Core (UK) Limited v Benjamin Puncher & Anor

: The Proceedings and the Application

1. On 14 July I heard the application of Core (UK) Limited ( Core ) dated 7 March 2025 for summary judgment ( the SJ Application ) against Benjamin Puncher ( BP ), Core’s former director, on part of the claim made in these proceedings.

2. In the proceedings Core makes claims against BP and his wife Ara Puncher ( AP ), Core’s former Head of Finance, in relation to payments made by Core between 2015 and 2022 allegedly for the personal benefit of BP, AP, their daughter or other third parties totalling £1,239,080.80 ( the Alleged Improper Payments ) and a loan of £40,000 to BP. It is said all these payments were made without proper authorisation. Further sums are claimed, representing tax, penalties and interest and professional fees incurred in regularising the tax position in relation to the Alleged Improper Payments making a total of £2,092,524.

3. The claim against BP is for breach of fiduciary duty or trust alternatively in debt so far as concern the Alleged Improper Payments themselves. The claim against AP is primarily for dishonest assistance in BP’s breaches of duty and for restitution of £28,978 representing payments made to her personally. A further or alternative claim is made against AP for her own breaches of fiduciary duty.

4. The SJ Application against BP relates to the sum of £266,503.70 made up of the £40,000 loan plus payments, admitted by their Defence to have been for BP and AP’s personal expenditure, of £226,503.70 ( the Admitted Payments ). BP and AP strenuously deny the claim for the balance of the Alleged Improper Payments and have endeavoured to provide evidence in support of their case that those payments were properly incurred for the purposes of Core’s business and for its benefit, although they say they have been hindered by a lack of access to Core’s books and records.

5. Core’s position is that since the payments are admitted there is obviously no answer to the SJ Application.

6. BP’s position is that although the amount is admitted, the question on the SJ Application is whether judgment should be entered for the amount of the Admitted Payments now. That will be so only if BP has no real prospect of succeeding on his defence to that part of the claim or there is no other compelling reason for the claim to go to trial. Background

7. BP was a director and CEO of Core and in day-to-day control of it at all material times until he resigned in December 2022. AP was Head of Finance until she resigned in the same month. BP and AP owned one third of the shares in Core. The other directors were Salvatore Marino ( Mr Marino ) and Geoffrey Jones ( Mr Jones ). Mr Marino and Mr Jones together with their respective wives each owned another one third of the shares.

8. BP fell out with Mr Marino and Mr Jones during 2022. The fall-out came about because of a disagreement as to the level of dividends to be paid from then available funds. The background to the disagreement was that Core’s profitability had increased significantly between 2011 and 2022, while BP’s salary had remained static. In October 2022 Mr Marino and Mr Jones procured Core to suspend BP’s employment and take control of Core and implement an investigation which identified the Alleged Improper Payments and culminated in BP and AP’s resignations in December 2022.

9. It is pleaded in BP and AP’s Defence that Core was run in an informal manner and that the shareholders all received informal financial benefits. A number of examples are given, including payment to Mrs Jones of a salary which had risen to £24,000 per annum in 2016 despite, they say, her providing no services to the Company. It is pleaded that Mr Jones and Mr Marino did not complain about BP’s management of the business and said that they acquiesced in the manner of it. So far as the loan of £40,000 is concerned it is pleaded that Mr Jones agreed to it orally. BP relies on an email sent by Mr Marino of 10 August 2022 which refers to “the wider family arrangements” as demonstrating his awareness of these informal financial benefits.

10. Core commenced these proceedings on 18 June 2024, shortly after BP and AP had sent Core the draft of an unfair prejudice petition. On 20 November 2024 BP and AP issued their unfair prejudice petition ( the Petition ) against Core and the other four shareholders.

11. Key elements of the unfairly prejudicial conduct relied upon in the Petition are that Mr Marino and Mr Jones have caused Core to make a claim against BP and AP to an amount that is substantially in excess of that to which Core is entitled and, so far as concerns the Admitted Payments, which fails to take account of the informal arrangements for the conduct of Core’s affairs.

12. By order of ICC Judge Barber made on 20 May 2025 the Petition has been transferred to the Business List so that the two sets of proceedings may be costs and case managed together. The Law Summary Judgment

13. There was no disagreement between the parties as to the law to be applied on the SJ Application or that it is conveniently summarised in [24.3.1] to [24.3.7] of the White Book. Director’s Remuneration and Receipts

14. Mr Hocking on behalf of Core included a helpful summary on the law concerning payments to directors. I do not understand Mr Harrison to disagree with that summary, while disagreeing with the consequences for the SJ Application.

15. In order for a company director to be paid remuneration the requirements of the company’s constitution must be followed, directors cannot simply authorise remuneration payments to themselves ( Re George Newman & Co [1895 1 Ch 674). While directors may rely upon informal and unanimous consent among the shareholders to a course of action (see Re Duomatic [1969] 2 Ch 365 ) in the case of director’s remuneration it is required that the shareholders turn their minds to the issue (see Ball v Hughes [2017] EWHC 3228 (Ch) ). A director may not avoid these requirements by claiming a quantum meruit for services provided (see Guinness Plc v Saunders [1990] 2 AC 663 ).

16. The only ways in which a director or shareholder may lawfully receive money from a company without a corresponding obligation to repay it is in (i) reimbursement of expenses properly incurred; (ii) salary; (iii) dividend. A payment outside those categories is a loan which must ultimately be repaid. What is relevant is how the payment was classified at the time it was made, a director may not rewrite history and reclassify the payment later (See Re Bronia Buchanan Associates Ltd [2022] BCC229 at [75], [82] and [86] and Re The Sky Wheels Group of Companies Limited [2020] EWHC 1112 at [48] and [49]).

17. A company may not make a loan to a director without the approval of the transaction by a resolution of the members (see section 197 of the Companies Act 2006 ). Any transaction contravening this requirement is voidable at the instance of the company (see section 213 of the Companies Act 2006). There is an exception provided for under section 207 of the Companies Act which means that a director (or connected person) may borrow from a company without member approval, provided the cumulative total of borrowing is less than £10,000. The Parties’ Positions

18. BP’s position is that: (i) at least part of the £266,503 was paid by way of informal remuneration for past services; (ii) any balance of the £266,503 is to be netted off against future dividends to be payable by Core to BP; (iii) it had been intended that BP would be paid a bonus by Core, but that has not happened since Mr Marino and Mr Jones took control of Core; and (iv) the relief BP and AP seek in the Petition is that the other shareholders buy out their shares. Letters dated 28 June 2024, 23 August 2024 and 9 December 2024 from Mr Marino and Mr Jones’ solicitors acting in the Petition make clear that a buy-out of BP and AP’s shares whether by the other shareholders or Core itself is agreeable in principle. It is apparent from that correspondence that one of the factors affecting the price to be paid will be the quantification of any amount owed by BP to Core. BP relies upon that correspondence to support his position that payment is not required now.

19. Core’s position is that: (i) attempts to recharacterise the Admitted Payments as a reward for past services are not in accordance with the legal position as to the remuneration of directors and/or shareholders and there is not even a bare allegation that the other directors or shareholders knew about them; (ii) the concept of “netting off” is not a legal one. So far as set-off is relied upon, set-off against future dividends is impermissible. Dividends have not yet been declared and there is no indebtedness of Core against which set off could be permissible. Any payment in anticipation of dividend payments would necessarily operate as a loan, which would be in breach of the Companies Act. Core has avoided it and is entitled to repayment; (iii) in any event the claims that the Admitted Payments are to be treated as remuneration or payment on account of dividend are inconsistent with one another and there has been no attempt to apportion them as between the two categories. Also the Admitted Payments were made before significant salary and dividend payments were made to BP without any “netting off” exercise being undertaken; (iv) no bonus has been awarded; and (iv) the possibility of a future buy-out of BP and AP’s shares, by the other shareholders or Core, is no justification for Core being kept out of its money Discussion and Conclusions

20. The Petition and the Claim are entwined, the facts and the issues overlap extensively and they have been ordered to be costs and case managed together. Common issues, if not all issues, will inevitably be tried together. The part of the claim against BP (and AP) for the balance of the Alleged Improper Payments is going to trial in any event. The Petition is going to trial. The claim against AP for dishonest assistance or for her own breach of duty so far as relates to the Admitted Payments is going to trial.

21. The correspondence to which I have referred makes clear that the true amount of Core’s claim against BP and AP (as well as other matters) will need to be determined in order to establish the proper value of Core and thus the share price on any buy-out.

22. At trial the court will need to consider whether AP assisted in making, carrying out and recording the Admitted Payments and whether her assistance was dishonest. The court will have to determine not only whether the balance of the Alleged Improper Payments were wrongly made but also whether making a claim for them amounted to unfairly prejudicial conduct. The court will have to consider also what informal payment arrangements subsisted within Core and whether, in that context, making a claim to the Admitted Payments was unfairly prejudicial. If the court concludes that a buy-out should be ordered, informal payments made to any of the shareholders, not just the Admitted Payments to BP and AP, will have to be brought into account in determining the value of Core and therefore the price at which any buy-out is to occur.

23. Disclosure will need to be given and witness evidence adduced about the Admitted Payments in order to determine the dishonest assistance claim against AP and the unfair prejudice issue concerning them. The disclosure and witness evidence will extend to the informal arrangements generally.

24. Awarding judgment against BP now on the SJ Application will not eliminate the Admitted Payments as an issue for disclosure, witness statements or trial. As a matter of efficient case management there would be only a marginal gain in determining the SJ Application now.

25. The key element of unfair prejudice on which the Petition relies is the allegation that the claim for the Alleged Improper Payments is substantially overstated. If BP and AP establish their case on unfair prejudice there is a real prospect that an order will be made that their shares will be bought out and that, in determining the price to be paid for BP and AP’s shares, the balance of the Alleged Improper Payments, plus associated taxation and other liabilities, will not fall to be taken into account.

26. Mr Harrison’s skeleton states that BP and AP have estimated the value of their shares at £2.7-3.5 million, while Mr Marino and Mr Jones say that the range is £1-1.4m before applying a discount. The re-stated company accounts for 2022 give a net asset figure for Core as £5.6m. In the course of the discussions about dividends during 2022 Mr Marino suggested that each of the Puncher, Marino and Jones shareholders should be awarded a dividend of £1m. On the basis of even the lowest of these figures there is in my judgment a real prospect of BP (and AP) achieving an order at trial for a buy-out of their shares at a price such that they will achieve a payment in their favour even if account must be taken of the full £266,503 of the Admitted Payments and associated amounts.

27. In those circumstances, even though the relief sought in the Petition is not strictly a set-off or counterclaim, I conclude that BP (and AP) have a real prospect of succeeding in achieving at trial a result in which they are not required to make a payment of the amount for which summary judgment is now claimed or any amount. On that ground alone I would refuse to grant summary judgment.

28. Taking the case management considerations and BP’s real prospect of success together, I am entirely satisfied that this is not a case in which I should grant summary judgment against BP. The Summary Judgment Application will be dismissed.