Majority Shareholders

If someone within the company is actively working against its interests, you should remove them as quickly as possible.

If the wrong-doer is a director of the company, the situation is more complicated than if they are simply an employee or a contractor. The complication arises because being a director of a company is a role that is considered as being different and in addition to someone’s status as an employee/contractor.

If you control the majority of a company’s shares, you have the power to remove someone from their role as a director under s 168 of the Companies Act 2006.

Section 168(1) says: “A company may by ordinary resolution at a meeting remove a director before the expiration of his period of office, notwithstanding anything in any agreement between it and him.”

The procedure is a simple one. You must set a date for a meeting of shareholders, giving at least 28 days notice and give notice to the director in question of the resolution to remove them.

Although they have an opportunity to respond in writing before the meeting, which must be sent to all of the shareholders, if you are the majority shareholder or have control of 51% or more of the company’s shares, it will have no effect and the meeting will be a foregone conclusion.

https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/1/crossheading/removal

After removing the wrong-doer as a director, they will retain the benefits of their employment contract and protection under employment law. So, you must take steps to dismiss them as an employee as well.

If the evidence of wrong doing is clear and you do not want them to have the benefit of generous severance packages, you may wish to dismiss them for gross misconduct. If you choose to do so, you must follow the correct procedure. This means allowing them to attend a meeting with representation to put forward any argument they may have against the accusations made.

If you simply want to get rid of them, you will still need to follow the correct procedure according to their contract, common law and statutory law. Make sure of the following:

• The correct procedure is followed to avoid unfair dismissal
• They receive the proper notice and payments due to them under their contracts or statute, to avoid claims for wrongful dismissal
• They are not being dismissed in a manner and for reasons that could give rise to a claim for discrimination.
• No other rights under employment law are breached.

The position is made simpler if the rogue director has a director’s service contract. Such contracts usually have a provision that says if they are dismissed as an employee they are immediately removed from their role as a director.

If you need to get rid of someone from the company who is a contractor, you will need to follow the terms of their contract when dismissing them to avoid a potential counter claim against you.  

Why You Need An Injunction

If you find yourself in a dispute with your fellow shareholders or directors/crucial employees, you will often find that the actions that are destroying the value of your company are either on-going; for example someone is working their way through your list of clients, or that the action is just about to begin; designs for your new products have been stolen and are just about to be marketed in competition with you.

Stopping the unlawful activity, or preventing it from starting, is crucial to protecting the interests of your company. Getting an injunction is the way to do that.

We will consider here what is required to obtain an interim injunction, the types of injunction available and other issues to consider; enforcement, undertakings for damages and costs.

What Is An Interim Injunction

An interim injunction is an injunction granted on an interim basis, until you are granted a final injunction or your application is dismissed.

A final injunction, for example permanently preventing someone from using your intellectual property or confidential information, is the ultimate remedy you are looking for. Final injunctions are either agreed by the parties or granted after a trial of the issues by the Court. Consequently, they can take many months or years to arrive at.

If you need a solution straightaway, you need to apply for an interim injunction.

What Will The Court Consider When Granting An Interim Injunction?

The Court’s power to grant injunctions comes from the Senior Courts Act 1981, Section 37. That sets out that a court may grant in injunction, where at the Court’s discretion it thinks it is “just and convenient” to do so.

The meaning of “just and convenient” and the principles the Court will apply when considering whether to grant an injunction, have been established in a number of cases, with the most important being American Cyanamid Co (No 1) v Ethicon Ltd [1975] UKHL 1.

The American Cyanamid Principles that are routinely applied by the Courts, (though they are not cast in stone) are as follows:

The First Test

Is there a cause of action that can be considered as a “serious question” that needs to be settled at a trial?  Such a cause of action will need to be set out unequivocally and have evidence to support it, but the test is not too difficult to overcome. The question may be framed as, is there a cause of action that has, at least, some prospect of succeeding?

The Second Test

The “balance of convenience”. Will granting an injunction cause more damage and disruption (inconvenience) that not granting one?

When considering the balance of convenience, the Court will consider these matters:

1. If the matter went to a trial and the party applying for an injunction (the applicant) won that trial, would damages be an adequate remedy for them? If so, then an injunction will not normally be granted.
2. If an interim injunction is granted but it later turns out to have been the wrong decision, the question arises as to whether damages would be an adequate remedy for the respondent in those circumstances. If the answer is “no” that will count against an interim injunction being granted.
3. If there is doubt as to the adequacy of damages then the court will look at all of the facts of the case, with a view to preserving the status quo. In more detail:
   1. The Court will look at the merits of the party’s cases, with a view to establishing if one party has an obviously more meritorious case than the other.
   2. The Court will also look at which set of circumstances should be preserved and how quickly the party seeking the injunction has acted: The question will often arise as to which status quo should be considered; the one that existed at the time of the application for an injunction, or the one that existed before the last significant change. It will often be the latter interpretation that the applicant will want the court to consider. If a director has resigned from a company but is now contacting all of the company’s clients in breach of his obligations, it is the status quo before these actions the applicant will want the court to preserve.

When To Apply For An Interim Injunction

If you want an interim injunction, you must act quickly. Otherwise, the status quo will shift to the situation that is causing the damage to your company and the court will be less likely to grant an injunction.

Types of Injunction

There are as many different injunctions as there are court cases. Below are some examples of the more common ones.

Injunctions to restrain unlawful competition by directors and employees.

Injunctions protecting patentee or IP right-holder rights.

Insolvency law injunctions, for example to prevent the presentation of a winding-up petition.

Proprietary injunctions, protecting property and trust assets.

Privacy and confidentiality injunctions, protecting an applicant’s personal privacy or confidentiality in business or personal information.

Orders directing a party to provide information about the location of property or assets

Orders requiring delivery up of property under section 4 of the Torts (Interference with Goods) Act 1977

Injunctions to protect interests related to real property, for example, rights of light.

Injunctions to restrain trespass or nuisance (including public nuisance).

Anti-suit injunctions, restraining foreign legal proceedings.

Freezing injunctions, restricting dealings with assets. (These are subject to different considerations of the court than set out in this article.)

Search orders, permitting a search of a respondent’s property for the purpose of preserving evidence and property. (These are subject to different considerations of the court than set out in this article.)

Other Matters

There is a risk to obtaining an interim injunction from the court.

Cross Undertaking As To Damages

Although it is not mandatory, it is very rare to be granted an injunction unless you give an undertaking to the Court that you will pay damages to the other side, if you are granted an interim injunction and it later turns out that it was the wrong thing to do. That means, if you lose your overall case against the other side, you will have to pay damages to them that have arisen from the granting of the interim injunction.

Costs

Applications for injunctions require a lot of activity over a short period of time, as they need to be issued quickly. Significant costs can be incurred in a short period of time.

Even if successful, the order for costs the court is likely to give is “Costs Reserved”. Such an order means that the question of who has to pay the parties costs of the injunction application will be delayed until a later date, most likely when the larger case between the parties has been settled.

Is It Worth It?

We appreciate that applying for an injunction can be daunting. The need to prioritise it above all other matters and act quickly, the costs and the undertaking for damages are all unattractive.

However, the benefits of obtaining an injunction are substantial. An injunction will prevent your company from incurring substantial losses and will thwart your nearest rival. Obtaining an interim injunction early in proceedings is  powerful signal to your opponent of your intention to oppose and can contribute to an early resolution of any dispute.

We will set out the basis of some aspects of the law that can used to recover losses from errant, dishonest directors below, but let’s consider first what you need to think about before entering into any court action.

Clarity

Getting what you want from litigation is based on clarity of advice and information on the essential questions. These are:

1. What is the best result I can hope to obtain from this dispute?
2. What are my chances of obtaining that result?
3. What are the costs of action going to be?
4. How likely and how much of those costs am I going to recover?
5. What are the alternative courses of action?

No action should be taken without a clear understanding on your part of what the answers to the above questions are.

You will be told again and again that litigation is inherently uncertain. We don’t deny that is the case but believe that the uncertainties can and should be clearly understood and, if possible, minimised.

Claim

To claim what you are entitled to from a misbehaving director and/or shareholder, you need a defined course of action and a strategy.

A claim starts with the first communication with the other side. That commumication; face to face, email or letter, should be based on a clear understanding of your case (See “Clarity”). It should also have a clear purpose: Are you trying to establish negotiating principles, trying to obtain information or setting out your opening position?

Communication with the other side without an understanding of these three crucial elements; basis of action, prospects of success and purpose of contact, happens all too often. It leads to arguments and interminable exchanges of emails and worse, expensive exchanges of letters between solicitors. At best this does little to advance your case and at worst leads to thoughtless concessions that can have significant consequences down the line. In any event, it will certainly increase your costs.

Instead, if your approach the dispute with a clear strategy, each step of the case will lead you towards your desired result, whether that is by settlement or through court action.

Closure

Disputes are always personal.

Conflict between you and someone else, especially someone you trusted and relied on enough to go into business with, is distracting, emotionally upsetting and psychologically difficult to handle.

Dealing with the emotions and stress and maintaining your objectivity, so you can make the right decision based on sound principles is essential. If you are entering into a dispute for personal reasons, that’s fine, as long as you are aware of why you are doing it and you are in control of your emotions and not controlled by them.

Acting on a dispute is always better than doing nothing and when the dispute is resolved to your advantage the peace of mind and sense of closure can be enormous. Successfully resolving your dispute gives you back your life.

Directors can face many different types of claims for personal liability for wrongdoing whilst managing the company. Examples of where a director may incur personal liability include but are not limited to, the following:

• Liability to the company regarding a breach of the director’s general duties under the Companies Act 2006 or for wrongful trading under the Insolvency Act 1986.
• Liability to third parties, such as an investor, for misrepresentation.
• Liability to employees for discrimination under the Equality Act 2010.
• Liability under health and safety legislation, environmental legislation, the Financial Services and Markets Act 2000, the Corporate Manslaughter and Corporate Homicide Act 2007 and the Bribery Act 2010.
• Liability for the costs incurred in defending civil, criminal or regulatory proceedings.

As they are the most important ones for our purposes, this article will concentrate on the duties owed by directors to the company under the Companies Act 2006 (CA 2006).

The Duties – Generally

The CA 2006 states that a director’s general duties are based on and have the same effect as the preceding common law rules and equitable principles that they were governed by. The duties should therefore be subject to consideration of, and interpreted and applied in the same way as, those common law rules and equitable principles.

Who are the duties owed by?

The general duties as set out in the CA 2006 apply to all directors of a company. The CA 2006 defines the term ‘director’ to include any person who occupies the position of a director, regardless of their title, which includes de facto and shadow directors.

Duties owed to the company

Directors duties are owed to the company. it is therefore for the company to take action if these duties are breached.

Directors do not owe duties to individual shareholders of the company or its creditors. In certain circumstances shareholders can apply to be allowed to act in the name of the company, even if they own only a minority of shares (called a derivative action).

However, as the majority shareholder you can effectively consider yourself as being the company.

Duration

A director will begin to owe duties to the company from the day that they become a director of the company. The general duties will not be owed by a director after they resign or are dismissed from their position. However, there are aspects of certain duties which will continue to apply even after leaving office, such as the duty to avoid a conflict of interest that arises from their knowledge of certain information obtained whilst they were a director in that company.

Another example includes the duty not to accept any benefits from third parties, with regard to things the director should or should not have done whilst they were a director of the company.

Cumulative duties

It is common for more than one duty to apply at any given time to directors, and it is imperative that directors comply with each of those duties.  An example of two duties overlapping would be the duty to promote the success of the company and the duty for directors to act within their powers. In exercising the duty to promote the success of the company, the director(s) must not breach the latter duty.

Relationship between the duties and the company’s constitution

Companies may place more onerous duties on their directors than those which are required of them by the CA 2006. If a company wishes to do this then they must set out such duties in their articles of association.  On the other hand, companies are not able to dilute the duties of a director, except to the extent permitted by specific sections.

The Duties

1. The duty to act within powers

CA 2006 states that a director:

• Must act in accordance with the company’s constitution; and
• Must only exercise those powers which are conferred upon them.

A company’s constitution has a wide definition and includes the following:

• The company’s articles of association,
• Decisions of the company, which have been taken in accordance with the articles.
• Any resolutions and / or agreements which affect the company’s constitution.

2. The duty to promote the success of the company.

CA 2006 requires directors to act in a way that they consider to be in good faith and in the manner which would most likely promote the success of the company and in turn to the benefit of the shareholders of the company. When acting in such a manner and in such a position, the director must:

• Consider the impact and consequences of any decisions taken in the long term;
• Take into consideration the interests of the company’s employees;
• Consider the impact and the way in which the company’s operations would affect the surrounding community and environment.
• The company’s desire to maintain a good reputation and be known for its high standards of business conduct;
• Consider the need for the company to act fairly between all the shareholders of the company.

3. Duty to exercise independent judgment

The CA 2006 requires directors to exercise their powers independently, without allowing their judgment to be affected by other people’s opinions or perceptions, particularly when making decisions.

An example of a breach of this duty includes a director agreeing or promising a third party (even a shareholder of the company) that they would vote in a certain way at a board meeting. This is even if voting in such a way the director would not otherwise have breached this duty.

The government has previously stated that this duty does not prohibit directors from relying on advice, so long as the directors exercise their own judgment when making the decision as to whether or not they should follow the advice.

4. Duty to exercise reasonable care, skill and diligence

This duty requires directors to exercise the care, skill and diligence which would be required and exercised by a reasonably diligent person with both of the following:

1. The general knowledge, as well as the skill and experience that would reasonably be expected of a person carrying out such functions and responsibilities in respect of the company. This is known as the objective test.

1. The general knowledge, skill and experience that a director in question actually encompasses. This is known as the subjective test.

In considering the above, at a minimum a director must convey and encompass the knowledge, skills and experience as required and set out in the objective test.  But, if a director has specialist knowledge, than the higher subjective test will have to be met. For example, where a director has specialist knowledge in accounting, this will be taken into consideration when looking at the director’s responsibilities in the circumstances of the company.

5. The duty to avoid conflicts of interest

This duty requires directors to ensure that they do not place themselves into situations which will conflict with the responsibilities and duties owed by them to the company. Unless, they have obtained consent from the company.

Directors must therefore try to ensure that they avoid placing themselves into situations where they have or may have, direct or indirect interests that conflict with, or may conflict with, the company’s interests.  This particularly arises in relation to the exploitation of property or information.

An objective test is applied in order to determine whether the director has breached this duty. A director will therefore not be able to rely on a cliam that he had no knowledge of a conflict.

6. The duty not to accept benefits from third parties

Under this duty directors must not accept any benefits or bribes from third parties, which are given to them as a result of their position.  This duty will continue to apply even after the individual ceases to be a director if it relates to actions or omissions of the director prior to them leaving.

7. Duty to declare interest in a proposed transaction and / or arrangement with the company

This duty requires directors to declare to the other directors in the company (if any) the nature and the extent of any interest they have (or may have), either directly or indirectly, in a proposed transaction and / or arrangement with the company. For this duty to apply, the director himself does not need to be a party to the transaction in question. A director may need to make a disclosure if he is aware of someone else’s interest which will amount to a direct or indirect interest on his part.

Remedies

There are various remedies that can be applied in the event of a breach of directors’ duties. Which of these remedies will be applied will depend on the type of breach. The remedies available include:

1. Damages,
2. An injunction (to prevent or stop someone from doing something).
3. Restoration of the company’s property which is held by the director.
4. Disqualification as a director under the Company Directors Disqualification Act 1986.

Fiduciary duties

What is a fiduciary relationship?

Under common law a fiduciary duty arises where two parties (A and B) agree that A will act on behalf of or for the benefit of B in situations which give rise to a relationship of trust and confidence. In such circumstances, A has some discretion and power which affects B’s interests, and in turn B relies on A to provide information and advice.

When trying to determine whether a relationship gives rise to fiduciary duties, it is the substance of the relationship that must be examined. It does not depend on the title that is given to the relationship or the position the individual holds in the company. When examining such a relationship you must consider it in the light of its commercial context and all the obligations which have been undertaken by the individual (in this case ‘A’ above).

Who owes Fiduciary Duties?

1. Company Directors

Company directors have always owed fiduciary duties to their companies under equity. Chapter 2 of Part 10 of the Companies Act 2006 (CA 2006) codifies some of those duties. The relevant statutory duties under the CA 2006 are:

1. To act within powers.
2. To promote the success of the company.
3. To exercise independent judgment.
4. To avoid conflicts of interest.
5. Not to accept benefits from third parties.
6. To declare an interest in a proposed transaction or arrangement.
7. The statutory duty replaced the corresponding fiduciary duty when the relevant provision came into force.

For information on actions against directors under the Companies Act 2006 see the article above.

2. Senior Employees of a Company and Contractors

Senior employees and in certain cases contractors will owe fiduciary duties to the company if they are in positions of trust in respect of the business and its assets  and they have the discretion to make decisions which can impact the company significantly.

Fiduciary duties require an employee/contractor to act in the best interests of the company. This requires them to:

1. 1. disclose any wrongdoing on his part to the company; the ‘disclosure rule’.
   2. avoid and not let any of his personal interests come into conflict with the interests of the company; the ‘no conflicts rule’.
   3. disclose and account to the company for any profits the senior employee has made because of the position he holds; the “not profits rule’.

Are Fiduciary Duties Important?

Fiduciary duties provide companies with an additional layer of protection beyomd the contraxtual relationship it may have with an employee or contractor, if an employee/contractor breaches their duties and obligations.

Proving the existence of fiduciary duties can be very valuable in cases, for example, where an employee/contractor resigns from his position/ends his contract and decides to set up their own competing business, using confidential information belonging to the company and/or using the contacts that they have made whilst being employed by the company.

In such circumstances the company would be able to enforce not only the express and implied duties which the employee/contractor owed to the company through an employment contract or contract for servies, but also breach of fiduciary duties.

Remedies

There are various remedies available to the company if an employee or contractor has breached their fiduciary duties.

1. Order for an account for the profits made. This will be particularly relevant where the employee/contractor has been enriched at the expense of the company, for example, receiving sums of money fron the compnay without authority or which should have been paid to the company, or using the company’s resources to generate money;

1. Order to pay damages for any losses incurred by the company resulting from a breach of fiduciary duties.

1. An injunction. This is a discretionary remedy. see the article above.

1. Disciplinary proceedings. In certain cases, it may be possible to bring disciplinary proceedings from an appropriate regulator against a senior employee. For example, where the senior employee held the role of a finance director and they were authorised under CIMA, the regulating body for management accountants.

Conclusion

If you own a company and you are aware of an employee or contractor who has breached their duties, take action to remedy the situation. It is not uncommon for employees or contractors to take advantage of the information they have obtained from their employer and set up their own business or use such information for their benefit inother ways.

It is important not to be hard on yourself, thinking that you may have been able to take certain steps to have prevented a situation from arising. The most important thing you can do is to act now to remedy the situation. Get in touch to speak to one of our members of the team to see how we can help.

After you have taken the necessary action to stop the company being damaged, removed the wrong doer from their position and taken the first steps towards recovering any losses they have caused, it is probable that you will be left in the unenviable position of still being tied to the person who you have been ripped off by because they were still hold shares in the company.

A minority shareholder may not be able to control the company but does still have rights, including the right to share in the profits of the business. Something you would presumably prefer to avoid.

There are a number of ways you can try to get rid of a minority shareholder. In our white paper, “How Do I Get My Shares Back?” we set out the procedures available to you and the pitfalls to avoid.

To download our white paper please enter your details in the form provided. 

Your white paper will be sent to the email address you provide.

In the beginning…

Tom had an idea. He had been working in the construction industry for a couple of years and had spotted a niche for high quality products that was not being met.

So, he set up a company and called it Clear Co. He asked someone he had worked with previously to come on board and they agreed.

Marketing was going to be crucial to Clear Co’s success, so Tom approach Anthony to get a quote for a website.

Anthony came up with a quote for the website for £15,000. He also explained to Tom that marketing didn’t just mean having a website, It was an on-going process that required a lot of activity.

As cash was tight at the beginning of the enterprise, Anthony agreed that he would carry out all the marketing for Clear Co. in return for 30% of the company’s shares.

Business Partners

A previous business partner of Tom’s dropped out, leaving him and Anthony to run the company. Tom held 70% of the shares and was the only named Director of the company. Anthony was a minority shareholder only, with 30% of the shares.

Crucially, Anthony was introduced into all aspects of the business, including being taken on trips to meet Clear Co’s main suppliers.

Tom, with the help of his suppliers, developed and refined Clear Co’s product. Based on Tom’s work, Clear Co. developed a unique, high quality product to sell to the market. Anthony continued the marketing.

Trouble Brewing

Anthony started complaining about the original deal and started asking for fees to be paid for his marketing work in addition to the shares he had already received.

Anthony also made sure that the Clear Co domain name was registered in his name and, of course, because he was responsible for the marketing, he had access to and control of Clear Co’s website and social media accounts and even the cloud based system the company used for its administration.

After a few years Anthony’s fees became the company’s biggest expense, yet he was still not satisfied.

Matters came to a head when Anthony suggested that a second website could be built to enhance the marketing effort. Tom said he thought it was a good idea, but he wanted to make sure that the website belonged absolutely to Clear Co.

Anthony became evasive and the matter was dropped, or so Tom thought.

In fact, Anthony went ahead and built the second website and once completed, presented it to Tom. Anthony suggested that Tom should pay a percentage of any leads obtained through the second website, which Anthony claimed to own himself, or Tom could give him (Anthony) 50% of the shares of Clear Co.

Breaking Up

Tom, tired of Anthony’s demands and extremely annoyed by being presented with the second website and Anthony’s ultimatum, didn’t accept either of the proposals.

He told Anthony that he didn’t want to work with him anymore and asked for control of the domain name, the website of Clear Co and all other company information to be returned to him.

Tom, angry but also sad at the turn of events, remained conciliatory in the letters that passed between the two and genuinely hoped for an amicable settlement.

Anthony apparently had no such ideas. He pretended to give back access to the company’s administration system and website, whilst ensuring he retained access.

He set up his own company; Opaque Limited, contacted Clear Co’s suppliers and set up in competition with Clear Co. Anthony used the second website, all the product and marketing knowledge he had gained whilst working with Tom and the information kept and updated on Clear Co’s systems.

Opening Exchanges

Still hoping for an amicable resolution, Tom instructed an intellectual property solicitor. An interim injunction was considered, but Tom didn’t want to “escalate” the legal proceedings and decided against it.  Correspondence was written to Anthony demanding the return of Clear Co confidential information and intellectual property.

Anthony had no concerns about increasing the temperature of the dispute and adopted a strategy of bullying Tom in to giving him what he wanted. He hired a large West End firm who we later found out,  agreed to work for him without charge.

Responses to Tom’s letters were not only deliberately obstructive, they began threatening court action against Tom on the grounds that he was prejudicing Anthony’s position as a shareholder of Clear Co.

The IP solicitor, not being a litigation specialist, became concerned with the threats of court action as the other side wanted him to. Tom was well and truly on the back foot with no sign of getting any recompense for the obvious wrong he had suffered. That is when he came to us.

Setting The Agenda

Shortly after we were instructed it came to light that Anthony has been hacking the Clear Co website and putting links from that site to his own Opaque website.

We advised Tom of his options and gave him estimates for the costs and time scales of the choices he might make.  We also advised him about the chances of recovering his costs from Anthony if he was successful. This gave Tom a greater feeling of control over the situation. 

The correspondence took a different turn with us setting out Anthony’s dishonesty and refusing to back down when challenged.

We also highlighted the conduct of the West End firm, who had been making numerous threats of court action when no possible cause of action existed.

With Anthony’s efforts to divert attention away from his own unlawful conduct failing, we started to build a case for Tom.

Tom’s Case Against Anthony

Even though Anthony only had a contract with Clear Co, (he was never an employee, never mind a director) such was the extent to which he had been involved in the business and his role within in it, he clearly owed fiduciary duties to the company. He also had obligations through the express and implied terms of his contract, which he had breached.

We drafted a claim that required:

Anthony to pay damages to Clear Co for the loss of business caused by Anthony through Opaque Limited, competing with it and/or an account of the money he had made through Opaque.

An injunction to prevent Anthony continuing to use the Opaque site and competing with Clear Co.

An order for delivery up of all the confidential information held by Anthony/Opaque and an injunction to prevent him from using the information further.

We went through hundreds, if not thousands of documents with Tom to build the strongest case we could for him and advised him of what he might expect to get and his prospects of success, which were good.

Court Action

At this point Tom was prepared to take the case the whole way but wanted to avoid the outlay if he could. So, we set out our case in detail to the other side, sending a copy of the Particulars of Claim we had drafted, along with a number of settlement offers.

Anthony refused the offers and proceedings were issued.

The sides then went through the process of exchanging Statements of Case. The Claim Form and Particulars of Claim for Tom and the Defence from Anthony. After consideration of the documents prospects for Tom continued to look positive and we advised him of this.

The case then went into the court’s administrative stage known as Allocation. Each side is required to put together a suggested timetable to take the case to trial and a budget for doing so. The parties exchange these documents. It was then that we learned that Anthony had been funded and probably still was being funded by West End firm.

This was a blow. Our efforts to settle the case had probably not succeeded because Anthony had thought he didn’t need to compromise with all the help he was getting.

The case was becoming complex. Anthony wanted to keep the case to a minimum of documents so that he could claim he had little to do with the company and did not owe any fiduciary duties. We wanted the history of his dealings with Clear Co set out in full, so that it would be obvious that he owed fiduciary and contractual duties to the company and that he had breached them.

We also had to prove the interference with the Clear Co website we knew had been going on.

The Tide Turns

At a Case Management Conference at the court, we argued for and eventually got the other side to agree that disclosure of documents had to be done fully. This also increased the costs, which the West End firm, who we think were still providing support for Anthony, probably didn’t like.

We also argued for and got permission to provide further expert evidence on Anthony’s hacking of the Clear Co’s website.

We went back to our expert and using analytical software were able to show beyond doubt that in the early exchanges of the dispute Anthony had been manipulating the Clear Co website. This had been done at the same time as he had been competing with the company and getting the West End firm to write letters falsely saying that we were the one undermining the company. 

Mediation and settlement.

The courts are very keen on the parties in court actions using mediation to settle cases. To not go to mediation means you run the risk of facing severe costs sanctions, even if you win your case.

We were satisfied with the preparation of our case and suggested mediation to Anthony and his solicitors.

Prior to mediation we set out our case in full and disclosed our expert evidence that showed that Anthony had been hacking the Clear Co website and acting dishonestly in the conduct of the litigation.

At the mediation we were able to speak to Anthony directly and set out what we knew. We were also able to speak to the West End firm and reinforce the point already made, that they potentially bore a liability for the costs of this action for having supported Anthony.

We got a settlement that exceeded what we had agreed with Tom would have been acceptable beforehand.

• Anthony to pay damages to Clear Co for loss of business.
• Anthony to return his 30% shareholding in Clear Co to Tom for £1,
• Restrictions on Opaque being able to trade in competition with Clear Co.
• All domain names and control of the Clear Co website to go back to Clear Co.

Would Tom have liked to put Anthony and Opaque out of business? Of course, but he would only really have been able to achieve that if he had gone for an interim injunction at the start of the dispute. Was he happy with the settlement though? He was delighted.

The Final Hurdle

At the end of the mediation, which lasted 11 hours, we had the outline of an agreement.

In the six weeks after the mediation, the experienced and capable litigators of the West End firm, tried everything to water down the agreement and limit its impact on Anthony and value to Tom.

Our experience and expertise enabled us to foil every attempt. At the point when we thought we just couldn’t do business with these people and we would have to go back to court, they agreed to what had been first set out in the mediation.

It was the last working day before Christmas, it had taken three years to settle and we had won. Tom was on holiday, so we told him the good news. We went to the pub to celebrate. 

Why did we win?  

• We relied on analysis of the issues rather than intimidation.  
• We did not give in to the intimidation used against us.  
• We supported Tom through what might have been one of the toughest things he has ever had to go through.  
• Our knowledge and experience helped us get what Tom wanted.