Andrew Michel v Benjamin Michel
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 29 May 2019 |
| Neutral Citation | [2019] EWHC 1378 (Ch) |
| Date | 29 May 2019 |
| Court | Chancery Division |
| Docket Number | Case No: CR-2016-006102 |
Neutral Citation Number: [2019] EWHC 1378 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURT ENGLAND & WALES
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Case No: CR-2016-006102
Alastair Tomson (instructed by CHARLES RUSSELL SPEECHLYS LLP) for the PETITIONER
Justina Stewart (instructed by HUGHMANS SOLICITORS LLP) for the RESPONDENTS
Hearing dates: 3 July–11 July 2018
Alastair Tomson (instructed by CHARLES RUSSELL SPEECHLYS LLP) for the PETITIONER
Stuart Adair (instructed by SBP LAW SOLICITORS LLP) for the RESPONDENTS
Hearing dates: 8–16 May 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
Introduction
On 28 September 2016 Andrew Michel (“Andrew”) presented a petition pursuant to section 994 of the Companies Act 2006, claiming that the affairs of a private manufacturing company had and continue to be conducted in a way that is unfairly prejudicial to him. Andrew seeks an order that his shares be purchased by the Respondents at fair value alternatively he seeks a winding up order on just and equitable grounds. He claims that a fair value should be determined on a non-discounted basis at £3,931,407.30. The Respondents deny the allegations of unfair prejudice but in any event say the shares are worth half this value.
L Kahn Manufacturing Company (the Company) operates from a property it owns in Hatfield and it owns (subject to a dispute raised by Andrew) the entire beneficial interest in CKC Manufacturing Holdings Ltd (CKC Holdings), which in turn owns 100% of a Chinese company, CKC Manufacturing (AH) Co Ltd (CKC). In addition, the Company owns a 30% shareholding in Caressa Kemas (Shanghai) Industrial Co. Ltd, a Chinese company (Muyazi), with which it has a joint venture. The Company employs 70 people in Hatfield, and approximately 60 employees work for CKC.
The Family
In or around 1932 Helmut Michel founded a business in London that manufactured cosmetic applicator products. Helmut is Andrew's father. In his witness statement in support of the petition Andrew explains the family tree:
“My parents are Helmut Michel (who passed away in 1986) and Juliet Rudolph (who passed away in 1991). I was born in 1950. I have 3 older siblings: Benjamin (“Benny”) Michel (born in 1945) Caressa (“Wendy”) Michel (born in 1942) and who passed away in December 1998 and Aubrey Michel (born in 1943). I also have a half-brother, John. John is the son of my mother from her first marriage. After the war, my father adopted John officially and John took the Michel name. John went on to marry and have two sons, Richard (the Second Respondent) and Philip”.
Caressa was also known as Wendy and Aubrey was also known as Bobby or Robert. I shall refer to the family members by their first names.
The Company
Richard, whose version of the family history does not differ dramatically from Andrew's, explains that the Company has a rich history. Helmut was born in Germany to Jewish parents. When he was 16 his father died, and as the eldest child he was expected to leave school and work to support his family. Fulfilling the expectation, he went to work for his uncle, Leopold Kahn, who owned a factory in Mannheim called Caressa. He developed a close relationship with his uncle. In 1931 when aged 26, his uncle advised that given the prevailing political situation and the state of the German economy he should seek employment outside of Germany. He borrowed £400 from Leopold and travelled to London where he took a small shop premises. Before long he began manufacturing. The factory was situated in Kilburn, London and called L Kahn (after his uncle) but the business also traded under the name of ‘Caressa’. In 1937 Juliet Rudolph, a Swiss national, travelled to England in search of employment and worked for Helmut. In around 1939, concerned about what was happening in Europe, Helmut brought his younger brother, also called Leopold, who was working in Palestine, to London with the rest of his immediate family. Leopold was conscripted into the British Army when war was declared against Germany. Leopold survived the war and returned to work with Helmut.
The business started to grow, and towards the end of the Second World War Helmut purchased a site at 527–539 Harrow Road and transferred the factory from Kilburn to the new site. The house in which the family lived had been bombed during the war and so the family moved to live in the factory that continued to manufacture. Although the business was manufacturing cosmetic products, Helmut turned his skills to manufacture, parachutes and developed the “Michel lip”. Andrew says that the “Michel lip” design saved many soldiers' lives.
After the war, the business worked on fashion items, such as handbags. Leopold was made responsible for the production facility at the Harrow Road site. In his evidence Andrew says that the handbag business was carried on under the name L. Kahn. The Company also traded in cosmetics such as powder puffs, but in the early post-war years the handbag business comprised the greater part of the turnover. In 1950, the business was incorporated under the name of L Kahn Manufacturing Company Limited. Helmut and his brother Leopold, were the original shareholders, subscribing for 1 share each. By August 1976, the share capital of the Company had been increased to 70,000 shares of £1 each, which were held by various family members. In or around 1956, the Company opened another factory, in Hatfield, where the main factory premises remain today. Mrs White ran production in Hatfield.
Helmut split his time between Hatfield and the Harrow Road site (sometimes referred to as the London site in evidence). Helmut was highly motivated with high energy, had a taste for invention and continually developed new products. When it became hard to compete in the handbag industry he turned to weaving, installed looms in the Hatfield factory and pioneered colour nylon watch straps. He was also a great observer. Andrew tells the story of Helmut visiting America in the early 1960s. He observed flocked products and immediately perceived the advantage that flocking could have in the powder puff industry, which until then had used velour or swan's down. His American experience inspired him to design and create the flocking machine which Andrew believes was the first of its type in the UK and possibly Europe.
His high energy and ideas made him an obvious leader in the Company, assuming control of sales, dealing with the finances and business strategy. Andrew described him as a visionary. Richard said he was motivated by hard work, a desire to treat employees fairly and family. It is clear from the evidence of Aubrey, Richard and Andrew that Helmut was held in the highest regard as a parent, grandparent, entrepreneur and worker. Each witness gave evidence in a manner that made it clear that Helmut was an inspiration and role-model. I had the distinct impression that by measuring themselves against Helmut each family member felt they fell short.
Aubrey joined the business from school, and soon found his niche in sales. Andrew describes him as a “natural salesman”. Mr Dunkley, the CEO of Synlatex Limited (SLG) a manufacturing competitor described Aubrey as “a very charismatic chap, incredibly knowledgeable”. A separate partnership formed in the 1970s to act as a sales arm for European sales for the Company. The members of the partnership included Aubrey, Benny, Andrew and Wendy.
Helmut and Aubrey formed a relationship with Yukigaya, Kemas, Keumi, and the Thai puff company. The relationship spawned a new set of products which were to be sold in Europe: cosmetic sponges and brushes. A new chapter for the Company was opening and an agreement was reached whereby the velour puffs would be produced off-shore to take advantage of less expensive labour costs. Aubrey grew in prominence and influence in the Company. It was not inevitable that Andrew would work for the Company since when younger he tried to make a success of his own enterprise. The success was not forthcoming, and Andrew was placed in the accounts department at the Company. He was not an accountant but held a Maths and Business Studies degree.
Aubrey's rise was perhaps timely as Helmut died in 1986. Aubrey assumed control. Aubrey could not do all that Helmut had done. He says in his witness statement that he ran the Company together with Benny and Wendy. I have no doubt that Benny played a role, but it was Wendy to whom Aubrey looked. He relied on her heavily calling her his “loyal confidante”, his “business partner” and the “rock of the business”. Wendy was, by all accounts, calm, thoughtful, providing measured business decisions and added balance to Aubrey's sales flair. It was around this time that Richard joined the business and soon after Theresa Pattenden joined. Theresa would later play an important role in the Company. Richard brought a new dynamic. He is an unassuming man with an engineering background. He had worked in the business on and off, as nearly the whole family had, as a child and young adult, but it was during this period that he joined on a full-time basis. Helmut left the Company in good shape. Its customers included major cosmetic industry players such as Max Factor, YSL and Chanel.
Tensions were strained between Aubrey and Andrew by the early 1990s. Perhaps they were always strained. Meetings were called by Aubrey “to discuss...
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