John Scott Unwin v Christopher Lee Bond
| Jurisdiction | England & Wales |
| Judge | Klein |
| Judgment Date | 10 July 2020 |
| Neutral Citation | [2020] EWHC 1768 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Claim No: E40LS567 |
| Date | 10 July 2020 |
[2020] EWHC 1768 (Comm)
HIS HONOUR JUDGE Klein SITTING AS A JUDGE OF THE HIGH COURT
Claim No: E40LS567
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
CIRCUIT COMMERCIAL COURT (QBD)
Leeds Combined Court Centre,
The Courthouse,
1 Oxford Row,
Leeds, LS1 3BG.
Hugh Jory QC (instructed by Chadwick Lawrence Solicitors LLP) for the Claimant
Lisa Linklater (instructed by Prodicus Legal Ltd.) for the Defendant
Hearing dates: 5, 8–12, 15 June 2020
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.
HIS HONOUR JUDGE Klein
HH Judge
This is the judgment following the trial of a claim by John Unwin that he was compelled to sell his shares in Hensall Group Ltd. (“the parent company”), at a forced sale (and artificially low) price, to Christopher Bond as a result of Mr Bond's bad faith conduct in September 2016 in connection with the termination of Mr Unwin's employment with Hensall Mechanical Services Ltd. (“Mechanical”).
Background – corporate documents and how Mr Unwin came to acquire his shares in the parent company
The parent company was incorporated on 22 July 2010. By September 2016 Mechanical was a wholly owned subsidiary of the parent company. As I shall explain, until June 2016, Mechanical was only an indirect subsidiary of the parent company, which was the ultimate parent company in a more complex group of companies (“the group”).
Mechanical's business is principally the provision of heating and ventilation (air-conditioning) systems, although it also offers a broader range of mechanical and electrical services.
On 7 September 2009 Mr Unwin began employment with Mechanical in the role of director. Mr Unwin's employment contract provided that, save in those cases where he could be dismissed without notice (for example, if he committed an act of gross misconduct), his employment would continue until terminated by him or Mechanical on 3 months' notice. It also provided, at clause 12.5, that, at the end of Mr Unwin's employment or on being put on garden leave, on being requested to do so he had to resign any directorships he held in Mechanical and the parent company.
Mechanical's July 2008 Employee Handbook formed part of Mr Unwin's employment contract. The Employee Handbook provided as follows in the section entitled “Rules and Disciplinary Procedures”:
“In any organisation it is necessary to have rules in the interests of both the employer and employees.
The rules set standards of performance and behaviour whilst the procedures are designed to help promote fairness and order in the treatment of individuals. It is the aim of the rules and procedures to emphasise and encourage improvement in the conduct of individual employees where they are failing to meet the required standards and not as a means of punishment.
Every effort will be made to ensure that any action taken under this procedure will be fair, with the employee concerned being given the opportunity to state their case and appeal against any decision they consider to be unjust.
The following procedure should ensure that:
— All employees are fully aware of the standards of performance, action and behaviour required of them.
— Disciplinary action, where necessary, is taken speedily and in a fair, uniform and consistent manner.
— An employee will only be the subject of disciplinary action after careful investigation of the facts and the opportunity to present his/her side of the case…
DISCIPLINARY PROCEDURE
Other than for gross misconduct, any disciplinary action taken will be based on the following procedure:
1 st Occasion
2 nd Occasion
3 rd Occasion
4 th Occasion
Verbal
Written
Final written
Dismissal
(or informal)
warning
warning
warning
Verbal (or informal) warnings will remain on your record for a period of 6 months and Written warnings will normally remain on your record for a period of 12 months.
Notes
The disciplinary and grievance procedures are non-contractual and do not form part of your contract of employment. The Company reserves the right to enter the disciplinary procedure at any stage depending on the circumstances and severity of the offence…
At all stages of the Disciplinary and Appeal Procedures you have the right to be accompanied by a fellow employee of your choice, an official employed by a trade union or an official of a trade union who is certified as a worker's companion at disciplinary or grievance hearings…
DISCIPLINARY APPEAL PROCEDURE
The Disciplinary Rules and Procedures incorporate your right to lodge an appeal in respect of any formal disciplinary action taken against you.
If you wish to exercise this right, you should apply to the Company within two working days of the decision you are complaining against, stating the grounds of your appeal.
The Disciplinary Appeal hearing will be heard by the Managing Director or a nominated deputy, wherever possible within 5 days of your appeal. You will retain the right to be accompanied and you will be given a full opportunity to state your case.
The result of the appeal will be made known to you in writing within 5 working days of the hearing…”
By September 2011 Mr Bond, who was also a director of the parent company and Mechanical, was the parent company's sole shareholder. Mr Bond and Mr Unwin agreed that Mr Unwin would buy 20% of Mr Bond's shareholding in the parent company (14,200 shares) for £50,000. Mr Unwin paid that price on 14 September 2011 and 14,200 shares in the parent company were transferred to him the same day.
The next day, 15 September 2011, Mr Bond and Mr Unwin resolved to re-designate Mr Bond's 56,801 shares in the parent company (his 80% shareholding) as A shares and Mr Unwin's 14,200 shares as B shares and Mr Unwin was appointed as a director of the parent company and of Mechanical.
Mr Bond, Mr Unwin and the parent company also entered into a shareholders' agreement (“the shareholders' agreement”) on 15 September 2011. The shareholders' agreement provides as follows:
“…2.1 The business of [Mechanical] is the provision of mechanical and electrical services and packages to its clients who operate across a wide range of sectors (Business).
2.2 Each Shareholder shall use its reasonable endeavours to promote and develop the Business to the best advantage of [the parent company] and [its] group…
6.3 Any distribution declared and distributed shall be:
(a) Subject to the Board recommending payment of the same and subject to Clauses 6.3(b) and Clause 6.3(c) any Available Profits which the Company may determine to distribute in respect of any financial year may be distributed either
(i) amongst the holders of A Shares, the B Shares and the C Shares (pari passu as if the same constituted one class of Share) according to the amount paid up credited as paid up on each such Share or the Company; or
(ii) amongst the holders of the A Shares only; or
(iii) any combination of (i) and (ii) above.
(b) …no dividend or distribution may be declared without the consent of both the A Shareholders and the B Shareholders.
(c) …the Shareholders shall procure that the Company and the Directors declared a dividend and/or distribution in accordance with the directions and/or policies given or specified by both the holders of the majority of the A Shares and the holders of majority of B Shares from time to time, to the extent that such dividend and/or distribution may be lawfully distributed and paid and subject to Clause 6.2…
9.6 No transfer of shares [by a B shareholder] shall be registered unless the transferee of such shares has executed and delivered to the seller a Deed of Adherence in the form provided at Schedule 2 of this agreement agreeing to be bound by the terms of this agreement as if it were a party to it…
14.1 This agreement, and any documents referred to in it or executed contemporaneously with it, constitute the whole agreement between the shareholders and supersede any previous agreement, understanding or agreement between them relating to the subject matter this agreement covers…
18 The shareholders to this agreement are not in partnership with each other. There is no relationship of principal and agent between them and neither of them has authority to bind the other…
19.2 Each shareholder shall at all times act in good faith towards the others and shall use all reasonable endeavours to ensure that the provisions of this agreement are observed.
19.3 Each shareholder shall do all things necessary and desirable to give effect to the spirit and intention of this agreement…” (emphasis added).
Also on 15 September 2011 Mr Bond and Mr Unwin resolved that the parent company would adopt new articles of association (“the parent articles”) (which were referred to in the shareholders' agreement). The parent articles provide as follows:
“…2.1 …Bad Leaver: a B Shareholder…is a Leaver (sic) who is not a Good Leaver or they leave for any reason (including, without limitation, death, bankruptcy, wrongful dismissal, permanent disability or permanent incapacity through ill health) before the sixth anniversary of the Relevant Trigger Date or they leave at any time and have been fraudulent or wilfully negligent…
Good Leaver: any B Shareholder who is a Leaver where
a) they would otherwise be a Bad Leaver and the Board (with the consent of a majority in voting terms of the holders of the A Shares) resolves that such person is to be categorised as a Good Leaver, or
b) they are a Leaver on or after the sixth anniversary of the Relevant Trigger Date [(that is, on or after 19 April 2017)] 1 and have not been fraudulent or wilfully negligent[, or]
c) they are a Leaver on or after the sixth anniversary of the...
To continue reading
Request your trial
-
Mark Faulkner v Vollin Holdings Ltd
...the matters contained in the agreement. In interpreting that clause, the Judge adopted the formulation of HHJ Klein in Unwin v Bond [2020] EWHC 1768 (Comm) of what were described as “minimum standards” of conduct required by a contractual good faith 6 The Judge held, in particular, that th......
-
Mark Faulkner v Vollin Holdings Ltd
...353 If I may respectfully say so, I agree with the explanation of Re Coroin recently set out by HHJ Klein in Unwin v. Bond [2020] EWHC 1768 (Comm), who at [224] said: “As I read the judgment: i) [Arden LJ] decided that, in the particular circumstances of that case, the duty of good faith d......
-
Ate Farms Limited Against (i) Aw Estates Scotland Limited (in Administration) And (ii) Arjowiggins Scotland Limited (in Administration) And The Joint Administrators Thereof; And Another
...that reected the Heads of Terms, but had been met with a systematic and unjustied refusal to provide that. [51] In Unwin v Bond [2020] EWHC 1768 (Comm) the court “set out some of the principles … in relation to express contractual good faith obligations”, including at [230] a minimum stan......
-
Court Gives Limited Interpretation To Express 'good Faith' Clause
...and in a commercially justifiable manner. In interpreting the good faith clause, the first-instance Judge followed Unwin v Bond [2020] EWHC 1768 (Comm) and held that a good faith obligation included a number of minimum standards, including procedural fairness and held in favour of the Respo......
-
Court Of Appeal Guidance On Good Faith Obligations In Shareholders' Agreements
...expressly to avoid reliance on implied terms that will almost invariably be subject to dispute. Footnotes 1 [2022] EWCA Civ 1371 2 [2020] EWHC 1768 (Comm) The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your ......
-
Meaning of “Good Faith” Under English Law: Latest Clarification
...be reluctant to rely on overarching general principles when interpreting good-faith clauses. Endnotes [1] [2022] EWCA Civ 1371. [2] [2020] EWHC 1768 (Comm)....
-
Contractual Duties Of Good Faith: Court Of Appeal Confirms Context Is King
...Faulkner v Vollin Holdings Ltd [2021] EWHC 787 (Ch). In interpreting the good faith clause, the High Court followed Unwin v Bond [2020] EWHC 1768 (Comm) in concluding that once a party is subject to a duty of good faith it is bound by the following "minimum they must act honestly; they must......