England and Wales High Court (Chancery Division) Decisions

Arrow Nominees v. Blackledge [2000] EWHC Ch 177 (21st January, 2000)

1. GRAHAM BLACKLEDGE

2. MARGARET BLACKLEDGE

3. GR & MM BLACKLEDGE

1. On the 2^nd November of last year I handed down a judgment in an interlocutory application in these proceedings seeking to strike out the petition of Arrow Nominees INC and Lorraine Blackledge against Graham and Margaret Blackledge and their company GR & MM Blackledge PLC seeking relief under the provisions of section 459 and 461 of the Companies Act 1985. I refer to that judgment and to its description of the background facts of this litigation. I will again use the nomenclature which that judgment uses. The application to strike out was based on the admitted acts of forgery by Nigel of documents later produced on disclosure in the proceedings. In the result I declined to strike out the petition on the basis that I was not satisfied, on the evidence before me at that time, that there was a substantial risk that a fair trial of the issues raised by the petition could not follow. However in one of the concluding paragraphs of the judgment I said this:-

   "I must emphasise, however, that I have dealt with this application on the evidence before me at the moment. That is not an end of the matter. If in the course of the trial further evidence emerges that there have been breaches of disclosure obligations by the petitioners and, in particular, that other documents have been suppressed or fraudulently altered, the application to strike out can then be renewed and is highly likely to be successful because it will lead the Court to take the view that contrary to Nigel’s denials he has not made a clean breast of his fraudulent activities."

2. The trial duly commenced on the 10^th November when Mr Rosen presented the case for Nigel and Lorraine as petitioners under the petition. Notwithstanding that Arrow was the nominal first petitioner I will hereafter refer to them together as "the petitioners" and treat Nigel as the first petitioner as was in effect the case. The hearing has run for 29 days greatly exceeding the parties’ estimate. In an attempt to define and concentrate the issues required to be decided in order to decide the dispute between the parties, I informed them in the course of the presentation of the petitioner’s case that at its conclusion, and after giving the three respondents to the petition ("the respondents") an opportunity to adduce any evidence they would wish to bring directed to the question of further falsification of documents or continuing breaches by the petitioners of their disclosure obligations, I would decide the following questions under CPR Rules 3.4 and 24.2:-

1. Whether the petitioners had shown a prima facie case against the respondents under Section 459 for relief under Section 461, failing which the petition would be dismissed.
    
2. In the event that the petitioners had demonstrated such a prima facie case whether I was still of the view that there was no substantial risk that a fair trial of that case could not take place. If I had changed my view the result would be the dismissal of the petition.
    
3. If the answer to questions 1 and 2 was yes, whether the petitioners had demonstrated a prima facie case for the Court to make a order requiring PLC to sell its 52% shareholding in Bodycare to the petitioners at a fair price (a "minority buy out order").
4. Whether the respondents cross petition against the petitioners was demurrable and should be struck out.

1. Mr Rosen concluded his presentation of the petitioners case at which point Mr Freedman introduced various witnesses directed to the issue of falsification of documents and they were cross examined. When that evidence was complete I received submissions from the parties directed to the first three issues. Those submissions concluded during the afternoon of the last day of last term. Since the first issue raised points of law which I had not already dealt with in my first judgment and because of the exigencies of time I decided not to give extempore judgment. Because I had formed a view at that stage and because it seemed to me in the interests of the parties that they should know my conclusions as soon as possible I gave the parties those conclusions with my reasons for arriving at those conclusions to follow later. My conclusions were to answer questions 1 and 2 yes and question 3 no. When the case resumed after the Christmas Vacation I was informed that the parties wished me to deal with question 4 and to add to it a fifth question whether the passing off proceedings should also be struck out under the same rules. This judgment gives my reasons for arriving at my conclusions as to the first three questions and also deals with the fourth and fifth questions on which I heard submissions over slightly less than a day and a half.
2. Graham is Lorraine’s uncle. Lorraine came to work for PLC on leaving school in 1985. She continued to work for PLC in an increasingly responsible capacity until the setting up of Bodycare in 1994. Nigel was a family friend of the Blackledge family. Until 1993 he had been engaged in the Tobias family wholesale business with mixed results, two of the businesses with which he was concerned having failed. He came on the scene as a result of interest, initially on behalf of his brother Peter in becoming a retail franchisee of PLC.
3. It is common ground that in 1993 Graham embarked on an attempt to promote a chain of franchisee retailers of toiletries being franchised to use a form of retail selling under the name Bodycare already established by PLC through a chain of retail outlets owned by it. Besides using the name Bodycare the shops had a common design of shop fitting and décor predominantly black and white. Their stock was confined to toiletries and perfumes and associated goods. The vast majority of the goods sold were "branded" goods although a small percentage were "own brand". Marketing policy was to sell branded goods at a discount on the prices attached to those goods by the major distributors such as Boots. In the course of the trial this marketing policy with its associated shop fitting design conducted under the name Bodycare became known as "the Bodycare concept". It was the respondents contention that the Bodycare concept was a goodwill asset of PLC, already established by the time the Bodycare company was set up in 1994, which it was thereafter permitted to use as an implied licensee of PLC.
    
4. Whereas there is considerable dispute as to the terms of the agreements or arrangements under which Nigel and Lorraine came to be shareholders and joint managing directors of Bodycare, which disputes I will shortly describe by reference to the pleading, it is not in issue that those terms were never comprehensively set out in a document or documents passing between the petitioners on the one hand and the respondents on the other.
    
5. The petitioners account of those agreements or arrangements is pleaded at paragraph 5 of the amended petition. At paragraph 7 are pleaded a series of "reasonable and legitimate expectations of the parties" said to flow from those agreements or arrangements. The respondents plead to the allegations in paragraph 5 of the petition in paragraphs 6 to 14 inclusive of the amended points of defence, in particular, paragraph 14. They plead to paragraph 7 of the petition by paragraph 16 of the points of defence. For the sake of brevity I will not set out those pleadings but will seek to summarise their effect by reference to paragraph 5 of the petition.
    
6. It is not in issue that the majority of the terms agreed between the parties were directed to the financing of Bodycare and its relationship with PLC during its first three years of trading life. Thus there were terms by which PLC undertook to give extended credit to Bodycare during that period and which fixed the terms upon which PLC supplied Bodycare with its stock of toiletries for sale and transferred to it eight of the retail outlets then owned and operated by PLC or which were in the process of being acquired and set up.
    
7. At paragraph 5(1) of the petition is pleaded a term whereby the petitioners would be able to acquire 24% each of the 1000 £1 issued shares of the company with the balance remaining with PLC. The respondents admit this. In due course the petitioners acquired their shares at par at a total cost of £480. Notwithstanding what is pleaded at paragraph 9 of the points of defence it is not contended by the respondents that the petitioners shares are subject to any conditions of forfeiture at the expiry of the three year term or, for instance, in the event that the petitioners cease to be directors or employees of Bodycare. The respondents therefore appear to accept that it was always envisaged that the petitioners would have a long term shareholding interest in Bodycare. The respondent’s cross petition seeks an order for the sale to the respondents of the petitioners shares in Bodycare at a fair price.
    
8. At paragraph 5(2) of the petition the following is pleaded:-

   "That Mr Tobias and the second petitioner and the third respondent [PLC] would be involved in the company but that only Mr Tobias and the second petitioner would manage the company and be joint managing directors. The precise composition of the board was not initially discussed but when the first respondent organised the details of directors he nominated himself and the second respondent as directors so that there would be four directors in the new company namely Mr Tobias and the second petitioner and the first and second respondents and that equal representation in fact reflected the quasi-partnership which the company was envisaged as constituting."

9. It is accepted by the respondents that the petitioners were to be appointed to the board of Bodycare "to run its day to day affairs and to participate in opening new stores as and when commercially feasible and prudent" with the title of joint managing director. Graham and Margaret would also be directors. It is not accepted that it was envisaged that they would play no active part in the management of Bodycare nor is it accepted that in fact they played no such part. It is not accepted by the respondents that the company was a "quasi-partnership company" as those words have come to be recognised by lawyers practising in this field. The two sides were equally represented on the board but in fact Graham was chairman with a casting vote. It follows, and this is relevant when I come to consider whether the cross petition is demurrable, that at all material times the respondents have controlled Bodycare at both board and general meeting level.
    
10. At paragraph 5(3) of the petition it is pleaded as a term that the respondents would transfer eight of their existing retail stores to Bodycare. The respondents admit this term. Again it is not contended by the respondents that these stores would return to PLC on the expiry of the three year period or on any other specific event. There is an issue between the parties as to how the stores were to be paid for the petitioners alleging that this was to be done on "an agreed formula… in relation to stock at cost, fixtures and fittings reduced by 25% per annum up to three years", the respondents case being that they were to be purchased at book value. This is an issue which has not thus far loomed large amongst the many issues in the case.
     
11. At paragraph 5(4) of the petition a term is alleged "that the petitioners would draw through the third respondent a loan for the company of £1M which would be interest free for three years which would enable the company not only to purchase the eight stores but also then to go on and set up more stores." The respondents admit that they were to provide credit to Bodycare interest free up to a limit of £1M for the first three year period after which the future credit facilities provided by PLC to Bodycare would be reviewed. It was envisaged that that credit facility would assist the company in purchasing the eight stores and to fit out, stock and operate all its retail outlets.
     
12. At paragraph 5(5) of the petition it is alleged that it was a term "that the supply of toiletries from the third respondent to the company would be at a starting margin/discount of 15% (on the method of calculation used by the respondents) which would rise at six monthly intervals at ½ % to a total of 17.5%." The discount was to be on the retail price of goods supplied as fixed by PLC. Around this sub paragraph of the petition arises one of the two principle areas of dispute between the parties. In particular the respondents deny that there was any agreed provision for a step by step increase in the discount given by PLC to Bodycare for toiletries supplied. In fact such a discount was given increasing by ½ % every six months with effect from the beginning of the three year period and rising by the end of it to 17.5%. This discount was not actually allowed initially. It is the respondents case that was agreed in 1995 to assist the company which was finding difficulty in financing its expansion and backdated in effect. It is further the respondents case that the terms on which PLC was to supply toiletries to Bodycare were to be reviewed on the expiry of the three year period. In fact, after the breakdown of relationship between the parties in 1997/8 PLC unilaterally reduced the discount back to 15%.
     
13. At paragraph 5(6) it is alleged that "the petitioners would be able to decide their own salaries but these should be low initially to allow the company to grow. After three years the salaries would be at a market rate." The respondents deny that there was any such term. They plead that the petitioners salaries were initially to be at a rate of £20,000 per annum thereafter to be determined in accordance with Bodycare’s Articles of Association.
     
14. At paragraph 5(7) of the petition a number of allegations are made. The first is "that the company should pursue a policy of expansion" this is admitted by the respondents subject to the caveat that it should be "commercially feasible and prudent to do so" and that the policy of opening new Bodycare stores would be reviewed at the end of the three year period. Secondly the petition alleges that "after a period of three years consideration could [sic] be given to how and when repayment to PLC of its £1M credit would be made and "at that stage the parties would also discuss the margin to be applied on sales thereafter" subject to an understanding that the margin would not be reduced. The respondents admit an intention to review the terms of supply but assert that the level of margin to be reviewed was that initially agreed namely 15%. The respondents deny that it was ever agreed that the level of margin would never be reduced from that which it reached in the course of the three year initial period. Finally it is alleged in this sub paragraph by the petitioners that "it was envisaged that the company might be floated or offered to investors at the expiry of the three period in the course of which it might do a reverse take over of PLC." This is denied by the respondents although they do admit that there was a suggestion for a floatation made by the petitioners in the Spring of 1996. It was the failure of this attempt to float PLC and Bodycare, with Graham and the petitioners retaining a minority in the resulting company, which lead to the breakdown in relations between the parties.
     
15. At paragraph 5(8) a series of alleged terms are pleaded. It is first pleaded as an implied term, not expressly agreed, that, in pursuing its expansion Bodycare would accrue "considerable trade and goodwill in its operations and in the Bodycare name and trading style and that ultimately the continuing use of such name and trading style would be that of" Bodycare. The respondents deny this. As I have described it is the respondents case that Bodycare was entitled to use the "Bodycare concept" as an implied licensee of PLC which took the benefit of any goodwill built up as a result of Bodycare’s trading. Secondly it is alleged that it was envisaged that "ultimately" all trading using the Bodycare concept would be conducted by Bodycare to which the remaining retail outlets of PLC trading under the Bodycare name would be transferred within the first three years of Bodycare’s trading. The respondents deny this. As part of the second allegation it is alleged that to the extent that such retail outlets were retained by PLC they were only retained pending the retirement of a female relative of Graham who was managing them and were to be transferred on her retirement. In any event these outstanding outlets were to be transferred to Bodycare before the agreed flotation alleged by the petitioners. All this is denied by the respondents.
16. At paragraph 7 of the points of claim are set out "the reasonable and legitimate expectations of the parties" alleged to be the "basis for the parties participation in the company and what was in any event fair as between them."
     
17. Paragraph 7(1) adds nothing to the allegations contained in paragraph 5(8) and is denied by the respondents. At paragraph 7(2) the petitioners plead "that the monies loaned to the company would be repaid as and when the company was in a position to obtain Bank finance to replace the same, alternatively upon the company being given a reasonable opportunity to obtain such finance (for which purpose sufficient time was required to allow a written supply agreement to be entered into and Bank finance to be sought thereafter). Such a period would have been not less than six months or such period as in fact proved to be required to obtain the alternative supply agreement and a reasonable time to arrange Bank funding thereafter."
     
18. It is not entirely clear what the effect of this pleading is. It is directed to what the expectations of the parties were as to how and when the initial credit of £1M and the further credit of £2M at an interest rate of 8.5% agreed in May 1995 to be made available by PLC to Bodycare were to be repaid. It is the petitioners complaint that after the parties fell out PLC unilaterally raised the interest rate to 10.5%, a rate greater than that obtainable in the market. By the time the hearing commenced the whole of the £3M credit given by PLC to Bodycare had been repaid, a process completed in mid 1999, leaving outstanding sums due for goods supplied under PLC’s normal terms of credit available to other customers.
     
19. At paragraph 7(3) of the petition it is pleaded "that the supply of toiletries from" PLC "to the company would after the expiry of the three year period be at a market rate margin which would be greater than and not less than 17.5%." The respondents deny this, and their denial appears to be supported by the way in which the petitioners plead in paragraph 5(7) that "… after a period of three years… the parties would also discuss the margin to be applied on sales thereafter." It is the respondents case, in any event, that a 15% discount on the retail price constitutes beneficial trading terms to Bodycare. Such terms guarantee Bodycare profit at all times. In addition PLC provided services to Bodycare leading to savings in that company’s overheads. Those services comprised such things as the selection and pricing of goods, the monitoring of competitors prices, frequent stock delivery, dealing with and buying in bulk from manufactures and suppliers etc. In fact when PLC reduced the margin to 15% the petitioners refused to accept the reduction and have since been paying PLC on the basis of a 17.5% margin. It is not in issue that to this extent the profits of Bodycare have been inflated rendering it that much easier for it to repay its indebtedness to PLC.
     
20. At paragraph 7(4) it is alleged that it was the expectation of the parties extending after the three year period "that the expansion of the Bodycare business would continue and would be pursued through the company." The respondents admit that in April 1994 it was envisaged that the chain of retail shops trading under the name Bodycare would be expanded but deny that this was to happen exclusively through Bodycare. That expansion was to be "so long as it was commercially feasible and prudent to do so" and subject to a "review" of the opening of new Bodycare stores by Bodycare at the end of the three year period. It is not clear from the points of defence what this "review" was designed to achieve. There is considerable dispute between the parties whether Nigel and Lorraine had authority to open new retail outlets without the consent of the respondents. It has not been suggested to the petitioners or their witnesses that it was envisaged by the parties that in default of agreement the expansion of retail outlets by Bodycare would cease at the end of the three year period. It seems to me that the respondents pleading amounts to an admission that the parties envisaged that the expansion of retail outlets by Bodycare would continue after the three year period provided that it was sensible in commercial terms to do so either generally or in the case of any particular proposed new outlets but that the consent of Graham and Margaret was necessary before Bodycare could undertake the obligations incurred in opening such an outlet. I don’t understand the respondents to be contending that their case on this point differs from this summary.
     
21. At paragraph 7(5) it is pleaded that there was an expectation by the parties that in the trading between Bodycare and PLC, Bodycare "would be not less favourably treated by" PLC "than other companies to which it supplied such goods at arms length." It is common ground that Bodycare was to be at liberty to purchase its own supplies of perfumes other than through PLC and to market them at prices set by itself. It is the petitioners case that the reduction by PLC of the profit margin on toiletries to 15% at least reduced the profits capable of being earned by Bodycare significantly below those which it could have earned had it been dealing with suppliers in the open market. It is Bodycare’s case that since the reduction to 15%, if trading in perfumes is discounted, Bodycare’s trading has been unprofitable. I have already set out the respondent’s answer to this allegation when summarising the respective cases in relation to paragraph 7(3) of the petition. In addition the respondents highlight the financial assistance given to Bodycare during its first three years of expansion. Paragraph 7(6) of the petition makes a similar complaint with relation to the interest to be charged on the £2M additional credit made available in May 1995 to that being made under (5) with the relation to the supply of goods. Notwithstanding the terms of paragraph 16.5 of the points of defence which, it is at least arguable, amount to an admission of paragraphs 7(5) and (6) of the petition, it was submitted by Mr Freedman and I am prepared to accept that what was intended was, in fact, a denial.
     
22. It is not easy to discern what paragraph 7(7) of the petition is directed to. That difficulty continues after the close of the petitioners evidence. It does not seem to me add anything to the proceeding three sub paragraphs.
     
23. Paragraph 7(8) was added by amendment in the course of the hearing. On reviewing it, it does not seem to me to add anything to the allegations contained in the sub paragraphs which proceed it save an allegation that the parties envisaged that in any arrangement under which Bodycare "would be sold or the subject of a floatation… or merged with the third respondent through any new corporate vehicle" then the petitioners interest in that new corporate vehicle "would equate with their holdings in" Bodycare. This allegation does not seem to me to be an allegation of the conduct of Bodycare’s business by the respondents so capable of supporting a petition under section 459.
     
24. Again it does not seem to me that sub paragraph 7(9) of the petition adds anything to paragraphs 7(4)(5) and (6).
     
25. It was not seriously argued on behalf of the respondents that if the evidence adduced in support of the petition were accepted the petitioners had not shown a prima facie case for relief under section 459 and 461. What was argued was that there had not been disclosed such a case of which it could be said that there was no serious risk that a fair trial could not be held. It was not suggested by either party that at the conclusion of the petitioners evidence, and after the respondents had had an opportunity to adduce such evidence as they wished directed to the issue of forgery and failure to comply with obligations of disclosure, it was not open to me to come to a conclusion whether the petitioners had disclosed such a prima facie case.
     
26. Lorraine gave evidence in accordance with her witness statements and was cross examined over six days. Questions were put to her directed to establishing that she was complicit in Nigel’s forgeries and, or alternatively, joined with him in attempts to conceal them after they had been disclosed to her on the evening of the 3^rd August last year. Nigel similarly gave evidence and was cross examined over a period of what was in effect rather more than three days. Much of his cross examination was directed to establishing that he had not been truthful in his account of the events surrounding his forgeries, that he had not made a clean breast of those forgeries but rather had continued and was continuing to present an untruthful account of them and that there were further forged documents amongst those disclosed by the petitioners which he had not drawn attention to.
     
27. Joel Tobias, Nigel’s brother, gave evidence directed to the circumstances in which on the 4^th August, through an acquaintance, a Mr Bluestone of Berkeley Security Bureau, he consulted Mr Browne a handwriting expert. He was extensively cross examined over his account of those events. Questions directed to showing that there were further undisclosed forged documents or those documents had been suppressed were directed to Mr Garry the sales manager brought into Bodycare by Nigel and Lorraine in September 1994, Linda Morris Bodycare’s Scottish area manager since March of last year, Mr David Royle regional director of LSH to whom four of the admittedly forged letters were purportedly sent, Mr Peter Hain the managing director of Peak Projects Ltd whose company undertook a shop fitting contract for Bodycare in mid 1998, Mr Barclay, managing director of M&S Toiletries Ltd, which company was approached by Bodycare in early 1998 with a view to replacing PLC as the primary supplier of toiletries to Bodycare, and Mr Tempany, the sales and marketing director of M&S.
     
28. The respondents called four witnesses. Mr Cobb the partner in GLF, the accountants with whom Nigel and Lorraine dealt from 1994 onwards and to whom two of the letters which Nigel admitted to be forged were addressed. He appeared on subpoena and declined to answer a number of questions directed to the documents on the ground of potential self incrimination. Though not charged he has been made the subject of police enquiries. The other witnesses called by the respondents on the issue of forgery were Mr Mark Halliwell a partner in the solicitors firm Halliwell Landau who were instructed by the petitioners at the time of the abortive floatation of PLC and Bodycare in 1997, Mr Seymour the partner in Linder Myers who acted for Lorraine and Nigel until early August of last year when they returned their instructions on discovery of the forgeries and Mr Browne the handwriting expert consulted by both Noel Tobias and Messrs Eversheds when Nigel’s forgeries became suspected and were disclosed.
     
29. In the course of the hearing a number of further documents have been produced by both sides as late disclosure. In particular, and relevant to the issues with which I am now dealing, pursuant to the rules established by the authorities with relation to disclosure in cases of established fraud, attendance notes and internal memoranda of Messrs Linder Myers between the 6^th May and 5^th August of last year, when they ceased to act, were disclosed by the petitioners.
     
30. Between pages 6 and 11 of the transcript of my first judgment in this case I set out a description of the events surrounding the forgeries by Nigel as they appeared on the evidence then before me. I do not understand that description to be challenged. It is necessary, however, in the light of the evidence given at the hearing to add to it.
     
31. Among the Linder Myers documents produced on discovery were a series of "file notes" made by Mr Seymour of that firm. A file note of the 14^th June of last year records his visiting the offices of GLF and being given access to two files of documents relating to the period during which GLF acted for Nigel. There is then a document of the same date in Mr Seymour’s secretary’s hand recording a message from Mr Cobb of GLF saying that some letters which he might find interesting in the Bodycare matter had been found amongst some papers of which copies would be sent over. There is then a file note of the 16^th June which reads:-

1. This is then followed by a copy of a transmission to Nigel and Lorraine from Mr Seymour sending them copies of the papers that he had obtained from GLF.
    
2. The next relevant document is a file note of the 2^nd July recording a meeting lasting approximately two hours with Nigel and Lorraine to check through the list of documents to be provided to the respondents on disclosure. It is clear from this note that the entire LSH file was to be included.
    
3. The next relevant documents are two file notes of the 3^rd August which record first a meeting and second a telephone conversation between Mr Seymour and Nigel which plainly followed on from Messrs Eversheds letter of the 28^th July and their fax of the 3^rd August in which they raised the question of the authenticity of documents in the LSH and GLF files. The file note of the meeting with Nigel records him maintaining that the documents were "authentic and put there at the time." The file note of the telephone conversation records Nigel reassuring Mr Seymour that none of the documents were forged, that they were genuine and that he Mr Seymour was not to worry. The note continues: "he said he did not have an explanation for why there was a 1 in the 0161 but believed that there would be and he would consider it."
    
4. At page 9 of my first judgment I set out Nigel and Joel Tobias’ account of how Joel consulted a forensic scientist. Joel gave evidence. It was his case that he consulted such a scientist who turned out to be a Mr David Browne of Berkeley Security Bureau (Forensic) Ltd on the 4^th August with a view to finding out whether it was possible to tell which of the diary entries in Nigel’s diaries for 1994 onwards were contemporaneous and which had been added recently as Nigel had confessed to doing.
    
5. Mr Browne gave evidence. He did so by reference to a statement given by a Miss Karen Brown of Eversheds which described conversations with him the contents of which he confirmed. It was Mr Browne’s evidence that on the 3^rd August he was telephoned by Miss Karen Brown to be asked whether it was possible to determine whether machine produced documents, contained in a file, which purported to have been created some years ago had actually been recently brought into existence. Mr Browne said that he answered that question that it was possible to do so giving certain technical details. Mr Browne’s evidence was that on the following day he received a call from an unidentified caller asking virtually the same question. It turned out that this caller was Joel Tobias who was an acquaintance of the managing director of Mr Browne’s firm Mr Bluestone. It was Mr Browne’s evidence that he, Mr Browne, raised the question of whether there was any connection between the subject matter of this call and Messrs Eversheds with the caller, to be told that there was no connection. On referring the matter to Mr Bluestone he discovered the name of the caller. On referring back to Miss Brown of Eversheds he discovered the connection between that firm and Mr Joel Tobias. It seems that shortly after these calls Mr Joel Tobias rang Mr Bluestone to tell him that there was no further need for any enquiries. The matter concerned his brother and had been sorted out. It was Mr Browne’s evidence that Joel Tobias did not raise with him any questions relating to diaries with hand-written entries.
    
6. As already described in my first judgment Nigel went to see Mr Seymour early in the morning of 4^th August when he confessed to the forgeries. It was his evidence and that of Lorraine that in addition to forging the letters to GLF and LSH on the previous evening he had confessed to Lorraine to forging entries in the diaries. Nigel said that his confession to Mr Seymour on the morning of the 4^th August also included a reference to the forged diary entries.
    
7. The file notes of Mr Seymour which were disclosed included five file notes for the 4th August. These record meetings attended by Nigel and Lorraine at Linder Myers’ offices that day. One file note timed for 10 am reads as follows:-

   "I went through again the letter of Eversheds of the 3rd August 1999 and asked him to reconsider whether there were any problems with the letters to which they were referring in the files of LSH and GLF. He told me that he had considered the matter last night and he wanted to tell me that the letters were not authentic and were forgeries. He went on to explain that Lorraine was not aware and he told her for the first time last night. That David Royle at LSH was not aware. That he had borrowed the file from LSH in order to check matters and then had inserted in these files letters in place of other letters that were already there in order to strengthen up small parts of the letters.

   With respect of the Gruber Levinson Frank’s file he had borrowed that from Edward Cobb to read. There were two letters on this file and he had extracted them and put in their place two other letters. The main one being the first one in May which he amended by changing two or three words to say that the margin would go on from 17.5%. …I then saw Lorraine on my own and asked her about the letters. She tells me that she had no involvement whatsoever with LSH or with GLF at that time and was not aware that there had been letters on the file. She was certainly not aware that Nigel had borrowed these files and then substituted other letters. That Nigel had told her last night of his actions and she told him he must tell me."

8. Another of the file notes records Mr Seymour informing Nigel and Lorraine "that we could no longer continue to act for both of them in the light of the intimation given by Nigel today that he had altered documents on the files of GLF and LSH."
    
9. Mr Seymour gave evidence which expanded but did not materially add to the description of the events of the 3^rd and 4^th August contained in his file notes. He did however say that he could not recollect Nigel disclosing to him that he had made additions to the diaries as well as forging the letters to GLF and LSH. Mr Seymour also said that the letter of the 4^th August sent to Eversheds, in which the forgeries by Nigel were disclosed and which does not refer to the diaries, was approved by Nigel and Lorraine before being despatched. However he said that he saw Lorraine separately and was satisfied with her account of the events with the result that his firm’s position was that, whereas they were not prepared to go on acting for Nigel, they would have been prepared to continue acting for Lorraine.
    
10. I am not satisfied that I have received from Nigel a truthful picture of the circumstances of the forgeries which he admits. On behalf of the respondents Mr Freedman submitted helpful written submissions containing a detailed analysis of the evidence available. I do not propose, for the sake of brevity to set out that analysis here. I accept that contrary to Nigel’s evidence the respondents have established that in respect of the four letters that Nigel admits he forged to LSH in late 1993 and early 1994, contrary to Nigel’s evidence, there were either no original letters and in consequence the forged letters were entirely new creations or, alternatively, the letters which were originally sent were in a substantially different form from the forged letters. I do not find it established that there were replies from LSH to these letters which have been destroyed as submitted. To do so might be said to be illogical. In any event notwithstanding that it transpires LSH have no records of letters sent out by the firm in 1993 and 1994 from which to test whether their files were complete, it seems to me unlikely that Nigel would have destroyed LSH letters on the file because of the risk that such a record might exist.
     
11. At the time that the respondents written submissions were prepared they did not have access to all the Linder Myers papers which are now before the Court. In particular they did not have access to Mr Seymour’s file note of the 10 am meeting with Nigel on the 4^th August the material terms of which I have set out above. This memorandum contradicts Nigel’s evidence that the two GLF letters were entirely new creations and their forgery did not involve the destruction of existing letters from him to GLF.
     
12. I am satisfied that an entirely false picture has been presented by Nigel and his brother Joel of the forged additions to the 1995,1996 and 1997 diaries. I accept Mr Seymour’s evidence that Nigel did not confess to forging entries in these diaries on the morning of the 4^th August. I accept Mr Browne’s evidence which, in my judgment establishes that Joel Tobias purpose in contacting Mr Bluestone and through him Mr Browne, was to find out whether forensic examination of the forged letters would reveal his brothers forgeries of those letters and had nothing to do with the forged additions to the diaries. It follows that I find that Nigel only confessed to the forged entries in the diaries after it was apparent to him from Messrs Eversheds letter of the 6^th August that they had suspicions as to certain entries in those diaries.
     
13. It was submitted by Mr Freedman that because Lorraine admits that she was told about the diary forgeries on the evening of the 3^rd August but sanctioned the terms of Linder Myers letter of the 4^th August, which did not disclose those forgeries, she must be taken to be implicated at least in the concealment of those forgeries until Nigel was compelled by the Eversheds letter to disclose them. In the course of the hearing no evidence emerged which implicated Lorraine in Nigel’s forgery of the LSH and GLF letters or the diary entries. I can see no reason to reject her evidence that the first she knew of the forgeries was on the evening of the 3^rd August. There is some confirmation of this in Mr Seymour’s file note of the10 am meeting with Nigel on the 4^th August. I am not prepared to find that she was implicated in Nigel’s dishonesty by apparently failing to insist, if she in fact noticed that Linder Myers letter of the 4^th August did not disclose the forged diary entries, that they be disclosed.
     
14. In my judgment, therefore, it must be accepted that there is a significant risk that the originals of Nigel’s letter to LSH which he admits to having tampered with contained information damaging to the petitioners case which is now not available because those letters have been destroyed. There must also be a significant risk that there were original letters by Nigel to GLF which his forged letters replaced which contain similar damaging information. In the light of Nigel’s untruthful account of the forgeries of these letters the disappearance of the 1993 and 1994 diaries becomes more suspicious as does the removal of pages from the diaries which were produced. None of the entries recording events in the produced diaries can now be trusted unless confirmed from reliable sources and this doubt must infect evidence contained in affidavits and witness statements which may have been prepared in reliance on those diary entries.
     
15. The respondents submit that because Nigel has been shown to have lied in his account of the forgeries it follows that his denial that any other relevant documents have been tampered with or suppressed cannot be accepted and that there must be a serious risk that other relevant documents now in evidence have been forged or have been destroyed containing relevant information damaging to the petitioners case. Subject to what I shall say about the apparent purpose of this campaign of forgery I accept that submission. However I am not able to find proved that there are other documents among those disclosed by the petitioners which were forged other than those which Nigel has confessed to.
     
16. The respondents draw attention to a series of documents produced in late discovery. These are

1. A letter dated 2^nd July 1996 from Dr Wilson of Abbot E. Sharp.
    
2. An invoice from a supplier of toiletries, Elizabeth French, dated the 30^th July 1997 of which only a copy of the document torn in half was produced. The original has never been produced although it is accepted it must have existed in the possession of the petitioners. The contents of the lost half are known from the suppliers records. From other disclosure it appears that a number of other faxes in July and September 1998 passing between the petitioners and Elizabeth French have not been disclosed.
    
3. Minutes of two meetings between the petitioner and M&S, the company which the petitioners approached in 1998 to replace PLC as their supplier of toiletries, which took place on the 15^th May and 3^rd June 1998 and which were disclosed late on the 4^th November of last year.
    
4. Relevant to the company’s acquisition of new premises at Braehead a letter from Peak Projects, the shopfitters, of the 12^th January 1999, to which I have already referred and a sketch pad of potential designs for Braehead shopfitting from an organisation called Astound. The first document was produced on the 18^th August but cannot be said to assist the petitioners case. The later document was produced in the course of the trial and, although referred to by the petitioners witnesses cannot be said to offer much assistance to their case.
    
5. A letter from Nigel to Mr Barclay the managing director of M&S dated the 13^th May of last year produced late on the 4^th November.

1. The respondents made detailed written submissions about these documents. Although there are oddities about the documents and their provenance, it does not appear to me that although they concern issues in the case that they are of particular significance so as to be likely to have been forged.
    
2. In his evidence Nigel sought to give the impression that his forgeries came about as a result of an impulsive moment of madness flowing from his disappointment that his case was not adequately supported by the documents. In my judgment, so far from that being the case, it is apparent that the process of forgery, which Nigel admitted to, was sophisticated and must have taken some time to complete including the special manufacture of headed notepaper of the defunct Tobias family companies. But for the slip up with relation to the telephone numbers shown on the headings it would, in all probability, not have been discovered.
    
3. In the course of his cross examination Nigel was pressed as to the purpose behind the forgeries. He would not admit that there was any specific purpose. It seems to me to be quite plain that the purpose of the forgeries was to manufacture written support for Nigel’s case as to what was agreed between himself and Graham in late 1993 and early 1994 as to the terms upon which Bodycare would deal with PLC in the supply of toiletries for the first three years of its trading and thereafter. In particular he wished to create written evidence which supported his case that he never at any time accepted that a 15% margin over the retail price fixed for toiletries by PLC would afford Bodycare an acceptable level of profit. That this was the purpose of the forgeries is specifically borne out by Mr Seymour’s file note of the 10 am meeting with Nigel on the 4^th August to which I have referred on a number of occasions already.
    
4. I turn to consider whether these findings require me to strike out the petition.
    
5. It was the respondents submission that any case which depended on breach of "reasonable expectations" of the petitioners derived from the 1994 agreements pursuant to which Nigel and Lorraine joined Bodycare cannot receive a fair trial or, at least, there is a substantial risk that it cannot receive a fair trial, because Nigel’s forgeries have placed in question the documentary evidence on which the Court could base its conclusions. I accept that submission subject to the qualification that there would be no substantial risk to a fair trial of a case which was not based on the 1994 agreements or, to the extent that it depended on the terms of those agreements, the relevant terms were not in issue between the parties.
    
6. In the present case it is not in issue that one of the terms was that the petitioners should each be able to subscribe at par for 24% of the issued shares of Bodycare. [Paragraph 5(1) of the petition paragraph 14.1 of the points of defence]. It is not in issue that Bodycare was to pursue a policy of expansion through the acquisition of retail outlets both during the three year period and thereafter [paragraph 5(7) of the petition paragraph 14.7.1 of the points of defence]. The issue here to which the terms of the 1994 agreement are relevant and which is contested by the parties, is whether the expansion of the Bodycare chain of retail shops was intended to be exclusively conducted through Bodycare. It is the respondents case that the agreement as to the terms upon which PLC would supply toiletries to Bodycare arrived at in 1994, and thereafter varied, would expire at the end of three years from the commencement of Bodycare’s trading when there would have to be a renegotiation of those terms. It is not suggested by the respondents that there was any agreement whereby the petitioners bound themselves to accept any particular level of margin after the expiry of that time. Indeed it is specifically their case that the parties were unable to agree the margin at that time or subsequently. It is not in issue that the company was at all material times entitled, whether as of right as the petitioners contend, or as an implied licensee of PLC as the respondents contend, to use the Bodycare concept in its existing retail stores and when it opened new stores as part of its expansion. As I have already pointed out Nigel and Lorraine were to receive their shares in Bodycare unconditionally. It is not suggested that, in the events which have happened the respondents are entitled to forfeit those shares indeed they are cross petitioning for an order that they be at liberty to purchase those shares at a fair value.
    
7. It seems to me that the petitioners are able to pursue a simple case for relief under sections 459 and 461 on the basis that at the time that the parties fell out in December 1997 they held 48% of Bodycare’s issued shares. Since that time the respondents by reason of the fact that they are majority shareholders and directors, with at least equal representation on the board, have been able to prevent any further expansion by Bodycare of its retail outlets see paragraph 8(1) of the petition. It is apparently accepted that whereas after the transfer of 8 Bodycare stores to Bodycare by PLC pursuant to the 1994 agreement, and before the fall out, PLC opened only one further Bodycare store, since the fall out it has opened a further nine including a store on a site where Bodycare intended itself to open a store but was prevented from doing so by the respondents. I say nothing as to whether the respondents intervention to prevent Bodycare opening a store at Ashton-under-Lyne was justified or not. [See also paragraph 7(4) of the petition and 16.4 of the points of defence]. It seems to me also that such a claim could be based on the allegation that it was reasonable to expect that the respondents would not use their control of Bodycare to require it to purchase from PLC toiletries on terms less favourable than those available to other customers of PLC or from third party suppliers in the open market thereby, at least, restricting Bodycare’s profits and so the value of the shares of the petitioners. [See paragraph 7(5) and 8(3) of the petition]. If it can be shown that the respondents have used their control of Bodycare to restrict its ability to borrow money to finance its trading and expansion to borrowing from PLC, which has charged interest on borrowings at a rate higher than that obtainable by Bodycare in the open market, that might also be a ground for seeking relief [see paragraphs 7(6) and (9) and 8(2) of the petition].
    
8. These claims of the petitioners do not depend on any term of the 1994 agreements which is in issue between the parties. If fought out, whether the petitioners establish a right to relief will depend on events which have occurred between December 1997 when the parties fell out and today. It will depend on whether the petitioners can establish that the respondents have used their control of the company to restrict its ability to expand and/or have diverted opportunities for expansion to PLC. It will depend on a comparison between the terms offered to comparable customers of PLC and those given to Bodycare during that period and whether Bodycare could have obtained supplies of toiletries from third party suppliers at appreciably less cost than that it was incurring in taking supplies from PLC to which supplies it was restricted by reason of the respondents control of Bodycare.
    
9. It was argued on behalf of the respondents that no such understanding as, for instance, the understanding that Bodycare would be dealt with by PLC on terms at least as good as those available to third parties, was capable of basing a petition under section 459 because no such term was included in the 1994 agreements or subsequently agreed to by the respondents. This contention was based on the authority of the decision of the House of Lords in O’Neill v Phillips 1999 1WLR p 1092 . I do not accept that that is the effect of this decision of the House. In that case the House was considering a petition by a holder of 25 of the 100 issued shares in a company against the majority shareholder. The petitioner was an ex-employee who had been taken into management at which point he was given his shares and was permitted to draw 50% of the company’s profits in addition to his salary. Some years later the respondent indicated in the course of negotiations with the petitioner that he was in principle agreeable to the petitioner increasing his shareholding to 50% if certain profit targets were reached. No final agreement was arrived at however before the respondent changed his mind and revoked the profit sharing arrangement. The petition which succeeded on appeal to the Court of Appeal was based on the respondents "unfair" refusal to make good the petitioners reasonable expectations that, on achieving the target set, he would be made a 50% shareholder in the company and that meanwhile the profit sharing arrangement would continue. The House allowed the appeal. The leading speech was given by Lord Hoffmann with whom the remainder of their Lordships agreed. He concluded that what constituted unfair conduct for the purposes of section 459 could not be decided in accordance with some general principle of fairness fixed by the Court but must be based on, and not inconsistent with, the agreements or understandings existing between the petitioner and the respondent upon which the petitioner was entitled to rely. Because in that case the petitioner was not entitled to rely on a continuing profit share arrangement or an agreement that he should receive a further 25 shares the Court was not entitled to pronounce the respondents refusal to grant those benefits as unfair within section 459. It is important to note in O’Neills case the petitioner was not basing his case on any suggestion that the respondents conduct was affecting his position as an existing minority shareholder in the company.
    
10. At page 1101 of the report Lord Hoffmann having agreed with a passage in the judgment of Mr Justice Jonathan Parker’s judgment in re Astec where he said:-

    "In order to give rise to an equitable constraint [on the power of a majority shareholder to control the company] based on "legitimate expectation" what is required is a personal relationship or personal dealing of some kind between the parties seeking to exercise the legal right and the party seeking to restrain such exercise, such as will affect the conscience of the former."

    then continued:-

    "This is putting the matter in very traditional language, reflecting in the word "conscience" the ecclesiastical origins of the long departed Court of Chancery. As I have said, I have no difficulty with this formulation. But I think that one useful cross check in a case like this is to ask whether the exercise of the power in question would be contrary to what the parties , by word or conduct, have actually agreed. Would it conflict with the promises which they appear to have exchanged? In Blisset v Daniel the limits were found in the "general meaning " of the partnership articles themselves. In a quasi-partnership company, they will usually be found in the understandings between the members at the time they entered into the association. But there may be later promises, by words or conduct which it would be unfair to allow a member to ignore. Nor is it necessary that such promises should be independently enforceable as a matter of contract. A promise may be binding as a matter of justice and equity although for one reason or another (for example because in favour of a third party) it would not be enforceable in law.

    I do not suggest that exercising rights in breach of some promise or undertaking is the only form of conduct which should be regarded as unfair for the purposes of section 459. For example there may be some event which puts an end to the basis upon which the parties entered into the association with each other making it unfair that one shareholder should insist upon the continuance of the association. The analogy of contractual frustration suggests itself. The unfairness may arise not from what the parties have positively agreed but from an a majority using its legal powers to maintain the association in circumstances to which the minority can reasonably say it did not agree: non haec in foedera veni. It is well recognised that in such a case there would be power to wind up the company on just and equitable ground (see Virdi v Abbey Leisure Ltd 1990 BCLC 342) and it seems to me that, in the absence of a winding up, it could equally be said to come within section 459. But this form of unfairness is also based upon established equitable principles and it does not arise in this case."

    My emphasis added.

11. From this passage in the speech of Lord Hoffmann it is plain that he was not restricting the right to relief under section 459 and 461 to circumstances where it could be shown that the respondent was exercising his control of the company to the disadvantage of the petitioner in breach of some contract or understanding between them which the Court would regard as either contractually binding or sufficiently binding in conscience so that the Court could treat its breach as being unfair. Lord Hoffmann plainly acknowledges the right, long established by authority under section 210 of the Companies Act 1948 and section 459, for a minority shareholder to petition where a majority exercised its majority power to the disadvantage of the minority in their capacity as shareholders. Such conduct can be rationalised as a breach of the express or implied terms of the articles of association binding on the shareholders.
     
12. Later in his speech Lord Hoffmann referred with approval to the Case of re H.R.Harmer Ltd 1959 1WLR p 62 as showing "that shareholders who receive their shares as a gift but afterwards work in the business may become entitled to enforce equitable restraints upon the conduct of the majority shareholder."
     
13. For these reasons it seems to me that notwithstanding what I said in my first judgment and my findings the petitioners are able to present a case for relief under their petition in respect of which there is no substantial risk that a fair trial cannot be held.
     
14. I turn to consider the third question namely whether the petitioner has established a prima facie case for a minority buy out order.
15. Whereas Mr Rosen was initially disposed to contend that it would premature for me to decide whether such an order should be made before he had opportunity to cross examine the respondents witnesses, in particular Graham Blackledge, in the end he accepted that I was in a position to do so at the close of the petitioners case.
     
16. The only reported case where a minority buy order was made to which my attention was drawn was re Brenfield Squash Rackets Ltd 1996 2BCLC p 184 a decision of Mr Justice Rattee. At page 190 of the report he says this:-

    "It may be comparatively unusual for a majority shareholder of the company to be ordered to sell its shares to minority shareholder petitioners, but in the circumstances of this case I consider it appropriate."

17. He then went on to draw attention to particular contractual provisions which bound the parties and might as a matter of contract have enabled the petitioners to require the majority shareholders to sell their shares. That a minority buy out order was an unusual order was also stated by Mr Justice Harman in an unreported part of the case of re Nuneaton Borough Association Football Club reported in the Court of Appeal on a different point at 1989 BCLC. In that case Mr Justice Harman appeared to base his decision to make such an order on the fact that the majority shareholder had demonstrated his unfitness to control a limited company. In neither case did the Court try to lay down any guidelines to the sort of conduct by a majority shareholder which would justify a minority buy out order.
     
18. In the present case it was argued by Mr Rosen that I should make such an order because the very evident success of Bodycare was substantially the result of the efforts and commercial skill of Nigel and Lorraine and it would be unjust for PLC to reap the benefit. I am unable to accept that submission. Quite apart from the impact of the fraud of Nigel in his conduct of the litigation a minority buy out order would disregard the fact that it is common ground that Bodycare was set up, if not to be the retail arm of PLC, to be a substantial customer of PLC bound to it by PLC’s control of a majority shareholding in it. It would also disregard the substantial financial and other assistance given by PLC which has undoubtedly meant that Bodycare has reached its present levels of commercial success in a much shorter time than would have been the case had it been throughout trading on its own without the support of a benevolent parent.
     
19. I now turn to consider the petitioners application to strike out the cross petition of PLC. This was presented on the 13^th November 1998. It is based on the alleged unfair conduct of Nigel and Lorraine as managing directors of Bodycare and alleges a series of events which were procured to take place by Nigel and Lorraine and which, it is said, constitute conduct of Bodycare’s business unfairly prejudicial to PLC. Complaint is also made that Nigel failed to disclose to the cross petitioner his chequered business history before being admitted to membership of Bodycare or at any subsequent material time, that he has been guilty of forgery and contempt of Court and that he has refused to resign as a director of the company in the light of that dishonesty in which refusal Lorraine has supported him.
     
20. I will hereafter refer to the respondents to the cross petition, Nigel, Lorraine and Arrow Nominees Inc as the "respondents" and to PLC as the "cross petitioner".
     
21. The respondents contend that the cross petition should be struck out as being demurrable on the ground that at all material times the cross petitioner has controlled Bodycare, at general meeting by being the holder of 52% of Bodycare’s issued shares and at Board level because, whereas at all material times the Board has consisted of Graham and Margaret Blackledge, Nigel and Lorraine, Graham as chairman of the company has held a casting vote.
     
22. In re Baltic Real Estate Ltd (2) 1993 BCLC p 503 Mr Justice Knox was considering a case where leave was being sought under RSC order 11 to serve a petition under section 459 out of the jurisdiction on certain respondents. Having found a jurisdiction to grant leave under order 11 Knox J went on to consider whether the petitioner had established the necessary "good arguable case" to justify service abroad. He found that no such case was established because the petitioner at all material times controlled the company in respect of the conduct of which relief was being sought under section 459. At page 507 of the report Knox J referred to a passage in the judgment of Lord Justice Jenkins in re HR Harmer Ltd ibid where he said :-

    "I think the point about the word "minorities" is that it is only where the voting control is elsewhere that a case for the application of the section [section 210 of the Companies Act 1948] arises. To take this case, if the voting control had resided where the beneficial interest in the ordinary shares resides, there would have been no need to invoke the section. The chairman( the father) would have been eradicated root and branch by this time. It is only because of the beneficial voting interests and his having voting control that it is necessary to invoke the section at all. I cannot think of any case where it would be possible to invoke the section if the voting control was in the hands of the persons who are alleged to have been oppressed… ."

23. Knox J then continued:-

    "That is authority, albeit obiter, for the proposition that a person with voting control cannot be oppressed by a person without voting control. One dictionary definition of "oppressed" is to keep under by tyrannical misuse of power and the word does in my view denote power invested in the oppressor over the oppressed. The same conclusion is much less clear when what is involved is unfair prejudice in the conduct of a company’s affairs. Even the wider phrase "unfair prejudice" however in my judgment is not apt to encompass prejudice from which the person whose interests are said to be prejudiced can readily rid himself. The prejudice relied on by the petitioner is based solely upon the activities of the second and third respondents as directors of the company a status which they only enjoyed until the majority shareholders removed them. That the second and third respondents were in breach of their obligations under the shareholders agreement, which I assume in the petitioners favour, does not in my view establish the proposition that the petitioners prejudice was unfair within the meaning of section 459, because on that hypothesis the petitioner had an available method of bringing the prejudicial state of affairs to an end and indeed did so. … the section was I believe enacted to enable help to be given to those who needed it and it seems to me to be improbable that the petitioner could show it fell into such a category."

24. That passage in the judgment of Knox J was cited with approval by Lord Justice Peter Gibson giving the lead judgment in re Legal Costs Negotiators Ltd 1999 BCC p547. In that case the Court of Appeal was considering a section 459 petition in respect of a company whose 100 issued shares were held equally by the four former partners in a partnership whose business it incorporated. The respondent in respect of whom unfair conduct of the company’s affairs was alleged had been dismissed from his employment by the company and, under threat of removal, had resigned his directorship. Thereafter the majority shareholders presented a petition under section 459 claiming an order that the respondent sell his shares to them at a fair price.
     
25. Lord Justice Peter Gibson said this, having cited the passage from Knox J’s judgment in The Baltic case which I have set out:-

    "The good sense and correctness of those words seem to me obvious. In my judgment the Judge was entitled to find Knox J’s observations in No 2 persuasive on the ground that they contain a clear statement that the section is not apt to deal with a case where the petitioner can himself readily put an end to the unfair prejudice alleged."

26. Earlier in his judgment Lord Justice Peter Gibson had said:-

    "Miss Garcia-Miller was in my opinion right to submit that there is academic and judicial consensus as to the meaning of the section and as to the mischief which it was intended to cure, viz. the abuse of power to the prejudice of shareholders who lack the power to stop that abuse. A mere majority shareholding may not suffice its holder: for example the voting rights may not accord with the shareholding as in re HR Harmer Ltd… . But in the ordinary case where the shares carry equal voting rights a majority shareholder will generally have the power to stop unfairly prejudicial conduct of the company’s affairs or any unfairly prejudicial act or omission of the company."

27. It was contended by Mr Freedman that in the present case the cross petitioner did not have "an available method" of bringing the prejudice of which it was complaining to an end by reason of its control of Bodycare. This was so because Nigel and Lorraine might have an equity to restrain their removal as directors of the company because of a contention that they had a right to participate in Bodycare’s management arising from the understandings between them and PLC through Graham and Margaret when they joined the company.
     
28. I cannot accept this contention. If correct it would have been available to the petitioners in both the Baltic case and the Legal Costs Negotiators case. Indeed it would be available in all cases where a petitioner with voting control of a company was petitioning to obtain a buy out order against a respondent against whom he was alleging unfairly prejudicial conduct of the company’s affairs. In all such cases it would be likely that the respondent could contend in a cross petition that to remove him was contrary to the equities upon which he joined with the petitioner in the relevant company.
     
29. In addition it seems to me that if the allegations contained in the cross petition could be established so that a Court would be justified in granting relief under section 459 they would also afford the cross petitioner grounds for contending successfully that its removal of Nigel and Lorraine as directors of the company was justified thereby negating the equity to participate in the management of Bodycare which they might otherwise have.
     
30. For these reasons it seems to me that the cross petition is demurrable and ought to be struck out. Indeed on the accepted facts I am bound by authority to do so.
     
31. I turn to consider Nigel and Lorraine’s application to strike out the action commenced by writ issued on 16^th February 1999 by PLC against them claiming injunctions and damages for passing off. This action is the basis of certain interlocutory relief granted in these proceedings. The action is based on the allegation that Bodycare are the licensees of PLC to exploit the Bodycare concept and that by varying that concept without the authority of PLC they have been selling products to the public outside the terms of their licence and so passing off their retail services as those of which PLC has the exclusive right to offer to the public or licence others to do so.
     
32. Because of the view which I have formed as to the part played by this action in the dispute between the parties I will deal with the application briefly.
     
33. It is apparent that this action was brought with the object of obtaining interlocutory relief restraining the defendants from opening new branches of Bodycare using the Bodycare concept and from varying that concept. If my orders on the petition stand the position will be that the petitioners will be petitioning for relief which is also being sought by one of the respondents as cross petitioner albeit pursuant to a demurrable petition it is clear that if my orders stand, whatever the result of the petition , the respondents will be left in control of Bodycare able to prevent the conduct which this action seeks to restrain.
     
34. The attack mounted by the defendants upon which they seek to justify an order striking out the action is based on the contention that it is demonstrable that within, CPR 24.2, the plaintiff has no real prospect of establishing one of the fundamental requirements of a successful action for passing off namely its right to the goodwill of the business being conducted under the name Bodycare using the Bodycare concept. To do this PLC must show the indicia of the Bodycare concept, the name, the décor of the shops, the types of goods sold, the sort of prices at which they sold, are associated in the minds of a substantial number of the purchasing public specifically and exclusively with PLC: see the judgement of the Court of Appeal in Scandecor Development v Scandecor Marketing 1999 FLR p 26 at page 40 .
     
35. In that case the Court of Appeal was dealing with a question of whether a foreign parent was entitled to the goodwill of a retail business through which its subsidiary had been distributing its products in the United Kingdom. At page 43 of the judgment the Court accepted "that, in an appropriate case, it is legally and factually possible for a business based overseas to acquire a goodwill in this country by the supply of its product or services through a subsidiary agent or licensee. Whether or not that occurs must depend on the facts of the particular case."
     
36. Indeed throughout the judgment, the Court of Appeal stresses that the decision of in which party the right to the goodwill of the business resides is, in almost all of the cases, essentially a question of fact. The conclusion of the Court in that case was that the goodwill of the distribution business in the United Kingdom was not shared between the parties (as found by the trial Judge) but was owned exclusively by the English company.
     
37. In the present case the facts are substantially different. It does not seem to me to be of importance that both parent and subsidiary are situated in this country. It may, however, be of importance that the business is one for sale to the public of branded goods not goods carrying any sort of trade mark of PLC. The degree of control exercised by PLC over the trading of Bodycare will clearly also be of importance.
     
38. It seems to me that just as in the Scandecor case these are questions of fact which it is not appropriate to determine on an application under CPR 24.2. I would therefore dismiss the application.
     
39. It was submitted to me that considerable savings of costs and expense would be achieved if this action could be disposed of at this stage. I accept that if it is tried at the same time as the remaining issues in the petition it will be necessary to enquire into facts and law much of which will be irrelevant to the final disposal of the petition. In my view whether it will ultimately be necessary to determine the issues in this action will depend on the result of any appeal from my orders in the petitions thus far made, and on the result of the petition whether at any appeal stage or at judgment after I have heard the respondents case and the parties submissions. As at present advised I would take the view that the appropriate course is that the hearing of the action should await the result of the petition to be dealt with by me immediately after judgment in the petition so that there will be no wastage of time and costs by having to examine common issues of fact on a second occasion.