Re Tobian Properties Ltd; Maidment v Attwood and Others

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLady Justice Arden,Lord Justice Aikens,Lord Justice Kitchin
Judgment Date19 July 2012
Neutral Citation[2012] EWCA Civ 998
Docket NumberCase No: A3/2011/2485
Date19 July 2012

[2012] EWCA Civ 998





[2011] EWHC 2186 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL


Lady Justice Arden

Lord Justice Aikens


Lord Justice Kitchin

Case No: A3/2011/2485

In the matter of Tobian Properties Limited and in the Matter of the Companies Act 2006

Geoffrey Maidment
(1) Allan Attwood
(2) Nicola Heard
(3) Tobian Properties Limited

Mr Thomas Grant & Mr James Sheehan (instructed by MacFarlanes LLP) for the Appellant

Mr Andrew Clutterbuck (instructed by Stockler Brunton) for the Respondents

Hearing date : 15 June 2012

Lady Justice Arden

This appeal arises out of the dismissal by HHJ Hodge QC of a shareholder's petition for relief from unfairly prejudicial conduct under section 994 of the Companies Act 2006. By his petition, Mr Geoffrey Maidment, the appellant, sought relief on the grounds that the affairs of Tobian Properties Ltd ("Tobian") had been conducted in a manner which was unfairly prejudicial to him. The issue to be decided on this appeal is whether the judge was correct in law to rule that the three elements of conduct which he found had occurred, including the payment of excessive director's remuneration, amounted in law to "unfair prejudice" for the purposes of section 994. First, the relevant facts.


Mr Maidment holds 25% of the issued shares of Tobian. He acquired his interest when Mr Attwood acquired a 50% holding pursuant to a share purchase agreement dated 2 March 2000. Mr Attwood agreed to hold half of those shares for Mr Maidment. Mr Attwood became a director with the other 50% shareholder, Mr S. Harris. On 28 June 2001, Mr Attwood acquired Mr Harris' shares. Mr Harris then ceased to be a director and Mr Attwood became, and at all material times remained, the sole director of Tobian. Mr Maidment's shares were not registered in his name until August 2002. On 29 July 2008, Mr Attwood transferred one share to the company secretary, the second respondent, Ms Nicola Heard.


So long as it traded, Tobian carried on business as an estate agent under the name of "Oliver Jaques". I will refer to this as "Tobian's trading name". Tobian had four offices in the docklands area of London and elsewhere. Mr Maidment took no part in the running of Tobian. He neither received nor requested copies of its annual accounts. For various reasons, there was no contact between Mr Maidment and Mr Attwood between December 2003 and December 2008. They were also shareholders in another company, Annacott Holdings Ltd ("Annacott"). Their business relationship turned sour in about August 2001. Tobian entered creditors' voluntary liquidation in October 2008. The estimated deficiency as regards creditors is between £199,000 and £259,000.


The accounts for Tobian's financial years ended 30 September 2002 to 2007 show that Mr Attwood drew large amounts of remuneration. As I have concluded, for the reasons given in paragraphs 44 to 49 below, that there should be a further hearing in this case to determine the amount of the loss to Tobian resulting from these payments, it is sufficient to give a few key figures to indicate the scale of the remuneration drawn.


Tobian had six financial years (other than 2008) when Mr Attwood was sole director. In three of those years, profits were made but on a declining basis: 2002: £78,119, 2004: £62,291, 2006: £29,643. In the three other years, substantial losses were made: 2003: (£169,508); 2005: (£100,370); 2007: (£121,594). Mr Attwood's total remuneration in these six years, including benefits in kind, was £779,110, which gives an average figure of approximately £130,000 for each of the six years.


I will take two years as a sample. In 2002, Mr Attwood paid himself remuneration of £170,750, plus benefits in kind of £10,777 (total: £181,527). In the following year, he drew £145,000 as remuneration. While this sum was smaller than the previous year's figure, it is to be noted that in the same year, shareholders' funds went down from £133,540 to (£9,680) and there was a loss of £169,508.


There are other pointers to the conclusion that this remuneration was disproportionate. Prior to Mr Attwood acquiring control, the then sole director, Mr Harris, was paid about £45,000 per annum. Ms Heard, who the judge considered might have contributed more to the management of Tobian's business than Mr Attwood, was paid £30,000, increasing to £50,000, per annum in the relevant period.


Another issue in the proceedings related to the use of Tobian's trading name. Another company also used Tobian's trading name in 2005 to 2008. It often happens in this situation that a company associated with the controlling shareholders emerges out of the shadows and acquires the goodwill of the first company. In this case, the company was called Epyc Ltd ("Epyc"). It came into existence in 2004. Mr Attwood and Ms Heard were appointed as its directors; and Ms Heard was appointed the company secretary. Ms Heard is shown as the sole shareholder in Epyc's accounts for the years up to 28 February 2007. Thereafter, Mr Attwood and Ms Heard were shown as equal 50% shareholders. Ms Heard became the sole director. Epyc continues to trade as an estate agency under what was formerly Tobian's trading name. Ms Heard is now the sole director.


Other issues arose out of Tobian's insolvency and the sale of Tobian's trading name. Tobian encountered financial difficulties in 2007. One winding up petition was paid off in October 2007. When a further petition was threatened in July 2008, Mr Attwood and Ms Heard decided to put Tobian into creditors' voluntary liquidation. On the eve of its liquidation, Tobian sold its goodwill and assets to Epyc, and Epyc paid Tobian for the sum of £5,000 + VAT. This sum was arrived at by reference to the prospective liquidator's estimate of the costs of putting Tobian into creditors' voluntary liquidation. The judge found that the transfer took place on or about 31 August 2008. The creditors' voluntary liquidation took place in October 2008.


Mr Attwood deliberately brought his petition against Mr Maidment in relation to Annacott, of which Mr Maidment is a majority shareholder, after Tobian had been put into liquidation. Mr Maidment brought this petition in relation to Tobian as retaliation. The judge heard the trial of both petitions at the same time. The judge did not consider either petitioner to be a reliable witness. The petition in relation to Annacott succeeded, and permission to appeal from the judge's order on that petition was refused by this court. In the case of Tobian, the issues were complicated by the fact of Tobian's insolvency, for reasons which I must now explain.

Insolvency complicates the unfair prejudice remedy but the courts take a wide view of prejudice


Shares in an insolvent company in liquidation are clearly valueless unless the value of any claims which the company has against the respondents to the petition will eliminate the deficiency and produce a surplus for members. Section 994 of the Companies Act 2006 requires the petitioner to show that the respondent's wrongful acts have caused him prejudice in his capacity as a member. If the company is insolvent, that means that—in general—the petitioner must show that his shares would have had a value but for the wrongdoing of the respondents.


There is a qualification to this requirement: the courts take a wide view of prejudice suffered by a shareholder. Where, for instance, the shares are worthless but the petitioner has suffered prejudice in some capacity connected with his shareholding, such as that of a lender under a loan made as part of the same investment as the acquisition of shares, unfair prejudice proceedings may be brought. ( Gamlestaden Fastigheter AB v Baltic Partners Ltd [2007] 4 All ER 164, PC).


There are no parallel facts in this case but the approach in Gamlestaden has an analogue in this case. Gamlestaden serves as a reminder that this court should not erect technical difficulties to prevent Mr Maidment from obtaining redress if there is a sufficient prospect that a potential surplus can at some stage be shown and no unfairness to the other parties is involved. At that level, this authority can be used analogically to assist in the resolution in this case. We shall see how the approach in Gamlestaden applies in paragraph 44 below. First, however, I shall summarise the judge's analysis of the three elements of conduct that he found proved.

Summary of the judge's reasons for holding that the three elements of conduct were not unfairly prejudicial


The first of the three elements of conduct that the judge held had occurred, but were not unfairly prejudicial, was excessive director's remuneration. The judge held that the remuneration was excessive having regard to Tobian's profitability and when compared with the remuneration paid to Ms Heard. In addition, Mr Attwood fixed the amount of his remuneration by reference to his personal interests and without regard to the interests of Tobian or Tobian's ability to pay it (judgment, paragraph 50). For this reason also the payment of the director's remuneration was a breach by Mr Attwood of his fiduciary duty to Tobian.


The judge appears to have accepted by implication that the remuneration was of a sufficient scale to be prejudicial in the sense of detrimental to the interests of Mr Maidment as a minority shareholder. There was clearly a strong case that this was so. If, for instance, the amount which Tobian could properly pay Mr...

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31 cases
1 firm's commentaries
  • Developments in Unfair Prejudice Litigation
    • United Kingdom
    • Mondaq UK
    • 7 July 2022
    ...the target of an unfair prejudice petition in certain circumstances. *Re Tobian Properties Limited; Maidment v Attwood and others [2012] EWCA Civ 998,per Arden LJ at The Importance of Getting it Right Identifying who the appropriate, and inappropriate, respondents to a petition might be is ......
1 books & journal articles
  • Company Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2019, December 2019
    • 1 December 2019
    ...for a breach of duty does not change the fact that it was an unlawful act. 135 Re Tobian Properties Ltd, Maidment v Attwood [2012] EWCA Civ 998; [2013] 2 BCLC 567 at [22], per Arden LJ (holding that “the terms on which the parties agreed to do business together include by implication an agr......

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