Macom GmbH v Christian Mark Randall Bozeat
| Jurisdiction | England & Wales |
| Judge | Hodge |
| Judgment Date | 21 June 2021 |
| Neutral Citation | [2021] EWHC 1661 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2020-MAN-0000461 |
| Date | 21 June 2021 |
[2021] EWHC 1661 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
INSOLVENCY & COMPANIES LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9DJ
HIS HONOUR JUDGE Hodge QC
Sitting as a Judge of the High Court
Case No: CR-2020-MAN-0000461
In the Matter of Macom GmbH (UK) Limited
And in the Matter of the Companies Act 2006
Mr Mark Harper QC (instructed by JMW Solicitors LLP, Manchester) for the Petitioner
Mr Charles Newington-Bridges (instructed by Horwich Farrelly, Manchester) for the First and Second Respondents
The Third Respondent did not appear and was not represented
The following cases are referred to in the judgment:
Re Audas Group Ltd [2019] EWHC 2304 (Ch)
Re Baumler (UK) Ltd, Gerrard v Koby [2004] EWHC 1763 (Ch)
Re Braid Group (Holdings) Ltd, Gray v Braid Group (Holdings) Ltd [2015] CSOH 146
Re Coroin, McKillen v Misland (Cyprus) Investments Ltd [2012] EWHC 2343 (Ch)
Re Cumana Ltd [1986] BCLC 430
Re Edwardian Group Ltd, Estera Trust (Jersey) Ltd v Singh [2018] EWHC 1715 (Ch)
Grace v. Biagioli [2005] EWCA Civ 1222, [2006] 2 BCLC 70
Hawkes v Cuddy (No.2) [2007] EWHC 2999 (Ch), [2008] BCC 390 (affirmed on appeal at [2009] EWCA Civ 291, [2009] 2 BCLC 427)
Michael Wilson & Partners Ltd v Sinclair [2020] EWHC 1017 (QB)
Michel v Michel [2019] EWHC 1378 (Ch)
O'Neill v. Phillips [1999] 1 WLR 1092
Sikorkski v Sikorksi [2012] EWHC 1613 (Ch)
COMPANY — Unfair prejudice — Petitioner 60% shareholder — Respondents 40% shareholders — Alleged breaches of director's duties and failures to observe Shareholders' Agreement — Undermining company's corporate governance — Appropriate remedy — Buy-out order or order regulating company's affairs
Hearing dates: 7 – 11 June 2021
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 Hodge QC
Judge Hodge QC:
I: Introduction and background
This is my judgment on the trial of an unfair prejudice petition presented on 14 May 2020 under s. 994 of the Companies Act 2006. It raises the question of the appropriate order for granting relief for breaches of director's duties and failures to observe the terms of a Shareholders' Agreement. One of the peculiarities of this case is that the petitioner is the majority (60%) shareholder in the company whilst the individual respondents (husband and wife) are the minority (40%) shareholders. However, by the terms of the Shareholders' Agreement, the husband has a casting vote on the board of two directors which means that (with the exception of certain matters specifically reserved to the shareholders) it is he who has control of the company.
For structural reasons, this judgment is divided into a number of sections as follows: I: Introduction and background II: Evidence and trial III: The new Articles of Association and the Shareholders' and Subscription Agreement IV: Legal issues V: Unauthorised remuneration VI: Undermining corporate governance VII: Reserved matters VIII: Information failures IX: Unauthorised disclosures X: Remedy. However, each section of this judgment has informed each of the other sections. During the course of this trial, a great many matters were raised which, as the evidence and the case have developed, have diminished in, or have ceased to have any real, importance. The fact that they do not feature in this judgment does not mean that they have been overlooked.
The petitioner is Macom GmbH, a German corporate entity which specialises in the provision of digital consulting and audio-visual technology services. It is represented by Mr Mark Harper QC, instructed by JMW Solicitors LLP. The petition relates to the affairs of the third respondent (to which I shall refer as ‘the company’), which carries on a similar business to that of the petitioner within the UK. It has taken no active part in the petition; and when I refer to ‘the respondents’ I refer only to the two active respondents to the petition, who are Mr Christian Mark Randall Bozeat (to whom, without any disrespect, I shall refer as ‘Christian’) and his wife, Mrs Virginia Jane Bozeat. They are both represented by Mr Charles Newington-Bridges, instructed by Horwich Farrelly (and previously by Knights Solicitors LLP). The petitioner holds 60% of the shares in the company and Christian and his wife together hold the remaining 40%.
Prior to the trial, the respondents had asserted that Mrs Bozeat had ceased to be a person with significant control of the company on 27 April 2020 (shortly before the presentation of the petition), having transferred her 20% shareholding to Christian. By the end of the trial, however, it was common ground that Mrs Bozeat had never effected a valid transfer of her shares to her husband, and that they each remain 20% shareholders in the company. It is, I believe, also common ground (and if not I so find) that Mrs Bozeat has never been a director of the company, nor has she ever taken any active role in its operation or the conduct of its affairs, and she has never acted in a manner that is unfairly prejudicial to the interests of the petitioner. Mrs Bozeat's name rarely features in the trial bundles, except as a respondent to the petition. Whatever order, if any, the court may ultimately consider it appropriate to make for giving relief in respect of any of the matters complained of by the petitioner, I make it clear at the outset that it will not extend to Mrs Bozeat personally (save in relation to her outstanding 20% shareholding).
The company was incorporated (under the name ‘Reemergent Technology Consultants Limited’) on 1 July 2016 under the Act. On (or shortly following) incorporation, Christian was appointed the director of the company. Originally the capital of the company was 100 shares, divided into 50 ordinary A shares (held by Christian) and 50 ordinary B shares (held by Mrs Bozeat), each share having a nominal value of £0.02. The company changed its name to its present style on 15 December 2016 in anticipation of the Shareholders' and Subscription Agreement being concluded with the petitioner and new articles of association being adopted. This took place on 6 September 2017 when the B ordinary shares in the company were re-designated as A ordinary shares, all of those A ordinary shares were re-designated as ordinary shares, and the petitioner applied for, and was allotted, 150 ordinary shares in the company (credited as fully paid) in consideration of the petitioner transferring to the company all of its current projects in the UK. The effect was that the petitioner became a 60% shareholder in the company and Christian and his wife each held 20% of the share capital. The purpose of the Agreement was to govern the relationship between the petitioners and the respondents as shareholders in the company and the conduct of its affairs during the period of their relationship. Initially the company prospered: during the year ending 31 July 2016–7 to 2017–8 turnover grew from £293,443 to £955,173 and operating profit before tax from £130,952 to £512,245. Growth slowed in the following year, 2018–9, when the corresponding figures were £1,051,112 and £517,628.
Christian had been introduced to the petitioner by Mr Michael Kottke, one of its employees, who had managed the petitioner's pre-existing relationship with Deutsche Bank in the UK. Initially, Mr Kottke became the petitioner's observer on the company's board; but Christian wanted him to play a more meaningful role in the company, spending more than six to eight days a month in the UK in support of the company's operations, and becoming a shareholder. After some discussions with Christian, on 1 January 2018 the petitioner appointed Mr Kottke to act as a director of the company pursuant to clause 5.3 of the Shareholder's Agreement; but he acquired no shares in the company. Under the terms of the company's articles, any decision of the directors must be made by a majority decision at a meeting of the board (which any director has the right to call), although under the terms of the Shareholders' Agreement, in the event of any disagreement within the board, Christian has the casting vote.
It is clear from emails passing between Christian and Mr Kottke in the middle of July 2018 that tensions were already developing between them. Christian was making it clear that “the agenda is set by the MD and approved by the Chairman” and whilst Mr Kottke could suggest topics, and Christian would consider them, it was Christian who was ultimately to decide what was discussed: “In the future as the MD I will propose the agenda and set the time and date for the meetings.” From an email sent by Christian to his father, Mr Miles Bozeat (a retired businessman, now in his early seventies) at about 11.45 am on 17 July 2018 it is apparent that even at this relatively early stage Christian (who suffers from dyslexia) was already involving his father, and seeking his input, in the drafting of letters concerning his relationships with his fellow director and the majority shareholder in the company. This is alluded to at paragraph 8 of Miles's witness statement, where Mr Kottke is described as “a difficult colleague” of Christian. The particular draft letter, addressed to Michael Kottke, reads: “It is clear that you have a misinterpretation of the position that you are in. We are not discussing my position or role within Macom...
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Developments in Unfair Prejudice Litigation
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Unfair Prejudice In Shareholder Disputes
...prejudice can even be brought by majority shareholders against minority shareholders. In the case of Macom GmbH v Bozeat and others [2021] EWHC 1661 (Ch), the court decided that a minority shareholder's restriction of the majority shareholder's access to information and his refusal to corre......