England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF C F BOOTH LIMITED
AND IN THE .MATTER OF THE COMPANIES ACT 2006

		Petition No: 5053 of 2015 Royal Courts of Justice Strand. London. WC2A 2LL
		14th March 2017

Mark Anderson QC:

1. This is a petition under section 994 of the Companies Act 2006 by shareholders in C F Booth Limited, which was incorporated in 1949 to carry on the family scrap metal business established by Clarence Booth in 1920.
2. Upon his death in 1980 Clarence Booth bequeathed (or had already given) almost all of the shares to his sons Ken and Dennis Booth ("Ken Senior" and "Dennis") and his stepson Harry Wilkinson ("Harry"). The petitioners in this dispute are descended from Dennis and Hariy, and own 27.4 per cent of the Company between them. The individual respondents (except the fifth and ninth, who played no active part in the litigation) are the sons and grandsons of Ken Senior, who between them and their families own 65 per cent and control the Company. References to "the respondents" are to these seven individuals.
3. The shares are now owned as follows (with the petitioners in bold italics, the respondents in bold) :

• Ken Senior's children:

Ken (32.8%)

James (29.8%)

Vivien (0.2%)

• Ken Senior's grandchildren:

Ken's sons, Scott and Jason (each 0.5%)

James's sons, Thomas, Jacob and Benjamin (each 0.4%),

• Dennis's son, Don (19%)

• Harry's son and grandchildren:

His son Christopher Wilkinson (7.7%) o

The children of his other son (Robert Wilkinson, deceased), Charles Wilkinson and Jane Compton (each 4.2%) (together, "the Wilkinson petitioners").

4. The directors are Ken, James, Scott and Jason ("the Booth directors") and Christopher Wilkinson. James's sons also work in the business but are younger than Ken's sons and have not been appointed to the board. They were represented by counsel for the Booth directors at the trial, but their conduct has not been the subject of the petitioners' complaints and no order is sought against them personally. Christopher Wilkinson and Vivien Hull were not represented, were not the subject of criticism and did not participate in the litigation except for a brief appearance by Mr Wilkinson on 28^th November to tell me that he had no interest in acquiring any shares.
5. The petitioners complain that the affairs of the Company have been conducted to their unfair prejudice because the Booth directors (not Christopher Wilkinson) have taken excessive remuneration whilst causing the Company to pursue a policy of not paying dividends. The prejudice alleged is the non-receipt of dividend income and the negative impact on the capital value of their shares resulting from unfair remuneration and dividend policies. The petitioners say that the Booth directors' intention in refusing to recommend dividends has been deliberately to devalue the minority shareholdings with a view to acquiring them cheaply.

Background history

6. The prejudice complained of is said to have started thirty years ago. Some of the things said in the distant past still rankle, and featured in the evidence before me. Both sides invited me to look far back in time, the petitioners because they complain that the current directors' policies have a long history which is relevant to remedies; and the respondents because they retort that there has been long acquiescence in those policies. In my judgment the events of the distant past are of limited importance, though the duration of any prejudicial conduct may be significant. When I do mention events from long ago, it is largely to set in context this family dispute as it stands today.
7. The Company began as a scrap metal business but (via subsidiaries) has diversified into engineering, demolition, haulage and foundry products. Its headquarters are in Rotherham but it has a yard in Doncaster as well. It is one of the largest metal recycling businesses in Europe and one of the largest private sector employers in Rotherham. In recent years Ken and James have developed the international business which represents a significant proportion of its turnover and led to the Company being awarded the Queen's Award for International Trade in 2012.
8. Upon incorporation in 1949 Clarence controlled the Company with 82 per cent of the shares, the remainder being held equally by Ken Senior, Dennis and Hariy. The original directors were Clarence and Ken Senior. Ken and James joined the Company when they left school, and became directors in the 1970's. After Clarence's death in 1980, Ken Senior came to own 50.15 per cent of the shares and so controlled the company.
9. Ken Senior worked in Rotherham, Robert and Christopher Wilkinson in Doncaster. The petitioner Charles Wilkinson joined his father and uncle in Doncaster when he left school in 1983.
10. The business was successful and profitable. Substantial dividends were paid every year from incorporation until 1985. (References in this judgment to particular years are references to the accounting period ending on 31^st March in that year.) In 1986 the Company suffered a loss and no dividend was paid. At the heart of this petition lies the complaint that despite returning to healthy profitability between 1987 and 2013, no dividend was ever again declared.
11. Ken Senior retired as managing director in 1986, though he continued in the role of chairman and was influential in the Company's affairs for many years thereafter.
12. The Doncaster business made a loss, and Robert was sacked in 1988. Charles Wilkinson left as well. Christopher Wilkinson stayed and is still a director today.
13. Ken Senior and his brother Dennis were on poor terms when the latter retired from the business in 1987. In March of that year Ken Senior wrote to Dennis's son, the petitioner Don Booth: ''The Inland Revenue have fixed a price of eight pounds each. You can be paid ten pounds each. Shares should collect a dividend but it Is my intention never to pay one, so it makes sense to sell. We did not pay a dividend last year and will not pay one this year. To anyone at all, until things are sorted out. Your Dad will not get a dividend, either."
14. The no-dividend policy became a source of enmity. In 1991 Don instructed solicitors to write a letter complaining that his interests as a shareholder were being unfairly prejudiced by the no-dividend policy and excessive directors' remuneration among other matters. The response was a firm denial of any wrongdoing, whereafter Don did not pursue the matter. He did not attend another AGM after 1991.
15. In 1993 Ken Senior wrote to Don again urging him to sell his shares. Don refused to negotiate, expressing himself in bitter terms. He had no further contact with his uncles and cousins until this litigation.

Recent history

16. Ken Senior continued to work in the Company after his retirement in 1986 until he fell ill in 2010, but before that he gradually handed over control to Ken and James. In 1997 he ceased to be the majority shareholder and transferred most of his shares to his sons, who have now been working in the Company for more than fifty years in Ken's case and forty years in James's. Ken Senior died in May 2013.
17. Shortly before that his grandsons Scott and Jason were appointed to the board. Both of them have now been working in the Company for more than twenty years. James's sons have now also joined the company, the youngest in 2016.
18. In May 2012 the Wilkinson petitioners wrote that they were considering selling their shares. Ken replied that "We are interested in purchasing your shares at a realistic value once the share price has been ascertained from Ernst & Young." In September 2012 Christopher Wilkinson relayed an offer from Ken to buy the shares for £50,000. In fact that offer was not based on any valuation or advice from Ernst & Young, but was apparently just the price that Ken was prepared to pay. It was not accepted.
19. In February 2014 the Wilkinson petitioners instructed solicitors who engaged Mr Stephen Grant, a Chartered Accountant, to provide an opinion as to the value of their 8.4 per cent shareholding. Adopting a capitalised earnings method based on the filed accounts for the four years to 31^st March 2013, cross-checked against a net-asset assessment, Mr Grant concluded that the Company's value was between £40.2701 and £53.73m. Applying a discount of 50 per cent for the fact that the shares he was valuing were a small minority holding, he concluded that they were worth between £843,359 and £1,125,142. That report was sent to the directors but did not result in any improved offer beyond £50,000.
20. Mr Grant's report concluded that the directors' current remuneration was excessive. Mr Grant did not mention remuneration in earlier years but it may be relevant that until 2005 directors' remuneration was modest relative to later years, at around £275,000 in total. It increased to £400,000 in 2005 and to £820,000 in 2006. Between 2007 and 2015 the annual average was £1,579,000.
21. In 2014 the Company made a significant loss of £4,566,000. This was the first loss-making year since 1994 (and only the third since 1986).
22. The following table summarises some of the relevant financial information:

	Turnover	Profit/loss	Overdraft	Net assets	Directors' pay
	£000	£000	£000	£000	£000
2007	£169,722	£5,654	-£4,068	£26,829	£1,423
2008	£165,890	£2,754	-£5,211	£29,583	£1,876
2009	£145,591	£1,776	0	£31,349	£i,953
2010	£139,565	£2,223	-£10,608	£33,572	£1,175
2011	£236,934	£2,252	-£15,585	£35,788	£1,322
2012	£273,282	£2,415	-£24,982	£38,203	£1,768
2013	£262,739	£2,073	-£23,875	£40,275	£i,759
2014	£197,430	-£3,816	-£21,455	£36,273	£1,358
2015	£156,016	-£5,340	-£22,967	£30,933	£2,464
2016	£118,822	-£9,320	-£20,685	£20,526	£446

23. These figures are derived from the audited accounts except for 2016 which come from the management accounts. The figures for directors' remuneration include Christopher Wilkinson's remuneration and include salary, bonuses, benefits in kind declared to HMRC and pension contributions. As the table shows, in 2016 the directors significantly curtailed their remuneration and I understand that there has been further curtailment in 2017.
24. The increasing overdraft and the amount of the losses caused the Company's bank to commission a report from KPMG which was published in March 2016. It appears that turnaround is now being achieved and I am told that the company is near to breaking even in 2017. The bank has made continuation of the overdraft conditional on stringent controls, including on directors' remuneration. It is also a condition of the overdraft that no dividends are declared.
25. Against the background of a recent report of the 2014 loss, in February 2015 the Wilkinson petitioners, now having joined forces with their distant cousin Don Booth, instructed their solicitors to write a formal letter before action dated 25^th February 2015. The letter alleged unfair prejudice arising from excessive directors' remuneration in combination with the no-dividend policy. Having made clear that the petitioners would not allow the current state of affairs to continue, and having alluded to the possibility of litigation, the letter said "The third and best option is that a negotiated settlement is arrived at based upon the true value of our clients' respective shareholdings." It enclosed Mr Grant's report but said that the petitioners would be content for an independent valuation by a third party. It made clear that the petitioners would not be content with a valuation by the Company's own auditors, because they were not independent of the Company.
26. The respondents' solicitors replied on 22^nd May 2015, firmly denying unfair prejudice and suggesting that if the petitioners wished to sell their shares, they should invoke the mechanism for doing so provided by the Articles of Association, which would have involved a valuation by the auditors. The letter added that "In order to allay any concerns on the part of your clients, our client is happy for them to make written submissions for the auditor for consideration in preparing a valuation report."
27. There were no further discussions towards resolving the parties' differences before the petition was issued in July 2015, nor, at least in open correspondence admissible before me, thereafter. I am told that there was a mediation at some point.

The evidence

28. I heard evidence from the petitioners and from Ken Booth. None of the other respondents gave evidence.
29. Mr Ken Booth explained uncontroversially that cash flow was very volatile, with net outflows in half the years since 1990 and inflows in the other years. He demonstrated, without challenge, that the Company had invested in assets when cashflow permitted. Mr Tarlochan Lall, counsel for the participating respondents, conveniently summarised this evidence in a table which I found very helpful in understanding the level of investment over the years.
30. Mr Booth also spoke of the energy and skill which he, his brother and latterly his sons had brought to the business, and rightly claimed the credit for those persons for its survival during hard times, and prosperity during good times. He was not challenged about that claim which I have no hesitation in accepting. I did however find his evidence less satisfactory on the more controversial issues. I will deal with that below when discussing remuneration and dividend policies.
31. Don Booth and Charles Wilkinson also gave evidence, upon which I have drawn above when relating the historical friction within the family. However most of the events of which they spoke occurred 20 to 30 years ago and Don Booth's evidence in particular was largely confined to incidents which are documented. He was asked why he had not taken action after 1991 until he was contacted by his distant cousins (whom he had never previously met) who were contemplating this petition. He said that he could not afford the cost or the risk of litigation on his own and felt that his only option was to bide his time. The evidence of the Wilkinson petitioners (which was not challenged) was that the report of the 2014 loss caused them to instruct their solicitors to pursue this claim. I accept both explanations for the timing of the petition.
32. Although the experts take differing views on some important issues, they did not attend the trial and were not cross examined. They did answer written questions under CPR 35.6.

The petitioners' expert evidence and submissions

33. The petitioners, represented by Mr James Couser, ask for an order that they be bought out at a price to be fixed by the court. Relying on a second report from Mr Grant, Mr Couser submitted that directors' remuneration had been excessive for many years and that this, in conjunction with the no-dividend policy, amounted to unfair prejudice of the clearest kind. Until 2013 the Company was profitable but after 1985 the profits were never distributed to the shareholders. They were paid to the Booth directors in the form of excessive salaries and other benefits including the use of a company yacht and a series of expensive motor cars.
34. Pointing out that even at trial Ken refused to repent of the no dividend policy, he submitted that the only realistic remedy was buy-out.
35. Mr Grant's second report concluded that (in view of the losses made in recent years) the only appropriate valuation method was that based on net assets, and that the Company's value was £21,963,310 as at 31^st March 2016. Thus according to Mr Grant the Company's value had declined by more than half in two years. The evidence in his second report was that a discount of 67.5 per cent should be applied in the case of the Wilkinson petitioners to reflect that their shares were only 4.2 per cent of the whole, and that a discount of 50 per cent should be applied in Don Booth's case because he has a larger holding of 19 per cent. On this basis Mr Grant valued the Wilkinson petitioners' shares at £597,886 and Don Booth's at £2,089,150. However Mr Grant's evidence developed in written answers to questions under CPR 35.6, as will be seen below.
36. Mr Couser submitted that there should be no discount for the fact that the petitioners are minority shareholders, despite Mr Grant's evidence. He said that my task is to find a fair value, which is not the same thing as the value that a hypothetical buyer would place on the shares. He submitted that these shares should attract a higher price to reflect the refusal to share the profits with shareholders for the past 31 years, especially since that policy was motivated by a desire to acquire the shares at a value which reflected that they were yielding no dividends. He argued that if the respondents were to be given the benefit of a minority discount, they would effectively have been allowed to oppress the petitioners into parting with an investment at a discount. He further submitted that the Booth directors clearly want these shares because they have over the years repeatedly sought to acquire them, albeit at an unrealistic price. He says that they are or are akin to special purchasers and that the price should reflect that.

The respondents* expert evidence and arguments

37. In response Mr Tarlochan Lall argued that there has been no unfairness, and that the petition is an abuse of the process of the court and should be struck out. Mr Lall submitted that the Booth directors have earned their remuneration through hard work and skill which have brought about the success of the Company. Mr Lall said, and this was not challenged, that the recent downturn in the Company's performance was the result of international metal price fluctuations beyond the directors' control. The petitioners, he says, have contributed nothing to the success of the business in its good days, and are not interested in contributing now to its recovery. Indeed he says that this petition was a cynical reaction to the first reported loss in 2014.
38. AS to the non-payment of dividends, Mr Lall submitted that the policy of reinvesting profits instead of distributing them was appropriate, not least because the Company has always needed substantial working capital which despite healthy profits has had to be funded by a huge overdraft which has grown from £2m or £3m in the 1980's to more than £20m today. Although even today the balance sheet shows net assets of £2om, that is illiquid and no money is available for distribution. Mr Lall accepts that there was a policy of not declaring dividends but says that It was for these perfectly proper reasons. He says that there is no evidence that it was for the improper motive alleged by the petitioners.
39. Mr Lall also submitted that the allegations of unfair prejudice are stale because the same policy has been adopted for 30 years. Don Booth complained in 1991 but did nothing about it, refused to negotiate with Ken Senior in 1993 and now petitions on essentially the same allegations as he did not pursue in 1991.
40. Mr Lall further submitted that the Articles of Association provide an appropriate and workable method for shareholders to dispose of their shares. There are preemption provisions which the petitioners should have invoked in this case instead of issuing this petition which was therefore premature and should be dismissed.
41. Obviously Mr Lall says that the issue of valuation does not arise, but he made submissions in case it did. The respondents adduced expert evidence from Mr Ian Brewer MRICS. Mr Brewer agreed with Mr Grant that the net asset basis of valuation was appropriate. He found that the true adjusted net asset value of the Company was £19,258,412 but considered that a 90 per cent discount from that figure was appropriate. Mr Lall urged me to accept that a substantial discount was appropriate although he acknowledged that Mr Brewer's 90 per cent was partly based on the fact that no dividends had been declared since 1986, and he accepted that if I find that dividend policy to have been unfair, a lesser discount would be appropriate. He suggested 70 per cent. That would value the Wilkinson petitioners' shares at just under £0.5111 and Don Booth's at £i.im. Mr Lall says that it is unacceptable for the petitioners to argue for no discount in the teeth of their own expert's evidence that discounts of 50 per cent and 67 per cent are appropriate.

The issues

42. In the circumstances the following issues arise for determination:

i. What remuneration was paid to the Booth directors?

ii. Was this excessive?

iii. Was the dividend policy fair?

iv. Is this petition an abuse of process?

v. In light of the above findings, were the petitioners unfairly prejudiced?

vi. What is the appropriate remedy?

vii. If buy-out is to be ordered, what is the correct date for the valuation?

viii. What is the correct valuation at that date leaving aside discount?

ix. Should that valuation be discounted?

Remuneration and benefits in kind

43. .I have been supplied with a spreadsheet which shows the Booth directors' remuneration for 2011 to 2016 (these figures include salary, bonus, benefits in kind and pension contributions):

	Ken	James	Jason	Scott
2011	£440,053	£757,219
2012	£553,302	£1,072,464
2013	£275,603	£1,209,515	£56,885	£71,242
2014	£551,539	£162,274	£134,726	£437,363
2015	£552,559	£1,297,875	£318,364	£268,604
2016	£6o,6oo	£137,110	£107,000	£113,667

44. It can be seen that James was paid more than Ken. This was explained by Ken by reference to James's more onerous duties. This was not challenged. The complaint made in this petition is against the Booth directors acting together to cause the Company to withhold dividends whilst distributing profits to themselves in excessive amounts. The individual amounts which the Booth directors were paid makes no difference to the outcome of that complaint.
45. The Company owned a yacht between 2001 and 2012. The directors were given access to it for personal recreation. That benefit in kind is not included in the above figures. Other benefits in kind are included.
46. Mr Lall submitted that I should not include the full value of benefits in kind when assessing remuneration because some of the expenditure benefitted the Company as well as the individuals. This submission was based on Ken's evidence that the yacht and the luxury cars had a sound business purpose, which I shall consider below.
47. My understanding is that the amount of a benefit in kind for tax purposes is the cash equivalent value of the benefit. I accept that the calculations for tax purposes may not adequately reflect the amount of business use in any particular case, but in the absence of evidence to the contrary I do not think I can depart from the figures declared to HMRC as being the equivalent value of the remuneration represented by these benefits. Those are the figures adopted by Mr Grant when assessing the Booth directors' remuneration, without challenge by questions under CPR 35 and without contradiction by any other evidence. I think it is far too late now to suggest that the benefits in kind are worth something other than the amount put on them in the expert evidence.
48. On this basis, excluding the benefit in kind in using the yacht, the average annual remuneration taken by Ken and James between 2011 and 2015 was £687,240 each. I take that figure from the helpful spreadsheet at schedule 2 of Mr Lall's skeleton. That spreadsheet does not go back beyond 2011. All I have for earlier years are the figures set out in paragraph 22 above which are aggregate directors' remuneration but do not show how much was paid to Ken and James as opposed to Christopher Wilkinson and Ken Booth Senior. I know that the latter was paid £65,000 per year. Unless Christopher Wilkinson was paid significantly more in 2007 to 2010 than in 2011 (£66,088), it would appear that Ken and James were averaging at least as much between 2007 and 2010 as in the later years.

Was this remuneration excessive?

49. In Irvine v Irvine [2007] 1 BCLC 349 Blackburne J observed (at [268]-[270]) that "the test is whether, applying 'objective commercial criteria', the remuneration which [the respondent] took was within the bracket that executives carrying the responsibility and discharging the sort of duties that [the respondent] was, would expect to receive".
50. In both his reports (2014 and 2016) Mr Grant expressed the opinion that the aggregate remuneration of the directors was excessive. Mr Lall submitted that the court had not given permission for expert evidence on that issue. Since no application had been made to exclude Mr Grant's remuneration evidence, I gave Mr Lall time to consider making one. Having thought about the matter overnight after the first day of the trial, Mr Lall did not make such an application. Had he done so, he would have been in some difficulty because Mr Grant's second report had been disclosed months before trial and no objection had been taken. On the contraiy, the respondents' solicitors had addressed questions to Mr Grant under CPR 35.6, including questions about his evidence as to remuneration.
51. An expert valuing shares in a family company for the purposes of an unfair prejudice petition will usually consider the reasonableness of directors' remuneration, especially where (as here) the issue had been raised as an important component of the petitioners' complaint. The court's task when granting remedies under section 996 extends to deciding a fair price to be paid for the petitioners' shares; and where it is alleged that the directors have paid themselves too much, that is a potentially relevant issue for the experts. Sometimes the court hears more specialist evidence from recruitment experts or the like, but in this case the parties did not choose to incur that additional expense and Mr Grant gave the only evidence on the issue, without any challenge by way of Part 35.6 questions or otherwise as to the extent of his expertise.
52. His inability to object to the admission of Mr Grant's evidence about remuneration left Mr Lall in some difficulty, because the respondents' own expert, Mr Brewer, did not deal with the issue at all in his report. This left the petitioners' expert evidence uncontradicted on a central issue. I have already mentioned that neither expert was asked to attend the trial and so Mr Grant's uncontradicted evidence was not tested in cross examination. I have therefore been especially careful in assessing his evidence and in using it to assess the reasonableness of the remuneration of the Booth directors.
53. In his first report, Mr Grant took a broad approach when calculating maintainable profits and allowed £200,000 per year for each director across the board. In his second report he relied on a paper published by Deloitte LLP in March 2016 entitled "Directors' remuneration in smaller companies". That paper reports a median salary of £317,800, and an annual bonus of 50 per cent of salary, for chief executives of companies of similar size to the Company but which (unlike the Company) are FTSE listed. Mr Grant applied a discount of 10 per cent to that median for the fact that the Company is not listed. The resultant £429,030 (£317,800 less 10 per cent plus 50 per eqgjt'' bonus) is the benchmark remuneration which Mr Grant considered appropriate for Ken and James in 2016. No figures were provided for earlier years and in the absence of such evidence I conclude that Mr Grant thought that the reasonable benchmark would have been about the same in earlier years too.
54. Scott and Jason are the junior directors. Their 2015 salary was £100,000. Mr Grant did not consider that any adjustment was required to that base figure, but he did think that junior directors in their position could expect an annual bonus of 50 per cent. So he concluded that a reasonable salary for each of them would have been £150,000 each.
55. - Mr Grant made no comment about Christopher Wilkinson's remuneration which is well below that of the other directors.
56. Dealing with Mr Grant's treatment of Ken's and James's salaries, I am persuaded that Mr Grant is right to deduct 10 per cent from the Deloitte figure. Mr Grant's reason (supplied in answer to the respondents' Part 35 questions) is broadly that it is a more onerous responsibility to be a director of a listed company than a private family company. I think that must be right, and it is not contradicted by other evidence.
57. However the Deloitte paper says that the vast majority of companies provide pension benefits to directors. It appears to me (though it is not explicitly stated) that the benchmark figure of £317,800 is the base salary before pension contributions are added. The paper says "Pension benefits should not be used as a mechanism for increasing total remuneration. Any changes to pension benefits should be disclosed and justified." I take that as emphasising the need for transparency, not as meaning that pension benefits must be taken as included in the "base salary levels" given earlier in the paper.
58. Mr Grant does not mention pension contributions in his discussion, and in assessing the amount he considers appropriate for directors' remuneration he allows nothing for pension contributions. He was not asked any questions about this and so there is no explanation available from him, but I am satisfied from reading his source material - the Deloitte paper - that the benchmark he takes is net of pension contributions whereas he is comparing that benchmark with the Booth directors' overall remuneration including pension contributions.
59. The Deloitte paper suggests that the median pension contribution for directors is 15 per cent of salary. I think that an allowance of that amount must be made in assessing the Booth directors' remuneration against Mr Grant's benchmark. I therefore conclude that the notional remuneration which would have been reasonable for Ken and James to take would have included pension contributions of £42,903, and the remuneration which it would have been reasonable to pay to Ken's sons would have included pension contributions of £15,000 per year each.
60. Mr Lall also attacked Mr Grant's evidence for not taking into account performance share plans (PSPs). The Deloitte paper says that 87 per cent of companies offer PSPs to their directors, whereas the Booth directors have no such benefit. Mr Lall submitted that since the typical PSP has a maximum benefit of 100 per cent of salary, the notional annual salaries for Ken and James (and presumably for Scott and Jason) must effectively be doubled from Mr Grant's figures.
61. In fact the Deloitte paper does not suggest that PSPs double annual salaries. It says that such schemes offer employees the chance to earn bonuses up to a maximum equivalent of one year's salary, but it also says that the median vesting rate is 54 per cent of annual salary. Moreover that is not an annual award but is achieved over a "performance period" the length of which is not specified in the Deloitte paper.
62. Anyway I cannot conclude that Mr Grant has made a mistake about PSPs. There may be a number of good reasons why he did not Include a figure for PSPs when assessing reasonable remuneration for the Booth directors. He was not asked and Mr Brewer gave no evidence about it. I decided to adjust Mr Grant's benchmark in respect of pension contributions because it was clear to me, even though it was not put to him, that he was not comparing like with like. That is far from clear as regards PSPs and his evidence is uncontradicted.
63. accept Mr Grant's evidence save to the extent indicated above. By my calculation, his evidence as modified by my findings is that a reasonable benchmark for annual remuneration for Ken and James would have been £47b933- For Jason and Scott, it would have been £165,000 per year each.
64. Mr Lall pointed out that Mr Grant's benchmark is just that, and no more. He submitted that there is no single correct figure for directors' remuneration and that, for example, I have no more reason to take the benchmark than to take the benchmark plus 10 per cent; and no more reason to take the median for annual bonuses (50 per cent) than to take, say, loo per cent. He points out that recalculation of Mr Grant's figures with such adjustments would significantly increase the notional remuneration which Mr Grant adds back in to the profit and loss account.
65. accept that there is no single correct figure for reasonable remuneration in the sense that there is room for a range of views, and also in the sense that "reasonable remuneration" will fall within a bracket as Blackburne J observed.
66. Mr Grant did not provide a range because he was not asked to do so by either party. However taking Mr Grant's benchmark as modified by my findings, my provisional calculation is that Ken's and James's remuneration exceeded it by an average of £215,307 each per year between 2011 and 2015. At least the same excess must have occurred between 2007 and 2010 as well, unless, which is improbable, the benchmark was higher in those earlier years or unless Christopher Wilkinson was being paid more than in later years.
67. In these circumstances, whatever the reasonable range each side of the benchmark might have been, Ken's and James's aggregate remuneration cannot have been within it between 2007 and 2015.
68. The average remuneration for Scott and Jason for 2014 and 2015 was £289,764.1 provisionally find on the basis of Mr Grant's evidence that that exceeded the benchmark by £124,764 each per year on average. Again, that excess must take their remuneration outside any reasonable range.
69. In my judgment the Booth directors' remuneration far exceeded the amount that reasonable directors acting in the best interests of the company could have thought fair remuneration for the work they undertook.
70. I should briefly mention Ken Senior's remuneration as chairman. I do not know what he was paid over the many years that he worked full-time for the Company. Although I consider that directors' remuneration was excessive in recent years, I have not found that that has always been the case. I have heard no expert evidence on what levels of remuneration would have been appropriate historically, and I note that until it started to rise in 2005 directors' remuneration was at an apparently modest level.
71. I found Ken Booth's evidence unsatisfactory on issues of remuneration and dividend policy, but I was left in no doubt about all the Booths' devotion to the family company. I accept that Ken Senior did remain involved in the Company's affairs after his retirement. Although he fell ill in 2010 and was no longer able to attend the Company's premises, he had given lifelong service to the Company which had enjoyed massive success under his leadership. And although he did not attend work, he was still there to support his sons. These relatively modest payments to the chairman during the last three years of his life have not been proved to my satisfaction to have been unfair to any class of shareholder.

Was the dividend policy fair?

72. The amount of directors' remuneration is a matter for the Company in general meeting and is not decided by the directors. However the directors do control the dividend policy because the Company in general meeting may not declare a greater dividend than the directors recommend. The Company's Articles provide:

The Company in General Meeting may from time to time declare dividends, but no such dividend shall be payable except out of the profits of the Company... No higher dividend shall be paid than is recommended by the Directors, and the declaration of the Directors as to the amount of the net profits shall be conclusive.

73. It is common ground that the directors have a discretion whether to recommend a distribution of profits. The following is taken from paragraph 9.705 of Palmer's Company Law:

"Subject to any restrictions which may be imposed by its memorandum, every company has an implied power to apply its profits to the distribution of dividend amongst its members... The inherent power of dividing its profits amongst its members, which a company normally possesses, reflects the fact that the company is conceived as a form of organisation of private enterprise and as such is motivated by the profit motive.

The statement that a company normally has implied power to distribute its profits to its shareholders by way of dividend does not imply that the company, while being a going concern, is bound to do so . . . It is at the discretion of the directors to decide what part of the profits available for distribution shall be carried to reserve or otherwise be set aside or be carried forward, and what part shall be made 'available for dividend'"

74. Mr Lall cited the following passages from Irvine v Irvine (No t) [2007] 1BCLC 349 at [272] to [274]:

" the petitioners had no legitimate expectation (in the sense discussed in authorities such as Re Saul D Harrison & Sons pic and O'Neill v Phillips) that dividends would be paid on their shares and that, in any event, no such expectation had been pleaded ...the petitioners had no expectation of a dividend payment merely because they were shareholders and that the reported decisions on the non-payment of dividends (for example (Re a company, Ex p Glossop [1988] BCLC 570, [1988] 1 WLR 1068 and Re Sam Weller & Sons Ltd [1990] BCLC 80, [1990] Ch 682) do no more than establish that the non-payment of dividends may, in the particular circumstances of the case, amount to unfairly prejudicial conduct.

"... in reliance on Re Saul D Harrison & Sons pic [1995] l BCLC 14 at 18, that there was no positive duty on directors to consider whether there should be a distribution of profits through the payment of a dividend. Instead, ... the question [is] whether by not recommending the payment of a dividend it could be said that the directors had abused their fiduciary powers. ...if there was such a duty the test to be applied, [relying on] Charterbridge, [is] whether an intelligent and honest man in the position of a director of [the company in question] could in all the circumstances have reasonably believed that the non-payment of dividends was appropriate.

75. Mr Lall also relies on McCarthy Surfing [2009] 1 BCLC 622 paragraph [69]:

"...the mere absence of the payment of dividends to shareholders cannot of itself constitute unfair prejudice, even if the failure to pay dividends continues for years on end.... If the directors consider that no dividends should be paid for any particular period, and do so bona fide in the best interests of the company, it is not for the court to 'second guess' the directors' reasoning, or substitute its own view of what the directors ought fairly to have done."

76. It follows that even where there are profits available for distribution, the directors may decide not to recommend a dividend. Their decision will be impugned only if it is taken in breach of their duties, which include:

i. to exercise the power to recommend or not recommend a dividend for the purposes for which the power was conferred (Companies Act 2006, s. 171(b));

ii. to reach the conclusion (dividend or no dividend) that they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole (s.172);

iii. to exercise independent judgment: s.173.

77. Mr Lall submitted that the issue of whether to pay a dividend was discussed more than once each year, when preparing the accounts and at the AGM. That may be so but on the evidence I have seen there was always only one possible answer. I formed the clear impression that Ken, the only respondent to give evidence, had long ago closed his mind to any possibility that this Company would ever pay a dividend.
78. This singlemindedness was explicitly articulated under cross examination. When asked if he accepted that the Company should pay a dividend to its shareholders when it is in a position to do so, Ken said not. He confirmed that answer when invited to reconsider it. He said that this rigid no-dividend policy was born of a need for cash. "Cash is key in our business."
79. That justification does not work in light of my findings about excessive remuneration. Take 2015 for example: directors' remuneration increased from £i.4m to £2.5m, but in the same year the Company made a loss of £5.301 and net investment fell from £6m to £2.5111. I note that even when the overdraft was successfully reduced in 2009, directors' remuneration increased to £1,953,000 but no dividend was paid. There was enough cash for Ken and James to be excessively remunerated, and there would have been enough for a dividend if they had not been.
80. I have already mentioned that the Company owned a yacht until 2012. It bought a new one in May 2007 for £993,504 which it sold two years later for £615,000, a loss of £378,500. It was replaced with a yacht which cost £1.7310 which was sold in 2012 and not replaced, Ken Booth's explanation was that the yacht was necessary to the business of the Company because it was used for research and development of the Company's marine products. When pressed about the nature of the research, he said that the Company's products were used in the boat and that enabled him to reassure customers as to the quality and durability of those products. I did not think that that provided a real justification for the claim that the boat was used for research and development. His evidence about the business advantages afforded by the yacht was generalised and vague.
81. The Company bought and sold large numbers of motor cars. They included luxury models which typically cost between £50,000 to £150,000, sometimes more. In 2014 Jason, Scott and Tom Booth were the principal drivers of two Mercedes, two Ferraris, a Porsche 911, a Maserati and three other cars which each cost more than £50,000. The list for 2013 included a Maserati, an Aston Martin, two Bentleys, two Porsches and two Mercedes. Ken said in evidence that Jason likes to deal in cars and that that is part of the Company's business. It appears true that these luxury cars were not all held simultaneously but were bought and sold, sometimes in short order and sometimes at a profit. However it cannot be true that Jason was dealing in cars for the benefit of the Company since losses on the sale of these luxury cars far exceeded profits. I do not accept that this activity was, or that anyone thought it was, for the benefit of the Company.
82. Mr Lall argued that buying and selling the cars only caused losses of some £50,000 per year, but competent directors would not want to lose any money at all unless the expenditure be for some sound business reason.
83. Ken Booth's evidence was also that the luxury cars were used to transport customers visiting the Company's premises. He said that between 6 and 10 people are transported to and from the airport every day in the cars. I do not discount the possibility that the directors do give lifts to customers and do use the cars for that purpose, but I do not accept that this provided a business case for so many and such luxurious cars at a cost of £50,000 per year. That was as far fetched and unsatisfactory as his evidence claiming that the cars were bought and sold for the benefit of the business.
84. The cash equivalent values of most of the luxury cars are already included in the remuneration figures set out in paragraph 43 above and I must not double count them when deciding whether the dividend policy was fair. However I have to evaluate Ken's explanation of the no dividend policy, that the Company was always in need of every last penny of spare cash. The fact that there was no real business need for these luxurious forms of transport is relevant to that issue.
85. Expensive cars were not only provided to the Booth directors but also to their wives. Scott's wife Natalie, for example, had a Range Rover Sport which cost £65,000. She was employed in a modest role in buying and selling. I did not believe Ken Booth's denial that his own wife had the benefit of the Bentley Continental which bore her personalised number plate. If the family thought it appropriate that Natalie have a Range Rover, it is likely that it was thought appropriate that the more senior Mrs Booth should have a luxury car too.
86. For these reasons I find that the provision of luxury cars to the Booth directors and their wives, as well as the provision of the yacht until 201a, was inconsistent with Ken Booth's claim that the no-dividend policy was justified by the Company's insatiable need for cash.
87. I accept that the Company did need cash for investment and that it did use some of its profits for that purpose. No one has suggested that the Booth directors drained the Company of every penny of profit. I have already mentioned Mr Lall's calculations demonstrating that cash was used for investment consistently over many years. I also accept that cashflow issues created the need for a large overdraft even when the Company was very profitable, and that it would have been important to the directors to see that the overdraft diminished if possible. I accept that this might provide a reason for not paying dividends out of the profits which remained after the excessive remuneration had been taken, but my finding that the Booth directors have taken excessive remuneration makes inevitable a finding that, in profitable years, there would have been sufficient distributable profit if that excess had not occurred. There were profits available for distribution, but they were taken by the Booth directors for themselves instead.
88. Mr Lall submitted that availability of profits for distribution does not mean that honest and intelligent directors would have recommended that a dividend be declared. It might have been left as cash available for re-investment. However if that cash had been retained the balance sheet and share value would have improved and the shareholders would have received as capital growth the benefit of the money which instead went as excessive remuneration. It is also very unattractive to suggest that money thought unnecessary for investment when deciding to pay bonuses would have been thought necessary for investment when deciding not to declare dividends.
89. When it was put to him that it would have been cash neutral for the directors to take less remuneration and distribute the difference to shareholders, Ken Booth first of all refused to engage with the question at all, saying he would have to ask Ernst & Young. When pressed he appeared to accept the proposition that the hypothetical arrangement would be cash neutral, only moments later to say that the Company would in fact be worse off if it paid a dividend. In my judgment his mind is closed to the notion that the Company will ever pay a dividend. His clear belief is that those who work hard for the Company's success should reap the reward of its profits, and those who do not, should not. He does not accept, in short, that investor shareholders should get anything.
90. In my judgment the policy which the Booth directors adopted of never paying dividends under any circumstances was a policy which they cannot have considered likely to promote the success of the Company for the benefit of its members as a whole. It, combined with the related feature of accepting excessive remuneration, was a policy promoting the success of the Company for their own benefit.
91. take this passage from the eighth edition of Mr Robin Hollington QC's book on shareholders' rights:

"Nevertheless, if the remuneration that is voted is plainly in excess of the market value of those services, then the court will be likely to infer that the remuneration is a dressed-up return of capital and hence unfairly prejudicial to the minority who are excluded from it. If the controlling directors or shareholders pay themselves remuneration not by reference to a proper reward for services rendered but as a disguised payment of a discriminatoiy dividend, then such conduct would be unfairly prejudicial to the interests of those members who were not directors. In the oft-cited judgement of Oliver J in Re Halt Garage (1964) Ltd [1982] 3 All E.R. 1016 Ch D, the learned judge summarised the underlying principles as follows:

"It seems to me that the answer to this lies in the objective test which the court necessarily applies. It assumes human beings to be rational and to apply ordinary standards. In the postulated circumstances of a wholly unreasonable payment, that might, no doubt, be prima facie evidence of fraud, but it might also be evidence that what purported to be remuneration was not remuneration at all but a dressed-up gift to a shareholder out of capital, like the 'interest' payment in [Ridge Securities Ltd v Inland Revenue Commissioners [1964] 1 W.L.R. 479] which bore no relation to the principal sums advanced. This, as it seems to me, is the real question in a case such as the present... The real test must, I think, be whether the transaction in question was a genuine exercise of the power. The motive is more important than the label. Those who deal with a limited company do so on the basis that its affairs will be conducted in accordance with its constitution, one of the express incidents of which is that the directors may be paid remuneration. Subject to that, they are entitled to have the capital kept intact. They have to accept the shareholders' assessment of the scale of that remuneration, but they are entitled to assume that, whether liberal or illiberal, what is paid is genuinely remuneration and that the power is not used as a cloak for making payments out of capital to the shareholders as such."

92. consider this passage apposite to the circumstances of this case. Although the level of remuneration was fixed in general meetings, the directors were nevertheless under a duty to consider whether part of their own "remuneration" was in reality a distribution of profit discriminating against non-director shareholders. They did not discharge that duty. They closed their minds to the concept of sharing profits with, and ignored the interests of, the non-director members.
93. In addition it is alleged by the petitioners that the policy of not paying dividends was intended not only to enable the Booth directors to take the profits for themselves, but also to enable their side of the family to acquire the minority shares at a price favourable to them.
94. accept that Ken and James as well as their father showed a longstanding tendency to acquire shares when available. Their reaction to the Wilkinson petitioners' approach in 20x2 demonstrates that they wanted to have the shares - they responded that they did want to buy them and actually made an offer. It cannot have escaped Ken and James that a shareholder is more likely to sell at a lower price if dividends are not paid and are never going to be paid. I do not know whether they ever actually articulated that as a reason for the dividend policy, whether to themselves or to each other, but they must have known that one consequence of the policy was to make it less attractive to own the shares, and provided a disincentive to hold out for a price which would be reasonable if dividends were being paid.
95. For these reasons, all three duties mentioned in paragraph 76 above were breached.
96. Since the remuneration policy was the result of a breach of directors' duties, I have no hesitation in finding that it was unfair from at least 2007 to 2015. The no-dividend policy was also unfair between 2007 and 20x3 inclusive (there being no profits for distribution in 20x4 and after).

Is this petition an abuse of the process of the court?

97. Mr Lall submits that these proceedings are an abuse of the process of the court and that they should be struck out. He relies on the pre-emption provisions of the Articles.
98. Article 28 provides that "no share shall be transferred to any person who is not a member of the Company so long as any member is willing to purchase the same at the fair value, to be fixed by the Company's Auditors". Article 29 provides that a member wishing to sell must give a sale notice, which will constitute the Company the agent of the seller for the sale of the shares to any member at the fair value. A sale notice, once given, cannot be withdrawn without the agreement of the directors. Article 30 provides that if a member comes forward to buy the shares at the fair value, then the sale must proceed.
99. -Mr Lall's argument is that this petition was unnecessary or at least premature because that procedure was not followed.
100. I reject that submission. To give notice under Article 29 would have committed the petitioners to a sale at whatever price was deemed fair by the Auditors, which might well have reflected the no-dividend and remuneration policies of which the petitioners complain. It would also have been a difficult task to persuade the Auditors to revise the balance sheet which they had themselves certified. By serving a sale notice, the petitioners would have been committing in advance to a decision by the Auditors under a procedure which provides no appeal. This disadvantage would not have beset the potential buyers: the directors could have the Auditors certify fair value before deciding whether to buy the shares. So the Articles provided a gamble which the departing members could, but the remaining members could not, lose.
101. The Articles are the terms upon which the members agreed to associate and so members cannot usually complain if, wishing to sell, they are faced with disadvantageous pre-emption provisions. But the unlosable bet cannot be appropriate where there has been unfair prejudice which might have a negative uncorrected impact on the value of the shares. That would encourage the conduct which section 994 is meant to discourage, and would deny the remedy it is intended to confer.
102. So if the petitioners establish unfair prejudice on the grounds they advance, the petition cannot be an abuse of the process for the petitioners' decision not to invoke the pre-emption mechanism.
103. Mr lull's next point was that the petition is an abuse for recycling complaints that were made but not pursued in 1991; and for complaining about matters which have been allowed to occur without protest over the intervening 25 years. He adds to this an allegation that the petition has not been brought for a proper reason, but out of longstanding family animosity.
104. There is no limitation period under section 994 but the courts will not allow stale claims. If the Company had brought proceedings against the Booth directors to reclaim excessive remuneration, the claim would not have been allowed to go back beyond six years before proceedings were instituted. I therefore think there is force in the point that I should limit any remedy which I will afford the petitioners by analogy with that limitation period. Mr Couser did not suggest otherwise.
105. But in my judgment there has been no acquiescence in the no-dividend policy such as to preclude this petition from proceeding. In particular, the omission to turn up at the AGM to complain does not amount to acceptance that the dividend policy is appropriate, nor does it involve any form of indication that a complaint about it will not be pursued. Don Booth made it very clear in 1991 that he did not accept that the dividend policy was fair. He did not institute proceedings when his complaint was rejected, but that did not entitle anyone to conclude that he had changed his mind and now condoned the no-dividend polity, and it certainly did not amount to waiver for all time of his right to renew his complaint and to seek a remedy for it. In short, the fact that the petitioners chose to do nothing for several years does not mean that it would be inequitable for them to complain about the failure to declare dividends in the six years leading to the issue of this petition.
106. I am satisfied that this petition has been brought to put right a wrong which the petitioners firmly believe they have suffered. There is family animosity, but the petition is not an abuse of the process of the court.

Were the petitioners unfairly prejudiced?

107. It is common ground that to establish a claim under section 994, both unfairness and prejudice have to be established. Conduct may be unfair without being prejudicial, and vice versa.
108. Unfairness usually (but not always) connotes some breach of the agreement under which the shareholders have agreed to associate, and typically involves breach of the Articles or of the Companies Act. Here I have found that the directors have not acted in accordance with their statutory duties for the reasons I have explained.
109. I find that if excessive remuneration had not been taken, until 2013 profits equal to the amount of the excess would have been available for distribution and would have been recommended for distribution by directors complying with their duties set out above.
110. The remuneration and no-dividend policies were prejudicial because the shareholders were denied a return on their investment, and because the balance sheet was diminished by the excessive remuneration. It was unfair because the petitioners' share of the profits was taken by the Booth directors.

Is buy-out the appropriate remedy?

111. Mr Lall submitted that no remedy should be granted if the unfair prejudice is not significant. I find that it is significant.
112. Mr Lall next submitted that his clients do not want to acquire any shares and that it would be better to devise and impose a proper dividend policy. I have already examined Ken's attitude to the petitioners' rights and to the payment of dividends and infer in the absence of any evidence to the contrary that his fellow directors feel no differently. In my judgment it would be impossible to devise a dividend policy which could result in harmony, even if, which I doubt, it was possible to devise one which could otherwise work.
113. Moreover the directors have recently agreed not to declare dividends without the permission of the Company's bank.
114. This is a case where there can only be one remedy, namely purchase of the petitioners' shares. The question of who should buy them and at what price is discussed below.
115. As to the respondents' assertion that they do not want to buy the shares, the evidence shows that they do want them. Hence their response to the approach in 2012, which was to say that they were interested and to offer £50,000, approximately one-tenth of the value for which even the respondents now contend. They want to acquire the shares, but only if the price is right for them. There is nothing wrong with that in itself, but it does mean that their protest that they do not want me to make a buy-out order does not cariy the weight it might carry if they genuinely did not want the shares to be concentrated in their hands.

Date of valuation

116. The expert evidence prepared for the trial values the company as at 2016 on the basis of the management accounts, to 31^st March in the case of Mr Grant and to 30^th April in the case of Mr Brewer. However Mr Couser submits that it would be wrong to value the Company at 2016 because his clients sought to achieve this remedy back in 2012 and again in late 2014 (in the case of the Wilkinson petitioners) and then again in 2015 in the case of all three petitioners. He says that it would be unfair for the shares to be valued as at March or April 2016 because the Company lost money (and therefore balance sheet value) dramatically from 2012 onwards. He says that it would be especially unfair to value as at spring 2016 as both experts have done, since the commodities markets are now picking up and the Company appears to be turning back towards profitability. To value as at March or April 2016 would be to take the value at the very bottom of the market which would be unfair on petitioners who brought a justified petition which was resisted on unjustified grounds whilst the market was collapsing.
117. In his opening submissions Mr Couser said that I should accept Mr Grant's evidence as to the value of the Company in March 2016 but should then add back in the value lost as a result of the decline in the Company's fortunes since the petition was issued - effectively a valuation at the date of the petition (July 2015). In closing, he suggested that I should value the shares as at May 2012, when the offer was made to negotiate settlement of the Wilkinson petitioners' holdings.
118. Mr Lall submits that the date of valuation should be the date of the court's order. He points out that that is the date usually taken and says that there is nothing in the circumstances of this case to cause me to take a different course.
119. In Profinance Trust SA v Gladstone [2002] 1 BCLC 141, the Court of Appeal said this:

"60. The starting point should in our view be the general proposition stated by Nourse J in London School of Electronics Ltd, Re [1986] Ch. 211 at 224: 'Prima facie an interest in a going concern ought to be valued at the date on which it is ordered to be purchased.' That is, as Nourse J. said, subject to the overriding requirement that the valuation should be fair on the facts of the particular case.

61. The general trend of authority over the last 15 years appears to us to support that as the starting point, while recognising that there are many cases in which fairness (to one side or the other) requires the court to take another date. It would be wrong to try to enumerate all those cases but some of them can be illustrated by the authorities already referred to.

(i) Where a company has been deprived of its business, an early valuation date (and compensating adjustments) may be required in fairness to the claimant: see Scottish Co-operative Wholesale Society Ltd v Meyer [1959] A.C. 324 [Tab 21].

(ii) Where a company has been reconstructed or its business has changed significantly, so that it has a new economic identity, an early valuation date may be required in fairness to one or both parties: see OC (Transport) Services Ltd, Re [1984] B.C.L.C. 251, and to a lesser degree London School of Electronics Ltd, Re [1986] Ch. 211. But an improper alteration in the issued share capital, unaccompanied by any change in the business, will not necessarily have that outcome: see DR Chemicals Ltd, Re (1988) 5 B.C.C. 39.

(iii) Where a minority shareholder has a petition on foot and there is a general fall in the market, the court may in fairness to the claimant have the shares valued at an early date, especially if it strongly disapproves of the majority shareholder's prejudicial conduct: see Cumana Ltd, Re [1986] B.C.L.C. 430.

(iv) But a claimant is not entitled to what the deputy judge called a one-way bet, and the court will not direct an early valuation date simply to give the claimant the most advantageous exit from the company, especially where severe prejudice has not been made out: see Elgindata Ltd, Re [1991] B.C.L.C. 959-

(v) All these points may be heavily influenced by the parties' conduct in making and accepting or rejecting offers either before or during the course of the proceedings: see O'Neill v Phillips [1999] l W.L.R. 1092."

120. The petitioners waited until July 2015 to bring these proceedings. The event which finally decided the Wilkinson petitioners to approach Don Booth and decided all of them to commit their resources to this litigation was the 2014 loss, which was reported in February 2015. Until then the petitioners bided their time, as Don Booth put it. I infer that the petitioners consoled themselves with the knowledge that the Company was profitable and that therefore their shares were not losing value, whatever that value may have been. Though thoroughly dissatisfied with the absence of dividends, they retained their investment instead of taking the risk of litigating to sell it. To that extent they chose to remain as investors and I think it would be wrong to take a date earlier than the date of the petition to relieve them retrospectively of the risk that every investor takes, of a fall in the value of the investment.
121. However by issuing the petition the petitioners gave unequivocal notice that they wished to dispose of their investment at a fair price. I have now found that their complaints were justified and that they should have the remedy they seek. In response to the letter before action of 25^th February 2015, and in response to the petition, instead of negotiating a fair price the respondents resisted the claim on its merits. I do not regard the offer, contained in the letter of 22^nd May 2015 mentioned in paragraph 26 above, that the petitioners should invoke the preemption provisions and make representations to the Auditors, as an offer of adequate redress for the reasons already explained.
122. In consequence the petitioners were, after they issued their petition and whilst it was being resisted, locked into a loss-making company which I have found they were entitled to leave. The respondents' decision to persist in an unmeritorious defence while the Company was losing value should not now result in 27.4 per cent of that loss being suffered by the petitioners. I do not think that they should bear any investment loss since the date of the petition. In my judgment the loss in the value of the petitioners' shares whilst this litigation was afoot should be borne by the Booth directors or by the Company if it agrees to do so pursuant to a lawfully made decision.
123. The shares should be valued, for convenience, as at 31^st July 2015.

Valuing the shares

124. After I had heard the evidence and submissions on the issue of whether there had been unfair prejudice, I announced (at the parties' invitation) that I had reached the conclusion that there had been unfair prejudice for reasons to be given later. The trial was shortly afterwards reconvened for submissions on remedies. In the course of those submissions both parties urged me, if a buy-out order was to be made, to fix the value of the shares in this judgment, on the basis of the evidence available to me. I regret that I am not able to do that. I have chosen a valuation date of 31^st July 2015, but the expert evidence values the company at 31^st March and 30^th April 2016. Mr Couser invited me to "add back in" the value lost between July 2015 and March 2016, but did not suggest how to do that. I could take a bold approach and make robust assumptions, and at one stage did consider doing so, but ultimately have decided that some of the assumptions which I would need to make would be so robust as to be unsafe.
125. I can however resolve some issues of principle and will attempt to do so.
126. Both experts agree that the Company should be valued on the net asset basis. Thus they take the value of net assets as stated in the balance sheet, adjusted as necessary to reflect that the book value of assets is different from their actual realisable value. However the net asset value of the Company goes only so far towards revealing the fair value of the petitioners' shares. As to that, in Bird Precision Bellows Ltd [1986] Ch 658 Oliver LJ said at 669ft:-

"It seems to me that the whole framework of the section, and of such of the authorities as we have seen, which seem to me to support this, is to confer on the court a very wide discretion to do what is considered fair and equitable in all the circumstances of the case, in order to put right and cure for the future the unfair prejudice which the petitioner has suffered at the hands of the other shareholders of the company; and I find myself quite unable to accept that that discretion in some way stops short when it comes to the terms of the order for purchase in the manner in which the price is to be assessed. It has been pointed out, and I mention it again, that section 75(4) is merely a collection of possible methods of giving effect to section 75(3), and it is expressed to be without prejudice to the generality of subsection (3), whichgives the court a very wide discretion as to the granting of relief in general terms in respect of the matters of which complaint has been made...

...In my judgment, the 'proper' price is the price which the court in its discretion determines to be proper having regard to all the circumstances of the case...

...The purchase price is fixed in the exercise of the full discretion vested in the court by section 75...

...It may be true that it can be compensatory, but what the court is required to do, in the exercise of its very wide discretion, is that which is just and equitable between the parties."

127. In my judgment it would be just and equitable between these parties, when valuing the petitioners' shares, that the balance sheet be adjusted to add back the excessive remuneration taken by the Booth directors in the six years to 3r^st July 2015. I limit the remedy to those six years because I think that any right to a remedy beyond that period is stale.
128. I have attempted to quantify the excess but I do not have precise figures for some of the relevant period and I have inadequate information about the yacht and about a further issue which I have not so far mentioned (Jason's loan) which arises out of disclosure only given after the conclusion of the evidence. I have sufficient confidence in my quantification to enable me to decide that the remuneration was excessive, but for the purpose of calculating the recoverable amount of the excess, my quantification in this judgment is to be taken as indicative only. There will have to be a further hearing if the parties cannot agree the final figures. However, since the parties both intended that I quantify the claim on the basis of the evidence already adduced, and because this litigation has already taken up considerable resources for the parties and for the court, I intend the quantification hearing to be relatively brief and will give directions to limit any additional evidence, lay or expert.
129. I will postpone the issue of principle whether the amount of excessive remuneration to be added back should be calculated according to Mr Grant's benchmarks which I have accepted, or some higher figure to allow for the fact that reasonable remuneration is usually expressed as a range. Mr Lall submitted that the latter is correct, Mr Couser the former. The only reason that I have been unable to decide this issue of principal is one of timing. Only after I had retired to prepare the final version of this judgment was I told that there was authority which contradicted my initial view that Mr Couser's submission was correct. There was not enough time to go into that matter which must therefore be left open. However there will be no further expert (or other) evidence on this issue, which will be resolved on the basis of the evidence already adduced.
130. For reasons to be given below I find that it is appropriate to value the petitioners' shares with a minority discount of one third. However in respect of that part of the value derived from the balance sheet adjustments for excessive remuneration it may be unfair that the petitioners suffer a discount on sums which, absent excessive remuneration, would have been paid to them as dividends without a discount. It may therefore be necessary that the amounts to be added back to the balance sheet for excessive remuneration up to and including 2013 should be grossed up by a factor of 1.5 to reverse this apparent unfairness. I will hear further argument about this at the final hearing.
131. There are two issues of principle between Mr Grant and Mr Brewer which I am able to resolve. The first is whether the assets should be valued on a break-up or going concern basis. Mr Grant says that the business is in fact a going concern and so should be valued on that basis. Mr Brewer says that a notional purchaser of the shares would not be able to realise their investment without winding up the Company and that should inform the basis of valuation.
132. There is some attraction in the simple argument that the Company was a going concern in July 2015 and that therefore a valuation of its assets at that date should reflect that fact. Lord Millett said this in CVC v Demarco [2002] 2 BCLC 108 at [38]:

"The choice [between going concern and break-up bases of valuation] must be fair to both parties, and it is difficult to see any justification for adopting the break up or liquidation basis of valuation where the purchaser intends to continue to carry on the business of the company as a going concern. This would give the purchaser a windfall at the expense of the seller."

133. In this case, though, the Company was not profitable and there is no evidence that it could have been sold as a going concern in July 2015. It is difficult to see why the petitioners, who are to be treated as selling their shares in it at that date, should have the benefit of its status as a going concern for the purpose of valuing it. Even if it could have been sold as a going concern in July 2015, it seems unlikely that it would have been regarded in negotiations over the price as a going concern in the ordinary sense.
134. However if I take the break-up value to reflect that a sale at going-concern prices would not have been likely, I run the risk of discounting the price for a hypothetical forced sale that was never going to happen and never did happen. That would yield a windfall for the respondents.
135. For these reasons I take the view that the midpoint between break-up value and going concern value is the most appropriate way to achieve fairness in the particular circumstances.
136. I am in no position to decide the figures, which the parties must try to agree.
137. The next issue between Mr Grant and Mr Brewer is that the latter, having restated the balance sheet to take account of asset valuations, then applies a 90 per cent discount to reflect a number of factors. One of those factors is that this is a minority holding which yields no dividends, and I shall discuss below whether a minority discount is appropriate. But Mr Brewer's proposed discount takes account of other factors which appear to me to pertain to the net asset value itself. Not having had the benefit of oral evidence from Mr Brewer, I am afraid that I do not understand how a further discount is appropriate once you have a valuation which takes account of saleability and once you have discounted the valuation of the shares for the fact that they comprise a minority holding. I find that the shares should be valued proportionately to the net asset value of the Company as at 31^st July 2015 with no discount except for the fact that the shares comprise a minority holding as discussed below.

Minority discount

138. The Company is not a quasi-partnership. It is a family company in which all the shareholders inherited most of their shares (though small numbers have been purchased from other family members on occasions). In Strachan v Wilcock [2006] 2 BCLC 555 Arden LJ observed that it was difficult to conceive of circumstances in which a non-discounted basis of valuation would be appropriate where a quasi-partnership did not exist. However as HHJ Purle QC observed in Sunrise Radio Limited [2009] EWHC 2893 (Ch), the point was expressly left open, and indeed Judge Purle QC went on to make such an order in circumstances where the petitioner had acquired her minority interest at an undiscounted price and where the company was likely shortly to be sold.
139. It is sometimes said that the decision whether to apply a discount is one of law, but the decision as to the amount of the discount is one of valuation. However I do not take that to mean that the decision whether to value a minority holding at a discount is taken separately from the decision as to the amount of the discount. The task is to find a fair price. That may require no discount, it may require the full discount which would be expected in an arm's length sale, or it may require something in between. As Oliver LJ observed in the passage quoted in paragraph 125 above, I have a wide discretion to fashion a remedy which will do justice between the parties.
140. I have carefully considered Judge Purle QC's review of the authorities in paragraphs 290 to 305 of his judgment in Sunrise Radio (which went to the Court of Appeal on other points) and the propositions which he derives from those authorities, the following of which seem to me to be relevant in this case:

i. The discount is usually applied to reflect the simple truth summarised by Blackbume J in Irvine v Irvine (no 2) [2007] 1 BCLC 445, "A minority shareholding, even one where the extent of the minority is as slight as in this case, is to be valued for what it is, a minority shareholding, unless there is some good reason to attribute to it a pro-rata share of the overall value of the company. Short of a quasi-partnership or some other exceptional circumstance, there is no reason to accord to it a quality which it lacks."

ii. However valuing shares for the purposes of fashioning a remedy under section 996 is not the same as ascertaining the value they would achieve in a sale in the open market.

iii. In some cases it may be unfair to treat the petitioner as a willing seller because he may only be selling because of unfair prejudice which has left him with no alternative. That consideration may apply outside the context of a quasi-partnership.

iv. Consideration only of the value which the petitioner could achieve by selling his shares elsewhere may be unfair without considering the value of the shares to the respondent, especially if the conduct giving rise to the petition was influenced by a desire to buy the shares.

v. A relevant factor may be the amount which the petitioner would receive if the company were wound up. If the conduct complained of would justify a winding up on the ''just and equitable" ground, the petitioners should not ordinarily be in a worse position by invoking section 994 than they would have been if they had petitioned to wind it up.

141. I conclude that there should be a minority discount in this case. The following are my reasons:

i. The starting point is that I am finding a fair value for a minority holding and such holdings generally attract less than a full pro rata value.

ii. It is obvious for reasons already discussed that the Booth directors do want to acquire these shares. However this is not of itself enough to cause me to conclude that a discount is inappropriate. The Booth directors between them already have a majority of the shares, and in a negotiated sale would be in a strong position to stipulate for a discount. There is no reason to accord to this minority holding a quality which it lacks.

iii. Mr Couser's submission, that there should be no discount to reflect the serious misconduct in not paying dividends over 35 years, is rejected. I am prepared to grant a remedy in respect of the 6 years before the petition and the excess remuneration taken over that period will notionally be added back to the balance sheet when valuing the shares. The amount of the excessive remuneration is the full extent of the dividends that it has been proved should have been declared, and anyway any further sums which should have been but were not declared as dividends would still be in the balance sheet at 31^st July 2015 and will increase the valuation in that way. Therefore adequate account will have been taken of the failure to pay dividends over the relevant period of time. I should also add that it has not been proved that directors' remuneration was excessive for the period relied on by Mr Couser. My finding is limited to 2007 and after. The remedy is limited further by analogy with limitation.

142. I now turn to what the discount should be.
143. The petitioners hold 27 per cent of the shares in the Company. The discount will reflect that fact. I do not think it appropriate to assess different discounts for each petitioner's holding as Mr Lall submitted and indeed as the experts have done. Mr Booth's 19 per cent would be worth more than the combined 8.4 per cent of the Wilkinson petitioners, but lam setting a price for a single transaction between sellers who have pooled their shares together for the sale and buyers of the entire pool. This is a sale of a 27.4 per cent stake. Mr Lull's point that the petitioners have never before acted in concert for any purpose, and have not ever pooled their shares to vote against a resolution together, is answered by the consideration that I am valuing the shares on the basis of a sale, not on the basis of what the petitioners might have done in the future if there were no sale.
144. Whatever the precise form of my final order, it will not result in Ken or James becoming a majority shareholder. Vivien Hull and Christopher Wilkinson did not take an active part in the litigation, but Mr Wilkinson did attend the final day of the trial and told me that he has no interest in acquiring these shares. I infer that the same is true of Mrs Hull. Mr Lall has prepared a very helpful spreadsheet which shows that if the Company buys the shares, which I understand to be his clients' preferred option, the shareholdings will be 45 per cent for Ken, 41 per cent James and 11 per cent Christopher Wilkinson. The remaining shares will belong to the younger Booths. No individual will be in control without the vote of one of the other major shareholders.
145. - The owner of 27.4 per cent of the shares could block a special resolution. However I reject Mr Couser's submission that a special resolution is required to sanction directors' remuneration under Article 58. The only business which would require a special resolution would be an amendment to the Articles themselves. Mr Couser did not suggest that the respondents needed any such amendment for any purpose. Nevertheless it is a theoretical possibility that they may do so one day. The Articles were in fact amended in 1968 and an attempt to do so was made in 1991, so it is not unknown. This is a relevant factor in assessing the amount of the discount.
146. Mr Grant values the shares of the Wilkinson petitioners as one bloc, but separately from those of Don Booth. In reliance on a technical factsheet issued by the Association of Chartered Certified Accountants he concludes that a discount of 67.5 per cent would be appropriate for the Wilkinson petitioners, and 50 per cent for Don Booth.
147. However in answer to questions under CPR 35.6 Mr Grant pointed out that the technical tactsheet contains the following caveat: "The discounts outlined above are likely to be appropriate for normal open market value valuations, such as tax valuation. Where the valuer is valuing for the purposes of a dispute or divorce, then if no guidance is provided via a shareholders' agreement or under the Articles, then the discounts of the order of those shown above are likely to be too high and even for small, uninfluential minority interests a discount of no more than, say, 33 per cent may be appropriate." I should also add that the factsheet provides that shareholdings of between 26 and 49 per cent would normally attract a discount of 30 to 40 per cent.
148. Reading Mr Grant's report and the technical factsheet upon which he relies, it would appear that the appropriate discount for a holding of 27 per cent if valuing for tax purposes would be 40 per cent, but that that figure is likely to be too high for the purposes of valuing in the context of this dispute. Since the factsheet says that even small uninfluential minority holdings might not, in that context, attract a discount of more than 33 per cent, it would appear that a holding of 27 per cent might attract a discount of less than that. When asked by his own instructing solicitors to express an opinion about the discount to be applied to a holding of 27 per cent, Mr Grant replied that the appropriate range is between 30 and 40 per cent. In light of the caveat quoted above, it seems to me that on the basis of the technical factsheet the discount would be towards the bottom of that range.
149. Mr Brewer's opinion is that a discount of 90 per cent is appropriate. However, as already discussed that is not the discount he would apply for the fact that this is a minority holding. Tt is the discount he would apply for a number of factors, only one of which is minority holding. One of the other factors is that the discount must reflect that no dividends have been paid since 1986 so the investment would yield no income. It is obvious, and Mr Lall conceded, that it would be wrong to take a discount which reflected the unfair conduct which necessitates the remedy. Another factor mentioned by Mr Brewer is that a minority shareholder cannot force a winding up. Again, that does not help me determine the level of discount. Another factor is that there is no ready market for the shares. That again adds little to the bald fact that this is a minority holding in a private company. Mr Brewer's remaining four factors are relevant to the value of the net asset base of the Company and do not assist with deciding the appropriate discount for the fact that this is a minority holding. For that feature on its own, Mr Brewer does not provide a figure.
150. In answer to questions under Part 35.6 Mr Brewer refers to his experience as a lead trainer in the Shares Valuation Team of HMRC and says that 90 per cent is the discount which his professional judgment tells him is correct in all the circumstances. Of the technical factshcet relied on by Mr Grant, he says that it is "just guidance" and should not be applied without regard to the unique circumstances. But in going on to say why the figures suggested in the factsheet should not be applied in this case, Mr Brewer again invokes a number of factors which have nothing to do with this being a minority holding. Mr Brewer's evidence is therefore unhelpful on the issue.
151. It may be that Mr Brewer is saying no more than that, in reality, these shares would be unsaleable in the open market except at a swingeing discount. I accept that that may well be right, but it does not get me very close to a fair valuation as between these parties. In CVC/Opportunity Equity Partners Ltd v Demarco Almeida [2002] 2 BCLC 108, the Privy Council pointed out that the proposition that the value of a petitioner's shares should reflect what a market purchaser would pay for it is unsound because it assumes that the fair value of the shares is to be measured by their value to the petitioner and that their value to the respondents is to be ignored. In fact minority shareholdings in family companies rarely change hands in the open market precisely because there is little or no market for them. But that does not mean that it would be fair to conclude that they have little or no value for the purposes of deciding what is fair when they change hands not in the open market but in a transaction between existing shareholders.
152. In these circumstances I accept Mr Grant's evidence and conclude that the appropriate level of discount to be applied to the 27 per cent of shares which I am to value is between 30 and 40 per cent. For the reasons I have given I think the proper discount is towards the bottom of that range. I choose one-third. As to Mr Lall's point that the petitioners cannot contend for a discount lower than the 67/50 per cent suggested by their own expert, I do not think that those were the discounts which his evidence as a whole, including his replies to questions, did in the end suggest as appropriate in the circumstances of this case.
153. In this case the conduct of which the petitioners complain would probably justify an order for the winding up of the Company on the just and equitable ground were it not for the alternative and more appropriate relief available under section 994.1 think it a relevant consideration that, so far as I am able to do so, I should choose a minority discount which is not likely to result in a price less than the amount which a winding up would yield. However I am in no position to calculate this because it would involve an inquiry into the likely liabilities created by a winding up including liquidator's costs and redundancy payments of which I have no evidence. I can only therefore do my best to choose a discount which does not obviously have the undesired effect of resulting in a price below that which a winding up would yield. The benefit of any doubt on this issue should go to the respondents, since the petitioners did not make a positive case that the winding up amount should be the bare minimum and did not adduce the evidence necessary to make good such a claim.
154. - I cannot be sure that a discount of one third will result in a price at least as great as would be yielded upon a winding up, but it would seem unlikely that it would be far below that amount. As I have said, the benefit of the doubt on that issue should go to the respondents.

The relevant respondents

155. The respondents responsible for paying the petitioners' fair value, when ascertained, are Ken, James, Jason and Scott. However if the Company is prepared to acquire the shares, after observing such decision-making procedures as are required, then that is what should happen.

Timing of payments

156. I will leave for resolution at the next hearing, if it cannot be agreed, the issue of whether the petitioners should receive an additional amount for being kept out of the purchase price of the shares since the date of the petition.
157. I will also stand over the issue whether I should permit the respondents any particular timescale for complying with the order.
158. Mr Couser however asked me to make an order for a payment on account of the purchase price pending its determination. He suggested £200,000, Mr Lall did not submit that I had no jurisdiction to order such a payment, even without ordering a transfer of some of the shares to the respondents. Mr Tail's only objection was that there might be a successful appeal and his clients would then be left having to recover the payment. I do not regard that as a good reason for not making the order sought. There is no presumption in favour of a stay pending appeal and I know of no reason to conclude that the respondents would be at risk of not recovering their money if an appeal were to succeed. In my view the discretion conferred by section 996 is wide enough to enable me to make an order for a payment on account of the purchase price and, since I think that the petitioners have been kept out of their money for too long already, I will make the order sought.