Matthew Nicholas Tom v Ashkhan Darius Candey & Ors

an express term, which is admitted, that he “would be paid remuneration of 50% of fees billed by him where the work was introduced by him, and otherwise 40% of fees billed by him, together with a commission of 10% of others’ billing where the client was introduced to them by him”;

an express term, also admitted, that he would join as an equity partner, with equity starting at 2%, rising by stages (at a rate which is in issue) to 7% after 7 complete years at the firm, with each increase to come from Mr Candey’s share; and,

an express term that on his exit from the LLP, “Mr Candey would procure the receipt by [Mr Tom] … of a payment from the Firm …equivalent to the value of his “shares” …”, independently valued as at the date of his resignation, and subject to Mr Candey’s own personal option to acquire Mr Tom’s interest for the same sum; whilst Mr Candey’s option is admitted, Mr Tom’s right to payment on exit is denied;

also in issue are whether or not there were implied terms of good faith, and that Mr Tom would be consulted in respect of significant business decisions and entitled to be involved in the management of the business.

that increasingly, from about the end of 2012, he was mistreated, excluded from management and put under pressure to agree disadvantageous changes to the Agreement (including in respect of commission) and/or to sell all or part of his shareholding;

that at a board meeting on 24 September 2015, he was told of a proposed “amortisation” exercise, the result of which would have been to reduce dramatically the value of his shares at that time, and which was wrongfully intended to favour Mr Candey and/or Candey in the event of Mr Tom’s exit (and their payment for his shares);

that at a further board meeting on 15 October 2015, the other directors voted to approve accounts which, as they knew, inaccurately understated the sum due to Mr Tom in respect of his director’s loan account (at £259,454, rather than £332,498, reflecting his claim to a 5% interest in the LLP as at the date of completion of the sale by the LLP’s members to Candey in 2014);

that since his resignation in October 2015, in breach of the Agreement:

that in November 2016, 99,000 new shares were allotted to Candey’s other members at par, the effect (and improper purpose) of which was to reduce Mr Tom’s shareholding to 0.055% of the Company’s issued capital; Mr Tom knew of the proposed allotment, but objected on grounds that by virtue of the Agreement he was entitled to maintain his relative interest in Candey without any need for further payment;

that in these respects, the Respondents acted in breach of their duties as directors (in causing Candey to act as it did) as well as their duties of good faith and the equitable constraints and duties implied by the characterisation of the business as a quasi-partnership.

an order under section 996 of the 2006 Act, compelling Mr Candey and/or Mr McEwen and/or Mr Dunn and/or Mrs Candey and/or Candey itself to purchase his shareholding in Candey at a fair value to be determined by the court on terms that will remedy the allegedly unfairly prejudicial conduct (including on the assumed basis that Mr Tom holds such percentage shareholding as the court finds he is entitled to) and/or on such other terms or assumptions as the court shall think fit; and,

“in any event”, an order under section 996, that Mr Candey and/or Mr McEwen and/or Mr Dunn and/or Mrs Candey and/or Candey itself shall pay Mr Tom “all sums which are found to be due and owing to him by [Candey] and/or that appropriate adjustments be made to the purchase price of [Mr Tom’s] shareholding to remedy the failure to pay such sums to [Mr Tom]”.

first, that any claim to payment of a specific sum in respect of the loan account and/or of commission in respect of Matter A is barred by the provisions of sections 8 and 9 of the Limitation Act 1980 (“the 1980 Act”); and/or,

second, that where in substance the claims to relief are based on the Agreement and/or the loan account, in respect of which Mr Tom has a parallel cause of action for breach of contract or in debt, albeit now barred by virtue of sections 5 and/or 6 of the 1980 Act, the claims ought to be struck out and/or summary judgment given, because there is no real prospect of the court at trial exercising its remedial discretion under section 996 to grant relief which would undermine the policy of the 1980 Act and allow for a petitioner, in effect, to circumvent its otherwise applicable provisions; those claims are therefore abusive and/or bound to fail; and/or,

third, whether alone or in combination with the second basis, that Mr Tom has acquiesced in the alleged misconduct and/or deliberately delayed the commencement of proceedings for tactical reasons amounting to an election against the relief sought and/or refused various offers made by Mr Candey to buy his shares, such that the proceedings are abusive and/or in any event realistically bound to fail.

The Relevant Law

Strike Out and Summary Judgment

the court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All E.R. 91;

a “realistic” claim is one that carries some degree of conviction; this means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];

in reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman;

this does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court; in some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];

however, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No.5) [2001] EWCA Civ 550;

although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment; thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] F.S.R. 3;

on the other hand it is not uncommon for an application under Pt 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it.

Unfair Prejudice Proceedings

A member of a company may apply to the court by petition for an order under this Part on the ground—

“Prejudice will certainly encompass damage to the financial position of a member. The prejudice may be damage to the value of his shares but may also extend to other financial damage which in the circumstances of the case is bound up with his position as a member. So, for example, removal from participation in the management of a company and the resulting loss of income or profits from the company in the form of remuneration will constitute prejudice in those cases where the members have rights recognised in equity if not at law, to participate in that way. Similarly, damage to the financial position of a member in relation to a debt due to him from the company can in the appropriate circumstances amount to prejudice. The prejudice must be to the petitioner in his capacity as a member but this is not to be strictly confined to damage to the value of his shareholding. Moreover, prejudice need not be financial in character. A disregard of the rights of a member as such, without any financial consequences, may amount to prejudice falling within the section.”

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

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

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

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

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

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

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

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

regulate the conduct of the company's affairs in the future;

require the company—

“The whole framework of the section, and of such of the authorities as we have seen, which seem to me to support this, is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the cases, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company.” 

Unfair Prejudice Proceedings: Limitation

Unfair prejudice proceedings commenced by petition under section 994 of the 2006 Act comprise an action “upon a specialty” within the scope of section 8 of the 1980 Act; they are therefore subject in principle to a 12-year limitation period from the date on which the petitioner’s cause of action accrued: see [65]-[78].

Relief sought under section 994 is not “equitable relief”; it is relief sought under a statute which the court is empowered to grant because section 996 gives it that power: see [25] and [85] (and Re Edwardian Group Ltd [2018] EWHC 1715 (Ch) at [571] per Fancourt J).

It follows that there is no room or need to apply a limitation period “by analogy” under section 36 of the 1980 Act (or indeed, otherwise) and that equitable doctrines and defences such as laches are not strictly applicable: see [128].

By virtue of section 8(2), the 12-year period prescribed by section 8(1) of the 1980 Act is disapplied if a shorter period of limitation is prescribed by any other provision of the same Act. If a petitioner under section 994 seeks a purely monetary remedy, such as compensation, that claim (or part of the claim) will comprise an action to recover a sum “by virtue of any enactment” falling within section 9 of the 1980 Act (the application of which depends on the remedy claimed, rather than the underlying cause of action) and will therefore be subject to a 6-year limitation period from the date on which the cause of action accrued: see [87]-[130].

It follows that different limitation periods will apply to different varieties of relief sought under section 994, as is the case, for example, in respect of section 238 of the Insolvency Act 1986 (see Re Priory Garage (Walthamstow) Ltd [2001] BPIR 144): see [123]. The court should look at the substance or essential nature of the relief sought (not just limited to the words of the pleading) in order to decide which of section 8(1) or section 9 is applicable; this was the “look and see” approach referred to by Lord Goddard CJ in West Riding County Council v Huddersfield Corp [1957] 1 QB 540, and by Mr John Randall QC (the Deputy Judge) in Re Priory Garage.

A claimant is in any event entitled to take advantage of a longer limitation period by framing his case appropriately (see [123] and Lord Goff in Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 at 193-194); for example, in the context of professional negligence by claiming in tort rather than contract, and in the context of section 994, by seeking an order to regulate the affairs of the company (governed by section 8(1)) rather than for payment of a compensatory sum (governed by section 9).

A claim under section 994 for an order that the petitioner’s shares be bought by the respondents is not a claim for the recovery of a sum, and therefore does not fall within section 9 of the 1990 Act; in such cases, no debt is due until a purchase order is made and share certificates are subsequently tendered against the price to be paid; the order is not “judgment for a sum of money”: see [124]-125], and [159].

“… on an application to re-amend the petition issued on 22 June 2022, and heard on 16 December 2022, the judge allowed Zedra to plead that it had been wrongly excluded from a bonus share issue on 11 July 2016. His judgment was given on 26 January 2023. The re-amended petition, so far as relevant to this appeal, alleges that the directors were in breach of their statutory duty to act lawfully, in good faith for proper purposes and fairly as between different shareholders when exercising the power to allot shares and the power to capitalise profits and appropriate the capitalised profits to shareholders. There is a specific allegation that the directors acted “in bad faith and/or for improper purposes in order to prejudice Zedra’s interest as a minority shareholder”. The petition goes on to allege that the effect of that exclusion was to dilute Zedra’s shareholding. Accordingly, the petition alleges, Zedra lost the right to additional shares which it would have sold. The loss to Zedra is therefore said to be the additional amount which it would have realised on the flotation of THG in September 2020. The principal claim for relief is for an order that the relevant directors pay equitable compensation to Zedra to redress that loss.” (Emphasis added.)

And then at [127] and [129]:

Unfair Prejudice Proceedings: Delay and Acquiescence

“What is, perhaps, more troubling is if a 12-year limitation period applies to claims for non-monetary relief, whether the court can dismiss a claim brought within the limitation period on the ground of delay. If and to the extent that a limitation period applies to a claim, the claimant has, at least in principle, the full statutory period within which to bring his claim. It would thus normally be inappropriate to strike out the claim merely because of delay. It may that on particular facts it could be seen that the claimant had acquiesced in the state of affairs of which he complains, with the consequence that the court’s discretion would not be exercised in his favour even if he were to prove all his allegations. In such a case it would, I think, be possible for the court to give summary judgment in the defendant’s favour. Although this question was mentioned in oral argument, it was not the subject of any developed submissions. I therefore prefer to leave that question to a case in which it matters.” (Emphasis added.)

The issue that has given me significant pause for thought is the one identified by Lewison LJ in paragraph [126] above, namely that it is generally thought to be impossible for a court to strike out or summarily dismiss a claim on the basis of inordinate delay if it is brought within an applicable statutory limitation period: see Birkett v James [1978] AC 297 at 320.

It is notorious that many petitions under section 994 can, if unchecked, lead to disproportionately lengthy and expensive trials. Such petitions require robust case management if they are to comply with the overriding objective. Accordingly, the policy of the courts since the relatively early days of the unfair prejudice jurisdiction has been to discourage litigants from dredging up old grievances and to encourage them to focus on a limited number of specific, current complaints. That approach was reflected in the Law Commission’s suggestion that a relatively short limitation period of three years should be introduced in relation to section 994 petitions.

I would not wish this decision to be seen as reversing that trend or providing any encouragement to petitioners to advance stale complaints under section 994. Judges should not be discouraged, in appropriate cases, from striking out or summarily dismissing allegations of historical misconduct if it can clearly be seen, at an interim stage, that even though the petition was presented within the applicable limitation period, no reasonable judge could consider that such matters would justify the exercise of discretion to grant the relief sought at trial. However, as Lewison LJ has indicated, the precise implications of our decision in this respect will need to be worked out in a future case in which it matters.” (Again, the emphasis is added.)

Mr Tom’s Loan Account

The Pleaded Cases

“… he was entitled to have the entire shareholding to which he was entitled at the date of his resignation purchased at fair value (either pursuant to the terms of the Agreement or in the form of relief for unfairly prejudicial conduct pursuant to section 996 Companies Act 2006). In those circumstances, the Petitioner does not seek repayment of his loan account in addition to that relief (save that he reserves his right to seek appropriate adjustments to any share valuation and/or appropriate alternative relief at trial, including in the event that the value of his loan account exceeds the fair value of his entire shareholding)”.

Limitation

it is brought against (or includes) different respondents, not said to have been parties to the Agreement and/or loan account;

it requires proof of different elements, and insofar as based on its terms, does not as such require Mr Tom even to prove that the Agreement was contractually binding;

moreover, it relies on different duties, including the 1^st to 4^th Respondents’ duties as directors, said to have been breached, as well as various equitable constraints;

circumstances surrounding the loan are relied upon by Mr Tom in combination with other circumstances to justify the grant of relief;

Mr Tom seeks a remedy which is flexible and discretionary and is therefore unlike contractual damages or an order for payment of a debt, and different from an order for specific performance of a certain, contractually agreed obligation;

moreover, any adjustment to the share price on a purchase order will not necessarily be for the full value of the loan account; any adjustment would reflect an exercise of the court’s discretion, and an exercise in valuation. There are many and various possible adjustments, but for example, if a court were to order that in exchange for his shares, and in order, as is common, to effect a clean break between the opposing parties, Mr Tom should be paid a sum by the 1^st to 4^th Respondents, or one or more of them, adjusted to include an amount in satisfaction of his loan account (and thus on the assumed basis that his loan account is repaid by the Company) that assumption would affect the value of the Company (and thus the total, single amount to be paid in exchange for his shares) but not in precisely the sum of the outstanding account; it would not comprise an order for payment of a sum of money, or a debt;

an example of the court considering a share price determination by reference (in part) to the petitioning members’ loss of opportunity to receive dividends (which I understood Ms Staynings to suggest might be analogous to the Company’s failure to pay sums in respect of Mr Tom’s loan account since his resignation, whilst nonetheless making payments to the other directors from time to time) is Re McCarthy Surfacing Ltd [2009] BCC 464, at [100] – [102], where the judge said, amongst other things, “What [counsel for the petitioners] is looking for, therefore, is an order that requires the respondents to purchase Mr Hecquet and Mr Hoare’s shares at a figure which reflects 40% of the dividends which the court considers ought to have been declared on the shares since 1996 on a non-discounted basis, plus a discounted value for the shareholding, computed after deducting from the company’s assets the amount of the notional dividends which the court judges should have been paid”, and “The appropriate remedy for that unfair prejudice is that the shares should be bought out by the McCarthy brothers at a value to be fixed by the court, that value to reflect (a) the loss of the chance to receive dividends from the company due to the failure of the board to give proper consideration as to whether dividends should be declared, and (b) the value of Mr Hecquet and Mr Hoare’s shares valued as a minority interest, and after taking account of any compensation payable under (a)”; the payment contemplated in that case would have been of a purchase price, determined in the circumstances of the case to do justice between the parties, in exchange for shares; it would not have been an order to make payment of a discrete sum as compensation; it would not, it seems to me, have fallen within section 9 of the 1980 Act;

these conclusions are not affected by adopting a “look and see” approach to the characterisation of Mr Tom’s claim in this regard. His claim is both literally, and in substance, a claim to non-monetary relief under section 994 of the 2006 Act. The fact that the purchase price might be adjusted by reference in part to the amount of the loan account, which might as a term of the order be treated as thereby satisfied, does not cause me to characterise the whole claim differently (and certainly not at an interim stage of the proceedings): it remains a claim to a share purchase order – an order that Mr Tom’s shares be sold and transferred at a certain price, on certain terms, to one or more of the Respondents.

First, the Respondents’ only pleaded limitation defence (by reference to section 6 of the 1980 Act, but not section 9) is predicated on the assumption that Mr Tom’s claim was to payment of the loan account, on demand, on a contract. Whilst I acknowledge that Mr Tom in fact demanded immediate repayment of his loan account (for example, by email of 26 October 2015, sent to Mr Candey, and copied to Mr McEwen, Mr Dunn and Mrs Candey) more than 6 years before commencement, his case as subsequently pleaded was that the sum is not repayable on demand, and was not even that it was repayable on his departure from the business; it was that it would or could have been repaid only “if and when [the Company] had funds to do so (having regard to [its] profits and available funds)”. Ms Staynings described this circumstance as something akin to that which would allow for the declaration of dividends. However, it follows that on neither side has it been pleaded that the Company ever arrived at the point at which, on this (or indeed any other) basis, it became obliged (or even free) to make payment, let alone that its liability arose more than 6 years before the petition. Without that specific allegation, it is not possible to hold that the claim is or would be time barred.

Furthermore, the pleaded defence was by reference to section 6 of the 1980 Act. It was therefore, as I have said, pleaded as a defence to a claim on a contract of loan. I am in any event doubtful (albeit I do not have to decide) that a claim to payment of a sum made by a petitioner under section 994 could, even in principle, be subject to section 6 of the 1980 Act, rather than section 9. Indeed, Mr Cook’s submissions proceeded on the basis that in respect of the loan, it was (if at all) by virtue of section 9 that the claim was barred, as in Zedra Trust. However, if that is so - if it is section 9 by reference to which this defence is raised - it raises the issue of when the relevant “cause of action” arose, being, presumably (although none of this was pleaded) the cause of action to recover the sum by virtue of section 994 of the 2006 Act (the relevant “enactment”) rather than by virtue of the contract. In the present case, one important instance of alleged unfair prejudice was the share dilution in November 2016, which was less than 6 years before the petition was presented. It might be said that this event, either alone or in combination with earlier events, comprised unfair prejudice justifying relief, and that in granting relief the court could in principle make an order for payment of a previously unpaid sum that remained outstanding. For example, a contractual right to payment might arise in year 1 and become time barred in year 6, but be recoverable on a different basis by proceedings commenced under section 994 in year 7, based on prejudicial conduct in year 5. None of this having been pleaded, it would be wrong to speculate as to how the point might unfold.

The claim is not to (re)payment of the loan whether on the terms of the Agreement and/or otherwise, whether in contract or at all: it is not said that payment has fallen due (because the Company has or has had sufficient funds) and that the term should therefore be enforced. Moreover, for the purposes of section 994, the relevant test is one of “unfairness”, which is broader than (or in any event, different from) the test in contract; the rules that require certainty of contractual terms are not necessarily applicable.

I would not in any event have been persuaded to strike out the claim or give summary judgment on the basis of contractual uncertainty. In this respect, Mr Cook relied on the decision of the Court of Appeal in Gadhok v Shamji [2003] EWCA 1928, in which the Court of Appeal refused an appeal against an order striking out a claim on the basis of limitation advanced on grounds that the judge had been wrong to conclude that the sum claimed had become repayable more than 6 years before proceedings began (see [15], [18] and [33]). The details of the case are unimportant, but in addition to the basis of dismissal, Arden LJ (as she then was) expressed some doubt (contrary to the view of the judge) as to whether, in any event, the alleged agreement (which had, over time, been advanced by the claimant in seven different versions) was sufficiently certain to be enforceable, being that the defendant would, “ … pay off the debt when either he or Gomba had the money …”: see [36], echoed briefly by Lord Justice Simon Brown at [42]. In doing so, Arden LJ distinguished the decision of Atkinson J in Ledingham v Bermeijo Estancia Ltd [1947] 1 All ER 749, in which a waiver “until such time as the company is in the position to pay the interest” was held, in the circumstances of the case, to have a meaning that was “quite clear”, being that it was until the company could pay interest out of income, which the court could determine on evidence. Additionally, Mr Cook referred to Dynamic Window Systems Pty Ltd v Robinson [2016] VSC 152, an Australian case in which an application to set aside a statutory demand (in the context of a proposed winding-up petition) under section 459G of the Corporations Act 2001 as being subject to a genuine dispute was dismissed, including because the repayment term alleged (that “the loan … will be repaid as soon as practible (sic)”) was too uncertain to be enforced (see [26]) meaning that the loan was repayable immediately.

Had Mr Tom advanced an alternative case for payment on the terms pleaded (“if and when it had funds to do so (having regard to the Company’s profits and available funds)” I would not have struck it out as too uncertain at this stage because: (i) I do not consider the term to be so obviously vague as to be incapable of contractual force; as Ms Staynings said, it is in terms not dissimilar to the expression governing a company’s profits available for distribution set out at section 830 of the 2006 Act; moreover, it is not wholly different from the Respondents’ own pleaded alternative version, that the Company “could only pay those with equity holdings in the LLP through profits generated through the continued skill and labour of the shareholders in the Company”; (ii) in this case, the issue is fact and context sensitive (as illustrated by the decision in Ledingham); it is one in respect of which the parties’ witness evidence would be relevant, and the court would wish to consider all the circumstances and documents; previous decisions are merely illustrative of general principles; in the present case, the parties are yet to exchange witness statements; the issue is not suitable for summary determination.

this is matter pre-eminently unsuitable for summary determination; it is for cross-examination on evidence contained in statements yet to be served; it is, in my view, impossible to conclude that merely because in 2015/2016 Mr Tom claimed in correspondence an immediate right to payment by the Company on one basis, he now has no prospect of establishing a different term in the context of these formal proceedings; no doubt he will be cross-examined, and no doubt, to the extent relevant, the judge at trial will take account of any inconsistencies between his case and his previous words and statements, and any explanations of those inconsistencies that he might wish to give; it is not uncommon for a party’s case to change or develop in the period before commencement, or even subsequently; it is not necessarily a hallmark of weakness, or worse;

indeed, the Respondents’ own case in this regard appears also to have changed; in his email of 16 September 2016, copied to Mr McEwen, Mr Dunn and Mrs Candey, Mr Candey said: “5. To the extent that you are able to establish the existence of a loan account it is expressly denied that such loan would be payable on demand. To do so would have the effect of immediately making CANDEY Limited insolvent, in breach of SRA regulations. It is the unanimous view of myself, Nigel and Andrew that this was not the intention of the parties. 6. To the extent that you are able to establish the existence of a loan account, drawdown of such loan account was conditional on cash being banked by CANDEY Limited in respect of billed services relating to your personal services in a sum of at least double the sum you would drawdown, and/or in a sum on the introduction of new business to yourself and others.” The Respondents’ pleaded case makes no reference to the alleged condition regarding the amount or particular source of “banked cash”.

Limitation “by analogy”

first, at [104] (and as was at that time assumed to be correct), that there “is no limitation period under section 994 but the courts will not allow stale claims. If the Company had brought proceedings against the Booth directors to reclaim excessive remuneration, the claim would not have been allowed to go back beyond six years before proceedings were instituted. I therefore think there is force in the point that I should limit any remedy which I will afford the petitioners by analogy with that limitation period. [Counsel for the petitioners] did not suggest otherwise.” (Emphasis added.)

and then, at [127], “In my judgment it would be just and equitable between these parties, when valuing the petitioners' shares, that the balance sheet be adjusted to add back the excessive remuneration taken by the Booth directors in the six years to 31st July 2015. I limit the remedy to those six years because I think that any right to a remedy beyond that period is stale.”

“There is no statutory period of limitation applicable to unfair prejudice petitions, but the court will not allow a petition to degenerate into “a raking over of old grievances”:… Where the ground of unfair prejudice relied upon is a wrong which is subject to a statutory period of limitation, such as a breach of a shareholders’ agreement or a breach of the duty of care by the directors, then no doubt the lapse of the statutory period of limitation would be a highly material factor in the exercise of the court’s discretion. In Re CF Booth Ltd [2017] EWHC 457 (Ch), it was held that the minority shareholders could not complain about matters which had occurred more than six years ago by analogy with the general limitation period but they could about matters since then.

But where no statutory period of limitation applied, delay or acquiescence by the petitioner would remain as relevant as misconduct on the part of the petitioner … in the context of the issues of the unfairness of the treatment of the minority by the majority and the appropriate remedy. The court will take into account the equitable doctrines of acquiescence and laches….” (Emphasis added.)

First, it was decided before Zedra Trust, at a time when it was commonly said and assumed that no limitation period applied to claims under section 994; in stating and proceeding on that assumption, it proceeded conventionally (and was, certainly in part, referred to in Zedra Trust as an illustration of that “received wisdom”, that the impact of delay was “treated as an evaluative judgment for the court, rather than the application of a bright line limitation period” – see Zedra Trust at [20] and [21]). Cases decided before Zedra Trust must be considered with a least some degree of caution, because courts were understandably reaching (in the absence of a relevant limitation period) for some principled means of fairly balancing the rights of parties affected by the passage of time.

Second, since Zedra Trust, there is no need or room for an argument that a claim under section 994 is limitation barred by reference to a limitation period applied “by analogy”; claims under section 994 are (at least) subject to section 8 and/or section 9 of the 1980 Act.

But in any event, third, the judge in CF Booth, in the course of a case in which the court had been invited to peer back at “events of the distant past” (see [6]) referred to a limitation period only in the context of determining what would be “just and equitable between [the] parties, when valuing the petitioners' shares” (the emphasis is mine) as part of the court’s approach to the fashioning of a fair remedy, on the facts of that particular case, in the exercise of its broad discretion (albeit a discretion exercised in the context of limitation as at that time differently understood). I note that counsel for the petitioners in CF Booth did not argue against that approach.

Since Zedra Trust, whilst the court cannot (if and when applicable) undermine the effect of section 8(1) of the 1980 Act on an action brought under section 994, there might nonetheless be cases in which, at trial, as an aspect of determining a fair remedy (in particular perhaps, in respect of valuation) a court would take into account, as a factor, the existence of some other limitation period: for example, if valuing a company by reference to its assets, one of which is said to be a right or claim which is, at the valuation date, wholly or partly limitation barred (as in CF Booth, where the remuneration notionally added back to the company’s assets was limited to that which the company would not have been time barred from claiming as at the valuation date). The approach taken in CF Booth, if so understood, is not, I think, inconsistent with Zedra Trust, or otherwise (in light of that decision) necessarily unprincipled; it concerned a different issue.

Abuse of Process: the Existence of a “Parallel Action”

".. the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied…It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power." 

First, it is based on a premise that I have rejected: the claim made by Mr Tom under section 994 is substantially different from that which he might (arguably) have brought in contract, as is the remedy (as, almost inevitably, are the prospects of success) as I explained above at paragraph 48.

In any event, had he claimed specific performance (as would have been necessary, for example, had he wished to seek the sale of his shares) his claim would not have been subject to a shorter, 6-year, limitation period (see section 36 of the 1980 Act). In any event, specific performance would not have given Mr Tom the relief which he seeks; it would not have entitled the court to make an order against all of the respondents or to make any adjustments in relation to the purchase order (for example, in respect of valuation date or other adjustments, such as in respect of his loan account); it would not have allowed for the court to compensate Mr Tom in respect of the alleged improper dilution of his shareholding (to 0.055%) on 2 November 2016.

Second, subject to the court’s powers to prevent the abuse of its processes, litigants, acting within the rules, are autonomous: they are free to frame their cases as they wish. Notwithstanding the possible existence of a related parallel claim in contract, Mr Tom’s use of section 994 does not, in my judgment, comprise the use of that process in a manner which is manifestly unfair to the Respondents, or which is such as to bring the administration of justice into disrepute among right-thinking people. Apart from anything, it cannot be “contrary to the policy of the 1980 Act” (as was suggested) to bring an action within the limits of a period imposed by the Act itself. It cannot be (and was not) suggested that Mr Tom does not genuinely wish for or seek the remedy which by his petition he has claimed. He has therefore invoked the court’s powers for the purpose for which they were created.

Unpaid Commission

The Parties’ Pleaded Cases

Limitation

First, it appeared to be common ground that completion of the costs assessment is or was a pre-condition of payment. However, it was neither agreed nor clear (or even pleaded) when that event took place, although it was apparently after 15 October 2015 (when Mr Tom resigned) a date about 7 years before proceedings commenced on 28 October 2022.

Second, Ms Staynings said that if limitation were to be pleaded, Mr Tom would - if necessary - rely on section 32 of the 1980 Act, based on the Respondents’ “deliberate concealment” of relevant facts, in respect of which she referred to the explanation at [108] – [109] of Canada Square Operations Ltd v Potter [2023] UKSC 41: “What is required is (1) a fact relevant to the claimant’s right of action, (2) the concealment of that fact from her by the defendant, either by a positive act of concealment or by a withholding of the relevant information, and (3) an intention on the part of the defendant to conceal the fact or facts in question.”

In that regard, Ms Staynings referred to the Respondents’ alleged (but disputed) failures to give timely disclosure of documents relevant to the date of receipt of fees by the Company, including their failure to disclose, before 27 December 2023, relevant ledgers (not produced in evidence) showing when certain sums were billed, and also (apparently due to a “technical hiccup”) to disclose before 28 March 2024 certain costs orders relevant to Matter A. I am not willing to speculate whether: (i) prima facie, the limitation period in respect of the commission claim has expired, and if so when; and (ii) if so, whether reliance on section 32 might be justified. In the present circumstances, the matter is not suitable for determination in this summary fashion.

I also reject Mr Cook’s argument (by reference to The Mihalis Angelos [1970] 2 WLR 907) that Mr Tom could in any event have sued in September 2015, in reliance on an anticipatory breach. First, again, the point was not pleaded. Second, in any event, it was not evidenced or obvious that as at (about) the point of Mr Tom’s departure from the business, the Company or the Respondents had repudiated contractual liability in respect of a future obligation to pay commission when it fell due, such that Mr Tom was then immediately entitled to relief.

Third, the Respondents’ limitation argument was based on the application of section 9 of the 1980 Act. I note, without speculating or deciding, that had section 9 been pleaded (rather than section 5) it would at least have raised the issue of when, for that purpose, Mr Tom’s cause of action accrued, and “by virtue of [sections 994 – 996 of the 2006 Act]” the sum claimed became recoverable.

Fourth, in any event, Mr Tom’s allegations about commission are part of his case in respect of unfairly prejudicial conduct, and part of his case about the appropriate, fair price to be paid for his shares. Given that they will therefore be ventilated and decided at trial in any event, there is (on the basis referred to at paragraph 23 above) further reason not to determine the issues at an interim stage.

Finally, in substance for the same reasons, I would reject any arguments based on the grounds explained above at paragraph 55 in relation to the loan account – given that it is not possible to conclude that the underlying limitation period has expired, there is no room for a conclusion that the court would be bound to reject the claim, in the exercise of its discretion under section 996.

Delay, Acquiescence, Election and Abuse of Process

Delay, Acquiescence and Election

“…HS and Estera did not deliberately delay their proceedings in order to take advantage of the rising fortunes of the Company. They did not elect to remain shareholders and benefit from that status. The reason for the delay in issuing proceedings was (for whatever misguided or ill-advised reason) to allow the BM Singh proceedings to be brought first. While that can rightly be criticised as a tactical decision made in order to try to obtain the best chance of obtaining relief against JS, it was not a tactical decision to try to benefit from remaining a shareholder notwithstanding a claim to be bought out. It is in that type of case that a minority shareholder is taken to have made an election and is denied relief. Moreover, although the Company’s financial position has undoubtedly improved since 2009, that was for particular reasons relating to the revaluation of its properties that I have already explained, rather than because of any change of direction of the Company’s business since 2009. I do not consider it at all likely that HS or Estera had such increases in mind at the end of 2009 as a reason for delay. As from the end of 2012, the increase in the Company’s value has been much more modest.” (Emphasis added.)

“The delay in issuing the claim for unfair prejudice in In re Edwardian Group Ltd was held to be both deliberate and tactically motivated. However, although the financial position of the company had strengthened during the period of delay, it was not a tactical decision to try to benefit from the rise in value of the shares by remaining a shareholder notwithstanding knowledge of the grounds for making a claim to be bought out. Fancourt J rightly observed that in that type of case, a minority shareholder is taken to have made an election and will be denied relief. The position of H and Estera was essentially the same throughout the delay. The behaviour of J and the company had been seriously prejudicial and unfair. Finally, the respondents could be adequately protected or compensated in other ways for the effect of culpable delay by valuing the petitioners’ shares at an earlier date, and, where appropriate, making them account for dividends received during the period of such delay.” (Emphasis added.)

On 26 October 2015 (almost immediately after his resignation from the business), Mr Tom asked the Respondents to “…kindly confirm your proposals within 7 days for repayment of my outstanding director's loan”.

On 17 November 2015, Mr Candey (on behalf of the Respondents) wrote to Mr Tom and disputed his claim in its entirety, including his alleged right to the sale of his alleged shares and repayment of his loan account.

On 5 August 2016, Mr Tom sent the Respondents a formal Letter of Claim. In relation to the loan account, he said: “I claim immediate repayment by [the Company] of the full amount of my loan to [the Company] arising from the sale of my entire interest in [the LLP] to [the Company] on 23 June 2014, plus interest calculated from 16 October 2015 onwards”.

On 25 August 2016, Mr Tom told the Respondents by email that he intended “in any event to be ready to issue court proceedings by the end of September [2016] …” and that he was “already in a position to pursue an unfair prejudice petition…”. On various occasions subsequently, he repeated his intention to issue proceedings imminently, as described by Mr Candey in his 3^rd witness statement.

On various occasions, Mr Candey invited the Petitioner to bring proceedings. For example, by letter of 9 October 2017, he said, “You have been litigating with us by correspondence for some 3 years. There is a limit to the extent that anyone is required to respond to pre-action correspondence. We are not prepared to engage with you any further, and if you therefore think that you have any claims then they must be brought within the discipline of Court proceedings”.

Following that letter of 9 October 2017, there was no correspondence for over three years. Then, on 28 May 2021, on behalf of Mr Tom, his solicitors, HCR, sent another letter before action to the Respondents. Mr Candey replied on the same day, stating, amongst other things: “In respect of the balance of your correspondence your client is asserting and relying on a factual matrix of many years ago. He threatened previously to sue me in 2015. He has now waited some 6 years and is no doubt only taking action because he is rightly concerned about limitation”.

This led to further rounds of letters exchanged between Mr Candey and Mr Tom’s solicitors, the last of which was on 13 July 2021. Again, there was a period of silence until 28 October 2022, when the petition was issued.

“Prior to the board meeting on 24 September 2015, I had only a vague understanding of what amortisation meant. I did not believe that this kind of ‘writing down’ exercise had any substantive impact on the underlying value of a business. Before the meeting, no accountants’ advice had been shown to me and none of the Respondents discussed it with me. The only explanation I received was at the board meeting itself.

Given this limited understanding, I was surprised at the suggestion that the amortisation exercise would actually reduce the value of the firm and R1 was suddenly keen to have the firm independently valued so a buyout of my shares could be agreed. Accordingly, my comment that I “didn’t need a buy out now” was directed at the position I presumed R1 was proposing to take on valuation of my shares in light of the amortisation exercise. I was also seeking to respond directly to an allegation that my having moved to Gloucestershire had been a plan to force a buyout, notwithstanding that I had confirmed my intention to stay.”

Abuse of Process: Mr Candey’s Offers

On 17 August 2016, Mr Candey said, “I hereby repeat my open offer, made for amicable reasons only and strictly without prejudice to my or the Firm’s position that your shares fell in on your retirement, to pay you whatever your interest was worth on the open legal market as at the date of your departure and retirement from the LLP and the Firm. You will recall that this offer was last made by me at our penultimate board meeting in October 2015”.

On 2 September 2016, Mr Candey repeated, “In the spirit of my previous offers I hereby formally exercise my option to acquire your shares in CANDEY Limited, at a price to be independently valued, as at the date of your departure. If we cannot agree a price and/or valuation mechanism then this will plainly have to be determined by the Court”.

past offers cannot necessarily be relied upon as a remedy for conduct yet to occur; they do not give the offeror “carte blanche to behave in future as he wishes” (see Re Sprintroom Ltd [2019] EWCA Civ 932 at [136]); in the present case, the offers relied on pre-dated certain of the allegedly unfairly prejudicial conduct, in particular, the share dilution on 2 November 2016;

no formal terms were offered and neither was equality of arms (for example, access to financial information);

the adjustments now sought by Mr Tom (for example, in relation to unpaid commission or the loan or the amortisation exercise or the number and proportion of shares claimed) were not part of what was offered;

certain of the offers imposed terms which were unreasonable; for example, that made on 17 August 2016 included the term that “the position at Companies’ House must reflect the fact that you have no ownership in the Firm as at the date of the next annual return, with any claim by you resting on the ascertainment and valuation of your interest. You will agree to execute whatever documents are required to give effect to this.” That term would have deprived Mr Tom of his shareholding in the Company prematurely, before any price had even been determined for those shares, and (on his case, albeit apparently not accepted by the Respondents) deprived him of standing to bring an unfair prejudice petition;

in any event, some of the alleged “offers” were in fact statements by Mr Candey of an intention (which he never sought to enforce, but could have done) to exercise his personal option to buy Mr Tom’s shares.