Brassed off: Family in court battle over dividend payments at metal recycling firm

But simmering tensions over 30 years between the family members running Rotherham-based CF Booth Ltd have now been aired in public after a row over dividend payments reached the High Court in London.

A judge ruled that Ken and James Booth, grandsons of founder Clarence Booth, together with Ken’s sons Scott and Jason, who between them own 61 per cent of the firm, were overpaid by the metal recycling company at the expense of the other family members.

Clarence’s grandson Don Booth, Charles Wilkinson and Jane Compton, who have a 27 per cent minority shareholding, were starved of dividends for years whilst the company bought luxury cars and a £1.73 million yacht, the court heard.

Judge Mark Anderson QC ruled yesterday that they must be bought out of their minority shareholdings for millions, and that the four descendants of Clarence Booth had “taken excessive remuneration” from the company.

CF Booth Ltd was incorporated in 1949 to carry on the family scrap metal business established by Clarence Booth in 1920. Clarence died in 1980 but a seething row has for more than 30 years been going on between two different branches of the family, the High Court heard.

The firm won the Queen’s Award for International Trade in 2012, the year in which it logged its biggest ever turnover of more than £273 million.

Over the years, the company has diversified into engineering, demolition, haulage and foundry products and has yards in Rotherham and Doncaster.

The company, however, made its first loss for a decade in 2014, losing more than £4.5 million, but is expected to almost break even in 2017.

The judge said total directors’ pay was modest until 2005 but then rose sharply to an average of over £1.5 million between 2007 and 2015.

The falling out within the family “started 30 years ago” and had its roots in bad blood between Clarence’s sons, Ken Senior and Dennis.

“Some of the things said in the distant past still rankle”, said the judge.

Since the mid-1980s, no dividends had been paid to Dennis’s son Don - who owns 19 per cent of the company - or Charles and Jane, who own 8.4 per cent.

They argued that Ken, James, Scott and Jason had caused them “unfair prejudice” by paying themselves too much for years.

And the refusal to pay dividends was a deliberate attempt to devalue the minority shareholdings “with a view to acquiring them cheaply”, they claimed.

There were no allegations against a fifth director, Christopher Wilkinson, who played no active part in the case.

Judge Anderson said noone had suggested that Ken, James, Scott and Jason had “drained the company of every penny of profit”.

Although the “no dividend policy” had become “a source of enmity”, they insisted there was no evidence of any “improper motive” on their part.

It had been for the benefit of the cash-hungry business to re-invest profits and keep down its overdraft, rather than pay dividends, they argued.

“I accept that the company did need cash for investment and that it did use some of its profits for that purpose,” said the judge.

But he noted that a string of luxury cars had been provided by the company to Ken, James, Scott and Jason, along with their wives.

The large number of cars bought and sold by the company “included luxury models which typically cost between £50,000 to £150,000, sometimes more”.

“Scott’s wife, Natalie, for example, had a Range Rover Sport which cost £65,000” despite her “modest role” within the company, said the judge.

He added: “I did not believe Ken Booth’s denial that his own wife had the benefit of the Bentley Continental which bore her personalised number plate.”

Until 2012, the company also owned a £1.73 million yacht, which Ken said was needed to research and develop the company’s marine products.

But the judge said: “The directors were given access to it for personal recreation”.

Ken’s evidence about the business advantages of the yacht was also “generalised and vague”.

The yacht and the cars were “inconsistent with Ken Booth’s claim that the no-dividend policy was justified by the company’s insatiable need for cash,” he added.

The judge also ruled that Ken, James, Scott and Jason had “taken excessive remuneration” from the company.

In 2015, directors’ pay and benefits went up to almost £2.5 million, from about £1.4 million in the previous year, although the company made a £5.3 million loss.

Their remuneration dropped sharply in 2016 as the company’s losses continued but, between 2011 and 2015, Ken and James were paid an average of over £687,000.

The remuneration received by Scott and Jason in 2014 and 2015 was also “outside any reasonable range”.

Never paying dividends, combined with excessive directors’ pay, “was a policy promoting the success of the company for their own benefit”, he ruled.

The judge said he was “left in no doubt about all the Booths’ devotion to the family business”.

But Ken, James, Scott and Jason had breached the duties they owed as directors to the minority shareholders, he ruled.

The company’s remuneration policy was “unfair” to Don, Charles and Jane from at least 2007 to 2015.

And the no-dividend policy was also unfair to them between 2007 and 2013.

They had been denied a return on their investment and their rightful share of the company’s profits.

At the height of the company’s success in 2012, Charles and Jane had offered to sell their shares, but were offered just £50,000 for them, a fraction of their real value.

And they and Don had brought their case to court “to put right a wrong which they firmly believe they have suffered”, said the judge.

He directed that the company should be valued as at July 2015 and Don, Charles and Jane bought out of their shareholdings.

Although their payouts will be reduced by one-third to take account of their minority status, they will receive millions between them.

Were it not for the option of making a buy-out order, the judge said the winding up of the company would probably have been justified.