Rui Gu v Simon Whibberley & Ors

The Vice-Chancellor:

1. The Petitioner, Mr Gu, alleges that the affairs of the Seventh Respondent company, European Automation Projects Limited (“the Company”) were conducted by its directors, the First and Second Respondents, Mr Whibberley and Mr Briggs, in a manner that was unfairly prejudicial to him as a minority shareholder of the Company, within s.994 Companies Act 2006.

2. The Third, Fourth, Fifth and Sixth Respondents are the other shareholders in the Company, but no allegations of unfairly prejudicial conduct are made against them.

3. The Company was a spin off from another company, Oilband Limited, which failed in 2010, and of which Mr Gu and the individual Respondents were all employees.

4. There are two principal allegations made by Mr Gu in his petition: i) that he was unfairly discriminated against in the payment of interim dividends, first by being paid a reduced amount on three dividends, from December 2019 to March 2022, and then by not being paid dividends at all from December 2022, whereas the Company’s articles and a shareholder agreement provide for dividends to be paid equally on all shares; ii) that when he resigned as an employee of the Company, the exit mechanism that provides for sale of his shares in the Company was deliberately not operated by the directors of the Company, contrary to the terms of the shareholder agreement, so that he remains locked into the Company and has not been able to release his investment. These matters are alleged to be breaches of duty by Mr Whibberley and Mr Briggs.

5. There are also ancillary complaints of unfair prejudice: first, the Company’s failure to provide documents and information to Mr Gu, when requested in July 2022, and second, the payment of the individual Respondents’ legal expenses of defending this petition being paid by the Company between May 2023 and March 20205. These are not relied on substantively as justifying the grant of relief, but as support for a finding of unfair prejudice.

6. The relief sought by Mr Gu is an order for the purchase by one or more of the Respondents of his shares at their current undiscounted value, as determined by the single joint valuation expert, Mr Pughe; alternatively damages or equitable compensation for breaches of statutory or fiduciary duties by Mr Whibberley and Mr Briggs, as directors, damages for breach of the shareholder agreement, and judgment for the unpaid dividends.

7. The business of the Company is the provision of automation systems to the petrochemical industry, to facilitate the measurement and metering control of petrochemicals. This includes the provision of terminal automation software and support services, as well as custom built control skids and electrical and mechanical engineering services.

8. Mr Gu is a Chinese national and came to the UK to study computing networks at Sheffield Hallam University in 2002. He was employed by Oilband Ltd (“Oilband”) following completion of his degree in June 2006. He specialised in developing computer programmes for use within the automation systems. He worked in the same team at Oilband as Mr Dootson, Mr Harris and Mr Shaw, which was managed by Mr Briggs. Mr Whibberley was the sales manager at Oilband.

9. The Company was incorporated in February 2010 and started to trade in May 2010, following the resignation of the individual Respondents and Mr Gu from Oilband. The employees of the Company, including Mr Gu and the individual Respondents, were initially paid the same salary by the Company as they were paid by Oilband.

10. After the Company was trading, Mr Whibberley obtained advice from an accountant about how best to structure the business. As a result, Mr Briggs and Mr Whibberley were appointed directors of the Company on 1 November 2010, and Mr Whibberley assumed the position of managing director. At the same time, new articles of association were agreed by all the employees (“the Articles”).

11. On 11 April 2011, an annual return for the Company was filed at Companies House, which identified the share capital of the Company as 41 shares of £1 each, with each employee being allotted 7 shares except that Mr Whibberley held 4 and his wife held 3 shares, and Mr Dootson had only 6 shares.

12. These shares were issued at a premium of £1,000 per share. Mr Whibberley explained that the greatest risk to a small business such as the Company was loss of key employees, so he decided to offer shares to all employees at the outset, and to raise some initial capital by asking for £1,000 for each share. Mr Dootson explained that he only had the funds to subscribe for 6 rather than 7 shares. Mr Whibberley intended that a share of profits could then be paid to each shareholder, in addition to their salary.

13. The return stated the following, under voting rights: “All shares rank equally with regards to voting rights, rights in respect of dividends, capital and distribution of capital in the event of the company being wound up ….” The return was signed by Mr Whibberley on behalf of the Company.

14. On 23 May 2011, a shareholders’ agreement was signed by all the individuals except Mr Gu and by the Company. Mr Gu did not sign because he had an issue with the numbering of the document, and a later, correctly numbered version was produced, but not signed. It is not now disputed that all shareholders agreed the terms of this document (“the SHA”) in or about May 2011.

15. The SHA identified for the first time that the Company share capital was divided into A, B, C, D, E and F shares, with Mr Whibberley holding 4 A shares, amounting to 10% of the shareholding, Mrs Whibberley 3 A shares (7%), Mr Briggs 7 B Shares (17%), Mr Shaw 7 C shares (17%), Mr Harris 7 D shares (17%), Mr Dootson 6 E shares (15%) and Mr Gu 7 F shares (17%).

16. Clause 5 of the SHA states that: “The net profits of the Company available for distribution to Shareholders shall be applied in payment to the Shareholders by way of dividends proportionate to their shareholdings in accordance with any dividend policy agreed by the Board and approved by the Shareholders in general meeting.” It was common ground that no dividend policy was agreed by the board and approved by the shareholders in general meeting. “Shareholders” is defined as meaning all of the shareholders of the Company.

17. Article 30 of the 2008 Model Articles, as incorporated into the Articles by article 1.7, provides (so far as material): “(1) The company may be ordinary resolution declare dividends, and the directors may decide to pay interim dividends. (2) A dividend must not be paid unless the directors have made a recommendation as to its amount. Such a dividend must not exceed the amount recommended by the directors. (3) No dividend may be declared or paid unless it is in accordance with shareholders’ respective rights. (4) Unless the shareholders’ resolution to declare or directors’ decision to pay a dividend, or the terms on which shares are issued, specify otherwise, it must be paid by reference to each shareholder’s holding of shares on the date of the resolution or decision to declare or pay it.”

18. Accordingly, despite the existence of alphabet share classes that could in principle have been used by the directors of the Company to pay differential dividends, the Company and the parties had agreed that dividends would be paid to all shareholders proportionately to their holdings (“proportionate dividends”). Clause 22 of the SHA provides that no variation of the SHA was valid unless made in writing and signed by each of the parties to it. Clause 5 of the SHA, in so far as it provided for proportionate dividends, could not therefore have been amended by the board or the Company in general meeting without unanimous agreement in writing.

19. Annual returns of the Company in 2012 and subsequent years, and its first Confirmation Statement filed on 1 March 2017 (which was not subsequently amended) all contained the same wording as the first annual return relating to shares ranking equally in respect of dividends, among other matters.

20. Part of the accountancy advice that Mr Whibberley obtained was that it would be more tax efficient to pay only the maximum tax- and National Insurance-free sum by way of salary and pay the rest of the salaries as dividends. Accordingly, from some time in 2011, the monthly payments paid to each employee were still paid in the same amounts, but the greater proportion of them was paid as interim dividends. I shall refer to these as “salary top-up dividends”. Mr Whibberley said that an interim salary top-up dividend was declared each month to enable this to be done. This was understood and agreed at the time by all the employees, and has been done by the Company ever since.

21. Despite the basic documentary formalities that I have identified above, the Company was in fact run extremely informally, as all employees, including the directors, worked from small premises with only two rooms, and all (including Mr Gu) regarded themselves as good friends. There were no board meetings or general meetings of the shareholders, or any notices sent out by the directors to the employees. Mr Whibberley explained that the accounting records (payslips, dividend notices and the like) were kept electronically on the Quickbooks system, in the office, and were not provided to the employees each month, but they were available to download if the employees wanted them (which Mr Gu did, as he used an external accountant to manage his tax affairs, no doubt because of his interests in his father’s business in China).

22. Within a year or two of the start of the Company’s business, as it became better established and moderately profitable, there was a desire to increase the overall amount of remuneration paid to all. This was regarded as being in the nature of a bonus, reflecting the performance of the Company, but it too was effected by declaring dividends – though not final dividends following approval of annual accounts. No such final dividend has ever been declared and approved by the Company. All further remuneration was paid by way of additional interim dividends, declared from time to time by Mr Whibberley, with the agreement of Mr Briggs, as and when there was sufficient cash in hand to justify it. I shall refer to these as the “additional dividends”.

23. Mr Whibberley’s evidence was that although additional dividends were not formally notified to the employees, they would have been aware of them, because of open discussions in the office, and the sums in question were simply credited to the employees’ bank accounts. Sometimes, such additional dividends were aggregated with a monthly payment of salary, so that each employee received a larger than usual payment at the end of the month in question; sometimes, they were paid separately (again, without any formal notification or voucher being sent).

24. The Company continued to prosper, and additional dividends were declared and paid. In 2018, there were additional dividends declared and paid on 26 February (£10,000), 26 April (£10,000), 26 September (£7,000) and 21 December (£5,000). In each case, this was the total payment in respect of 7 shares; in each case, Mr Dootson was paid 6/7ths of this amount, thereby ensuring that the same sum was paid in respect of each of the 41 shares, consistently with clause 5 of the SHA.

25. In May 2018, Mr Gu approached Mr Briggs and said that he was going to return to China, to run the family business in Chengdu, as his father had become ill. He said that he wanted to be paid £165,000 for his shareholding in the Company. This event and the subsequent discussion with Mr Whibberley and Mr Briggs was not covered in Mr Gu’s witness statement. It was evident, in the course of his evidence, that he had confused certain aspects of the 2018 meeting with what happened in October 2019, to which I will come shortly.

26. I accept Mr Whibberley’s evidence about the May 2018 discussion: “… I explained that there were set procedures in the [SHA] for exiting the company. We did not believe his shares were worth that figure. In reply he said he needed that figure as that was the balance on the mortgage of his property in Sheffield. As an alternative he asked if we could transfer the shares to his wife Qi Qi and pay her monthly in dividends. We explained very clearly to [Mr Gu] that the agreement was designed to reward shareholders when they were employees of the company and working for its benefit. If he left, there would be no further dividends payable to him. The idea that we would pay his wife indefinitely was not agreed.” He added, in cross-examination, that he explained that if Mr Gu left the Company his shares would be bought out.

27. Mr Whibberley said that Mr Gu seemed to accept this explanation and that nothing more happened until 3 October 2019, when he found a resignation letter on his desk giving notice for 6 December 2019. The letter said: “Due to personal reasons, I am unable to continue to work with the team the same way as I did in the past. There seemed to be no other viable ways for me to keep contribute to the team, I therefore have made the regrettable decision leave the company.”

28. As a result of that letter, discussions took place between Mr Whibberley, Mr Briggs and Mr Gu. What was said, or agreed, in those meetings is the main factual dispute in this case. What is common ground is that an agreement was reached that the resignation would be withdrawn on the basis that Mr Gu would work part time for the Company, when in the UK, and that he would be free to spend time in China as needed. This appeared to suit both sides, as Mr Gu was a valuable employee of the Company and would not be easy to replace, and equally Mr Gu was not sure how things would work out in China and whether he would move back there permanently with his wife and children. He wanted to retain contact with what he regarded as “his family” (i.e. his work colleagues) in the UK. It was also common ground that to the extent that Mr Gu could and did work for the Company remotely, when in China, he would be paid for that work.

29. What is disputed is what was said, or agreed, about Mr Gu’s remuneration. Mr Gu’s case is that it was not agreed that his additional dividends – to which he was entitled as a shareholder in the Company – would be pro-rated according to how much time he spent working for the Company, but that it was agreed that his regular monthly remuneration would be pro-rated in that way. The Respondents’ case is that it was agreed and understood that the whole remuneration package – i.e. base salary, salary top-up dividends and additional dividends – would be pro-rated. The Reliability of the Witnesses

30. I must say something at this point about the reliability of the evidence of Mr Gu, Mr Whibberley and Mr Briggs. Although Mr Harris and Mr Dootson also gave evidence, what they said is of no real significance for the resolution of this principal factual dispute.

31. Relatively shortly before trial, the Respondents applied to have Mr Gu’s witness statement disallowed, on the basis that it did not comply with CPR PD 57AC. There were several instances where the statement provided commentary on documents, or consisted of argument. I indicated at the start of the trial that I considered there was non-compliance but that this more appropriately sounded in costs. I also said that it remained to be seen whether the witness statement was in the words of Mr Gu or had been written for him.

32. Having heard Mr Gu give evidence, I am satisfied that the non-compliance was more serious than appeared to be the case. Mr Gu presented in the witness box as taciturn and cautious. His witness statement is fluent and expansive. It was clearly not written using the words of Mr Gu. When Mr Gu did speak more than a single sentence in reply to a question, I was satisfied that his English is very good. Though it is his second language, he has lived in the UK continuously since 2002. He was therefore not disadvantaged in his understanding of or ability to communicate in English.

33. One thing that can be taken from the statement is what it does not say. It says nothing about the May 2018 discussion about resignation and dividends, and it does not contain the more elaborate description of discussions about remuneration that Mr Gu gave orally, in support of his case that no agreement was reached that additional dividends would be pro-rated. At times, Mr Gu was clearly confused about what had been said when. I am not persuaded that what he said about this in the witness box was a genuine recollection that had only just returned to him.

34. All of the Respondents’ witness statements were defective, in that they contained neither the certificate of the witness nor of the relevant legal representative, as required by paragraphs 4.1 and 4.3 of PD 57AC, nor the mandatory list of documents to which the witness was referred in preparation for the purpose of refreshing his memory. Separate documents dated 20 May 2025 said to be certificates of compliance by the relevant legal representative (only) were exhibited to a witness statement of Jonathan Partridge dated 18 June 2025, but it was not said that these were part of the witness statements that were served. They were exhibited “for completeness”. No point was taken by the Petitioner, but the Court nevertheless must take into account the serious failing.

35. I nevertheless formed the view that Mr Whibberley was, broadly, a reliable witness, based on his oral evidence, its consistency with the documents and the inherent likelihood of his account being true. Mr Whibberley struck me as a fair and straightforward man, though quite a strong personality, and opinionated. He was quite forceful on certain issues. While there is undoubtedly bad feeling now, as a result of the friction between him and Mr Gu since March 2023 and the conduct of the grievance process, Employment Tribunal claim and this litigation, and on occasions his annoyance with Mr Gu was evident, nevertheless Mr Whibberley made fair concessions in cross-examination when it was appropriate to do so, e.g. when it was put to him that on any view Mr Gu should have been paid some of the December 2022 dividend, to which he responded that he could see that that point had some merit.

36. Some of the detail that Mr Whibberley gave about what was said in the disputed meeting, in response to challenges put to him, in particular with reference to Qi Qi’s position and Mr Gu’s attitude to her, struck me in view of the way that it was given as highly likely to be true and accurate. I am satisfied that he has a reliable recollection of what was discussed and that what he said orally under cross-examination was likely to be true. There is one material point where his witness statement diverges from the account of conversations with Mr Gu given orally, to which I will turn shortly. I prefer to rely on the evidence that Mr Whibberley gave in court rather than what is written in his statement, on the significant disputed issue.

37. Mr Briggs appeared to be a less strong personality than Mr Whibberley, and somewhat reticent to provide detail in his answers to questions. In one respect he identified a passage of his witness statement which was not correct, but otherwise there was consistency between what he said in his statement and what he said in court. I accept that he was truthful in the evidence that he gave, which supported Mr Whibberley’s account. The Central Disputed Issue

38. There is no dispute that the salary top-up dividends and the additional dividends paid to the employee shareholders were dividends, not wages or other perquisites or emoluments. Having structured payments to employees in this way, to avoid having to pay employer’s NI contributions, the Respondents could not argue that they were not dividends, and Mr Gu asserted that they were indeed dividends. Dividend vouchers existed to support that. However, Mr Whibberley and Mr Briggs appear nonetheless to have regarded the payments as being remuneration for the work done by the employees as employees, not as distributions of profits to investors. That manifested itself in a number of ways.

39. First, Mr Whibberley and Mr Briggs (and the other employees who gave evidence) emphasised that their subscriptions for their shares were repaid at an early stage, probably by way of salary – as if the premiums paid for the shares were a loan rather than an investment of capital. Indeed, Mr Whibberley said that they were essentially a loan to the Company, paid back in the first year. It is extremely doubtful that Mr Whibberley had heard of a company’s share premium account, or understood what it is. There was however no reduction in share capital, and the employees remained shareholders, with the rights given to them by the Articles and the SHA.

40. Second, as reflected in the evidence about the May 2018 discussion with Mr Gu, but also more generally asserted, Mr Whibberley (at least) regarded dividends as being paid to reward employees who worked for the Company and contributed to its success. Therefore, an employee who stopped working should not be paid dividends, regardless of the exit mechanism for sale and purchase of that employee’s shares.

41. Third, given the way that dividends were used to pay what was in reality the salaries of the employees, it was natural, in the informal and non-legalistic way in which the Respondents ran the Company’s affairs, to regard them as remuneration for services, rather than a distribution of profits to investors. The additional dividends were, I find, seen by Mr Whibberley and Mr Briggs in the same way, namely as in the nature of bonuses and additional remuneration – albeit they were paid proportionately to shareholdings rather than as a percentage uplift of base salaries, and they reflected the Company’s success not the employee’s performance of his or her responsibilities.

42. Fourth, Mr Whibberley and Mr Briggs had little, if any, understanding of company law, beyond what their accountant recommended that they should or must do. They had never been company directors before 2010, and the Company had been run very informally, without a single board meeting, or general meeting, or any record of decision-making. This is clearly a matter of concern for the discharge of their responsibilities as directors.

43. In view of the above, at the October 2018 discussion with Mr Gu, Mr Whibberley and Mr Briggs had an understanding that Mr Gu’s remuneration for his work included payments of additional dividends, though up to that time these had been paid to all shareholders in proportion to their holdings.

44. What Mr Gu’s view was in those discussions is rather less clear. He clearly knew that he was being paid his former Oilband salary on a monthly basis, and was receiving occasional additional payments. He must have known that the salary top-up payments and the additional payments were paid as dividends, because he obtained from the Company’s administrator dividend vouchers to give to his accountant. He would therefore probably have been aware that the top-up payments were paid unequally to each employee, but that the additional dividends were paid on an equal basis to all shareholders. Whether he was aware in 2019 that Mr Dootson was paid only 6/7ths of the additional dividend payments is unclear.

45. I accept Mr Whibberley’s evidence that Mr Gu was very punctilious about checking what he was paid. That evidence was persuasively given, in cross-examination, and seems to me to fit with the personality of Mr Gu, as I was able to observe it during his own evidence from the witness box. He was extremely careful and meticulous in considering each question put to him, and very precise in the answers that he gave.

46. At the relevant time in 2019, despite being careful to ensure that he was correctly paid, I do not consider that Mr Gu had a clear understanding of the legal nature of dividend payments, or indeed of the terms of the Articles and SHA in that regard. He does not say so in his witness statement, though his statement, written in 2025, rehearses all the relevant terms and asserts that he expected to receive his share of the distributable profits as a result of his investment. I am satisfied that this is either not in Mr Gu’s words or that, if it is, it is coloured by knowledge acquired between 2023 and 2025. It was only when Mr Gu returned from China in December 2021 and discovered, probably in January 2022, that he had not been paid a dividend at all in December 2021 (unlike the other shareholders), that he began to investigate these matters, with the benefit of the internet, messaging and discussion with Mr Dootson, and ultimately solicitors’ advice.

47. I therefore consider it very unlikely that, at the time of the discussion in October 2019, Mr Gu had a clear distinction in his mind between the nature of the top-up dividends and the nature of the additional dividends, or of the legal requirements for payment of dividends. What Mr Gu probably did know was that the additional dividends were paid in equal amounts to the shareholders. Mr Whibberley said that this was openly talked about by the directors in the office, and even if that were not so, it is inherently likely that the employees would have talked to each other about what they received from time to time.

48. As at October 2019, Mr Gu had no objection to the top-up dividends being paid to employees in different amounts. They were in substance part of each employee’s remuneration. The additional dividends were and would have been seen by Mr Gu at that time as a means of adding to the basic remuneration (otherwise frozen at 2010 rates) by paying bonuses on top of the salaries, at the discretion of the directors, reflecting how well the Company was doing at the time. In October 2019, Mr Gu would have had in mind the explanation given to him in May 2018, namely that someone who does not work for the Company cannot be paid dividends.

49. Rather different accounts of the discussion in October 2019 were given in evidence by Mr Whibberley and Mr Briggs on one side, and by Mr Gu on the other. Further, the description contained in Mr Whibberley’s witness statement was not quite the same as the description that he gave in cross-examination, and what Mr Gu said in cross-examination is not contained in his witness statement.

50. In his witness statement, Mr Whibberley said: “We suggested that we could offer him the opportunity to work on a pro rata basis, and that he would be paid pro rata including bonus payments being paid on a pro rata basis. This was accepted. It had to be as no other financial arrangement would work.”

51. In cross-examination he said that he offered to pay Mr Gu for the work that he did in the UK for a period of 2 years, and said that he would pay all his remuneration pro rata, and that it could be discussed again after 2 years. When challenged with the slightly different account in his witness statement, Mr Whibberley said that, in his mind, bonus payments (that is, the additional dividends) were part of the remuneration, and were the same thing as the basic salary. He believed that he had said at the meeting that Mr Gu’s “total remuneration” or “all his remuneration” would be on a pro rata basis.

52. In his witness statement, Mr Briggs said that it was agreed with Mr Gu that “his remuneration for his time working for the Company would be on a pro-rata basis”. He did not say anything different in cross-examination.

53. Mr Gu said in his witness statement: “It was agreed by Simon Whibberley that I could divide my time between working for the Company and working in China, on the understanding that I would not receive my Monthly Payment whilst I was in China. If I carried out work remotely for the Company whilst I was in China, however, I was to be paid for the number of days or hours that I worked. In what I now assume was an attempt to convince me to continue working for the Company, Simon Whibberley stated to me that I would not receive any payment in respect of my shares if I resigned. Whilst this did not seem right to me, I was happy to continue working for the Company and so did not look into this issue further at this stage. I still expected to receive my further dividend entitlement, and to receive my share of the distributable profits, which followed on from my investment in the Company. At no stage was it ever proposed or suggested to me that I would only receive a pro rata share of Further Dividends and no meetings took place to discuss any such proposal.”

54. In cross-examination, however, Mr Gu said that the additional dividends were expressly discussed, and that he maintained that he should receive them in full, and Mr Whibberley maintained that he should only be paid them pro rata, depending on how much he worked. He said that he gave Mr Whibberley the example of the owner of BT shares, who would be paid dividends regardless of whether they worked for that company, and that Mr Whibberley said to him that the Company was not that sort of company. He said that the matter was left with the two sides disagreeing.

55. I am unable to accept Mr Gu’s evidence about what was discussed in this regard, and in particular that there was an express discussion and disagreement about whether Mr Gu would be paid additional dividends in full or pro rata, and that the parties ended the discussion with a disagreement about that matter. Mr Gu was confused, when giving his evidence, about what was said to him in May 2018 and what was said in October 2019, and he maintained at first that the discussion about payment of additional dividends in full took place before he wrote his resignation letter on 3 October 2019. When it was pointed out to him that that made no sense, because the occasion for a discussion about part-time working was receipt of the resignation letter, he said that the same conversation took place before and after the resignation letter was sent. This was unpersuasive.

56. I find that Mr Gu is wrong, and that – apart from the discussion in May 2018, when he was told that Qi Qi could not continue to receive dividends if he stopped working for the Company – the discussion took place only after receipt of the October resignation letter. The discussion happened then because Mr Whibberley was concerned about losing Mr Gu’s services entirely, from the Company’s point of view, and (he said) concerned as a friend of Mr Gu that he was proposing to give up his employment entirely, without knowing what the future held for him in China, leaving his wife and children in Sheffield. Mr Whibberley was therefore offering Mr Gu something better than he had decided on, in that he would be able to go to China as much as he needed to, on unpaid leave, but continue to work part-time for the Company when he could. If he worked for the Company remotely, when in China, he would be paid for that. The terms offered were that Mr Gu would be paid for the time he was working for the Company. This was an attractive offer.

57. Having heard Mr Whibberley’s oral evidence, I consider that his account given then is more likely to be correct, and that what was referred to in the discussion was pro rating all Mr Gu’s remuneration, not just the basic salary and the salary top-up dividends. Nothing was said to distinguish the additional dividends from the rest of the remuneration. What was agreed was that for a period of 2 years the Company would pay Mr Gu for the amount of time that he worked for the Company, on a pro rata basis, and that the position would then be reviewed at the end of the 2 years. There was no separate discussion about the additional dividends. In both Mr Whibberley’s and Mr Gu’s minds at the time, they were bonus payments that were part of Mr Gu’s remuneration for his work. Mr Whibberley said that Mr Gu accepted the proposal, saying “Yep, that would work for me”.

58. The relevant question, for the purposes of this case, is not whether the directors of the Company and Mr Gu made a binding agreement, varying his terms of employment, but whether Mr Gu understood and accepted that there would be pro rating of all his income from the Company, so that he would not receive any in respect of the time when he was absent in China. I consider that he did understand that, and accepted it, for the following reasons. i) I do not believe that, in October 2019, Mr Gu was distinguishing between dividends that were paid to top up the basic tax-free remuneration and additional dividends that were regarded as “bonus” payments, which had the effect of bringing total remuneration up to something like current market levels rather than 2010 rates. It was not until early 2023 that he developed an understanding of what in law a dividend was, and what his entitlement was under the Company’s constitution. ii) Mr Gu was being done a considerable favour by the Company (albeit in its own interests too), and I do not consider that he would have quibbled about what was being offered to him. He knew by this time, as a result of the May 2018 conversation, that if his resignation had had effect in December 2019, he would receive no payments thereafter on his shares because he would lose his shares. iii) If a disagreement about the additional dividends had arisen, as Mr Gu suggested, it would not have been left unresolved. Mr Whibberley regarded the additional dividends as part of the remuneration package, which only those who were working for the Company would receive. I do not consider that the pro rata payment understanding would have been approved by Mr Whibberley and Mr Briggs without that issue having been resolved. It is therefore likely that no such disagreement arose. iv) If there was doubt, as a result of the October 2019 discussion, about whether additional dividends were to be treated separately from salary top-up dividends, Mr Gu would have checked, by requesting pay slips and dividend vouchers from the Quickbooks system, to make sure that he was being paid in accordance with his understanding. Differential payments were made to Mr Gu on 18 December 2019 and 27 January 2021, following absences in China, and the issue would have been raised by Mr Gu following one or other of those payments, not only in March 2022. The fact that these payments were not challenged suggests that there was no doubt in Mr Gu’s mind at those times about what had been agreed. v) In January or February 2022, Mr Gu discovered that he had not been paid any part of the December 2021 additional dividend. At this time, there was considerable friction already about Mr Gu having to prove the extent to which he was working for the Company. Not being paid any dividend at all was something different from being paid promptly a proportion of it, and it was the entire non-payment that upset him. At first blush, Mr Gu had a legitimate complaint about this. It caused him to start researching his entitlement, with the assistance of solicitors. It was only at that time that he became aware that the SHA (which even then he was not satisfied had been signed off) required all dividends to be paid in proportion to the number of shares held. vi) The main complaint in the 1 March 2022 email was that Mr Gu had not been paid any dividend on 21 December 2021. There is no reference in it to what was agreed in October 2019, and the solicitors’ letter dated 4 March 2022 does not refer to any such agreement, or any unresolved question of whether dividends would be paid in full. Unfairly Prejudicial Conduct?

59. There is no doubt that failure by a company’s directors to declare and pay dividends to certain shareholders, according to their entitlement under the terms of its constitutional documents, can be omissions or conduct of its affairs by its directors that is unfairly prejudicial to those shareholders. It will self-evidently be prejudicial, and will be unfair if it is unjustified.

60. Relief is only granted to a shareholder under s.996 of the 2006 Act if the conduct of the company’s affairs in question is unfair to them as well as prejudicial: Re Ringtower Holdings Ltd (1989) 5 BCC 82 at 90; Re Saul D Harrison & Sons plc [1995] 1 BCLC 14 at

31. If the conduct is unlawful (e.g. contrary to a company’s constitutional documents or a breach of its directors’ statutory or fiduciary duties, or both) and prejudicial, then in most cases the criterion of unfairness will be satisfied too. But not necessarily so: there may be particular reasons why what has happened is not unfair to the shareholder in question.

61. In my judgment, this is such a case. Although the effect of the Articles and the SHA is that dividends were to be paid proportionately for each share, unless the SHA was varied in writing by all the shareholders and the Company, the shareholders and the Company had for years conducted themselves on the basis that the salary top-up dividends would be paid unequally. While Mr Gu’s legal challenges originally complained about this too, by the time of this trial he had conceded that no remedy under s.996 of the 2006 Act could flow from that conduct, despite the technical infringement. The question here is whether the same conclusion applies in relation to the additional dividends.

62. My findings of fact are that it was proposed to Mr Gu that, for a period of 2 years from December 2019, he would be free to work for the Company when he was able to do so. That was on the basis that his remuneration from the Company would be paid pro rata. This was accepted by Mr Gu, and it was understood by him and by the directors that this meant that all remuneration, including any dividends paid to him, would be pro-rated. The additional dividends were paid out of the surplus income of the Company from time to time, derived from the work done by its employee shareholders. It was not therefore intrinsically unfair that if Mr Gu only worked for (say) half the year, he would be paid half the dividends that would otherwise have been paid to him, even though it was contrary to the terms of the SHA.

63. In my judgment, it was not unfair (for the purposes of s.994) in the circumstances that Mr Gu should be paid a proportion of his additional dividends depending on the proportion of each financial year that he spent working for the Company. As I have found, that was his expectation until he discovered that he had been paid no part of the December 2021 dividend and, as a result of that, began to examine his legal entitlement. Mr Gu was happy to go along with that from October 2019 until January 2022.

64. Mr Budworth contended too that Mr Gu should be taken to have acquiesced in the directors’ decision to pay him only a pro rata share of his additional dividends, on the basis that he must have known about it from the end of 2019. This was said to make it inequitable for Mr Gu to rely on the breaches of the SHA as a ground for relief. Mr Budworth relied on dicta of Hart J in Knight v Frost [1999] BCC 819 at 828C-E, Mr Philip Sales QC in Fisher v Cadman [2005] EWHC 377 (Ch); [2006] 1 BCLC 499 at [84], and Neuberger J in EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch) at [122] in this regard. It is in my view unnecessary to deal further with the cases of acquiescence, since the same facts that I have found about the understanding reached in October 2019 mean that it is not unfair to Mr Gu in the circumstances for his dividends to have been reduced during the two-year period.

65. The additional dividends that were apportioned were calculated by reference to the amount of unpaid leave of Mr Gu in each financial year of the Company. Thus, for the year April 2021 to March 2022, Mr Gu was paid 9/12ths of his total remuneration, on account of 3 months spent in China between October and December 2021. That is why he was paid £8,750 in March 2022 instead of a full dividend of £20,000. When the additional dividends for 2021-2022 are added up, Mr Gu did receive 9/12ths of the total additional dividends declared in that financial year.

66. I accept Mr Whibberley’s evidence that Mr Gu was not paid any part of the December 2021 dividend until March 2022 because, until the exchange of correspondence in March 2022 when Mr Gu insisted that he wished to remain employed by the Company, it was unclear whether he would return to the office in January 2022 (post-Covid), as the other employees did, or refuse to continue to work for the Company. Further, the directors had no advance notice of when Mr Gu was returning from China. I am satisfied that if the directors had been fully sighted about Mr Gu’s intentions, he would have been paid a proportion of the dividend in December 2021. So the delay in payment from December 2021 to March 2022 was not unfairly prejudicial in itself. It was not a refusal to pay, nor was it withheld for malign motives. Mr Gu was eventually paid the correct proportion of dividends for the year 2021-2022, according to the understanding that was reached in October 2019.

67. The directors’ concern to understand from Mr Gu in late 2021 what his employment intentions were was understandable, on many levels. The arrangement put in place in October 2019 had come to an end at the end of 2021. Some new arrangement was needed, unless Mr Gu was going to cease to work for the Company, or work full time. Mr Whibberley had made it clear to Mr Gu in emails that he was expected to attend the office rather than work from home, unless good medical grounds for not doing so could be established. In the event, Mr Gu insisted that a medical condition made him especially vulnerable to the Covid viruses and did not attend the office, but he did make clear that he refused to be pushed out of the Company and would continue to work remotely. No new arrangement relating to part-time working was agreed. Mr Gu remained employed and, according to him, working from home.

68. The Company could have given Mr Gu notice to terminate his employment, but did not do so. The understanding reached in October 2019 was not extended. Mr Gu resumed his position as a full-time employee, albeit not complying with the directors’ requirements. The issues between employer and employee were soon subsumed in a formal grievance procedure instigated by Mr Gu, which ran until September 2022. Then, on 9 December 2022, Mr Gu resigned his position as employee of the Company with immediate effect.

69. At all times, Mr Gu remained, and still remains, a shareholder of the Company, with 7 F shares. The Company has at no time sought to implement the exit provisions in the SHA for the sale of his shares, nor was any new understanding about reduced payment reached. Had the exit mechanism been activated, Mr Gu would have been bought out and his entitlement to dividends ended. But this did not happen. His entitlement to dividends from the end of 2021 therefore cannot be disputed. There was no understanding that they would not be paid, or acquiescence in non-payment. On the contrary, a full payment was made on 5 July 2022. The Failure to Exercise the Exit Mechanism

70. The SHA contains an elaborate mechanism whereby a shareholder may offer their shares for sale at any time, by giving a Transfer Notice to the Company. Once the value is agreed or determined, the Company first, and then the other shareholders, have rights of first refusal, which, if not taken up, then allows the selling shareholder to sell to their intended purchaser. A similar, but different, mechanism applies in the event of any of a number of “events of default” listed in clause 8: death, bankruptcy, mental illness, unremedied material breach of the SHA, and “if a Shareholder employed by the Company ceases to be employed by or work for the Company”. In any of these circumstances, a Transfer Notice is deemed to have been given by the shareholder.

71. Clause 8.2 of the SHA provides in this regard: “The deemed Transfer Notice has the same effect as a Transfer Notice, except that: (a) the deemed Transfer Notice takes effect on the basis that it does not identify a proposed buyer or state a price for the shares and the transfer price shall be the Fair Value of those shares, determined by the Valuers in accordance with clause 9; (b) the Seller does not have a right of withdrawal following a valuation; (c) if the shares were not sold in accordance with clause 7, the Seller does not have the right to sell the shares to a third party and the Company shall be wound up forthwith upon the continuing shareholders giving notice in writing to the Company within 10 Business Days from the delivery of the deemed Transfer Notice or written notice of the Fair Value, whichever is the later…” The reference in clause 8.2(a) to clause 9 is probably in error, and clause 10 is intended, which specifies the basis of valuation.

72. The effect of a Transfer Notice is stated in clause 7.3, the relevant part of which provides: “… such notice shall constitute the Company as the agent of the Seller for the sale of the Transfer Shares and [sic] the terms of this agreement and except in accordance with clause 7.4 or otherwise with the consent of the Board, the Seller may not withdraw a Transfer Notice or cancel the Company's authority to sell. As clause 8.2(b) stated, there is no right of withdrawal in the case of a deemed Transfer Notice.

73. Clause 7.4 states (so far as material): “if the Seller does not specify a price, or if the price stated in the Transfer Notice is not agreed by the Board, then the price of the Transfer Shares (Transfer Price) shall be determined by the Valuers in accordance with clause 10 and notified to the Seller and the Board in writing (Fair Value Notice)…” “Valuers” is defined in clause 1.1 as: “the auditors or accountants for the time being of the Company or, if they decline the instructions, an independent firm of accountants appointed by agreement between the Seller and the Company or, in the absence of agreement between them on the identity of the expert or its terms of appointment within 10 Business Days of the need to appoint them arising under clause 7.4 or 8.2, an independent firm of accountants appointed, and whose terms of appointment are agreed, by the President, for the time being, of the Institute of Chartered Accountants of England and Wales (in each case acting as an expert and not as an arbitrator).”

74. Clause 7.5 provides the machinery for the exercise of the rights of pre-emption. It requires the Company to give notice to each shareholder other than the selling shareholder within 10 business days after receipt of the Fair Value Notice.

75. Clause 7.7 provides: “During any period after the service of a Transfer Notice, but prior to the completion of the transfer of the shares, the Seller shall remain entitled to any dividends or interest payable in respect of his shareholding, but shall not otherwise be entitled to vote or be counted in a quorum of any meeting of shareholders or of the holders of any class of securities therein ….”

76. Clause 9.1 provides: “completion of the sale and purchase of shares under clause 7 and clause 8 of this agreement shall take place 20 Business Days after: (a) the day of delivery of the Transfer Notice, unless the Valuers have been requested to determine Fair Value; (b) the day of delivery of the Fair Value Notice.”

77. Clause 10.1 contains the basis of valuation: “the Fair Value for any Sale Share shall be the price per share determined in writing by the Valuers on the following bases and assumptions: (a) valuing each of the Sales Shares as a proportion of the total value of all the issued shares in the capital of the Company without any premium or discount being attributable to the percentage of the issued share capital of the Company which they represent; (b) if the Company is then carrying on business as a going concern, on the assumption that it will continue to do so; (c) the sale is to be on arms’ length terms between a willing seller and a willing buyer; (d) the shares are sold free of all restrictions, liens, charges and other encumbrances; and (e) the sale is taking place on the date the Valuers were requested to determine the Fair Value.

78. It is common ground that an event of default occurred when Mr Gu gave his notice of resignation to Mr Whibberley, as managing director, on 9 December 2022. For the avoidance of doubt, his notice stated: “As you will be aware, under clause 8 of the Shareholders Agreement that you say governs the relationship between the shareholders, I will be deemed to have served a Transfer Notice under clause 7.3 upon ceasing to be employed by the Company. As the Company does not have appointed auditors to determine the Fair Value, I suggest that we agree the joint instruction of an expert accountant, by joint letter of instruction, to determine the Fair Value in order to avoid further disputes arising. Please confirm that this course of action is agreed.”

79. The notice of resignation was either drafted by a lawyer or written with lawyers’ advice and input. It is notable that it calls on Mr Whibberley to agree an independent expert accountant to value Mr Gu’s shares, on the basis that the Company did not have an auditor. The author of the letter must, in my view, have studied the exit machinery in the SHA and noted that the definition of “Valuer” contemplated that the Company’s auditors or accountants would be the valuer. They were, understandably, anxious that an independent accountant should be appointed, if possible.

80. The response of the Company came from its solicitors, in a letter dated 21 December 2022. This refers to an earlier response from the Company on 16 December 2022, but it was not in evidence. The letter says, so far as material: “When discussing [the validity of the SHA] with your client you can no doubt advise him that his understanding of the operation of clause 8 is misguided. In short, any claim or claims that your client believes that he may have against our client, should they concern his previous employment or shareholding, are entirely without merit. Our client’s position has been clearly explained in correspondence and no further correspondence will be entertained. In the event your client believes that his claim or claims have any merit then it is a matter for him to instruct your firm to issue proceedings on his behalf.” What it was about Mr Gu’s understanding that was misguided was not specified, but it could only be the suggestion that, absent a company auditor, the parties had to agree on an expert accountant.

81. No attempt was made by the Company to put into effect the machinery for buying Mr Gu’s shares. There was no suggestion that the Company's accountant should be instructed. In short, nothing was done. The Company was clearly willing to wait and see whether Mr Gu had the courage of his convictions and would sue it.

82. It is clear from clauses 7 and 8 that the Company, whether as agent of Mr Gu or in its own right, or both, should have instructed the Company’s accountant to value Mr Gu’s shares. The timescale in the SHA machinery is very short, particularly where there is a deemed Transfer Notice. Unless the Valuer is requested to determine Fair Value within 20 business days after the deemed Transfer Notice, completion of the sale and purchase was due (though this could only have happened if a price had been fixed). If the Valuer was instructed within that time limit, completion was then due 20 business days after the delivery of the Fair Value Notice. If the shares were not sold in accordance with clause 7, the Company was to be wound up.

83. There was no request made of Valuers to determine Fair Value within 20 business days of 9 December 2022, nor was notice given by the shareholders to wind up the Company. Mr Gu remained locked in. He was not paid the 20 December 2022 additional dividend or any subsequent one.

84. Mr Gu proceeded to bring a claim for unfair dismissal, discrimination and wrongful dismissal in the Employment Tribunal on 7 March 2023. The Company filed grounds of resistance, stating repeatedly that Mr Gu’s shareholding was unconnected with his employment. On 30 June 2023, Mr Gu’s solicitors wrote a letter before claim, asserting that an unfair prejudice petition would be presented, enclosing a draft petition. This sought payment of dividends, a buy-out of Mr Gu’s shareholding at full value, and interest. No response to that letter was made by the Company.

85. On 18 September 2023, the parties entered into a COT3 settlement of the ET claim, on the basis that Mr Gu would withdraw his ET claim with no order as to costs. There was an express term that nothing in the settlement should impact on Mr Gu’s ability to pursue claims in his capacity as a shareholder of the Company.

86. It appears that at some time following the COT3 settlement, Mr Whibberley contacted the Company’s accountant, Mr David Toner, in connection with a valuation of Mr Gu’s shares. He accepted that there were oral discussions about what was required before and after a formal email of instruction (clearly drafted by solicitors, requesting a valuation as at 9 December 2022) was sent by Mr Whibberley to Mr Toner on 5 October 2023. It was not copied to Mr Gu.

87. In their disclosure statement, the Respondents stated that there were no written communications between the Company and Mr Toner, only oral discussions. The letter of instruction was only much later deployed in evidence on an interim application concerned with expert evidence. Further communications in writing between Mr Whibberley, the Company’s solicitors and Mr Toner were only produced on day 2 of the trial, pursuant to my order to do so. On 12 October 2023, Mr Toner asked for a copy of the SHA and asked whether it said anything about quasi-partnerships and minority discounts. Mr Whibberley replied saying that no discounts were applicable. None of this was copied to Mr Gu.

88. Mr Toner provided his valuation to the Company’s solicitors on 24 October 2023, but it was not provided to Mr Gu’s solicitors. It valued the Company, based on an averaging of profits before tax in the accounting years ending on 5 April 2020, 2021, 2022 and 2023, less an heroic adjustment, almost equal to the average profits figure, for the costs of management (to adjust for the fact that the directors and all the key staff were paid principally with dividends, not salaries), multiplied by 4, and adjusted for reserves standing on the balance sheet as at 5 April 2022, to reach an equity value of £174,365. That meant that Mr Gu’s shares were worth only £29,642.05, according to Mr Toner.

89. The petition was presented on 16 October and sealed on 18 October 2023. It was not served immediately. The Company and the shareholder Respondents other than Mr Shaw filed Points of Defence and a Counterclaim in December 2023. The Counterclaim was in respect of two high specification Macbooks that had been issued by the Company to Mr Gu in 2017 and 2021, for use in connection with his employment, which were not returned by Mr Gu upon his resignation. The 2021 laptop had cost £3,999.

90. There was some debate about when exactly the petition was served and when Mr Gu received a copy of the valuation – it is not necessary to resolve this – but both happened towards the end of November 2023, shortly after without prejudice negotiations had taken place.

91. The first substantive engagement by the Company’s solicitors with the basis of Mr Gu’s claim and his allegation that the Company had failed to comply with the terms for providing him with a prompt exit from the Company came in their letter dated 31 January 2024. While denying all claims, it emphasised that the maximum amount of Mr Gu’s claim was £18,490 in respect of three apportioned additional dividends paid in December 2019, January 2021 and December 2021, and the value of his shares, as determined by Mr Toner. Nothing was said about dividends in December 2022 and in 2023. The letter stated: “Accordingly, we write to invite your client to agree that at best your client's claim for unpaid dividends amounts to £18,490, that he is bound by the valuation provided by the company's accountant and that the value of his shares amounts to £29,642.05. To avoid an application for summary judgment your client is requested to provide his answer to our clients invitation on or before 4pm on Thursday, 8 February 2024.

92. While this did not amount to an offer to purchase Mr Gu’s shares or to settle the claim for those sums, it is clearly an offer to be bound by Mr Toner’s valuation, with the obvious consequence – if Mr Gu agreed it – that Mr Gu would be paid that sum for his shares.

93. However, no agreement was forthcoming. No other offer was made by the Company to buy out Mr Gu. The petition has been keenly fought on both sides ever since, with numerous contested interlocutory applications.

94. Mr Gu contends, as part of his petition, that he has been unfairly prejudiced by the Company’s failure to comply with its obligations under the SHA, and that as a result he has remained locked in to the Company, without payment of dividends, and has not been able to realise his investment. He was indisputably entitled to be bought out within at most a month or two of his resignation letter, and entitled to dividends until his shares were sold. The valuation of the shares was a necessary part of the process of selling Mr Gu’s shares, which the Company was authorised and required to conduct, not just for Mr Gu’s benefit but in its own interest. The Company was the potential purchaser of the shares, and if the shares were not sold, it was to be wound up, as a fall back means of realising Mr Gu’s investment.

95. This was a clear breach of the terms on which it was agreed that the Company’s affairs would be conducted. The Company deliberately failed to do what it was required to do.

96. Mr Budworth on behalf of the Respondents argued that there was here no overlay of equitable considerations, the breach of which would justify, independently, an order for Mr Gu to be bought out on fair terms. He also suggested that what was complained about was not the conduct of the Company’s affairs but the conduct by shareholders of their own affairs, such that a remedy should not be available under s.996 for failure of the exit mechanism.

97. In support of this argument, Mr Budworth cited Re Coroin Ltd [2012] EWHC 2343 (Ch), in which David Richards J said at [626]: “The section is not directed to the activities of shareholders amongst themselves, unless those activities translate into acts or omissions of the company or the conduct of its affairs. Relations between the shareholders inter se are adequately governed by the law of contract and tort, including where appropriate the ability to enforce personal rights conferred by a company's articles of association. This important distinction has been emphasised in many of the authorities.” I note, however, that later in the same part of his judgment, the Judge said that the court will not adopt a technical or legalistic approach but will look at the business realities, and he drew attention to a passage of a judgment of Powell J in Re Dernacourt Investments Pty Ltd(1990) 2 ACSR 533 that was approved by the Court of Appeal in Re Neath Rugby Ltd (No.2) [2009] 2 BCLC 427, in which Powell J said that the words “affairs of a company” are extremely wide and should be construed liberally, and that they include all matters which may come before its board for consideration.

98. Mr Budworth also referred to Re Kings Solutions Ltd [2021] EWCA Civ 1943; [2022] BCC 529 (“Re Kings”) and emphasised the requirement that any allegations of personal misconduct be causally connected to an act or omission of the company. In that case, Snowden LJ emphasised, after reviewing the authorities, that the potential breadth of s.994, as drafted, was kept under control: “… by the express statutory requirements that the acts complained of must either (i) be an act or omission of the company, or (ii) be conduct of the company's affairs rather than acts done in the conduct of a shareholder’s personal affairs. Satisfaction of these requirements should not be overlooked or minimised.” In that case, the put options were held to be matters between shareholders, which did not have any causal connection with the conduct of the company’s affairs, and so were not within the scope of s.994. Mr Budworth submitted that the same analysis applied here, where the terms of the SHA were matters between the shareholders only, which were capable of contractual enforcement between them.

99. Alternatively, Mr Budworth submitted that, if relief was to be granted to Mr Gu in relation to breaches of the SHA, that relief should not be more generous than the relief that Mr Gu and the Company agreed would be provided in circumstances in which he ceased to be employed. He pointed out that clauses 7-10 of the SHA entitle Mr Gu to be paid a proportionate share of the value of the Company as at (approximately) the date of the event of default, with the valuation to be performed by the Company’s accountant, acting as an expert and not an arbitrator. That is what the Company now, belatedly, seeks to hold Mr Gu to, which cannot therefore be prejudicial or unfair. Mr Gu cannot, he submitted, present a s.994 petition in order to seek to obtain a valuation at a later date on a more advantageous basis.

100. In my judgment, the matters of which Mr Gu complains were an omission by the Company, and, more broadly, the non-operation of the exit mechanism was a matter of the Company’s affairs, not just the affairs of its shareholders inter se. This is not a case, like Graham v Every[2014] EWCA Civ 191 or Re Kings, where there has been an acquisition of shares by one shareholder in breach of terms agreed with other shareholders, or a failure by one shareholder to honour terms agreed with another shareholder for purchase of his shares. It is a case where the Company was responsible, in its own interests, for operating a mechanism to buy out a shareholder who was no longer suitable to be a shareholder of the Company, for one of the reasons specified in clause 8.2.

101. The buy-out mechanism was to be operated by the Company for the purpose of acquiring its own shares, if it saw fit to buy them, and, if not, to re-distribute the shares among its other shareholders, in accordance with the policy that the Company’s shareholders should be its employees, so far as possible. If that procedure was not successful, the Company was to be wound up. These were matters for the board of the Company to administer, in the interests of the Company as a whole, not simply matters between Mr Gu and Mr Whibberley and the other shareholders. Moreover, it was the Company that had omitted to comply with its duty to instruct the Company’s accountant to value the shares, on which the whole timetable for the buy-out depended. It was this failure (unexplained but clearly deliberate) that left Mr Gu with neither dividends nor pay-out, which was self-evidently prejudicial to him.

102. Mr Budworth is right to say that, at an early stage, Mr Gu could have brought a claim to enforce the Company’s obligations. For whatever reason, he did not do so. The reason was not explored in evidence, but the fact that Mr Whibberley had not agreed Mr Gu’s suggestion that an independent accountant should be appointed to value his shares could be connected with it. The directors were not bound to agree that, as they were entitled to have the Company’s accountant perform that exercise, but they chose not to pursue that. Had Mr Gu presented a petition in January 2023 complaining that the Company had not activated the exit machinery and seeking an order that he be bought out at a value to be determined by the court, it is quite possible that the petition would have been struck out, if the Company had been willing to proceed with the contractual exit route, or a remedy of specific enforcement of the SHA was available. But that did not happen.

103. The fact that another remedy might have been more appropriate in January 2023 does not mean that it is more appropriate now, and that the court should simply leave Mr Gu to bring another claim. The clock cannot be re-wound.

104. In the first place, the time limited for operation of the contractual machinery has long since expired. There was a time limit for completion of the sale and purchase of Mr Gu’s shares. With no reference to the Valuer having been made within 20 business days of the event of default, time expired at that point.

105. It is notable that the SHA specifies that the valuation is to be done as at the date of the instruction of the Valuer, not as at the date of the event of default. Further, in the case of a deemed Transfer Notice, reference to the Valuer is essential in order to identify the Fair Value and the Transfer Price. Completion cannot take place without it. If completion does not take place within the time specified, the Company is supposed to be wound up. Taking all these matters into consideration, it seems to me that time is implicitly of the essence for completion of the sale and purchase of the Seller’s shares. If it were not, the Company could change the valuation date, possibly to its advantage, by delaying the reference to the Valuer. That would defeat the intention underlying these provisions, namely that the Seller is to be paid his proportionate share of the value of the Company promptly, based on its value at about the time of the event of default, with the Company being promptly wound up if no sale was effected.

106. It could be inferred from the instruction of Mr Toner in October 2023 that the Company was then willing to buy out Mr Gu, but it made no offer to do so. It is more likely, in my judgment, that it actioned the internal valuation as a defensive measure, knowing that a s.994 petition would shortly be presented, and wanting to pull the rug from under Mr Gu’s feet. It was also considered useful in terms of negotiating a settlement of all disputed matters. The instruction of Mr Toner and the terms of the instruction were concealed from Mr Gu. In the event, Mr Gu managed to present and serve his petition before he received the formal valuation. For whatever reason, Mr Toner’s valuation was not pleaded in the points of defence, nor therefore is it pleaded that that valuation was obtained in compliance with the terms of the SHA.

107. In any event, no reference was made to the Valuer that complied with the terms of the SHA. There was an in-built advantage to the Company of its own accountant determining the Fair Value and Mr Gu being bound by it. Given that, a process in which the terms and fact of instruction were concealed from Mr Gu (and any written instruction then denied) is not the procedure contemplated by the SHA, because it is not a fair and open process. Mr Whibberley was unable to recall what the exact oral instructions were, so the reasons why Mr Toner valued as he did, taking particular figures for all-inclusive salaries of the other shareholders, are unknown. The Company was not acting as Mr Gu’s agent, as it was supposed to be, but solely in its own interest. A secret process of obtaining a valuation from Mr Toner is not what the SHA required.

108. In any event, Mr Toner has done neither the exercise that he was appointed to do nor the exercise that the SHA mandates. He was instructed to value a share in the Company as at 9 December 2022. However, his valuation is based on an average of profits in the 4 years leading up to 5 April 2023, so including post-valuation date events, and he has taken the capital reserves of the Company as at 5 April 2022. What the SHA requires is a valuation at the date of his instruction, which would have been 5 October 2023 if the instruction was valid. Mr Gu is therefore not bound by the valuation on which the Company relies, because it is not a valuation in accordance with the terms of the SHA.

109. I consider that the Company’s sustained failure to act in accordance with the terms of the SHA was unfairly prejudicial to Mr Gu. He lost his right to be paid out his full share promptly, in January 2023. There is recent authority (if needed) for the proposition that a Company’s failure to carry out the exit machinery agreed with its shareholders can be unfairly prejudicial conduct within s.994: Saxon Woods Investments Ltd v Costa [2025] EWCA Civ

708. The Court (Edis, Snowden and Zacaroli LJJ) noted that there was no real dispute, depending on the true meaning of the articles, that the conduct of the director was unfairly prejudicial, and said: “[87] We think that is undoubtedly correct. SW's rights as a member of the Company included the benefit of the Company's obligations under article 6.2, including to work in good faith with the Investors towards an Exit no later than 31 December 2019 or, if no Exit was achieved by that date, to secure an Exit as soon as practicable afterwards. The fact that Mr Costa caused the Company to breach that obligation, and pursued a strategy that was contrary to it, means that SW’s rights as member were prejudiced by the loss of that opportunity. [88] The point of dispute between the parties is whether this amounts to unfair prejudice within section 994 if SW would have been in no better position, absent the conduct of Mr Costa of which complaint is made, because no exit would in any event have been achieved.”

110. In its judgment, the Court considered that the lost opportunity to try to achieve an Exit was itself unfairly prejudicial to SW, regardless of what the outcome would have been.

111. Here, the conduct of the directors of the Company prevented Mr Gu from obtaining a timely exit from the Company, as a result of which he remained locked in, without any income from his investment. The Company only offered (if the 31 January 2024 letter can be said to amount to an offer) terms that were unfair. The appropriate remedy

112. The question then becomes one of fashioning the appropriate remedy for the prejudice caused to Mr Gu.

113. Mr Metcalfe submitted that the court should order a buy-out of Mr Gu’s shares valued without a discount as at the date of the trial. He submitted that that was the usual order, though sometimes the court takes the date of presentation of the petition or the date of the unfairly prejudicial conduct. He accepted that the court has a discretion to select a valuation date that is appropriate and just on the facts of the particular case.

114. Mr Pughe has conducted a valuation as at December 2022 and at the date of his reports, the last of which was in May 2025. His conclusion, taking account of various matters raised in the parties’ questions to him, is that Mr Gu’s shares were worth £126,318 in December 2022, without any discount, and £348,996 on the same basis in May 2025.

115. It follows that, if the date of trial is taken as the appropriate date on which to value Mr Gu’s shares, far from being prejudiced by the conduct of the Company, he will have benefited hugely from remaining invested in the Company, with a right to dividends, while the profitability of the Company grew substantially.

116. It is not easy to see why a later valuation date should be the appropriate date to choose, to do justice in this case. All considerations point to the date of Mr Gu’s resignation. i) First, that is what Mr Gu was entitled to under the SHA, albeit the court needs also to address and remedy prejudice that was caused by delay in providing it. ii) Second, the fortunes of the Company after Mr Gu’s departure were not directly attributable to his earlier contribution to its success. As Mr Whibberley explained, the work that it has done since that time has, mainly by chance, been of a different nature from the earlier work to which Mr Gu contributed, comprising more hardware projects and less software work. These have been very remunerative for the Company. Mr Whibberley did say that most of the Company’s work has now reverted to software work. iii) Third, although Mr Gu did not receive his share of value in early 2023, as he should have done, he did not plead any consequential prejudice caused by not receiving his investment at that time. He will therefore be compensated for the delay by the dividends that he remains entitled to, as a shareholder, and, if appropriate, by interest on the price payable for his shares. In short, it is unnecessary to fashion a different remedy, which would be unfair to the other shareholders, when the parties themselves have stipulated what a fair remedy should be and the petitioner can be adequately compensated for delay.

117. There were, however, a number of challenges to Mr Pughe’s methodology raised by the Respondents, in relation to his December 2022 valuation. These are that: i) There should have been no addition to the EBITDA for the salary of Mr Cubitt as well as a deduction for the salary of a like-for-like replacement of Mr Gu. ii) The rates of pay for Mr Whibberley at Oilband in 2010 were understated because of bonuses that were paid to him. iii) The rates for Mr Whibberley should have been upgraded, not just indexed, because of the additional responsibilities that they took on at the Company. iv) Other employees in the positions of Mr Harris and Mr Dootson should be paid significantly more, in comparison to the salary for Mr Gu’s role. The Respondents suggest that they should be given the chance to question Mr Pughe further about these points, even though an earlier application for Mr Pughe to attend court to be cross-examined was refused. I do not consider that that is necessary or appropriate.

118. Mr Pughe explained that he was unable to resolve the question of who, if anyone, replaced Mr Gu, which depended on facts that he did not know. As at December 2022, the position is that Mr Cubitt was already a full-time employee of the Company. The Respondents’ evidence was that Mr Cubitt, who was first employed in 2020, took on some of Mr Gu’s responsibilities after December 2022, but far from all of them; Mr Webster, who was recruited on 1 May 2024, took on other responsibilities; and Mr Ali, who was recruited in September 2024, also took on some responsibilities. In valuing as at December 2022, it therefore seems to me to be most appropriate to deduct the cost of a notional Mr Gu, at the salary level that Mr Pughe considered justified, but for no addition to be made to the valuation in respect of the salary of Mr Cubitt, who was already employed at the time of Mr Gu’s resignation. The position as at today’s date is more complicated, but it is no longer relevant.

119. As for the appropriate rates of pay of senior managers to perform Mr Whibberley’s and Mr Briggs’ roles, the Respondents raised their challenges in questions put to Mr Pughe, pursuant to the Court’s directions. They should not be entitled to have another go at this stage. With one exception, I am satisfied that Mr Pughe has dealt with the challenges in a satisfactory way in his Responses letter dated 23 April 2025. Mr Pughe has indexed the value of the 2010 remuneration to the valuation date and compared it with evidence of current market rates, and he finds that the derived figures are appropriate for the roles performed by Mr Whibberley and Mr Briggs. I accept that evidence. Accordingly the figures contained in his final report dated 20 May 2025 are probably the best estimate of the right figures to use for adjustments to the EBITDA in each of the years used to derive the average profit figure.

120. The one exception is that in calculating the indexed value of Mr Whibberley’s remuneration, Mr Pughe has added Mrs Whibberley’s Oilband salary to Mr Whibberley’s Oilband salary, before indexation. I am unclear why Mr Pughe did this, although I note that it did not result in a further challenge from the Respondents. Mrs Whibberley was employed by Oilband as an administrator. There should therefore be an expense allowed for the administrator’s salary as well as a proper level of remuneration for the equivalent of Mr Whibberley. I am not sure if this has been done. Mr Whibberley’s salary is stated in para 6.3 of Mr Pughe’s Report to be only £57,019.92, but I note that in his Responses document, Mr Pughe does consider that £75,919.92 is the appropriate 2010 base salary for Mr Whibberley’s role.

121. With the exception of the removal of the addition of Mr Cubitt’s salary and the above question for Mr Pughe to reconsider and determine, by way of a further letter of response, I accept Mr Pughe’s December 2022 valuation. I do not consider that there is a proper challenge to the rates taken for Mr Harris and Mr Dootson in comparison with Mr Gu’s role.

122. I therefore direct Mr Pughe to remove the additions for Mr Cubitt’s gross salary at para 6.38, consider the question raised in [120] above and make an adjustment, if appropriate in his opinion, and then provide a final calculation of the Transfer Price, taking account of these points. The parties may have liberty to apply to seek further directions in relation to the carrying out of my direction, if necessary. Conclusion

123. In light of the above, I consider that the appropriate remedy is to order that Mr Gu’s shares be bought by the Company, at the Transfer Price without a discount that will be determined hereafter by Mr Pughe, as at December 2022, with liberty to apply to substitute such of the shareholders as will submit to an order if the Company does not wish to or cannot buy the shares.

124. The Company must also pay Mr Gu additional dividends (not the salary top-up dividends) from and including the 20 December 2022 dividend to the date of sale of his shares pursuant to the court order, at the same rate per share as was paid to the other shareholders. The Company’s solicitors must confirm forthwith to Mr Gu’s solicitors the details of any additional dividends declared and paid after 19 December 2023.

125. In view of the dividends that Mr Gu will receive, it does not seem to me that interest on the purchase price should be payable. If the purchase price had been paid in early 2023, as it should have been, Mr Gu would not have received any such dividends. To order interest on the purchase price will therefore over-compensate him. I invite submissions on whether interest should be awarded on the unpaid dividends. Counterclaim

126. But for one aspect of the counterclaim, one would hope that it would never have come to court. The second-hand value of two laptops, which are now 8 and 4 years old respectively, is a few hundred pounds only.

127. That aspect is the fact that valuable proprietary software is loaded on the laptops that Mr Gu retains, which contains source code written by the Company for its business purposes. This is contained in JetBrains IntelloJ, used to compile the Company’s projects system, OpenJDK, used to compile source code, Maven, a build automation tool, and Git, a system used to manage source code. The directors are concerned that if Mr Gu retains that software, he will be able to compete with the Company in relation to clients or would-be clients of the Company in the Far East. Mr Gu has offered to wipe the laptops and restore the factory settings if he can keep them.

128. The only question, apart from which remedy is appropriate, is who owns the laptops. Mr Gu said that they are in the nature of a perk, provided by the Company to its shareholder employees. He went as far as to say that they were a gift. Unlike laptops provided to non-shareholder employees, the laptops are not shown in the Company’s accounts as fixed assets. They were undoubtedly paid for by the Company and provided to the shareholders so that they could do their work for the Company.

129. Mr Gu suggested that, as with mobile phones similarly purchased and provided, there was previously no attempt by the Company to recover the phones when they were replaced with new models. The Company accepted that, while the employees remain employed (as all others do) it has no desire to recover the laptops, but that the position is different when one of them leaves the Company. The reason is the source code that is on the laptops.

130. I find that the laptops were not gifted to the employees. They may have been in the nature of a perk, but as Mr Whibberley pointed out, that does not mean that ownership in the laptops passed. The fact that the Company chose not to ask for their return from existing shareholders, when upgraded, does not signify that they were gifted by the Company. The fact that they are not shown as assets in the accounts is inconsistent with the Company’s case, but it does not prove a gift. There are other possible explanations.

131. I therefore find that the Company did not part with property in the laptops, when it provided them to Mr Gu, and that it is entitled to require their delivery up. Given the valuable software loaded on them, damages in lieu of delivery up would not be an adequate remedy.