Neutral Citation Number: [2012] EWCA Civ 998
Case No: A3/2011/2485
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE 
(CHANCERY DIVISION) (COMPANIES COURT)
HIS HONOUR JUDGE HODGE QC
[2011] EWHC 2186 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 19/07/2012

IN THE MATTER OF TOBIAN PROPERTIES LIMITED AND IN THE MATTER OF THE COMPANIES ACT 2006
Before :

LADY JUSTICE ARDEN
LORD JUSTICE AIKENS
and
LORD JUSTICE KITCHIN
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Between :

	GEOFFREY MAIDMENT	Appellant	
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	(1) ALLAN ATTWOOD 
(2) NICOLA HEARD 
(3) TOBIAN PROPERTIES LIMITED	Respondents	

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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
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Judgment

Lady Justice Arden : 
1.	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.
2.	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.  
3.	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.  
4.	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. 
5.	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. 
6.	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. 
7.	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.  
8.	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.
9.	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.  
10.	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  
11.	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.
12.	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). 
13.	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
14.	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.
15.	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 Attwood was fixed at £80,000 for each of the six years in question – which is more than 75% greater than the amount which Mr Harris was paid - the claim must have been worth some £300,000 plus interest.  
16.	The amounts which Mr Attwood took as remuneration were disclosed in Tobian’s annual accounts, and Mr Maidment would have seen those amounts for the year in which they were drawn if he had inspected the annual accounts. The judge failed to make any finding, however, as to whether the accounts were ever sent to him.  This might have been significant because Mr Maidment had a right under the articles of association of Tobian to have them sent to his address shown in the register of members.  The judge held in the course of his judgment that Mr Maidment could not complain of the failure to provide information because he had not asked for the accounts.  There thus emerged in the judge’s judgment the line of thinking that a shareholder could not complain of an act which would otherwise have qualified as unfair prejudice if by diligence he could have found out about it earlier through taking some step.  
17.	The judge went on to hold that the payment of this excessive remuneration to Mr Attwood was not unfairly prejudicial.  On the face of it, this is, with respect to the judge, a surprising conclusion. The reason which the judge gave for holding that the payment of excessive director’s remuneration was not unfairly prejudicial was in effect that Mr Maidment could by diligence have found out about it earlier by taking some step.  In the judge’s judgment, Mr Maidment could have obtained a copy of the annual accounts by exercising his right as a member of the public to search Tobian’s file at Companies House.  Not having done so, he could not, in the judge’s judgment, claim that the payment was unfairly prejudicial to him.  In the judge’s own words: 
“158. …the remuneration being drawn by Mr Attwood as the sole director was clearly disclosed on the face of the accounts of Tobian filed at Companies House.  It would have been clearly apparent to Mr Maidment had he chosen to consider those accounts.  As I have indicated, Mr Maidment accepted that he never even asked for the accounts, and he did not consult them.  The excessive remuneration went unchallenged. It does not seem to me that the excessive remuneration should properly be treated as unfairly prejudicial in the particular circumstances of the present case.”
18.	The second issue related to use of Tobian’s trading name.  On the judge’s findings, Epyc traded under Tobian’s trading name between 2005 and 2008 for no payment.  The judge’s conclusion was again with respect surprising.  He held that this conduct, while in breach of Mr Attwood’s duty as a director, did not result in unfair prejudice because Epyc had not succeeded in doing what no doubt was Mr Attwood’s aim in its using Tobian’s trading name, namely trading profitably in this period.  
19.	The third complaint related to the sale of Tobian’s trading name on the eve of its liquidation.  Mr Attwood sought to defend the claim that the sale was at an undervalue on two bases.  He submitted that it was the liquidator who determined the sum of £5,000 +VAT paid by Epyc for Tobian’s goodwill and assets. The judge rejected that submission on the facts.  However, the judge accepted the second argument that the undervalue could not in any event exceed the amount of the deficiency in Tobian’s liquidation and thus did not amount to unfair prejudice. 
Features of the unfair prejudice remedy
20.	Section 994(1), so far as relevant, provides:
“(1)     A member of a company may apply to the court by petition for an order under this Part on the ground—
(a)     that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself),…”
21.	The key phrase in section 994(1), “unfairly prejudicial”, comprises two elements, unfairness and prejudice but both of these must be understood in the context of company law.  The concept of fairness inherent in this phrase is flexible and open-textured but it is not unbounded.  The courts must act on a principled basis even though the concept is to be approached flexibly.  They cannot decide whether to grant or refuse relief from unfair prejudice on the basis of palm-tree justice. The impact of the context was explained by Lord Hoffmann in O’Neill v Phillips [1999] 2 BCLC 1.  The editors of Pettet’s Company Law: Company Law & Corporate Finance (Longman 4th ed 2012) have described his speech as “a state-of–the-art account of the rationale of this area of law”.  So far as material to this case, Lord Hoffmann held: 
“Although fairness is a notion which can be applied to all kinds of activities, its content will depend upon the context in which it is being used. Conduct which is perfectly fair between competing businessmen may not be fair between members of a family. In some sports it may require, at best, observance of the rules, in others (‘it’s not cricket’) it may be unfair in some circumstances to take advantage of them. All is said to be fair in love and war. So the context and background are very important.
In the case of s 459 [predecessor of section 994 in the Companies Act 1985], the background has the following two features. First, a company is an association of persons for an economic purpose, usually entered into with legal advice and some degree of formality. The terms of the association are contained in the articles of association and sometimes in collateral agreements between the shareholders. Thus the manner in which the affairs of the company may be conducted is closely regulated by rules to which the shareholders have agreed. Secondly, company law has developed seamlessly from the law of partnership, which was treated by equity, like the Roman societas, as a contract of good faith. One of the traditional roles of equity, as a separate jurisdiction, was to restrain the exercise of strict legal rights in certain relationships in which it considered that this would be contrary to good faith. These principles have, with appropriate modification, been carried over into company law.
The first of these two features leads to the conclusion that a member of a company will not ordinarily be entitled to complain of unfairness unless there has been some breach of the terms on which he agreed that the affairs of the company should be conducted. But the second leads to the conclusion that there will be cases in which equitable considerations make it unfair for those conducting the affairs of the company to rely upon their strict legal powers. Thus unfairness may consist in a breach of the rules or in using the rules in a manner which equity would regard as contrary to good faith.”
22.	One of the most important matters to which the courts will have regard is thus the terms on which the parties agreed to do business together.  These are commonly found in the company’s articles. They also include any applicable rights conferred by statute.  In addition, the terms on which the parties agreed to do business together include by implication an agreement that any party who is a director will perform his duties as a director.  Primary among these duties are the seven duties now codified in sections 171 to 177 of the Companies Act 2006.   Under these duties, a director must act in the way which he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole.  There is also the well-known duty to avoid conflicts of interest and duty:  a director must avoid a situation in which he has an interest which conflicts with that of the company.  Six out of seven of these duties are fiduciary duties, that is, duties imposed by law on persons who exercise powers for the benefit of others.  Non-compliance by the respondent shareholders with their duties will generally indicate that unfair prejudice has occurred.
23.	Moreover, fiduciary duties are stringent.  A director is liable to account for a profit that he obtained from a breach of duty even if the company has suffered no loss:  see, for example, Murad v Al-Saraj [2005] EWCA Civ 959.  This is a harsh result.  Equity has not developed exceptions to avoid this because there is a strong deterrent element in the imposition of liability for breach of fiduciary duty.   Cardozo CJ expressed these points in the New York case of Meinhard v Salmon (1928) 249 NY 458, 463 in the following memorable passage: 
“Uncompromising rigidity has been the attitude of the court of equity when petitioned to undermine the rule of undivided loyalty by the “disintegrating erosion” of particular exceptions. Only thus has the level of conduct for fiduciaries been kept at a level higher than that trodden by the crowd.”
24.	Moving to the consequences if the court finds that unfair prejudice has occurred, we find that the court has a wide power to fashion appropriate relief.  Section 996(1) of the Companies Act 2006 confers on the court wide powers to grant relief:
“(1)     If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.”
25.	In particular, the court’s order may: 
“(2)     …
(e)	provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accordingly.”

26.	An order for the purchase of the non-controlling shareholder’s shares by the respondents to the petition is commonly called a “buyout order”.  It effects a divorce of the parties’ interests in the company.  For the purpose of establishing the price payable under a buyout order, the courts have adopted a flexible attitude to share valuation. Notably, actual share values can be adjusted to reflect the effect on the company of all or any wrongs which the wrongdoer respondents have committed against it. 
27.	Unfair prejudice proceedings generally raise numerous factual issues entailing examination of events over a considerable period of time.  Just as defended divorces used to raise numerous issues, making trials long and complex, so trials of section 994 petitions can be long and complex.  Thus a high degree of case management is required if the case is not to get out of hand.  Effective case management means that, where possible, the court prevents unnecessary court time being spent on issues that are not capable of giving rise to relief.  Thus a court will generally determine the issues necessary to determine whether a buyout order should be made at one hearing (“the liability hearing”) and only proceed to a second hearing (“the quantum hearing”), at which evidence would be given relevant to establishing the value of the petitioner’s shares, once it has determined that a buyout order should be made.  Case management, however, must be consistent with both parties’ right to a fair hearing.  
28.	The dominant characteristic of the unfair prejudice remedy, both in statute and case law, is its adaptability.  This enables the courts to produce a just remedy where minority shareholders can show wrongdoing that prejudices their interests.  It also makes the unfair prejudice remedy important as a means of encouraging proper corporate behaviour in the management of smaller companies and building up the confidence of investors in them.   This policy aim is as important today as it has always been since the original version of what is now the unfair prejudice remedy was introduced in the Companies Act 1947.
29.	I now turn to the submissions on this appeal on the three matters that the judge held did not amount to unfair prejudice.
ANALYSIS OF THE THREE ELEMENTS OF CONDUCT HELD BY THE JUDGE NOT TO CONSTITUTE UNFAIR PREJUDICE:
PAYMENT OF EXCESSIVE REMUNERATION
30.	Mr Thomas Grant, for Mr Maidment, submits that Mr Attwood’s remuneration was so obviously excessive that the onus of showing that the remuneration was reasonable had shifted to Mr Attwood.  On his submission, the judge was wrong to hold that Mr Maidment was debarred from bringing an unfair prejudice claim because the accounts had been placed on a public file.  Mr Andrew Clutterbuck, for Mr Attwood, seeks to uphold the judge’s conclusion on a number of grounds principally directed to the judge’s finding about excessive remuneration and Mr Maidment’s conduct. I will deal with those matters separately after I have dealt with the question whether the judge was right to hold that Mr Attwood’s conduct was not unfairly prejudicial because Mr Maidment could have found the information about the excessive remuneration by inspecting Tobian’s file at Companies House.  
No unfair prejudice because of failure to inspect Tobian’s accounts at Companies House?
31.	In my judgment, the judge’s approach was wrong in principle: it involves a new restriction on the manner in which shareholders can enforce the liability of directors for wrongs to their company. As we have seen, in O’Neill v Phillips Lord Hoffmann held that the content of fairness in the unfair prejudice remedy is coloured by its context of the corporate vehicle. One major feature of the context is that, in a company, shareholders in general permit the directors to apply the assets of the company in accordance with its constitution on terms that the directors perform their duties.  If the directors do not perform their duties, they may be liable to the company in accordance with the stringent standards applying to fiduciaries. 
32.	To maintain the balance of power between shareholders and directors, shareholders are given the right in certain circumstances to bring proceedings to enforce that liability of the directors to the company in circumstances where the company cannot take action itself.  Thus the Companies Act 2006 provides that in certain circumstances, shareholders have the right to bring a derivative action to enforce the directors’ liability to their company, or, through the unfair prejudice remedy, to ensure that they (the shareholders) are compensated or obtain other relief in respect of the loss.  Shareholders are limited by the statutory requirements in relation to these remedies. In the case of derivative actions, those requirements are to be found in sections 260 to 264 of the Companies Act 2006.  Those requirements do not include a failure to read the filed accounts at Companies House.  The judge’s approach means that minority shareholders are at risk of losing their rights if they do not read their company’s filed accounts.  This approach imposes a requirement for diligence that has no basis in the statutory provisions or in principle or authority.
33.	The judge’s approach was flawed in another respect.  There was also the second breach of duty by reason of the fact that Mr Attwood had fixed the remuneration by reference to his own interests contrary to his duty as a director of Tobian. This was unfairly prejudicial conduct on the basis of the approach to unfairness adopted in O’Neill v Phillips. The fact that this breach of duty had occurred was unsurprisingly not disclosed in Tobian’s filed accounts.  The judge’s reason for rejecting Mr Maidment’s case based on excessive remuneration was additionally flawed because it did not address this separate basis for holding that there was unfair prejudice.
34.	I now turn to the two grounds raised by Mr Clutterbuck for upholding the judge’s order for different reasons.
No proper finding about excessive remuneration?
35.	Mr Clutterbuck submits that the judge’s finding on excessive remuneration is unsound.  He submits that there was no proper benchmark before the judge to enable him to conclude that Mr Attwood’s remuneration was excessive.  On his submission, Mr Maidment had not adduced expert evidence on the proper level of remuneration, and the liability trial was intended to deal exhaustively with all issues as to unfair prejudice.  Therefore his claim based on excessive remuneration should also have been dismissed for this reason.  I would reject this submission for the reasons given in the next two paragraphs. 
36.	In my judgment, as Blackburne J held in Irvine v Irvine [2007] 1 BCLC 349 at [267]–[268], where the court has to determine the appropriateness of a director’s remuneration, it should do so by reference to objective commercial criteria.  I would add to that observation that, in the light of the public debate that has taken place in recent years over executive pay in large companies, much guidance can be found about the remuneration of directors in listed companies in the various guidelines that have been produced, such as the Association of British Insurers’ Principles of Remuneration.  The court may today also find this useful background material. But the practice of the court as to the determination of appropriate levels of remuneration is not applicable unless all issues as to liability for unfair prejudice were required to be resolved at the liability trial.  I will consider that question when I consider below the course which the judge should have taken with regard to this claim.
37.	Mr Clutterbuck’s second submission under this head is that the judge should have treated Mr Attwood and Ms Heard as a single management team, that is to say, rather than ask whether the remuneration paid to Mr Attwood was excessive, the court should ask whether the remuneration paid to both of them viewed overall was excessive. In my judgment, it is not open to him to say that, because Ms Heard was underpaid, or ungenerously paid, her remuneration can be taken into account as some form of mitigating factor when considering how much Mr Attwood was overpaid.  In any event there is no evidence that Ms Heard was underpaid. 
Mr Maidment’s conduct
38.	In limited situations the court rejects an unfair prejudice petition because of some conduct on the part of the petitioner: see Buckley on the Companies Acts, [18] (Protection against Unfair Prejudice), paragraph [24].  Examples of such conduct include cases where a party has abused the process of the court.  Mr Clutterbuck essentially relies on this principle for saying that Mr Maidment’s petition should have been dismissed in its entirety because of Mr Maidment’s conduct. 
39.	I would reject that submission also.  The short answer is that the judge did not make any finding that Mr Maidment had so conducted himself as to disentitle him from relief, and there is nothing that would justify this court in taking that course.  Mr Clutterbuck relies on various items of conduct by Mr Maidment.  Mr Maidment had decided unilaterally upon a divorce of the interests that he and Mr Attwood jointly had in Annacott and Tobian.  Mr Maidment’s evidence was that he considered that he should be entitled to the former and that Mr Attwood was adequately compensated by his shareholding in Tobian.  Mr Clutterbuck submits that the judge found, in paragraph 76 of his judgment, that Mr Maidment considered that, as compensation, Mr Attwood should have Mr Maidment’s interest in Tobian.  The judge held:
“76. I have no doubt that after the correspondence between solicitors ended in December 2003, Mr Maidment felt that Mr Attwood had been sufficiently remunerated for his earlier contribution to Annacott by his investment in Tobian, and that he was entitled to nothing further from Annacott.  I conclude that Mr Maidment therefore set about engineering a situation in which he would divest Annacott of its assets, leaving nothing against which Mr Attwood could assert a claim.”
40.	The critical words are “his investment”: they are ambiguous but more naturally refer to Mr Attwood’s majority holding than to Mr Maidment’s shareholding. Moreover there is no evidence that Mr Maidment took any steps to transfer his shareholding to Mr Attwood. Paragraph 76 of the judge’s judgment accordingly does not justify the inference that Mr Maidment decided to abandon his shareholding in Tobian to Mr Attwood.  In any event, the judge did not refer to this point in paragraph 158 of his judgment (paragraph 17 above).  The judge did not hold that Mr Maidment was disqualified from pursuing the proceedings by virtue of his conduct but that there had been no unfair prejudice.
41.	Mr Clutterbuck points out that the relationship between Mr Maidment and Mr Attwood was hostile and that Mr Maidment had made no point about the remuneration until after Mr Attwood served his petition in relation to Annacott.  Mr Maidment had blamed Mr Attwood for an incident in which he was seriously mugged in Rainham station car park on 28 April 2003. (The judge made no findings about whether Mr Maidment was right to attach any blame to Mr Attwood).   Mr Clutterbuck also submits that Mr Maidment had set about destroying the value of Mr Attwood’s investment in Annacott by misappropriating its assets. In my judgment, neither the parties’ hostility to each other nor the fact that the Tobian petition was retaliatory justifies Mr Attwood committing what would otherwise be unfairly prejudicial conduct in relation to Tobian.  Justice is not administered on the basis of tit for tat. Moreover, the judge did not mention any of this conduct in paragraph 158 of his judgment. 
42.	Furthermore, there is no finding of the judge that Mr Maidment had knowingly acquiesced in any breach of duty by Mr Attwood to Tobian.  Had Mr Maidment made a covert strategic decision to leave Mr Attwood with the burden of running Tobian and free to continue drawing excessive remuneration with a view to seeking to recover it from him at a later date, the court might well have held that he was barred from pursuing the excessive remuneration ground.  However, that is not what the judge held.  The judge rejected the complaint about excessive remuneration on the basis that there had been no unfair prejudice, not on the basis that Mr Maidment’s conduct had disentitled him to relief.
43.	Accordingly the next question is: what should the judge have done about the excessive remuneration claim? 
 What should the judge have done about the excessive remuneration claim?
44.	We have seen that the content of fairness is contextual.  It is also flexible and open-textured.  It is capable of application to a large number of different situations.  The courts are also given wide powers to fashion relief to meet the circumstances of a particular case.  Parliament clearly intended the courts to adopt a flexible approach to proceedings under section 994, and to be flexible in the exercise of their powers in relation to these proceedings.  This is confirmed by the approach that the Privy Council took in Gamlestaden (paragraph 12 above).  The course that I consider that the judge should have used in this case is a development of that approach.  
45.	In this case, the judge was not engaged on the exercise of quantifying the value of Mr Maidment’s shares in Tobian, but of ascertaining whether there had been unfair prejudice.  If Tobian had been solvent, the judge would not have had to quantify the amount of the excess remuneration.  That quantification exercise would be done at the quantum hearing as a step in establishing the price payable under any buyout order.  
46.	Where, however, the company is insolvent, the court has to be flexible in its approach.  This is because there is the complication that the petitioner may not be able to show that he obviously has some interest in the company meriting relief because his sole interest constitutes shares which at the moment of trial are valueless because no relief has yet been given in respect of the matters of which he complains.  The court has to do what is necessary in that situation to achieve a just and fair result.  
47.	In this case, the right course in my judgment is for the judge to consider whether enough has been shown to justify a further hearing.  Normally this will involve showing a provisional case to an appropriate standard in the circumstances of the case.  The appropriate standard will usually be a real prospect of success.  The usual dividing line between the liability hearing and the quantum hearing is not set in stone.  
48.	In my judgment, there was a real prospect that the claim based on excessive remuneration could lead to the grant of relief even though Mr Maidment did not adduce expert evidence as to how Tobian’s loss should be quantified at the liability trial.  There were ample grounds on which the judge could reach the conclusion that Mr Attwood’s remuneration was out of the norm for this particular company, and in that sense (if no other) that the remuneration was excessive.  The judge did not need to make a finding at that stage as to the amount of remuneration that could properly have been paid.  It was sufficient for him to conclude, as he would have been bound to do, that there was a real prospect that the claim for loss would exceed the amount of Tobian’s deficiency as regards creditors. 
49.	In these circumstances, in my judgment, the judge could properly remit to the quantum hearing any issue from the liability trial that was more conveniently dealt with at the further hearing provided that it was not procedurally unfair to either party to do so.  He would hear their submissions on this as we have done.  In my judgment, in the circumstances of this case it was just and convenient to remit the issue of the quantification of the element of Mr Attwood’s remuneration which was excessive to the quantum hearing even though it went to the issue of unfair prejudice which would normally be wholly dealt with at the liability trial.  Dismissal of the petition deprived Mr Maidment of the opportunity of showing that the excess was sufficient to “plug the hole” resulting from Tobian’s insolvency.  It deprived him of access to justice in that respect. Mr Attwood is put to the cost of a further hearing but he could have had no expectation that all the issues in the case would be dealt with at a single hearing: there had been no order to that effect.  Newey J had made an interim order that share valuation evidence should be adduced at the quantum hearing but I give little weight to that as he was working on the basis of the usual dividing line between the liability hearing and the quantum hearing. Procedural fairness, therefore, supported remittal of the issue to a quantum hearing.
50.	In my judgment, the appeal must be allowed on this ground.  There is no need to deal with Mr Grant’s submission that the onus of showing that the remuneration was not excessive to any particular extent had shifted to Mr Attwood.    
EPYC’S USE OF TOBIAN’S TRADING NAME
51.	Mr Grant submits that it was a clear breach of duty for Mr Attwood to allow Epyc to trade using the name of Oliver Jaques without payment.  Mr Attwood would not have caused Epyc to use Tobian’s trading name if it had not carried a certain cachet.  It was Mr Attwood’s responsibility to protect Tobian from misuse of its assets.  The fact that Epyc did not trade profitably in this period does not constitute a good defence to this claim. 
52.	Mr Clutterbuck contends that there was no liability on Mr Attwood since Epyc made no profits.  If he is wrong on this, he submits that there is a risk of double liability if Tobian was held to be entitled to both this claim and a claim arising out of the subsequent sale to Epyc. 
53.	In my judgment, by not negotiating a licence fee from Epyc Mr Attwood failed to protect the interests of Tobian as he was bound to do in order to discharge his duties as a director of Tobian.  I do not consider that there would have been an outright sale of Tobian’s trading name in 2005 since Tobian required the name for its own business.  The correct measure of loss, therefore, is the amount that Tobian would have received if Mr Attwood and Epyc had negotiated at arm’s length for a licence for Epyc to use Tobian’s trading name for the period 2005 to 2008.  I reject Mr Clutterbuck’s further submission that it is too late for this claim to be advanced and that the witnesses were not asked about the terms of the licence.  This claim was argued below.  The measure of damages is a matter of law and any evidence can be dealt with at the quantum hearing.
54.	Mr Clutterbuck’s further submissions go to the important issue of proportionality. He submits that a claim arising out of the use of Tobian’s trading name would at best lead to the recovery of only a small sum of money.  Thus, on his submission, it would be disproportionate to have a further hearing to determine the value to be put on this claim, especially given the length of other hearings between the parties in relation to Tobian and Annacott.  
55.	In my judgment, a claim or other potential asset should not be left out of account in valuing the company’s assets unless it is clear that it would be involve disproportionate cost to value it.  I recognise that there is bound to be a risk that this claim may prove to be insignificant in value.  I also accept that, had this claim stood alone it would not have been sufficient to eliminate the deficiency as regards creditors and it would not have justified a further hearing. However, leaving aside the question of the claim which I have yet to consider arising out of the sale of Tobian’s trading name, I consider that the claim for damages for the use without payment of Tobian’s trading name should be remitted for the following reasons:
•	I have concluded that the substantial claim in respect of excessive remuneration should be remitted to a further hearing in any event;
•	in those circumstances, this claim will not add materially to the costs of the further hearing;  
•	in any event, the judge has powers to ensure, so far as can be done, that disproportionate costs are not incurred or recovered on this issue.  
EVE OF LIQUIDATION SALE OF TOBIAN’S TRADING NAME TO EPYC 
56.	Contrary to the submission of Mr Clutterbuck, it is clear that Mr Attwood was responsible in law for fixing the price of £5,000 + VAT for the eve of liquidation sale of Tobian’s assets, including its trading name, to Epyc in his capacity as the sole director of Tobian, and that he did not discharge his duties as a director in fixing it.  Mr Attwood fixed it not by reference to the best interests of Tobian but by reference to the estimate of the sum that needed to be injected into Tobian so that a meeting of creditors could be called and Tobian put into voluntary liquidation.  It is not, as Mr Clutterbuck suggests, a defence to this breach of duty that, after the liquidation, the liquidator in her letter dated 14 December 2010, having investigated Tobian’s assets, confirmed that Epyc did not need to pay any further sum for the assets acquired from Tobian. It was likewise not a defence that Epyc had agreed to pay more if the liquidator determined that a further sum should be paid.  In any event, the liquidator’s valuation was incorrect because it was prepared on the express basis that the goodwill was valueless because Epyc had already been using it.  Epyc could not properly have acquired the trading name or goodwill as it had not paid for the right to do so.  Mr Attwood could not delegate his duty to anyone else. Mr Attwood is liable to account to Tobian for any loss resulting from his breach of duty.
57.	There is again the question of whether it would be disproportionate to remit this issue to a further hearing. On the one hand, Mr Grant submits that there was a substantial undervaluation of Tobian’s goodwill and trading name.  Epyc is still using the name of Oliver Jaques.  In addition, Tobian would have had partly completed contracts with sellers of property and management agreements with the owners of flats, which were simply handed over to Epyc.  On the other hand, Mr Clutterbuck submits that Epyc agreed to cover these contracts and agreements so as to protect Tobian from claims for breach of contract.  There are insufficient findings to resolve this dispute.  It is clear, however, that there was a breach of duty.  I consider that the question of the value of the claim arising out of the breach of duty should be remitted to a further hearing.  There is a real prospect that at a further hearing Mr Maidment could show that goodwill and trading name was undervalued on sale to Epyc.  In addition the reasons given in paragraph 55 above apply also here.
Conclusion
58.	I would allow this appeal.  In my judgment the judge was wrong to dismiss the unfair prejudice petition brought by Mr Maidment in respect of Tobian.  The judge should have adjourned the petition for a further hearing.  This would have provided an opportunity to determine whether Tobian would have had a surplus as regards members if Mr Attwood had not acted in breach of duty in (1) drawing excessive director’s remuneration, or (2) permitting Epyc to use its trading name without fee in the period 2005 to 2008, or (3) selling its name and goodwill to Epyc on the eve of liquidation for £5,000 + VAT.  In my judgment, Mr Maidment had established that, if that were the case, he had suffered unfair prejudice as a member of Tobian in respect of which the court could grant relief. 
59.	There will be no buyout order or other relief ordered at this stage since it still has to be determined whether Mr Maidment’s shares have any value. 
Lord Justice Aikens:
60.	I agree.
Lord Justice Kitchin:
61.	I also agree.