England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Claim No. HC-05-C04004 Royal Courts of Justice Strand, London, WC2A 2LL
		2nd August 2007

Introduction

1. The Claimant, PNC Telecom plc ("the Company"), was incorporated in 1992 and carried on business in telecommunications including mobile phones. The First Defendant, Mr. Thomas, was one of the Company's founders, and was for many years its Chief Executive.
2. In June 2000, the Company acquired the entire issued share capital of KJC Mobile Phones Limited ("KJC") from a Mr. Case and a Mr. Ridge who became substantial shareholders in the Company.
3. In 2001, the Company was listed on the London Stock Exchange. By that time, conditions in the mobile phone market had become difficult. Mr. Thomas put forward a proposal to split the company in two. This proposal was rejected by the Board, following which Mr. Thomas was dismissed as Chief Executive on 22 April 2001. He retained a 17.6% shareholding in the Company.
4. In 2002, the Company was involved in a major restructuring, ultimately resulting in its being delisted from the main market and relisted on the Alternative Investments Market (AIM). Also, towards the end of that year, Mr. Thomas requisitioned an EGM effectively for the purpose of taking control of the Board, which resulted in a dispute and litigation, ultimately ending in a compromise under which Mr. Thomas was reappointed to the Board, together with the Third Defendant, Mr. Pack.
5. In April 2003, the Board agreed to sell the Company's main trading subsidiaries (as well as some dormant subsidiaries) to Harthall Limited, later renamed Vanguard Group Holdings plc ("Vanguard"). As part of the terms of the sale, the purchaser agreed to take over the liabilities in respect of a number of onerous leases held by the Company and its subsidiaries. Following the sale, the Company was placed in administration on 23 June 2003. The principal reason for putting the Company into administration was apparently to deal with the liabilities under the leases and other contracts.
6. Mr. Thomas and some of the shareholders were very unhappy about the Company being placed in administration, and in due course an application was made in the name of Mr. Thomas to discharge the administration order. The application was successful, and the order was discharged on 15 January 2004. Mr. Thomas was appointed Chairman and non-executive director of the Company. He appointed a Mr. Till as an additional director. The Second Defendant, Mr. Etherington, was appointed Company Secretary. (Mr. Etherington was a solicitor and had in the past been the Company Secretary). Mr. Pack, a former Finance Director of Securicor plc, was appointed a non-executive director at the end of March 2004, replacing Mr. Till.
7. The Company's strategy after coming out of administration was apparently to look for another company to "reverse" into the Company so that it could become a trading company again, and in the meantime to "clean up" the Company by getting rid of the onerous liabilities under the leases.
8. Mr. Thomas remained Chairman until a board meeting on 24 June 2004 when he resigned as Chairman and Director in favour of Mr. Etherington. At this time, Mr. Thomas also sold his shareholding to Mr. Etherington. These steps were apparently taken as part of a wider transaction in contemplation under which a company known as Snapper Seafoods, 50% owned by Mr. Etherington, would be reversed into the Company. As will be seen, what happened at this board meeting, and the circumstances surrounding it, is one of the principal matters in dispute between the parties.
9. Not long afterwards, on 9 July 2004, Mr. Case and Mr. Ridge (the former owners of KJC and now shareholders in the Company) gave notice to the Board requisitioning an EGM to remove Mr. Etherington and Mr. Pack as directors in favour of Mr. Case and Mr. Ridge. The EGM was held on 24 August 2004, and the resolutions duly passed, with the result that Mr. Etherington and Mr. Pack were ousted and Mr. Case and Mr. Ridge took control of the Board.
10. As will be apparent from that brief summary, the Company has had a fairly volatile history with frequent proceedings involving directors and shareholders, boardroom coups or attempted coups etc. This includes litigation or threatened litigation with Mr. Case and Mr. Ridge.
11. At the end of 2005, the Company commenced the present proceedings, making various complaints about the Defendants' conduct in the period after the Company came out of administration in January 2004. By the time of the trial, only the claims against Mr. Thomas remained to be determined. The Company recently obtained judgment against Mr. Etherington under an "unless order" for failure to comply with his disclosure obligations, and has settled its claims against Mr. Pack, for a total of £56,000 inclusive of interest and costs.
12. There are five claims made against Mr. Thomas.

(1) Payment of Nicholson Graham & Jones' legal costs

13. The first claim concerns the authorisation of a payment to Nicholson Graham & Jones on account of legal costs. Nicholson Graham & Jones had been advising and acting in the application to discharge the administration order, which was ultimately successful. Following the discharge of the administration order, the former administrators transferred a total of £1,024,215 to Nicholson Graham & Jones. Out of that sum, Nicholson Graham & Jones made a number of payments, including the sum of £122,288.67 to themselves in payment of legal costs, remitting the balance of £806,367.62 to the Company's account. The payment of £122,288.67 was authorised or approved by Mr. Thomas. Complaint is made that of this sum of £122,288.67, £75,085.67 was directly or indirectly a liability of Mr. Thomas', not the Company's, and the Company's funds should not have been used to discharge a debt or liability of Mr. Thomas'. Alternatively, even if it was not directly or indirectly a liability of Mr. Thomas, the Company says it was still not a liability of the Company, and the Company's money should not have been used to discharge someone else's liability.
14. The position with regard to the Nicholson Graham & Jones' fees is not entirely straightforward. As indicated above, the application to discharge the administration order was brought in the name of Mr. Thomas. On the discharge of the administration order, Mr. Thomas' costs were ordered to be paid as expenses of the administration. The complication arises because the amount of those costs was agreed between Nicholson Graham & Jones and the former administrators in the sum of £47,203. That sum of £47,203 was included in the total of £122,288 paid to Nicholson Graham & Jones, and there is no issue about that. The issue is as to the remainder of that payment totalling £75,085.67.
15. There was no evidence as to how the figure of £47,203 was arrived at, or why it is different from the total amount of Nicholson Graham & Jones' fees of over £122,000. Mr. Thomas' evidence is that he was not aware of the difference, or that some of Nicholson Graham & Jones' costs had not been recovered under the costs order, until he was asked by his solicitors about the figure of £47,203 in the Particulars of Claim.
16. There was some issue as to whether Nicholson Graham & Jones had a wider role than just advising and acting in connection with the application to discharge the administration order.
17. The application to discharge the order was not actually made until 12 December 2003. Nicholson Graham & Jones were first instructed in June 2003. However, on the evidence before me, it appears that when they were first instructed back in June 2003, it was with the intention of seeking a discharge of the administration order.
18. Mr. Thomas' evidence was that when the administration order was made, he and other shareholders were very unhappy that the Company had been (as he put it) "forced" into administration. He wished to challenge it, but did not have sufficient funds to do so. He sought to raise a fighting fund from other shareholders, but did not succeed in doing so. However, a company called Oakley Capital Limited (a private equity fund) agreed to do so. Oakley Capital was not itself a shareholder in the Company, but it represented or was associated with another shareholder, one Jonathan Wood of UBS, a very well known and powerful figure in that world. So Nicholson Graham & Jones were retained by Oakley Capital to advise and act for the purposes of seeking to discharge the administration order.
19. In cross-examination, Mr. Thomas gave evidence that "the intention from day one was to get rid of the administration [order]". That evidence is inherently plausible, and is supported by the Nicholson Graham & Jones' time records at Bundle 2C Tab 98, the first entry of which (for 23 June 2003) refers to Court and Counsel's Clerks, telephone conferences with Counsel, Instructions to Counsel etc. I accept Mr. Thomas' evidence, and find that from the outset Nicholson Graham & Jones were retained with the intention of seeking to discharge the administration order and, so far as I can tell from the evidence, that their role thereafter was essentially for the purposes of or in connection with seeking to discharge the administration order which was ultimately made by application in December 2003.
20. That leaves unresolved the question of how the figure of £47,203 came to be agreed by Nicholson Graham & Jones with the administrators for the purposes of the costs order, and why it was only a proportion of Nicholson Graham & Jones' total fees. There is no evidence before me about that. I accept Mr. Thomas' evidence that he was unaware of that difference, and the fact that only a proportion of Nicholson Graham & Jones' total costs had been recovered under the costs order, until receipt of the Particulars of Claim in this action.
21. Another, more important issue is who was legally responsible for Nicholson Graham & Jones' costs. The Company's case is that Mr. Thomas was responsible for their costs in one of two ways.
22. First, it was suggested that Mr. Thomas was Nicholson Graham & Jones' client and the person who instructed them, most obviously in connection with the application to discharge the administration order which was made in his name. Alternatively, even if Nicholson Graham & Jones were instructed by someone else (Oakley Capital), it was suggested that they would not have done so without some indemnity from Mr. Thomas, so that ultimately he was responsible for Nicholson Graham & Jones' costs via an indemnity or agreement to reimburse Oakley Capital.
23. The key question for this purpose is who retained Nicholson Graham & Jones, i.e. who was contractually responsible for their fees. Mr. Thomas explained that the application to discharge the administration order was brought in his name because he was a member of the Credit Committee and the largest shareholder on the Committee, so he was chosen as the appropriate person in whose name the application would be made. He was adamant, however, that he did not retain Nicholson Graham & Jones or sign any engagement letter with them. That evidence is consistent with what appears to have been Mr. Thomas' financial position at the time, namely that he could not himself fund the exercise and had sought (unsuccessfully) to raise a fighting fund. Mr. Case, who gave evidence for the Claimant, confirmed that he had been approached by Mr. Thomas about the possibility of contributing to a fighting fund. It is also consistent with Nicholson Graham & Jones' invoices which are addressed to Oakley Capital. The later invoices add, somewhat curiously, "payable by PNC Telecom Plc", but none of them are addressed or refer to Mr. Thomas. Thirdly, Mr. Thomas' evidence is consistent with what Nicholson Graham & Jones told Mr. Case later when he began to investigate the position, stating in terms that they had been instructed by Oakley Capital. I accept Mr. Thomas' evidence that he did not retain, and was not contractually liable for, Nicholson Graham & Jones' fees. That person was Oakley Capital.
24. As to the suggestion that even if Nicholson Graham & Jones were retained by someone else (Oakley Capital), they would not have done so without some indemnity from Mr. Thomas, there was no evidence to that effect. Mr. Thomas' evidence was to the contrary.
25. The thrust of the Company's submissions was that Mr. Thomas cannot be telling the truth about this, and that there must have been some arrangement between Mr. Thomas and Oakley Capital for him to indemnify them or reimburse their costs. Why would they do it otherwise? But there are perfectly possible explanations why they might do so. Oakley Capital might have agreed to do it at the behest of Mr. Wood with whom they had an association. Mr. Wood is an important, powerful figure in that world, and that association may have been a very valuable and remunerative one for Oakley Capital. That is a perfectly possible explanation as to why Oakley Capital might agree to assist without recourse to Mr. Thomas. Moreover, the suggested indemnity or agreement on the part of Mr. Thomas to reimburse Oakley Capital is again not consistent with Mr. Thomas' financial position at the time, that he could not afford to fund it. I accept Mr. Thomas' evidence, and find that there was no indemnity or agreement on his part to reimburse Oakley Capital.
26. It follows that the primary basis for this complaint, that it was a payment to discharge a debt or liability (direct or indirect) of Mr. Thomas, fails.
27. I turn then to the alternative basis of this claim, namely that even if it were not a liability of Mr. Thomas, it was not a liability of the Company, and it could not have been in the Company's interest to pay it.
28. Mr. Thomas' evidence is that the payment was approved at a meeting of the Board of Directors comprising himself and his co-director, Mr. David Till, at the Clifton Ford Hotel in London on 13 February 2004. Also present at the meeting were Mr. Etherington, the Company Secretary, and Mr. Tutty the solicitor who had been primarily involved in handling the matter at Nicholson Graham & Jones. At that meeting, Mr. Tutty sought authority for payment of Nicholson Graham & Jones' fees. Mr. Thomas' evidence (which I accept) was that he did not see any invoices or schedules of costs. He was told the total amount of the fees (£122,288.67) which he understood were the costs of discharging the administration order. He was not aware, and Mr. Tutty did not tell him, that only a proportion of Nicholson Graham & Jones' costs had been recovered under the costs order. The request for authority to pay was made on the basis that these costs had been incurred for the benefit of the company, and that it was right and proper that they should be paid. Both Mr. Tutty and Mr. Etherington told Mr. Thomas it was "all fine", and on that basis the payment was approved. Mr. Thomas did not find the amount surprising or in any way unreasonable.
29. Although the minutes of the Board meeting make no reference to the approval of this payment, it is clear from subsequent letters of Nicholson Graham & Jones of 17 February 2004 and 9 September 2004 that it was approved at this meeting in the presence of both Mr. Etherington and Mr. Tutty, as Mr. Thomas says. Moreover, the latter letter is consistent with Mr. Thomas' account of the basis upon which the payment was approved, that "payment of our fees were approved by the Directors on the basis that they had been incurred for the benefit of the company and its shareholders".
30. It is said, nonetheless, that this was not a liability of the Company's, and it could not have been in the Company's interest to pay it. However, Mr. Thomas was not aware of that and it was not explained to him. On the contrary, he understood it to be the costs of discharging the administration order. He was not aware that only a proportion of Nicholson Graham & Jones' costs had been recovered under the Costs Order.
31. In those circumstances, Mr. Thomas was in my judgment acting honestly and in good faith in the interests of the Company in relation to this matter, and was not negligent. He was not in breach of fiduciary duty or the common law duty of care.
32. A further complaint is made against Mr. Thomas, not directly in respect of his own conduct, but in respect of the position and conduct of Mr. Till, his co-director. Mr. Till was a director and shareholder of Oakley Capital. Accordingly, his interests should have been declared and his vote should not have been counted towards a quorum, so that the payment was not properly authorised by the Board. That may be so, but it is hardly the fault of Mr. Thomas who was not aware of any potential breach of the Companies Acts or Articles of Association. If anyone was at fault for that, it is either Mr. Till (who I note has not been pursued in respect of this matter) or Mr. Etherington, the Company Secretary, whose job it was to ensure compliance with company law requirements and procedures, and upon whom Mr. Thomas would reasonably rely for that purpose.
33. If, contrary to my view, Mr. Thomas was technically at fault in this (or any other) respect in connection with the authorisation of the payment of Nicholson Graham & Jones' fees, I would unhesitatingly grant him full relief under Section 727 of the Companies Act 1985.

(2) Etherington's fees in connection with disposal of leases

34. The second claim against Mr. Thomas concerns the fees paid to Mr. Etherington's firm, Etheringtons LLP, in connection with the disposal of the onerous leases to Vanguard and the removal of the contingent liabilities.
35. It appears that only limited progress had been made on this during the period when the Company was in administration. After the administration order was discharged, the Company retained Mr. Etherington's firm, Etheringtons LLP, to deal with it. No complaint is made as to the engagement of Mr. Etherington's firm for this purpose per se. The complaint is as to the fees the Company agreed to pay Etheringtons for this work, namely a flat fee of £2,500 per lease plus VAT. Etheringtons LLP submitted, and were paid, invoices for a total of 13 leases at £2,500 plus VAT for each lease. There is a report from a single joint expert who has reviewed Etheringtons' files and concluded that a reasonable fee for the work done would have been £300 per lease. The Company also points to the terms of the sale agreement under which the purchaser was to be primarily responsible for the assignment or novation of the leases, and to pay the Company's costs of co-operating in that connection. The Company says that in those circumstances no reasonable director would have authorised Etheringtons' retainer on these terms.
36. Mr. Thomas' evidence (which I accept) was that he had not seen the contract with Vanguard, and was not aware that they were responsible for the Company's costs in this connection. In any event, whether or not Vanguard were responsible for seeing to this matter and bearing the Company's costs, the fact of the matter was that these matters had for the most part not been dealt with, and it was of paramount concern that they be dealt with, and dealt with quickly. They were what caused the Company to be put into administration in the first place. The amounts involved were potentially very substantial (up to £3.4 million according to an attendance note of Denton Wilde Sapte, the Administrator's solicitors) and there was some doubt as to the strength of the financial covenant of Vanguard. Very little progress had been made in dealing with these matters while the Company was in administration. It appears that of a total of 26 leases, only 3 had been dealt with. There were arrears of rent and dilapidation claims outstanding. In my judgment, Mr. Thomas reasonably took the view that it was appropriate to instruct Etheringtons to deal with this, and it was reasonable for him to conclude (as I find he did) that the work involved might well be extensive, and that accordingly it was in the Company's interests to agree a flat fee for this work of £2,500 plus VAT per lease.
37. Mr. Thomas' evidence (which again I accept) was that Mr. Etherington reported to him from time to time as leases were assigned or novated. Mr. Thomas did not know how much work Etheringtons were actually doing but reasonably assumed that they were getting on with the job and doing it properly. If the Company was being "taken for a ride" by Mr. Etherington or his firm, Mr. Thomas was not aware of that. In my judgment, it would not be reasonable to expect Mr. Thomas to check with Mr. Etherington, the Company Secretary and Solicitor, how much work was actually involved, and whether it justified the flat fee agreed of £2,500 per lease or, in effect, to audit their work. He was not negligent in failing to do so. On that basis, this claim also fails.

(3) Payments to TNTI

38. The third claim against Mr. Thomas concerns a payment of £3,000 (plus VAT) to a company called TNTI for the use of office space at its premises and secretarial services. TNTI was a company in which Mr. Thomas had a large minority shareholding. Most of the remaining shares were owned by his brother who ran the business. Complaint is made that the Company was not trading at the time, and that there was no need for any office space or secretarial services for the Company whatsoever. Accordingly, there was no reason to make any such payments to TNTI, or anyone else for that matter. The Company says this arrangement was in breach of Mr. Thomas' fiduciary duties as a director because of a conflict of interest, indeed a breach of the strict "self dealing" principle, and a breach of the disclosure of interest requirements of the Companies Acts as well as a breach of the common law duty of care.
39. Although the Company was not actively trading, it is not right to say that the Company was completely inactive. On Mr. Thomas' evidence (which I accept), the Company had a strategy of looking for another business or company to reverse into the Company. The extent to which they were actively looking for prospective deals (as opposed to waiting to be approached) may have varied, not least because, as Mr. Thomas explained in evidence, it became apparent that prospective interested parties would not be interested in proceeding until the Company had been "cleaned up" of all outstanding liabilities. Nonetheless, that was the Company's strategy which it was pursuing so far as it could, and there were discussions with a number of parties in that connection. I find that the Company did have some need for office space and secretarial services, albeit not very much, and that such needs were provided on an informal basis by TNTI, initially without charge.
40. Around the end of April 2004, the arrangement was put on a more formal basis and it was agreed that the Company would pay TNTI a fee of £1,000 per month. Mr. Thomas' evidence was that the change came about because his brother had queried a mobile telephone bill of £500 which he pointed out was not (or not all) for TNTI's business. Mr. Thomas' brother having raised the issue, they negotiated and agreed an arrangement whereby the Company would pay TNTI a fee of £1,000 per month for the limited office space and services which TNTI had previously been providing on an informal basis free of charge.
41. Mr. Thomas' evidence is consistent with the Board Minutes of 29 April 2004 which make reference to his being in negotiations to agree a rent for the use of office space, and with the Board Minutes of 24 June 2004 which record Mr. Thomas informing the meeting that the Company had made an agreement with TNTI for the use of its offices at £1,000 per month until the end of June 2004. Mr. Etherington, the solicitor and Company Secretary, was present at both meetings.
42. I accept Mr. Thomas' evidence as to how the arrangement came to be made. The Company had some (albeit limited) need for offices and services, those needs were supplied by TNTI, and the amounts charged were modest and probably less than the Company would have had to pay elsewhere. The charges were even less if one has regard to the first three months when no charge was made at all. Overall, the arrangement was a perfectly reasonable one for the Company to make and for its benefit.
43. The agreement was not approved by the Board before it was made. It was reported by Mr. Thomas to the Board after the event. Mr. Thomas was in a position of conflict in negotiating and agreeing the agreement on behalf of the Company with TNTI, a company in which he was a substantial shareholder and non-executive director, and it may even have infringed the strict self dealing principle. Certainly (as Mr. Virgo, Counsel for Mr. Thomas, fairly accepted) there was a technical breach of the company law requirements for disclosure of interests, albeit everyone knew of Mr. Thomas' interest in TNTI. However, as stated above, Mr. Etherington, the Company Secretary, was present at both board meetings where the matter was raised, and it would be his job to ensure that the transaction was properly approved and ratified. The transaction itself was a reasonable one for the Company to enter into and for its benefit. I find that Mr. Thomas was technically in breach of fiduciary duty and the disclosure of interests requirements, but I have no hesitation in relieving him entirely of any liability for such breaches under s.727 of the Companies Act 1985. He was acting honestly and reasonably, and in all the circumstances he ought fairly to be excused from any liability for such breaches.

(4) Payments to Toocan

44. The next claim relates to a series of payments from March 2004 onwards totalling £26,331 made by cheque drawn by Mr. Etherington on the Company's bank account in favour of a company called Toocan, owned by Mr. Etherington and of which he was sole director. The invoices relating to these payments refer to the provision of "secretarial services … including provision of e-mail, photocopying, postage, telephony and all general office infrastructure". The Claimant says there was no legitimate basis for making these payments, and this was just another excuse for Mr. Etherington to extract money from the Company.
45. The claim against Mr. Thomas is for breach of the common law duty of care, on the basis that no reasonable director would have authorised the Toocan contract. It was clear from Mr. Thomas' evidence (which I accept) that he did not authorise the Toocan contract (if indeed there was one). Indeed, Mr. Thomas did not know about these payments or invoices. The fact that he did not know about them is confirmed by the minutes of the Board meeting of 24 June 2004 (the day Mr. Thomas left the Company), which refer to Mr. Etherington informing the meeting that the Company's papers were at the Company's registered address (Etheringtons' offices), that office space had been "provided at no cost since January 2004" but that additional office space would be required for the future. It appears from this document that not only was Mr. Thomas not aware of the invoices and payments, but that Mr. Etherington was lying to him about this.
46. Mr. Thomas and Mr. Etherington were the two signatories to the Company's bank account. Under the bank mandate, both their signatures were required for any payment exceeding £5,000, but only one signature was required for cheques for less than that amount. With one exception, all of the cheques were for less than £5,000, so that Mr. Etherington's sole signature was sufficient under the bank mandate. (The one exception was a payment for £5,318 in early August, after Mr. Thomas had left the Company and the mandate had been changed to make Mr. Etherington sole signatory.)
47. Mr. Moeran, Counsel for the Company, submitted that Mr. Thomas should periodically have checked the bank account to check any payments below the £5,000 limit on Mr. Etherington's sole signature. In my judgment, Mr. Thomas was not negligent in failing to do so. The provisions of the bank mandate permitting one signature for cheques below a certain limit, but requiring two signatures for cheques above a certain limit, are quite normal. The limit of £5,000 appears to be a reasonable one, and there was no evidence to suggest otherwise. Moreover, at the time, Mr. Thomas had no reason to distrust Mr. Etherington, who was Company Secretary and the Company's solicitor.
48. Finally on this topic, some criticism was made of Mr. Thomas' conduct at the board meeting on 24 June 2004 at which a contract or arrangement with Toocan for the use of office space at a rent not exceeding £1,500 per month was approved for the future. This of course would have coincided with the termination of the arrangement with TMTL which was ending with the departure of Mr. Thomas and such a proposal from Mr. Etherington would have seemed reasonable. In any event, the two payments which were made after that date, £3,818.75 in mid-July and £5,318.75 in early August, to Toocan bore no relation to that figure, and would no doubt have been made by Mr. Etherington in any event. In my judgment, this criticism of Mr. Thomas is also unfounded.
49. Accordingly, this claim also fails.

(5) Board meeting of 24 June 2004 and "change of control" provisions

50. The final claim relates to a board meeting on 24 June 2004, and payments made to Mr. Etherington and Mr. Pack the following month totalling some £329,750 (a total of £281,750 to Mr. Etherington and £48,000 to Mr. Pack) pursuant to arrangements alleged to have been approved at this meeting.
51. The background to this meeting was explained by Mr. Thomas in evidence. As already indicated, the Company had been pursuing its strategy of looking for a company or business to reverse into the Company (which was still listed on the AIM) so that the Company would become a viable, active trading company again. Mr. Thomas had discussions with a number of potentially interested parties, but nothing had come to fruition. It was proving difficult because potentially interested parties were deterred, partly because the Company had not yet been "cleaned up" completely of all the contingent liabilities, and partly because of the volatile history of the Company.
52. However, Mr. Etherington apparently had 50% interest in a company which ran a food distribution business called Snapper Seafoods. Mr. Thomas, on behalf of the Company, had discussed with Mr. Etherington reversing Snapper Seafoods into the Company. Mr. Etherington of course knew all about the Company's position and history, unlike other potentially interested parties who had been deterred when they learned about them.
53. As part of this proposed arrangement, Mr. Thomas would sell his shareholding to Mr. Etherington at market value (the price quoted on the AIM), and resign as chairman and director in favour of Mr. Etherington, who would thereafter be in control of the Company (at board level). The proposed reversal of Snapper Seafoods into the Company would not be effected immediately. Mr. Etherington was not prepared to implement it until the Company had been "cleaned up" and all contingent liabilities removed. In addition, they had yet to discuss the arrangements with the Company's nominated advisor ("NOMAD"). Mr. Etherington was due to do so the day after the board meeting. Mr. Etherington was, however, prepared to proceed immediately with the purchase of Mr. Thomas' shareholding, which was completed at around the time of the Board meeting or shortly afterwards. Mr. Thomas said that he regarded this as a good sign for the Company's future, indicating Mr. Etherington's confidence and commitment to the Company. Mr. Etherington apparently hoped to benefit from an increase in the Company's share price after Snapper Seafoods was reversed into the Company.
54. There are two different versions of the board meetings at Trial Bundle 2D, Tabs. 163 and 164 respectively, both signed by Mr. Thomas. How and why there came to be two different versions of the board minutes is hotly disputed and I shall have to examine that in some detail. However, it appears to be common ground that the first version (Tab. 163) was produced and signed on or about 24 June 2004, the day of the meeting, and the second one (Tab. 164) was produced and signed some weeks later.
55. The first version of the minutes provided inter alia for:

(1) the resignation of Mr. Thomas as "non executive Chief Executive" and records the fact that he had sold his entire equity holding with effect from that day;

(2) the appointment of Mr. Etherington to the Board and to the position of Chief Executive "on the same terms as the former Chief Executive", and authorising Mr. Thomas to sign a letter of appointment between the Company and Mr. Etherington for that purpose;

(3) Mr. Etherington to continue as Company Secretary on the same terms as before, and again authorising Mr. Thomas to sign a letter of appointment confirming that;

(4) Mr. Thomas to be paid £55,900 as compensation for the unexpired term of his service contract. (This compensation payment to Mr. Thomas has since been recovered by the Company).

There were a substantial number of other matters dealt with in the minutes, including the change of bank mandate, with Mr. Etherington to be the sole signatory for the future.

56. The second (longer) version of the minutes also contained those provisions, but with some important amendments and additions. In particular:

(1) Mr. Etherington was to be paid an extra £35,000 for his "executive duties as Chief Executive, Company Secretary and General Legal Counsel and all other roles" in addition to his salaries of £36,000 as Chief Executive and £24,000 as Company Secretary.

(2) Mr. Pack's fees as a director were doubled from £12,000 to £24,000 per annum.

(3) There were "Change of control" provisions for Mr. Etherington (in all three roles) the effect of which was that was that if there was a change of control of the Board or any action to remove Mr. Etherington as a director, the Company would "forthwith pay all monies due under the terms of appointment" of Mr. Etherington in his various roles as chief executive, company secretary and general legal counsel, provided that if an action to remove or change the Board or to remove Mr. Etherington as a director failed, the monies would be repaid to the Company. There was a similar change of control provision in the case of Mr. Pack.

(4) £90,050 was due to Mr. Etherington for breach of contract in the termination of his service contract on 1 July 2001, and payable on demand, with interest at 5%, but Mr. Etherington would not demand payment provided no action was taken to remove him as a director before 30 June 2007.

(5) All previous decisions at board meetings since the company came out of administration were approved and ratified in case there had not been a valid quorum in view of a director having to abstain from voting on a matter of personal interest.

57. As foreshadowed in the minutes, there were letters of appointment also dated 24 June 2004. There were 3 for Mr. Etherington and 1 for Mr. Pack. These letters of appointment refer to their salary increases, but not the change of control provisions.
58. The effect of the change of control provision was that if there was a change of control, all future sums which would have been payable to Mr. Etherington (or, as the case may be, Mr. Pack) under their service contracts would become payable at once. Their effect would also be increased by the increases in salary on which they operated. On the basis of a minimum two year appointment at a total (increased) salary of £95,000, Mr. Etherington would be entitled to an immediate payment of £190,000, and Mr. Pack £48,000 on the basis of a minimum two year appointment at an (increased) salary of £24,000. Mr. Etherington would also demand and be paid compensation of £90,050.
59. About two weeks later, on 9 July 2004, Mr. Case and Mr. Ridge gave notice to the Company requisitioning an EGM to remove Mr. Etherington and Mr. Pack as directors, and at a board meeting on 12 July 2004, it was decided to convene an EGM pursuant to the notice of requisition, thus on the face of it triggering the change of control and compensation provisions. Between 12 and 16 July 2004, Mr. Etherington, who was now the sole signatory on the Company's bank account, made a series of payments by cheque totalling £281,750 to himself and £48,000 to Mr. Pack.
60. The Company's primary case in respect of these payments is in fraud. It says that the first version of the minutes, which closely reflects the agenda for the meeting, is the true record of what was actually discussed and agreed at the meeting. The change of control and compensation provisions, which do not appear in the first version of the board minutes, were never discussed, or agreed at the meeting at all. The second version of the Board minutes, which do refer to the change of control and compensation provisions, were produced fraudulently after the event in response to the notice of 9 July 2004 requisitioning an EGM to remove Mr. Etherington and Mr. Pack, in order to provide a bogus justification for the payments a few days later, purporting to be pursuant to the change of control and compensation provisions agreed at the meeting on 24 June 2004 when no such provisions had in fact been discussed or agreed at that meeting.
61. Mr. Thomas' explanation for the differences between the two versions of the minutes in his witness statement was that the first version was an interim version only, produced and signed as a matter of urgency immediately after the meeting. Mr. Thomas was due to go to Spain the next day for three weeks, and Mr. Etherington was due to be in Finland. They needed the minutes of the appointment of Mr. Etherington in place of Mr. Thomas as a matter of urgency in order to make the necessary regulatory ("RNS") announcements. (Such announcements were indeed made early the following week, copies of which appear in the trial bundles). Accordingly, Mr. Etherington produced as a matter of urgency the less detailed version as interim minutes for Mr. Thomas to sign immediately after the meeting, with a view to producing a more detailed version for Mr. Thomas to approve and sign later, which Mr. Thomas says he did on or about 2 August 2004 when Mr. Etherington attended at his home in Somerset.
62. Mr. Thomas maintained that evidence in cross examination, and expanded on what happened. He said that Mr. Etherington had a number of items on his "wish list" to be discussed at the Board meeting, including his overall salary package and change of control provisions. They had discussed then beforehand, but not in any detail. (There was no prior discussion of Mr. Pack's salary).
63. The meeting itself lasted several hours. Mr. Pack, the other director, was away at the time. Mr. Thomas had called him in advance to tell him to be available at the end of a telephone. He and Mr. Etherington had detailed discussions at the meeting before calling Mr. Pack.
64. The items discussed included the level of Mr. Etherington's total salary. Mr. Etherington was looking for a total salary in excess of £100,000, which Mr. Thomas thought inappropriate. Mr. Etherington sought to justify it on the basis that the Company was being transformed into a trading entity, but Mr. Thomas said that had not yet happened. The figure was negotiated and eventually agreed in the sum of £95,000.
65. The change of control provisions were also discussed. Because of the volatile history of the company (which included the termination of Mr. Etherington's appointment as company secretary in 2001 which he claimed to be in breach of contract) and a concern that Mr. Case or Mr. Ridge might seek to oust him, Mr. Etherington was apparently concerned to protect his position (in replacing Mr. Thomas on the Board and becoming Chief Executive and purchasing his shares, with a view to the reversal of Snapper Seafoods into the Company) by "change of control" provisions. The precise terms of the change of control provisions which Mr. Etherington required were not spelt out, but he said he wanted protection similar to those of other officers of the Company who preceded him. This was apparently a reference to clause 4.1 of the service contracts of Mr. Bradfield and Mr. Gray dated 23 August 2002 which provided that in the event of the Company becoming subject to a change of control, the notice period for terminating their service contracts doubled from 6 to 12 months. Mr. Etherington assured Mr. Thomas that the change of control provisions he was seeking were entirely reasonable.
66. Having discussed these and other matters, they then telephoned Mr. Pack, discussed the various matters with him and agreed them.
67. As regards the minutes of the meeting, Mr. Thomas explained that it had been the normal practice for Mr. Etherington as Company Secretary to take notes at board meetings, and to draw up minutes later for approval and signature at the next board meeting. The first version of the minutes of the meeting on 24 June 2004 was produced as interim minutes immediately after the meeting by way of exception to the normal practice, because of Mr. Thomas' imminent departure to Spain and the need to have minutes signed before making the RNS announcements, but with a view to Mr. Etherington preparing more detailed minutes for approval and signature at a later date.
68. Mr. Thomas says he approved and signed the second version of the minutes around 2 August 2004 when Mr. Etherington came to see him in Somerset. Mr. Etherington sat in Mr. Thomas' office and told him to read the minutes, which he did although not in great detail. The minutes appeared to him to reflect the points which had been agreed in principle at the meeting. He asked Mr. Etherington, the Company's lawyer, whether they were "ok" for him to sign, to which Mr. Etherington said yes, whereupon Mr. Thomas signed them.
69. By far the most important issue in this part of the case, indeed in the whole case, is whether Mr. Thomas' account of what happened is in general correct; or whether he is lying about all of this, and there was no discussion of change of control provisions until after 9 July 2004 when Mr. Case and Mr. Ridge requisitioned the EGM to remove Mr. Etherington and Mr. Pack as directors, and the second version of the Board minutes was fraudulently concocted by Mr. Etherington and Mr. Thomas in response, to provide a pretext for Mr. Etherington to extract the money from the Company shortly afterwards. There is no halfway house here. Either Mr. Thomas is telling the truth, or it was an out and out fraud by him and Mr. Etherington, and Mr. Thomas is lying about it now. It is, as Mr. Virgo said, a very serious allegation. The evidence required to prove it must be strong and convincing.
70. In my judgment, there is no strong and convincing evidence of a fraud on the part of Mr. Thomas. Indeed, I am satisfied that Mr. Thomas was telling the truth about this, and he was not involved in any fraud.
71. Having seen and heard Mr. Thomas give his evidence, I have concluded that he was an honest witness, doing his best to tell the truth about these matters.
72. Nor was there any evidence to the contrary. The only other witness was Mr. Case, for the Company, but he could give no evidence about these matters.
73. Moreover, the fraud theory is that Mr. Etherington and Mr. Thomas concocted the second version of the minutes after, and in response to, the notice requisitioning the EGM given on 9 July 2004 and before the payments were made on 12-14 July. However, Mr. Thomas' evidence was that he did not even know that the EGM had been called, as he was still in Spain. On the basis of that evidence (which I accept), Mr. Thomas was not even aware that the EGM had been called at the time when he is supposed to have been concocting the second version of the minutes with Mr. Etherington in response to it.
74. Moreover, in my judgment, it is inherently implausible that Mr. Thomas would have participated in such a fraud. By the time of the notice requisitioning the EGM, he had already sold his shares in the Company (as recorded in the first version of the minutes). His compensation of £55,900 had also been agreed (again as recorded in the first version of the minutes) and paid (Bundle B4, p.1411). He had nothing to gain by concocting this fraud with Mr. Etherington. Why would he embark on such a fraud for the benefit of Mr. Etherington (and Mr. Pack) which was of no benefit to him? Moreover, it would be fraught with risk, concocting a second version of the minutes after the EGM had been requisitioned which was different from the first version, and which would inevitably attract attention and be investigated. He had nothing to gain and everything to lose. It makes no sense.
75. It is also relevant to consider Mr. Pack's position in all this. In my judgment, Mr. Virgo was right in his submission that if Mr. Thomas was a party to a fraud of concocting the second version of the minutes, so too was Mr. Pack. That too seems very unlikely, particularly given Mr. Pack's "pedigree" (as Mr. Virgo put it), a former finance director of Securicor, a very large, well-known company.
76. The Claimant has settled its claims against Mr. Pack and he has not given evidence. However, his Defence, which contains a signed statement of truth, states that on or about 6 July 2004, he met Mr. Etherington who showed him a copy of the minutes, which he approved. He goes on to say that the minutes in that form were subsequently signed (at a date unknown to him) by Mr. Thomas. He says he only saw one version of the minutes and was unaware that there was more than one version. However if, as he says, Mr. Thomas subsequently signed the minutes in the form that Mr. Pack saw on 6 July, that must be the second version of the minutes. Indeed, Mr. Moeran's submissions proceeded on that basis. He submitted that the date of 6 July given in Mr. Pack's Defence is wrong, and that the true date was more likely to have been around 12 July. He so submitted in order to be consistent with the fraud theory (that the second version of the minutes was only produced after, and in response to, the notice requisitioning the EGM). But there is no evidence to support that, and on the face of it that part of Mr. Pack's Defence is inconsistent with the fraud theory espoused by the Company.
77. Mr. Moeran for the Claimant sought to adopt and rely upon other parts of Mr. Pack's Defence, in particular paragraph 33(2) where he stated that:

"[His] participation [in the meeting] was via a phone call from the 1^st Defendant of very brief duration (possibly only 2-3 minutes in length) who advised he was in a meeting with the 2^nd Defendant discussing company matters; the 3^rd Defendant does not recall the meeting being described by the 1^st Defendant as a board meeting."

Mr. Moeran relied upon this as inconsistent with Mr. Thomas' account of Mr. Pack's participation in the meeting by telephone and sought to cast doubt on whether it was a real board meeting at all with Mr. Pack properly in attendance by telephone (his attendance being required as the only other director apart from Mr. Thomas).

78. This was explored with Mr. Thomas in cross-examination. He accepted that Mr. Pack was not on the telephone for all, or even most, of the meeting. The meeting lasted several hours, and most of the discussion was between Mr. Etherington and Mr. Thomas without Mr. Pack on the telephone. Having discussed matters, however, he said they did telephone Mr. Pack and went through the various matters, discussing them with him. The time spent on the telephone with Mr. Pack was not very long (certainly as compared with the time Mr. Thomas and Mr. Etherington had spent discussing matters on their own), but Mr. Thomas was quite clear that it was more than 2-3 minutes, and certainly sufficient time for him to explain to Mr. Pack that it was a board meeting and to go through the various items with him. I accept that evidence of Mr. Thomas. Indeed, if Mr. Pack was not attending the Board meeting, what was the point of calling him at all?
79. It will also be noted that this paragraph of Mr. Pack's Defence is expressed in tentative terms. He says, for example, that the meeting was "possibly" only 2-3 minutes in length, and that "he does not recall" the meeting being described by Mr. Thomas as a board meeting. The Defence also admits that a board meeting was held at which he attended by telephone. His Defence is not necessarily inconsistent with Mr. Thomas' evidence, and insofar as it is, I prefer Mr. Thomas'.
80. At all events, Mr. Pack's Defence, which the Company does rely upon for that purpose, does not support the Company's case on when the second version of the minutes was produced, which is crucial to the fraud theory espoused by them.
81. Mr. Thomas in cross-examination said he thought Mr. Etherington had come to the meeting with drafts of the letters of appointment and the new bank mandate already prepared. He could not recall whether Mr. Etherington had also brought with him draft minutes already prepared. However, they needed to sign minutes urgently, and although not as detailed as the second version of the minutes and covering fewer items, the first version of the minutes was still quite a substantial document which would have taken some time to prepare. In my judgment, the probability is that Mr. Etherington also had with him at the meeting a draft of the minutes prepared in advance.
82. The first version of the minutes, which Mr. Etherington probably had with him in draft at the meeting, does not refer to the change of control provisions, nor the salary increases. These were to be discussed at the meeting. It would have required some time to draft those sections as they ultimately appeared in the 2^nd version of the minutes. The salary increases from Mr. Etherington and Mr. Pack do appear in the letters of engagement, but those would probably have been drafted in advance with the salary left blank to be filled in quickly after the meeting once the figures were agreed.
83. At all events, the change of control provisions and the salary increases for Mr. Etherington and Mr. Pack were not mentioned in the first version of the minutes signed by Mr. Thomas. In those respects the first version of the minutes was incomplete, and the references to Mr. Etherington being appointed chief executive on the same terms as Mr. Thomas, and continuing as Company Secretary on the same terms as before were incorrect. Mr. Thomas in cross-examination accepted that the initial version of the minutes did not accurately reflect what he says had been agreed at the meeting, but he says he did not draft the minutes, he was invited to sign them by the Company Secretary, and he was expecting to receive detailed minutes later in accordance with the Company's normal practice. When Mr. Etherington did present the second version of the minutes to him later, telling him to read through them and sign them, he did read through them although not in great detail, line by line. They appeared to him to reflect what had been agreed in principle at the meeting. He relied on Mr. Etherington, the Company Secretary and solicitor, who told him they were "ok" to sign, and he did so. As already indicated, I accept that evidence of Mr. Thomas.
84. In any event, for the reasons already given, I reject the Company's primary case in fraud that there was no discussion or agreement of the change of control provisions at the meeting, and that the second version of the minutes was fraudulently concocted by Mr. Etherington and Mr. Thomas after, and in response to, the notice requisitioning the EGM to remove Mr. Etherington and Mr. Pack.
85. Although the claim was put primarily in fraud, that was not the only basis upon which it was put. It was also said that Mr. Thomas was in breach of his fiduciary duties and common law duty of care in agreeing the change of control and compensation provisions in any event, and that he is accountable for any secret profits he made on the sale of the shares, equitable compensation and common law damages, to which I must now turn.
86. On the evidence, I am bound to conclude that Mr. Thomas was in breach of fiduciary duty. His own evidence was that the change of control provisions were part of a wider arrangement, ultimately driven by the proposed reversal of Snapper Seafoods into the Company, but which also included the sale of Mr. Thomas' shares to Mr. Etherington. Mr. Thomas confirmed in cross-examination that Mr. Etherington would not have agreed to buy Mr. Thomas' shares without the change of control provisions. He was thus in a clear position of conflict between his interest in selling his shares to Mr. Etherington and his duty to consider the change of control provisions solely in the Company's interests. Mr. Virgo on behalf of Mr. Thomas rightly did not seek to dispute that.
87. There was another basis on which it was argued that Mr. Thomas was in a position of conflict and in breach of fiduciary duty in voting for the change of control and compensation provisions, namely that the decisions taken at the meeting on 24 July 2004 were all part of a package which placed all 3 Defendants in positions of conflict. But it is unnecessary to decide that in view of the indisputable conflict of interest arising by virtue of the connection to the sale of the shares. The real issues are as to the remedy (if any) to be granted for the breach of fiduciary duty, and whether Mr. Thomas should be relieved from liability in whole or in part under s.727 of the Companies Act.
88. The claim for secret profits was made on the basis that Mr. Thomas might have sold his shares in excess of market value, in which case he would be accountable for the excess as secret profits. At the commencement of the trial, the Company had no information as to the price at which Mr. Thomas sold the shares. Mr. Thomas was asked about this in cross-examination and said that he had sold them at market value, 3p per share being the price the shares were then quoted at on the AIM. On the basis of that evidence, which I accept, no secret profit arises and the claim for secret profits falls away.
89. However, the Company can and does claim equitable compensation equal to the amount of the payments which Mr. Etherington made to himself and Mr. Pack pursuant to the change of control and compensation provisions which Mr. Thomas voted for in breach of his fiduciary duties. In my judgment, that is a valid claim and the Company is entitled to equitable compensation equal to the amount of the payments, subject only to the possibility of relief under s.727 considered below. Mr. Etherington would not have purchased Mr. Thomas' shares (or proceeded with any other part of the proposed arrangements) without the change of control provisions. Mr. Thomas' breach of fiduciary duty caused the loss because the payments were made pursuant to the change of control and compensation provisions which only came into existence because Mr. Thomas voted for them in breach of his fiduciary duty to the company.
90. Mr. Virgo on behalf of Mr. Thomas sought to deny causation on the basis that if the change of control provisions had not been agreed, Mr. Etherington might have found some other way to extract the money from the Company. That is pure conjecture, and it does not alter the fact that the money was extracted in the way that it was, involving a breach of fiduciary duty by Mr. Thomas which was the direct and proximate cause of the loss.
91. I turn then to consider relief under Section 727 of the Companies Act. S.727(1) provides as follows:

"(1) If in any proceedings for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as it thinks fit."

92. There are three requirements which must be satisfied before the Court has a discretion to grant relief under this section:

(i) that the Defendant has acted honestly;

(ii) that the Defendant has acted reasonably; and

(iii) that having regard to all the circumstances the Defendant ought to be fairly excused for his breach of duty.

93. As to the first requirement, I have already rejected the case in fraud against Mr. Thomas. In my judgment, he was acting honestly throughout.
94. The second requirement is more difficult. Was Mr. Thomas acting reasonably (as well as honestly)? In that regard, I bear in mind that the section expressly contemplates that a person can have acted reasonably for the purposes of the section, even though he has been negligent. I approach this question applying the well known test of asking myself whether Mr. Thomas acted "in the way in which a man of affairs with reasonable care and circumspection could reasonably be expected to act in such a case" (re Duomatic Limited [1969] 2 Ch. 365 at 377 per. Buckley J.).
95. Regrettably, I cannot find that Mr. Thomas acted reasonably applying that test. In addition to the obvious conflict of interest, I have regard to the following matters.
96. The obvious purpose and effect of the change of control provisions would be to interfere with, and deter shareholders from exercising, their powers to control the composition of the Board of Directors, as Mr. Thomas must have appreciated, or at any rate should have appreciated.
97. Indeed, Mr. Thomas himself had had direct experience of the power and effect of change of control provisions at the time of the disputed EGM back in 2002, when he had sought to take control of the Board but was forced to compromise because it would have triggered change of control provisions in existing director service contracts, which would have cost the Company a lot of money.
98. Mr. Thomas said he thought it unlikely that the change of control provisions would be triggered. By in my judgment, he must (and certainly should) have anticipated that they might very well be triggered, particularly given the volatile history of the company. Mr. Etherington apparently thought so; that was presumably why he was insisted upon having them.
99. If the change of control provisions were triggered, they would result in immediate large payments to Mr. Etherington and Mr. Pack for no apparent benefit to the company. In Etherington's case, the change of control provisions together with the compensation provision would result in him receiving £280,000, which would recoup the entire purchase price of Mr. Thomas' 17.6% shareholding (approximately £250,000) and more besides.
100. Moreover, although Mr. Thomas thought the overall arrangement proposed, and in particular the proposed reversal of Snapper Seafoods which drove it, was for the Company's benefit, he committed the Company to the change of control and compensation provisions without actually getting that benefit for the Company, or indeed any contractual entitlement to it. At the time when the change of control and compensation provisions were agreed, they did not know what the NOMAD would say about the proposal (in the event they advised strongly against it). Nor was Mr. Etherington obliged to procure the reversal of Snapper Seafoods into the Company, still less the owner(s) of the other 50% of Snapper Seafoods which Mr. Etherington did not own.
101. Further, Mr. Etherington's concern, or one of his concerns, which he apparently wished to protect himself against was that there would be a change of control before he had reversed Snapper Seafoods into the Company, and which would prevent him from doing so. In those very circumstances, the Company would not get the benefit of the reversal of Snapper Seafoods into the Company, but would still be obliged to make the payments, for no benefit to the Company.
102. Moreover, Mr. Thomas approved the compensation provisions for Mr. Etherington without taking any steps to investigate the detail of the claim, its strengths and how much it was really worth. He also approved the increase in Mr. Pack's salary and the change of control provision for him which operated on that increased salary, when neither had been asked for by Mr. Pack.
103. In those circumstances, I conclude that Mr. Thomas was not acting reasonably in believing that he and Mr. Pack could go ahead and properly approve these arrangements themselves. Accordingly I find that I have no jurisdiction to grant relief under Section 727(1) of the Companies Act.
104. For the sake of completeness, I should say that if, contrary to my view, Mr. Thomas did act reasonably, I would have concluded that in all the circumstances he ought fairly to be excused from liability and I would have granted him full relief under s.727(1).
105. Mr. Thomas did not profit from the arrangements (apart from the £55,900 compensation which has been recovered). If he was relieved from any liability, that would in effect put him in the same position as Mr. Pack who has settled with the Company on the basis that he repay the money he received. If, on the other hand, relief was not granted, it would put him in the same position as Mr. Etherington, although their positions and culpability are not remotely comparable. Mr. Etherington was the recipient of all the money not restored to the Company, and on the material before the Court he appears to have been the villain of the piece. This case was indeed brought and pursued against Mr. Thomas on the basis that he was on a par with Mr. Etherington in terms of culpability, and that they were both parties to an out and out fraud and equally responsible. But that is not correct.
106. Finally, I should add that a substantial amount of time was spent investigating certain other matters, relating to claims submitted by Mr. Thomas to the Company in connection with his solicitors' costs of the EGM dispute back in 2002 and fees of a company called Bankside. These matters are not the subject of any claims in these proceedings, and they were relied upon by the Company solely in relation to credibility of Mr. Thomas. It is unnecessary for me to deal with them, save to say that they have not affected any view of Mr. Thomas' honesty and credibility as a witness.
107. I shall hear Counsel on the form of order in the light of my judgment.