Allmark v Burnham and another
| Jurisdiction | England & Wales |
| Judgment Date | 30 November 2005 |
| Neutral Citation | [2005] EWHC 2717 (Ch) |
| Docket Number | Case No: 4249 of 2004 |
| Court | Chancery Division |
| Date | 30 November 2005 |
[2005] EWHC 2717 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr John Randall QC
Sitting as a Deputy Judge of the High Court
In the Matter of Distinct Services Limited
And in the Matter of the Companies Act 1985
Case No: 4249 of 2004
Mr Paul Paveley, Solicitor (of Paul Paveley & Co, Solicitors of Totton, Southampton), having been granted rights of audience in this matter by Order of Mr Registrar Rawson dated 21 September 2004, appeared for the Petitioner
Mr Ervel Burnham appeared in person for the Respondents
Hearing dates : 8 th—11 th and 14 th November 2005
In accordance with paragraph 9.3 of the Chancery Guide (October 2005), this is the official judgment of the Court, and I direct that this written judgment may be used for all purposes as the text of the judgment, and that no further transcript of the judgment need be made.
John Randall QC, Deputy Judge
The Deputy Judge:
Introduction
These proceedings are brought by petition under Part XVII of the Companies Act 1985 ("CA85") by Mr Albert Allmark ("Mr Allmark"), who seeks relief in respect of alleged unfairly prejudicial conduct of the affairs of the Second Respondent, Distinct Services Limited ("DSL") against it and the First Respondent, Mr Ervel Burnham, the registered holder of a majority (64) of the issued shares in DSL. Mr Allmark is the registered holder of the remaining 36 issued shares.
DSL was incorporated by company formation agents on 15 th March 2002 [1/137], and in due course Mr Burnham and Mr Allmark were appointed its directors, and Mr Burnham's partner Cathryn Baldock ("Ms Baldock") was appointed its Secretary [1/151–154]. The company's registered office became Mr Burnham and Ms Baldock's home address in Dibden Purlieu, Southampton.
Mr Burnham and Mr Allmark (together "the parties"), who had been friends for many years, decided to go into business together, acquiring and running a newsagents, bookshop and greetings card business in the High Street of Lyndhurst in Hampshire, known as Royals of Lyndhurst ("the business"), through DSL. Mr Allmark moved from London to Lyndhurst, living in the flat above the shop. Sadly, their friendship did not survive undertaking this venture together, and within quite a short time of the commencement of DSL's trading in August 2002, relations between them became strained and Mr Burnham (to put it neutrally) started to refer to the possibility that he might buy out Mr Allmark's interest.
Mr Allmark did not want to leave the business, but in late September 2003 reluctantly put steps in hand to that end. The parties' attempt, with some assistance from well-meaning friends, consensually to achieve this foundered, and hence Mr Allmark petitions this Court. Despite Court directed mediation, and then encouragement from me at the outset of the trial, settlement has not proved possible. Particularly given the size of the business and the relatively modest sums at stake, this is regrettable.
In consequence, the Court has been faced by the need to maintain some degree of proportionality in respect of the scope and expense of these proceedings. Directions have been given for the instruction of single joint experts in accountancy and surveying/property valuation, and this evidence has been received in writing in circumstances which I will briefly explain in a moment. Equally, as will become clear, it is necessary for me to adopt a fairly robust or even rough and ready approach to (in particular) evidence as to the company's financial position and the value of its shares in order to bring this matter to a conclusion without yet further unwanted and disproportionate expense to the parties.
The witnesses of fact
Mr Allmark, for whom the whole experience of going into business with a close friend, and then having it all turn sour in the manner I shall summarise below, has plainly been traumatic and stressful, was nevertheless a generally composed and reasonable witness. I find that he was mistaken in his (honest) recollection in respect of 2 matters of note:
6.1 that Mr Burnham's suggestion of the 64–36 shareholding proportions made in or about March 2003 was merely a 'flippant statement' to which he (Mr Allmark) had not given any indication of assent. I find that Mr Allmark did give some indication of assent (see further at paragraph 136 below); and
6.2 the extent to which the content of Mr Wood's valuation report was discussed when he visited Mr Wood at home in December 2003, dropping in a present. At one point in his oral evidence Mr Allmark asserted that they spent 1 1/2 hours discussing it. Although the total visit may well have been of something like that duration, I find that the subject probably was touched on, but not at any length and certainly not for anything like 90 minutes.
Otherwise, I find Mr Allmark's evidence of facts to have been honest and generally reliable. His evidence (in particular in his witness statement) did at times extend to attributing motives to and drawing inferences against Mr Burnham. As to this, whilst I am quite satisfied that the opinions expressed were genuinely held, they must of course be treated with considerable caution.
Mr Raye is a 62 year old retired accountant, now active in charitable work. He was a friend of Mr Allmark's father and family between 1967 and 1976, when they lost touch, and resumed that friendship in 2001. Though his underlying loyalties are therefore apparent, and he does not shrink from expressing certain views in his witness statement, I am nevertheless satisfied that he gave his evidence in a balanced and fair manner, and that it should be treated as honest and reliable.
Mr Burnham gave his evidence in a measured manner, but with a somewhat condescending air. Like Mr Raye (see witness statement para. 19 at [1/115]) I should immediately add that he was never discourteous or hostile towards the Court. Nevertheless, having heard him in the witness box for some time, I do not find it at all hard to imagine him belittling Mr Allmark in front of their staff. The terms of para. 1.5 of the minute of the directors' meeting held on 26 th September 2003 [1/179] only reinforce that view.
I am very sceptical as to his categoric denial of having taken any steps to rekindle negotiations with Abbey National for a loan to assist with purchasing the freehold after Mr Allmark was put on garden leave, given the terms of the letter from Abbey National dated 27 th January 2004 [3/573], and Mr Allmark's telephone conversation with the author on 11 th February 2004 (though see also [3/592]). It seems most improbable that the work being undertaken by Abbey National's solicitors at the time of writing (see second paragraph) can have been in response to a document signed in March 2003, without some much more recent prompting from the prospective borrower, which logically (given who had been in sole charge of the business since 26 th September 2003, some 5 months earlier) can only have been Mr Burnham. However given how the issues in this case ultimately resolve themselves, I do not find it necessary to make any specific finding on this point.
He has produced a number of notices purportedly convening directors' or general meetings during 2004 which I am satisfied were not in fact ever sent to Mr Allmark (see paragraph 82 below). To put it at its lowest, the impression given by their production was misleading.
He has made points through his solicitors letters which are either patently unsustainable (see e.g. paragraph 76 below), or have not then been acted on by him (see e.g. paragraph 80 below). He has also given at least one explanation of his own conduct which I have felt bound to regard as disingenuous (see paragraph 72 below).
Whilst I am quite sure that Mr Burnham is a man with some intelligence and business acumen, who may well make quite a success of DSL once it is his alone, and am satisfied that much of his evidence (e.g. as to the detail of how 'his' accounting systems operated) was accurate, I have to say that I think it right to approach his evidence with some caution on matters of fact which are in dispute.
Mr Wood (whose evidence was interposed after Mr Allmark's, by reason of pending medical treatment) is qualified as a chartered accountant, though no longer practising. He gave his evidence in a balanced and fair manner, and I find it to have been honest and reliable.
It was perhaps unhelpful that, despite his knowledge as a chartered accountant, the accounts he produced as part of his informal valuation exercise did not include a balance sheet. However he gave a clear explanation for this omission in his evidence—he believed at the time that the trading accounts which he did prepare were adequate for the purpose of producing a valuation.
In the context of the business Royal's Greetings established by Mr Burnham, to which I must come, it was noteworthy that Mr Wood thought what he was looking at when the second shop was established (at 63 High Street) was all one business.
The expert evidence
The Order of Registrar Baister made on 2 nd December 2004 [1/22–26] provided for a single joint accounting expert to report on a series of issues specified in the Order itself (it therefore does not assist Mr Burnham to attack the form and structure of the questions—written closing argument, page 13). At a time when the parties were both represented by solicitors, they agreed to instruct Mr Michael Mason FCCA of BDO Stoy Hayward to act as such. His resultant report occupies most of the second bundle [2/338–430, appendices 431–505]. Given the size of the business and the sums with which the Court is here concerned, the decision...
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