Ms Swarandeep Birdi (Petitioner) v Specsavers Optical Group Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 13 October 2015 |
| Neutral Citation | [2015] EWHC 2870 (Ch) |
| Docket Number | Case No: 11102 of 2011 |
| Court | Chancery Division |
| Date | 13 October 2015 |
[2015] EWHC 2870 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Nugee
Case No: 11102 of 2011
James Stuart & Matthew Winn-Smith (instructed by Akin Palmer LLP) for the Petitioner
James Potts QC & Jack Rivett (instructed by Taylor Wessing LLP) for the Respondents
Hearing dates: 23 & 24 Oct; 27–31 Oct; 3–7 Nov; 10–14 Nov; 18–19 Nov, 2014
Approved Judgment
Introduction
This is the trial of certain issues arising on an unfair prejudice petition brought under s. 994 of the Companies Act 2006 in relation to the affairs of the 4 th Respondent, Dartford Specsavers Ltd ( "Dartford").
Dartford has a share capital of £100 divided into 100 'A' shares of 50p each and 100 'B' shares of 50p each. The Petitioner, Ms Swarandeep Birdi ( "Ms Birdi"), holds 50 of the A shares; the 2 nd Respondent, Mr Kamaljit Singh ( "Mr Singh") holds the other 50 A shares; and the 1 st Respondent, Specsavers Optical Group Ltd ( "SOG") holds the 100 B shares.
In the Petition Ms Birdi complained that SOG and Mr Singh had conducted Dartford's affairs in an unfairly prejudicial manner, and among other relief sought an order that they purchase her shares at a fair valuation. As explained in more detail below, it is now common ground that SOG will purchase her shares at a fair value determined by an independent valuation, and by Order dated 30 July 2012 Deputy Registrar Briggs directed that there be a trial whether the matters set out in particular paragraphs of the Petition constituted breaches of contractual or fiduciary duties on the part of SOG and Mr Singh such as to warrant an adjustment to the price payable for Ms Birdi's shareholding.
Those paragraphs give rise to 6 specific issues, which I will call "Issue 1", "Issue 2" etc, and which I will describe in due course.
Outline facts
I give here an outline of the facts, without attempting at this stage to deal with the detailed facts that are relevant to each of the 6 Issues or resolve any of the contentious matters.
SOG, a Guernsey company, is the principal trading company of the Specsavers Group, a highly successful and prominent national and international supplier of optical services. The group has over 700 stores in the UK and Republic of Ireland and a further 775 stores in other countries worldwide. There are various companies in the group apart from SOG; one of the others is its wholly owned subsidiary Specsavers Optical Services Ltd ( "SOS"), which is incorporated in England and Wales and is the head office for the group in the UK. Save where the context makes it appropriate to identify the particular company concerned, I will use "Specsavers" to refer to the group generally.
This litigation concerns the Specsavers store in Dartford, Kent. Specsavers stores are generally run as joint ventures between Specsavers and individuals who are known as 'joint venture partners' ( "JVPs"). There is a separate 'store company' for each store, typically divided, as in the case of Dartford, into A shares, held by the JVPs and B shares, held by SOG. The relationship between the parties is governed by the articles of association, a shareholders' agreement, and service agreements. The usual, although not universal, model is to have one ophthalmic optician ( "OO") JVP and one other JVP (either a dispensing optician ( "DO") or a retailer). This reflects the fact that there are two sides to the business: optics – that is, carrying out eye tests, something that has to be done by an ophthalmic optician, and sales. In very simple terms, the JVPs as A shareholders are entitled to a salary and also to the profits of the business by way of dividends, and as directors are responsible for the day to day running of the business; SOG as B shareholder does not receive dividends but does receive a management fee based on a percentage of turnover, and is also entitled to appoint the chairman of the Board of directors, with a casting vote, and so controls the Board.
Ms Birdi is an optometrist registered with the General Optical Council. She graduated in 1991 and joined Specsavers in 1994, initially as an employed optometrist in a Specsavers store in Bradford. She was interested in becoming a director and in 2000 she was told that there was an opportunity to do so at Dartford as the two JVPs were selling their interests. She was introduced by Specsavers to Mr Nimesh Patel (" Mr Patel") as someone who was also interested in the store, and it was suggested they meet to see if they were compatible. They met and agreed to do business together. They each paid £125,000 to acquire 50 A shares, and on 20 March 2000 signed a shareholders' agreement with SOG (later replaced by one dated 17 July 2000) ( "the Shareholders' Agreement").
Ms Birdi also entered into a service agreement dated 29 March 2000 with the 3 rd Respondent, Dartford Visionplus Ltd ( "Visionplus"), a subsidiary of Dartford. It is common (although not universal) for Specsavers stores to be operated using a 'dual company' structure with not only the store company (here Dartford) but also a 'service company' (here Visionplus). I give further explanation of this practice, which was adopted for VAT purposes, below, but it is sufficient here to note that for most practical purposes it is not necessary to distinguish between Dartford and Visionplus: between them they operated the store.
I will have to set out the terms of the Shareholders' Agreement in more detail in due course but in outline it provided for the 2 A shareholders to be A directors of Dartford and Visionplus, for SOG to nominate 2 B directors (in the event SOG itself and Dame Mary Perkins, who with her husband founded Specsavers), and for the day to day management of the business to be delegated to the A directors, with a list of matters that were not to be regarded as day to day management (and which were to be decided at a Board meeting).
Nothing of direct relevance to these proceedings took place between 2000 and 2006, during which time Ms Birdi accepts that her relationship with Specsavers was very good. In late 2006 however Ms Birdi was contacted by Specsavers and was told that they suspected that someone was stealing from the Dartford store and further suspected that it was Mr Patel.
Specsavers has a number of departments. One of these is SOS's Loss Prevention and Audit Department ( "Loss Prevention") which, among other things, assists stores to avoid and detect theft. Loss Prevention was then run by Mr Mel McAlindon, and, after further investigation, he and Mr Phil Barnes (another Loss Prevention employee) came to the Dartford store on 20 February 2007 and interviewed Mr Patel. In the course of the meeting Mr Patel admitted theft. Having consulted Mr Derek Dyson (who was then Specsavers' Retail Director and on the Board of SOG), Mr McAlindon proposed to Mr Patel that if he resigned, Specsavers would purchase his shares at fair value less the sums he had stolen from Dartford and the costs of the investigation. Mr Patel accepted the proposal, resigned as employee and as director of Dartford and Visionplus, and sold his A shares to SOG. The shares were transferred on 19 March 2007, the price paid being £55,000. Specsavers says that this represented the fair value of £70,000 less £15,000 for the costs of the investigation, and that the amount which Mr Patel admitted stealing (£4,180) was largely recovered by offsetting £3,752.62 owed to Mr Patel on his loan account.
Ms Birdi complains about these arrangements and some minor costs paid to Mr Patel and this is Issue 1.
In the course of his interview Mr Patel made a number of off the record allegations against Ms Birdi, the principal allegations being that she had put her husband Mr Mushtaq Rehman and her father on the payroll but neither had done work such as to justify the amount paid them; and that she had had work done at the Dartford store without complying with Specsavers' practices and procedures.
That led to Ms Birdi being suspended on 27 March 2007 to allow the allegations to be investigated. After investigation, and an interview by Mr Neil Hamilton (a Retail Development Consultant in Specsavers' Retail Support Team) in July 2007, disciplinary proceedings were commenced against her. A disciplinary hearing was held on 20 September 2007 and conducted by Mr Mark Raines (then Director of Retail Development at SOS). He found some (but not all) of the allegations against Ms Birdi proved, and considered that her behaviour could amount to gross misconduct warranting summary dismissal from her employment; but in the light of her unblemished record and length of service, he issued her instead with a final written warning. Ms Birdi's suspension was lifted on 3 October 2007.
Ms Birdi appealed against Mr Raines' decision. The appeal was heard by Mr John Perkins (Dame Mary Perkins' son and then Joint Managing Director and Group Finance Director of Specsavers). By letter dated 12 December 2007 he upheld Mr Raines' decision.
During Ms Birdi's suspension there was no A director to run the Dartford store on a day to day basis (as Mr Patel had resigned and Ms Birdi was suspended). Specsavers therefore arranged for temporary managers to come in and run the store. Specsavers levied substantial charges against Dartford during this period, amounting to some £86,000, the majority of which consisted of charges levied by Loss Prevention for emergency management cover. Ms Birdi complains about these charges (which reduced Dartford's profits and hence her entitlement to dividends) and...
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Paul Dinglis v Andreas Dinglis
...must be relevant to consider what the outcome would have been had proper disclosures been made to the other board members: see Birdi v Specsavers Optical Group Ltd [2015] EWHC 2870 (Ch), per Nugee J at [183]–[184]. Given Andreas' description of the roles they played, it seems likely that t......