste from Enterprise House it charged £40 an hour which he says is “less than NAAC rates and reasonable even if [PLC] fuel has been used, which it sometimes may have been”.

I am not satisfied that PLC has incurred a loss as a result of the Partnership using PLC fuel when removing the liquid waste from Enterprise House and spreading it. Paul asserts that the rate charged for doing this is reasonable (less than NAAC rates) even if PLC fuel is used, this assertion was not challenged in cross examination and I have no evidence before me that the charge of £40 per hour was unreasonable taking into account the Partnership using PLC fuel for the vehicles removing liquid waste from Enterprise House. Fuel used by Partnership vehicles in carting away liquid waste from Enterprise House should not therefore be included in the losses incurred by PLC as a result of the Partnership using its fuel.

In paragraph 539 (d) I concluded that PLC fuel had been used by all of the Partnership vehicles, plant and machinery involved in planting, cultivating and harvesting ABF’s potatoes. I have already noted (when dealing with the use of PLC’s employees by the Partnership) that Paul says that he deliberately adjusted downwards the charge that the Partnership made for husbandry work carried out for ABF to reflect the fact that PLC’s employees and fuel were used as part of that husbandry work. I have explained why this does not compensate PLC for the use of its employees. For the same reason it does not compensate PLC for the use of its fuel either and there should be no deduction from the loss caused to PLC by the Partnership using its fuel for planting, cultivating and harvesting potatoes from the 2016 season to date for any undercharging of ABF by the Partnership.

I have found that PLC incurred a loss as a result of the Partnership using its fuel, since February 2016, when not working for either ABF, or PLC (see paragraph 539 (e) above). There is no assistance in the evidence as to what the quantity of fuel involved is and I will ask the experts to calculate the fuel use for one Partnership tractor five days a week from February 2016. I accept that this is a largely arbitrary (although I hope reasonable) means of estimating such use, but given the state of the evidence it is, I think, the best I can do.

I am not satisfied that ABF has made any loss as a result of the arrangements for the Partnership to plant, cultivate and harvest its potatoes from the 2016 growing season (compared to what ABF would have paid to a third party contractor to carry out this work) because: (a) it is common ground that NAAC rates are the average rates charged by contractors to farmers, they are the best evidence I have about what a third party contractor would have charged ABF for husbandry work that the Partnership carried out; and (b) whilst the Partnership has used PLC’s fuel for its vehicles, machinery and equipment used to plant, cultivate and harvest potatoes for ABF (at no costs to ABF) it has purported to compensate PLC for this use by adjusting its charges to ABF downwards (Mr Lewis has calculated that the Partnership has undercharged against NAAC rates by £85,211, RSM calculated, in the RSM Report that the Partnership undercharged ABF by £170,000 against NAAC rates). ABF appears therefore to have gained from these adjustments.

I am not satisfied that the arrangements for ABF to rent the land from the Partnership at Home Farm have resulted in any loss to ABF nor are such losses pleaded in the ABF Petition.

So far as PLC is concerned, the PLC Petition pleads that the arrangements between PLC/ABF/the Partnership are a breach of the no conflict rule and that Paul should be required to account for the profits that the Partnership has made as a result, it is not pleaded that PLC suffered any loss as a result of those arrangements. Further I am not satisfied that PLC did suffer any loss as a result of those arrangements. Mr Bell accepts that PLC has paid substantially less to ABF to purchase ABF’s potatoes, than it on average paid to third party suppliers. Whilst Mr Bell complains that PLC is funding the losses of ABF, by advancing money to ABF to enable it to cover those losses, I am not satisfied the PLC has suffered any loss as a result of advancing those monies to ABF, the advances are treated as money owing by ABF to PLC. To the extent that PLC’s fuel has been used for Partnership vehicles, machinery and equipment used in carrying out husbandry work for ABF, a claim is made separately for the use of PLC’s fuel by the Partnership and cannot be claimed twice.

I am not satisfied that PLC has suffered any loss as a result of the Respondents failing to comply with Section 175 CA 2006 by not disclosing to a board meeting of PLC, their interest, as shareholders in WPS, in the loan of £623,500 by PLC to WPS, because the £623,500 was repaid to PLC, together with interest earned upon that sum by WPS. In any event, as I have already noted, a breach of duty under Section 175 does not form part of the pleaded case against the Respondents in the PLC Petition (Andrew’s case is that the transfer of £623,500 to WPS was an attempted fraud on him which I have rejected).

In his skeleton argument, Mr Zaman asserts that the remedy for failure to comply with Sections 177 and 182 CA 2006 is that the director who breaches their duty under either of those sections must account to the relevant company for the profit that they have made out of the arrangements which they have failed to disclose the nature and extent of, to the directors of that company. In support of that proposition, Mr Zaman refers to Stafford and Ritchie Fiduciary Duties 2^nd Edition paragraph 9.44 which says “the account of profits has been described as the primary remedy for the breach of fiduciary duty. In one sense, however an account is not simply a remedy it is a primary obligation of the fiduciary to account for the profits made…”. However that paragraph is concerned generally with the obligation of a fiduciary to account for profits, at paragraph 2.113 and 2.114 Stafford and Ritchie refer to their being doubt about whether a civil remedy is available for a breach of Sections 177 or 182.

In his comments upon this specific issue, Mr Zaman says that “The losses arising to the Companies by way of loss, or account of profits are matters that can be addressed at a remedies hearing”.

Mr Auld in his skeleton argument and closing argument does not, so far as I can see, address the question of whether the companies have a right to an account of profits made by the Partnership, as a matter of principle, if there has been a breach of Section 177/182 CA 2006.

The issue of whether the relevant company has a right to seek an account of profits from the Partnership does not appear to bear directly on the question of whether the affairs of that company have been conducted in a manner that is unfair or prejudicial to Andrew in his capacity as a shareholder of that company (or in the case of PLC, ABPT) and Mr Zaman does not submit that it does. I will leave to the remedies hearing therefore, this issue, and its relevance to any remedy.

Have the affairs of (a) ABPT and/or (b) BIL and/or (c) ABF been conducted in a manner which is unfairly prejudicial to the interests of members including Andrew?

If so, what directions are required to be made for a remedies hearing?

Section 994 of the CA 2006 provides:

It is common ground that “the company’s affairs” includes the affairs of a subsidiary and so, if the affairs of PLC have been conducted in a manner that is unfairly prejudicial to Andrew’s interests as a member of PLC’s holding company, ABPT, then this will be covered by Section 994.

Mr Zaman’s case may be summarised as follows:

Mr Auld’s case may be summarised as follows:

Mr Zaman and Mr Auld agree and I accept that:

I accept Mr Auld’s submissions that:

Paragraph 4 of the judgment of HHJ Purle QC in Sunrise Radio (relied on by Mr Zaman) appears to go beyond the points agreed between Mr Zaman and Mr Auld, in suggesting that, if the conduct of the directors (who are also shareholders) falls so far below the minimum standard of integrity and basic competence that any shareholder is entitled to expect, then, irrespective of whether there has been a breach of the Articles, statute or general principles of company law, and irrespective of whether the value of the Petitioning shareholder’s shares have been impacted, the conduct will be unfairly prejudicial. HHJ Purle QC also said that this applied irrespective of whether the relationship between shareholders was in the nature of a Quasi Partnership.

I approach what HHJ Purle QC says in paragraph 4 of his judgment in Sunrise Radio with some caution, because the judge was summarising in very short and broad terms what a Petitioning creditor would need to prove, in order to establish unfair prejudice. Paragraph 4 was not meant to be a precise or exhaustive definition of what a Petitioning creditor must prove in order to demonstrate unfair prejudice, which is in any event not capable of precise or exhaustive definition. Mr Zaman relies in particular upon HHJ Purle QC saying that, if the conduct of a company’s directors falls so far short of what shareholders are entitled to expect of them, such that the petitioning creditor cannot be expected to have the minimum trust in their basic integrity and competence, that any shareholder is entitled to expect, the conduct will be unfair and prejudicial…”irrespective of any impact on the value of his or her shares”. This still leaves the question of whether the relevant conduct has fallen sufficiently short of what the Petitioner as shareholder is entitled to expect to mean that the conduct is unfair and prejudicial, irrespective of any impact on the value of the petitioner’s shares.

I accept Mr Auld’s point that breach of the agreement or understanding between shareholders is the basis of the Section 994 jurisdiction and that, by implication, this agreement will include a term that directors who are shareholders will comply with their fiduciary duties as directors. That agreement, or understanding would also, in my judgment, by implication include an agreement or understanding that the directors would not act in bad faith (malevolently) in relation to the interests of shareholders or in a seriously incompetent manner. The implication that directors who are shareholders will not act in bad faith viz shareholders appears to me to be an obvious term to be implied in the agreement between shareholders. HHJ Purle QC’s reference to crass stupidity is, consistent with the guidance given by Arden J in Re Macro (see paragraph 578 (h)) above that serious mismanagement may justify the court intervening to grant a remedy under section 459 of the Companies Act 1985 (the predecessor to Section 997 CA 2006) provided it is serious enough to justify such a remedy.

I have found that the Respondents have breached their fiduciary/statutory duties to ABPT/ABF in the following respects:

I will now consider separately, whether each of the respects (673 (a)-(e)) in which I have found that Andrew has proved that one or more of the Respondents have breached their fiduciary or statutory duties to either PLC or ABF mean that the affairs of ABPT or ABF have been conducted in a manner that is unfairly prejudicial to Andrew’s interests as a member of those companies.

Whilst issue 55 directly asks the question of whether any knowledge or conduct of Andrew is relevant to the question of whether the affairs of ABPT/BIL/ABF have been conducted in a manner that is unfairly prejudicial to Andrew, as their member, I consider it both logical and convenient to consider as part of issue 54, whether Andrew’s knowledge of the conduct of the Respondents (which I have found to breach their statutory/fiduciary duties as directors) and what Andrew did or did not do, having acquired that knowledge, is relevant to the question of whether the affairs of ABPT/ABF have been conducted in a manner that is unfair and prejudicial to Andrew as a shareholder of those companies. It seems to me to be entirely artificial to purport to decide whether the affairs of ABPT/ABF have been conducted in a manner which is unfairly prejudicial to Andrew as a member of those companies, whilst disregarding Andrew’s knowledge and conduct and then to ask (if I find that it is unfair and prejudicial) whether Andrew’s knowledge and conduct changes that answer. It seems to me that the conduct of the affairs of ABPT/ABF either is or is not unfairly prejudicial to Andrew in all the relevant circumstances and if those relevant circumstances include Andrew’s knowledge and conduct, then this should be taken into account in deciding whether the affairs of ABPT/ABF have been conducted in a manner that is both unfair and prejudicial to Andrew.

I will consider first therefore to what extent Andrew’s knowledge of the Respondents’ various breaches of their statutory/common law duties as directors, or of the matters giving rise to those breaches and Andrew’s own conduct can and should be taken into account in deciding whether the affairs of ABPT/ABF have been conducted in a manner that is both unfair and prejudicial to Andrew as their member. As part of that process I will consider Mr Zaman’s objection to my dealing with issue 55, which is that the question of Andrew’s knowledge and conduct is not raised in the Respondents’ statements of case.

It is common ground that ‘clean hands’ does not apply to a claim under Section 994 CA 2006, because Section 994 CA 2006 is a statutory regime and not an equitable principle. So Andrew’s general conduct as a shareholder of the Group companies is not relevant to the question of whether the conduct by the Respondents means that the affairs of ABPT or ABF have been conducted in a manner which is unfair and prejudicial to Andrew.

Mr Auld says that:

I broadly accept Mr Auld’s submissions as to the relevance of Andrew’s knowledge and conduct, but will consider and analyse his submissions in more detail when considering the particular knowledge or conduct of Andrew which is said to be relevant to the specific breaches of fiduciary/statutory duty by the Respondents.

None of the three breaches of duty by the Respondents that I have identified, in answering issue 14 (breaches of duty in connection with the advance of £1,006,000 by PLC to ABF and acquisition of Barn Farm by ABF) are pleaded by Andrew in his ABPT petition as breaches of duty by the Respondents. I have identified the three unpleaded breaches of duty only because issue 14 asks whether there has been a breach of fiduciary or statutory duty in connection with the loan of £1,006,000 by PLC and purchase of Barn Farm by ABF and I have therefore identified three breaches of duty, in connection with the loan notwithstanding that they are not pleaded. As Andrew has not pleaded any of the three breaches that I have identified, he cannot rely on any of them to make out his case that the affairs of ABPT have been conducted in a manner which is unfairly prejudicial to him as one of its shareholders. I will nonetheless say briefly why I do not consider that any of those three breaches of duty amount to carrying on the affairs of ABPT in a manner that is either unfair of prejudicial to Andrew, in any event.

I would describe the breach of Section 175 CA 2006, by the Respondents, in failing to disclose at a board meeting of the directors of PLC that each of the Respondents had (on my findings) a beneficial interest in the shares of ABF, as a technical and trivial breach. The directors of PLC, in September 2014 were the Respondents and Mr Sharratt and they all knew (again, on my findings) about the beneficial interests that each of the Respondents (and Andrew) had in the issued shares of ABF. If the Respondents had formally disclosed at a board meeting of PLC, their interest in the shares of ABF, which all of the directors already knew about, there is no reason to suppose that the result would have been any different (that is the directors of PLC would have approved the loan of £1,006,000 by PLC to ABF, in any event).

The failure of the Respondents (and Mr Sharratt) as directors of PLC to ensure that the terms upon which PLC would advance £1,006,000 to ABF and to document those terms, left PLC vulnerable to not recovering the principal and a commercial rate of interest, There is no evidence that that vulnerability either has or is likely to result in any loss to PLC and therefore any diminution in the value of Andrew’s shares in ABPT. I take the view that these breaches of duties by the Respondents have not resulted in any unfairness or prejudice to Andrew. No unfairness, because the terms of the loan are now documented and no prejudice because Andrew has not proved that PLC has suffered any financial loss and therefore that he has suffered a diminution in the value of his shareholding in ABPT. There is nothing exceptional about these breaches of duty that lead me to conclude that the Respondents conduct fell so far below what Andrew was entitled to expect of them as directors that Andrew should be regarded as having been prejudiced regardless of PLC having suffered no financial loss (and Andrew not having suffered any diminution in the value of his shares in ABPT).

Finally as regards the loan of £1,006,000 from PLC to ABF, there is the backdating of the loan agreement from 22/23 November 2016 to 14 September 2015 which I have found to involve breaches of duty by Mr Sharratt and Paul. I have already found that Mr Sharratt decided that it was appropriate to backdate the loan agreement and the director’s resolution of ABF approving it, and Mr Sharratt who presented the backdated loan agreement to Paul to sign on behalf of PLC (Mr Sharratt signing on behalf of ABF). As the backdated loan agreement mirrors the terms on which PLC loaned money to BIL in 2010 (when Andrew was both the sole director of BIL and a director of PLC) and the terms of the loan appear to be objectively commercially fair to PLC, I am not satisfied that the backdating of the loan agreement, whilst being inappropriate, was unfair to Andrew and I am not satisfied that it has resulted in any financial loss to PLC (and therefore diminution in the value of Andrew’s shares in ABPT). Whilst the conduct of deliberately backdating documents might be described as undermining Andrew’s confidence in the integrity of the directors involved and therefore as conduct falling well below what Andrew was entitled to expect of them, it is only the conduct of Paul that Andrew can complain of in his ABPT Petition and I have already found that it was Mr Sharratt who took the lead role in deciding to backdate the loan agreement and that I am not satisfied that Paul acted dishonestly in signing the backdated loan Agreement that Mr Sharratt put in front of him to sign. For those reasons I am not satisfied, absent Andrew proving that he has suffered a financial loss as a result of the backdating of the loan agreement (and I have found that he has not proved that he has suffered such a loss) that Andrew can say that he has been prejudiced in his capacity as a shareholder of ABPT, because his confidence in the integrity of Paul has been undermined to the extent to which he has legitimately lost all trust and confidence in Paul.

I am not satisfied that the breaches of duty by Mr Tomkinson and Mr Ellis owed by them to PLC under Section 173 CA 2006, in connection with the Cemex sub-contract amount to the conducting of ABPT affairs (through its wholly owned subsidiary, PLC) in a manner that is unfair to Andrew as a member of ABPT. My reasons are as follows:

Paul’s position is different in that he breached his duty under Section 177 CA 2006 to disclose the nature and extent of the Partnership’s interest in the Cemex arrangements and he breached his fiduciary duties, by agreeing the terms of the Partnership’s sub-contract with PLC on behalf of both PLC the Partnership. These breaches of duty are more serious than those of Mr Tomkinson and Mr Ellis and there are further serious breaches of duty by Paul in causing the Partnership’s vehicles to be placed on PLC’s Operator’s Licence, knowing that he should not have done so and in order to enable the Partnership to earn revenue that it could not otherwise have earned and in causing or allowing the Partnership to use PLC’s resources. Whilst I take the view that Paul’s failure to disclose the nature and extent of the Partnership’s interest in the Cemex sub-contract and his agreeing of its terms on behalf of the Partnership and PLC were not unfair to Andrew, I do take the view that: (i) putting the Partnership’s vehicles on PLC Operator’s Licence and thereby causing or allowing PLC to incur the cost of taxing and insuring those vehicles; (ii) causing the Partnership to use Mr Whetton and Mr Elliott-Dickens as drivers for the Partnership on its Cemex sub-contract; (iii) causing the Partnership’s trailers used on its Cemex sub-contract to be repaired and maintained at PLC’s expense; and (iv) causing or allowing Partnership vehicles used on its Cemex sub-contract to fill up on PLC fuel on 72 occasions is unfair to Andrew and if the Partnership received more money for transporting similar loads away from the Cemex site than Gilbert did (about which I have asked for further evidence from the experts) that will also amount to the affairs of ABPT being conducted in a manner that is unfair to Andrew (I have accepted Paul’s evidence that the terms of the Cemex sub-contract were that the Partnership would charge the same as Gilbert so the charges should have been the same). I make all these findings for the following reasons:

As I have found that Andrew has not proved that the entry by PLC into the Cemex sub-contract with the Partnership was unfair to Andrew, in his capacity as a member of ABPT strictly speaking it is not necessary for me to consider whether the entry into that sub-contract was prejudicial to Andrew’s interests as a shareholder of ABPT. Andrew has not however, in any event, satisfied me that it was prejudicial because

I am not satisfied that Paul’s breaches of duty in causing Partnership vehicles to be put on PLC’s Operator’s Licence has resulted in a financial loss to PLC beyond PLC paying the insurance and road tax on those Partnership vehicles which appeared on PLC's Operator’s Licence, for the period the Partnership’s vehicles appeared on PLC’s Operator’s Licence) there is no evidence that it has. There was a risk that PLC may have suffered some regulatory consequences in having Partnership vehicles, which were not being used for the purposes of PLC’s business, included on PLC’s Operator’s Licence, but there is no evidence before me as to how serious that risk was. I accept that it is at least in principle possible for Andrew to establish prejudice to his interests as member of ABPT, absent financial consequences flowing to PLC (and through PLC to the value of Andrew’s shares in ABPT). However there is no evidence of PLC suffering any intangible prejudice either, such as a loss of reputation from Paul’s actions. As I have already said, in Sunrise Radio HHJ Purle QC suggested that if the conduct of directors falls so far below the minimum standards that the shareholders can expect of them, then that conduct may be found to be prejudicial even if there is no financial loss. Here I have no doubt that Paul’s actions in causing Partnership vehicles to be placed on PLC’s Operator’s Licence, so that those vehicles could participate in removing waste from the Cemex Site (whilst appearing to do so legally in compliance with the relevant regulations) was conduct which fell well below the minimum standard that the other shareholders of ABPT (including Andrew) were entitled to expect of him. However, I have not found that any of the other breaches of duty by Paul are founded on his acting dishonestly and I am not satisfied that this single incident of dishonesty by Paul, should mean that Andrew is entitled to say that that conduct is prejudicial to him (because he has legitimately lost all trust and confidence in Paul) even though he has suffered no loss, when the conduct occurred, over 10 years ago and 8 years before the ABPT Petition was issued.

Causing or allowing: (a) Mr Whetton and Mr Elliott-Dickens to drive for the Partnership on the Cemex sub-contract (for 20 days and 9 months respectively); (b) Partnership trailers used on the Cemex sub-contract to be repaired and maintained by PLC; (c) Partnership lorries used on the Cemex sub-contract to fill up with PLC fuel on 72 occasions; and (d) causing road tax and insurance on at least 2 Partnership vehicles to be paid by PLC, whilst they appeared on PLC's Operator’s Licence, does represent a material loss to PLC and therefore prejudice to Andrew, in the form of a material diminution in the value of Andrew's shares in ABPT

If I find, having considered further expert evidence on the question of whether there was a material difference between the price charged by the Partnership to PLC and the price charged by Gilbert to PLC, for the same work on Cemex, that there was a material difference, which makes it unfair to Andrew that the Partnership charged more than Gilbert, then I will also need to decide whether that conduct caused prejudice to Andrew, in his capacity as a shareholder of ABPT (causing a loss to PLC and prejudice to Andrew, in the form of a consequential diminution in the value of Andrew’s shares in ABPT).

There are two separate sub-contracts between PLC and the Partnership relating to arrangements for the removal of waste from the Biffa Site: (a) a sub-contract for the removal of solid waste; and (b) a sub-contract for the spreading of liquid waste.

I have found that similar breaches of duty were committed by Paul, Mr Ellis and Mr Tomkinson for the Biffa solid waste and liquid waste sub-contracts and I will deal with each in turn.

The sub-contract for the removal of solid waste appears to have started in late 2012 and only lasted a few months until early/mid 2013. I have accepted Paul’s evidence that the terms of that sub-contract were that PLC sub-contracted the removal of solid waste to the Partnership and the Partnership in turn used a third party to remove that solid waste from the Biffa Site. Whilst it is unclear to me why PLC did not contract direct with the third party, rather than with the Partnership, on the basis that the Partnership was simply passing on what the third party charged the Partnership, I am not satisfied that the breaches of duty by the Respondents in connection with the entry by the Partnership into the sub-contract with PLC, to dispose of solid waste was unfair or prejudicial to Andrew because:

The sub-contract between PLC and the Partnership to spread liquid waste from the Biffa Site appears to have been entered into from late 2014 and have continued (albeit at a reducing rate) until 2018. Paul says, and I have accepted his evidence, that the Partnership entered into the sub-contract with PLC to dispose of liquid waste from late 2014, because PLC, which had, up to that point been disposing of liquid waste from the Biffa Site alongside another contractor, took over sole responsibility for disposing of that liquid waste and from that point it was necessary for the Partnership to work alongside the existing sub-contractor to PLC (Prestons) in order to spread the additional liquid waste that PLC had to dispose of, from the Biffa Site.

I am not satisfied that the breaches of duty by any of the Respondents in connection with the entry by the Partnership into the sub-contract with PLC for spreading liquid waste from the Biffa site was unfair or prejudicial to Andrew (save for the use of PLC's fuel by the Partnership tractors engaged in spreading the liquid waste from the Biffa Site):

I am satisfied that Paul's breaches of duty, in causing or allowing Partnership tractors engaged in spreading liquid waste from the Biffa site to use PLC fuel was both unfair to Andrew and prejudicial to him in his capacity as a shareholder of ABPT: (a) it was unfair because the failure to maintain any record of what fuel was being used by the Partnership tractors which were spreading liquid waste from the Biffa Site for what appears to be a little over a year meant that proper and accurate recompense could not be given to PLC by the Partnership for the use of that fuel and I am satisfied on the balance of probability that PLC in fact received no recompense for the use of that fuel; and (b) I am satisfied, on the balance of probabilities, that the loss caused to PLC by the Partnership using PLC’s fuel for over a year for the Partnership tractors used to spread liquid waste from the Biffa Site will have resulted in a material loss to PLC and prejudice to Andrew in the form of a material diminution in the value of his shares in ABPT, caused by PLC suffering such a loss.

I have found that: (a) the Partnership has used PLC employees and fuel; (b) PLC paid the road tax and insurance on Partnership vehicles that were added to PLC’s Operator’s Licence for one year; and (c) PLC has maintained and repaired Partnership vehicles, equipment and machinery, in each case without a proper record being kept of the use of those resources and without PLC being properly recompensed for their use. I have concluded that Paul breached his duties under Section 172 (failing to act in what he considered, acting in good faith, to be in the best interests of PLC) and 175 (avoiding conflicts of interest) CA 2006 in relation to the use of all those resources of PLC by the Partnership and that Mr Ellis breached his duties under Sections 173 (failing to act independently) CA 2006 in relation to the Partnership’s use of PLC’s employees and fuel, but not otherwise.

I am satisfied that Andrew has proved that the use by the Partnership of PLC’s fuel, employees causing PLC to pay the road tax and insurance on Partnership vehicles, whilst they were included on PLC’s Operator’s Licence and maintenance and repair services which was procured by Paul, in breach of Paul’s duties under Sections 172 and 175 is unfair to Andrew in his capacity as a member of ABPT, for the following reasons:

In so far as Mr Ellis’s breaches of duty (sections 173) enabled PLC’s fuel and employees to be used by the Partnership, without proper records being kept and without PLC being properly recompensed for such use, I do not consider that those breaches of duty by Mr Ellis can properly be regarded as substantial causes of the unfairness which Andrew is entitled to complain about, as a member of ABPT. Andrew was alerted by Mr McQuaide to the Partnership’s use of PLC’s resources in 2010 and Mr McQuaide expressed concerns to Andrew that this should not be happening, but Andrew chose to do nothing about it. Andrew therefore, as a director of PLC up to August 2014, breached his duties to PLC under Sections 173 in the same ways that he complains that Mr Ellis breached his duties to PLC, but, as Mr McQuaide specifically brought the issue to Andrew’s attention, in the expectation that Andrew might do something about it, I regard Andrew’s breaches of duty as more serious than those of Mr Ellis. In contrast Mr Ellis was only aware in general terms about the Partnership making use of PLC’s employees and fuel (but not I find, its scale) and no one mentioned it to him in the expectation that he might do something about it.

I am satisfied that Andrew has suffered prejudice, in his capacity as a shareholder of ABPT, as a result of the Partnership using PLC’s resources (disregarding for present purposes the resources of PLC used by the Partnership in connection with the Partnership’s Cemex and Biffa sub-contracts (dealt with separately)), without that use being properly recorded and without PLC being compensated for that use because:

I have found that Paul breached his duties as a director of: (a) ABF; (i) under Section 182 CA 2006 (failing to disclose, when appointed a director of ABF, on 13 July 2015, the nature and extent of the Partnership’s interest in providing husbandry services to ABF); and (ii) his fiduciary duty owed to ABF, by agreeing on behalf of the Partnership and ABF, what the Partnership would charge ABF for those husbandry services; and (b) PLC under section 177 CA 2006 (because PLC was invoiced by the Partnership for husbandry services that the Partnership carried out for ABF and paid those invoices, deducting the costs from what it paid ABF for its potatoes and PLC was therefore a party to the arrangements by which the Partnership carried out husbandry services for ABF) by failing to disclose the nature and extent of the Partnership’s interest in providing husbandry services to ABF, when they were agreed at the beginning of 2016.

I have found that Mr Tomkinson breached his duties under Section 173 CA 2006 (duty to act independently) owed to both PLC and ABF by allowing Paul to agree what the arrangements would be, as between ABF and the Partnership for the provision of husbandry services and as between ABF, PLC and the Partnership, for the supply of potatoes/payment for the Partnership’s husbandry services.

I am not satisfied that the arrangements for the Partnership to provide husbandry services to ABF were unfair to Andrew in his capacity as a shareholder of ABF:

I am not satisfied that the arrangements for the Partnership to provide husbandry services to ABF and for PLC to buy the grown potatoes from ABF and fund the payment of the Partnership for those husbandry services were unfair to Andrew in his capacity as a shareholder of ABPT:

I am not satisfied that Andrew has been prejudiced by any breach of duty by the Respondents, in his capacity as shareholder of ABF or ABPT: (a) for the reasons set out in paragraphs 657-659 above I have not found that ABF and PLC (and in the latter case therefore ABPT) have suffered financial loss as a result of the Respondents’ breaches of duty; and (b) absent there being any financial loss to ABF/PLC and consequent diminution in the value of Andrew’s shares in ABF/ABPT, it is for Andrew to establish prejudice in some other way. I am not satisfied that the breaches of duty of the Respondents are serious enough to amount to conduct which fell so far below the minimum standard of integrity and competence that Andrew was entitled to expect as a shareholder of ABF/ABPT, that Andrew could not reasonably be expected to have the minimum trust and confidence in the integrity and competence of Paul and Mr Tomkinson.

The Respondents breached their duties to ABF in relation to the arrangements for the Partnership to rent land to ABF, in the following respects:

I am not satisfied that the arrangements by which the Partnership rented land at Home Farm to ABF for it to grow potatoes on were unfair to Andrew:

I am not satisfied that ABF has suffered any loss as a result of renting land from the Partnership (and therefore I am not satisfied that there has been any diminution in the value of Andrew’s shares in ABF as a result) or that Andrew’s interests as a shareholder of ABF can otherwise be regarded as having been prejudiced, again there is nothing exceptional about these breaches of duty that leads me to conclude that Paul and/or Mr Tomkinson’s conduct fell so far below what Andrew was entitled to expect of them as directors that Andrew should be regarded as having been prejudiced regardless of ABF having suffered no financial loss (and Andrew not having suffered any diminution in the value of his shares in ABF).

A breach of Section 175 CA 2006 by the Respondents is not pleaded in Andrew’s ABPT Petition in connection with the transfer by PLC of £623,500 to WPS. In any event, I have already described the failure of the Respondents to disclose, at a board meeting of PLC, their interests as shareholders of WPS in the transfer by PLC of £623,500 to WPS as a technical breach of Section 175 CA 2006. I would also describe it as a trivial breach because the directors of PLC at the time of the transfer, on 29 May 2014 were Paul, Andrew, Mr Tomkinson, Mr Ellis and Mr Sharratt, the same people, who owed a duty under Section 175 to disclose their shareholdings in WPS (Andrew had, as I have already found agreed to Mr Sharratt having a small shareholding in WPS). No purpose would be served by disclosing to the directors of PLC, at a board meeting, what they already knew, namely that they were all beneficial shareholders in WPS. The failure to make the relevant disclosure at a board meeting of PLC was not therefore unfair to Andrew as a shareholder of ABPT (in any event I have found that the transfer was made to WPS when it was, in order to help Andrew in the financial relief proceedings in his divorce and Andrew wanted it to be done for that reason).

PLC suffered no loss as a result of the transfer of £623,500 to WPS, because it was transferred back with accrued interest to PLC some 4 months later. The breaches by the Respondents are trivial and therefore come nowhere near amounting to conduct that fell so far below the minimum standards of competence and integrity that Andrew was entitled to expect of the Respondents, so that Andrew might be able to show that he has suffered prejudice, even though he has suffered no financial loss.

I have dealt with all relevant aspects of Andrew’s conduct in dealing with issue 54.

Following the circulation of my draft judgement, Andrew’s solicitors requested that I provide amplification/clarification of certain points made in my draft judgment. I have agreed to do so by way of an addition to my judgment and do so below.

In the request for amplification/clarification Andrew’s solicitors point to:

Andrew’s solicitors ask that in light of those findings and given that there is such a significant difference between the amount that the RSM Report suggests the Partnership undercharged ABF against NAAC rates (£170,000) compared to the amount by which Mr Lewis considers that the Partnership undercharged ABF against NAAC Rates (£85,000):

The request for amplification/clarification assumes that ABF is entitled to compensation for the use of fuel (or other resources) by the Partnership. It is not ABF which is entitled to compensation because it is not ABF’s resources that the Partnership has used, but rather the resources of PLC and therefore it is PLC that is entitled to compensation from the Partnership. Paul has purported to provide compensation for the use of PLC’s fuel by charging ABF less than NAAC Rates for the husbandry work it carried out for ABF, but, as I believe my judgment makes clear charging ABF less money does not compensate PLC for the Partnership using PLC’s fuel. I believe that this answers the request for amplification/clarification but I have set out below an explanation of why I have not allowed the experts an opportunity, in advance of the remedies hearing to express a further opinion upon the question of whether the Partnership charged ABF more than an independent 3^rd party contractor would have charged for the same husbandry work, but I have allowed the experts to express further opinions on whether independent 3^rd party contractors would have charged PLC less than the Partnership charged PLC for work it carried out under the Cemex and Biffa sub-contracts.

There is a difference between the opportunity that the experts have already had to calculate any loss suffered by PLC as a result of entering into the Cemex and Biffa sub-contracts with the Partnership and the opportunity they have already had to calculate any loss ABF has suffered as a result of it entering into an agreement with the Partnership, that the Partnership would carry out husbandry services to its potato crops: