Boardroom battle ends in High Court

Over 11 gruelling days last November, in the glare of publicity, the High Court in London was the battleground for a sensational legal showdown between top bosses at the Stobart Group logistics firm and the Cumbrian businessman had transformed it into a £1bn business success.

Some of the claims put before the court were as lurid as they were shocking.

There was an alleged conspiracy to harm the firm involving major names from the British business world; a claim that Mr Tinkler milked millions from his firm in “excessive” expenses, splashing out on private jets and pop stars; and a fierce boardroom battle of wills that severely dented Stobart’s slick corporate image.

This case had it all.

At the heart of this case was a bitter dispute between Stobart Group chairman Iain Ferguson and Mr Tinkler, who wanted the Edinburgh Woollen Mill tycoon Philip Day to take on that key leadership role.

Despite the senior Stobart executives who sacked him winning most of their case, and legal bills of several million pounds, Mr Tinkler, who began his working life as a joiner in Appleby, vowed to continue fighting.

In his 186-page judgment, Judge Jonathan Russen QC ruled that his dismissal from the Stobart Group board was lawful.

But he said there was no evidence - as claimed by Stobart directors - that he had conspired with other businessmen to harm the company.

The judge said Mr Tinkler did act in breach of his legal and contractual duties as a director by openly criticising the board’s management and “agitating” for the removal of Mr Ferguson; and by “improperly sharing” confidential information with Mr Day.

But there was some good news in the judgment for Mr Tinkler.

For Judge Russen ruled that four Stobart Group directors - including Mr Ferguson and Mr Tinkler’s successor as chief executive Warwick Brady - had breached their duty to act “for proper purposes” by transferring shares worth £16m to an employee benefit trust before the AGM vote that would determine whether Mr Ferguson was to remain as chairman.

According to Mr Tinkler’s QC, this was a bid to boost support in the vote for Mr Ferguson. Indeed, by transferring those shares, the directors involved gave the trustees involved voting rights, potentially boosting Mr Ferguson’s support in what everybody knew would be a knife-edge vote.

Yet the judge accepted the directors believed they were acting in the best interests of the company; and that their actions did not affect the outcome of the AGM vote on Mr Ferguson’s chairmanship.

The dispute has laid bare the tensions in the Stobart Group boardroom between its current top managers and Mr Tinkler, whose decade as chief executive ended when he stepped down in 2017.

An independent thinker, known for speaking his mind, he found himself in the eye of a public relations storm as his row with Mr Ferguson and other board members escalated. He wanted Mr Ferguson out but the chairman had key allies in the boardroom - including the chief executive.

On May 29, 2018, the board released a statement, confirming that Mr Tinkler would vote against Mr Ferguson’s re-election at the AGM. Bosses said the board had full confidence in their chairman.

But what followed was a direct attack on Mr Tinkler.

“The board has been forced to address a number of challenges posed by Mr Tinkler in the recent past,” said the statement. It goes on to spell out that his opposition to Mr Ferguson created serious risks, which would trigger boardroom resignations, weaken governance, and potentially have a negative effect on share values.

Mr Tinkler’s response was typically robust.

In a letter to shareholders, he wrote: “The directors of Stobart Group Limited are currently engaged in a dispute which, fundamentally, is about the rights of shareholders to choose who should run the company on their behalf, and the strategy they wish the company to pursue... I am therefore writing to you, as the shareholders and owners of Stobart Group, to explain my position in that dispute.

“A few weeks ago, in May, I told the board of Stobart Group that I did not believe it was in the best interests of the Company for the current chairman, Mr Ferguson, to remain in office. I believe that the company requires a robust, independent chairman to ensure that the company sticks to its agreed strategy and concentrates on delivering value to shareholders.”

“The recent actions of Mr Ferguson prove beyond doubt that he is the not the man for the job.Mr Tinkler also responded to claims that he was “subverting” the board, destabilising staff, and enriching himself through huge expenses claims He urged shareholders: “I hope that you will vote to re-elect me as a director on July 6, and vote against the re-election of Mr Ferguson, who must accept full responsibility for the situation in which the company now finds itself. Then, at the EGM on 18 July, I urge you to elect Philip Day to be our new chairman.”

As far as Mr Tinkler is concerned, Judge Russen’s rulings are a disappointment, not a defeat. In an exclusive News & Star interview, he said he will appeal the rulings against him - including the finding that he was wrong to defend himself in his letter to shareholders in June 2018.

Of the finding that he “agitated” for Iain Ferguson’s removalas chairman, and breached his legal duty as a director by sharing his concerns with key shareholders, Mr Tinkler said: “That means a director needs the permission of the board before talking to major shareholders.

“It means you have to follow the board like sheep. Where’s the independence in that? I wanted to get the board back on track. I felt the board was taking the company in the wrong direction. Imagine you have a business, and you are one of the biggest shareholders and also a director. You’ve been used to talking to other shareholders.

“I saw the share price falling, and felt I had to be honest. If I hadn’t been honest, I wouldn’t have been doing my job properly. The board is there to protect shareholders’ interests, and provide good governance.

“As far as I am concerned, I was protecting shareholders’ interests, and shareholder value.”

Mr Tinkler said he was delighted that the most damaging allegations against him were rejected by the judge. One related to his Stobart Group expenses claims, running to an astonishing £4.5m over three years, paying for private jets, helicopters, and corporate entertainment - and even payment for pop star such as Ronan Keating.

“I had defend myself, and my reputation,” said Mr Tinkler.

“After I was voted back on to the board - and before I was then sacked again - I put out a tweet, saying my intention was to bring back democracy to the boardroom. The directors don’t own the company.

“They’re there to run it. I wanted the shareholders to know the full picture.”

He called for the resignation of the four directors found by the judge to have breached their “fiduciary” - legal - duty by transferring shares before the AGM vote on the chairmanship.

He said: “In light of the Judge’s findings, Mr Brady, Mr Ferguson, Mr Coombs and Mr Wood have no place on the board of Stobart Group and they should all step down without further delay.”

Mr Tinkler accused them of last year adopting a “highly aggressive strategy to retain Mr Ferguson” as chairman. A spokesman for the millionaire added: “The judgment records that Mr Tinkler was motivated by his genuine belief that the proposed changes in management would be for the long-term benefit of the company.

As the judge pointed out, no sensible answer could be given to the question of why such a shareholder would act with the intention of harming the company. The Judge has rightly rejected the allegation that Mr Tinkler and others “conspired to injure” the company.“Mr Tinkler firmly believes that the expenses and conspiracy claims should never have been brought...

“It is likely that millions of pounds of shareholder money have been wasted by bringing this claim against Mr Tinkler. It is notable that the findings by the Judge follow closely on from a ruling by Mr Justice Philips in relation to another claim brought by Stobart Group against Mr Tinkler. That claim was struck out on the grounds that the company sought to create a claim out of nothing, at significant cost to the shareholders...

“These findings vindicate Mr Tinkler’s concerns about other members of the board, which he expressed at the time

“Mr Tinkler believes that it is now time for him to move on from being directly involved in the day-to-day management of the Company.

“At Stobart, a new board should be put in place so that the company can thrive again.

“Mr Tinkler firmly believes that Mr Ferguson, Mr Brady, Mr Coombs, and Mr Wood should not and cannot remain in post in light of the judge’s findings.“will continue to exercise his rights as a responsible shareholder. He is proud of the company and its employees, with whose support he built a £2m business into a PLC with a value of £1bn when he stepped down as CEO in 2017.

“He is both disappointed and concerned as the company’s third largest shareholder that this value has more than halved under Mr Ferguson and Mr Brady’s tenure.”

For shareholders, the dispute has coincided with a catastrophic fall in the value of Stobart Group shares. Once worth almost £3 each, the shares yesterday valued at just £1.46. High Court judges certainly have clout, but in business the ultimate judge is the market. Only time will tell whether Stobart Group can recover.