Andrews v Stanway
| Jurisdiction | England & Wales |
| Judge | Sara Cockerill |
| Judgment Date | 29 June 2017 |
| Neutral Citation | [2017] EWHC 2248 (QB) |
| Date | 29 June 2017 |
| Court | Queen's Bench Division |
| Docket Number | Case No: IHQ16/0146 |
[2017] EWHC 2248 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
The Royal Courts of Justice
Strand
London WC2A 2LL
Sara Cockerill QC
(Sitting as deputy High Court judge)
Case No: IHQ16/0146
Mr W Edwards (instructed by Tenet Law) appeared on behalf of the Claimant
Mr A Gupta (instructed by Morgan Phelps Solicitors) appeared on behalf of the Defendant
THE DEPUTY JUDGE: This is the hearing of the application of the claimant, Mr Andrews, dated 24 March 2017 for a freezing order against the first defendant, Mr Stanway, only. It is unusually made on notice.
In many ways, this is a rather sad case in that Mr Andrews and Mr Stanway were both experienced businessmen, have known each other for 30 years and were close friends prior to the events which underpin these proceedings. But that friendship is now at an end in that they have fallen out very extensively and these proceedings are the result.
Both Mr Andrews and Mr Stanway have previously acted as directors of companies. They have both previously worked for a company called Unilock Group Limited which failed in 2007. As a consequence of the failure of Unilock, the claimant, who was a director of Unilock, was disqualified to act as a director between 2008 and 2013. In 2009, the claimant was working for Parkgrove Management Limited, and at that time it there came either to his attention or to the attention of Mr Stanway's son-in-law, Mr Jupp, a waterproof sealant product then called liquid rubber, which has been referred to as "the product", and the UK licence for which was held by Liquid Rubber UK Limited.
There is no dispute that Mr Andrews and Mr Stanway discussed the potential of the product and there is no dispute they agreed something about how they could exploit the product. But there is at the heart of this case a very considerable dispute about the nature of what was agreed, which given their history was not unnaturally agreed apparently informally and orally. Each says the other one's recollection of what was agreed is at best highly faulty.
In the pleadings, the battle lines are drawn in summary thus: Mr Andrews contends that he and Mr Stanway entered into a joint venture agreement under which they owed contractual and fiduciary duties to each other and pursuant to which they were to purchase and market the product using various corporate vehicles. Mr Andrews maintains that four companies were incorporated for these purposes; Morton Austin Limited, Rubbeco Limited, Ecolast Limited and Flame Engineering UK Ltd(?).
For his part, Mr Stanway maintains that the agreement between them was merely to incorporate two companies to pursue the purchase, supply, and so forth, of the product. Those companies were MAL and Rubbeco, and there were no further agreements to incorporate other companies. He says they agreed to incorporate a single company to purchase and supply the product and this was to be a separate company from any in which the claimant was already involved.
The product which they were to exploit they called the Rubbeco Seamless Membrane System and they agreed to have an equal shareholding in the company to be incorporated.
Mr Stanway says that Mr Jupp and the claimant's then wife, Mrs Dorothy Andrews, expressed an interest in being involved in the purchase, supply and application of the product, and it was then agreed that a second company would be set out so there would be a parent company in which Mr Andrews and Mr Stanway had an equal shareholding as a management company, and a subordinate company which would be the trading company and would bring the product to market for use but in which the two main participants would hold the majority shares to maintain shareholder control. The two companies in question are MAL and Rubbeco Ltd. If Mr Stanway is right about the nature of the agreement and that there was effectively no joint venture, Mr Andrews' claim falls to the ground.
There is no dispute between the parties that in 2009 a number of things occurred; for example the incorporation of MAL (the name of MAL being based on the middle names of the claimant and the first defendant) with the claimant and the first defendant holding half of the shares each. With Mr Andrews being debarred from being a director, Mr Stanway was the sole director. Meanwhile, Mr Andrews was employed by Rubbeco until August 2014. Rubbeco was incorporated in October 2009 and MAL held a 60 per cent shareholding with Mrs Andrews holding 10 per cent and Mr Jupp 20 per cent. In 20009 also the product was acquired, it was re-branded, the intellectual property rights being held by MAL and the sales and marketing was commenced by Rubbeco.
There is no dispute that substantial efforts were made to develop a business using the product, and by 2013 it was generating a not inconsiderable turnover. There is a dispute between the parties as to the extent to which it was profit making. Mr Stanway says it was only profit making to a small extent, Mr Andrews says the profit was substantial and the pre-tax profit was reduced because Mr Stanway caused improper payments to be made to himself and elsewhere.
The two further companies which were incorporated are Ecolast, of which the sole shareholder and director was the daughter of Mr Stanway. The claimant says this was designed to operate as the cleaning and prep company for the early stages of the work before the Rubbeco product was applied. The first defendant disputes this. Flame Engineering UK Ltd was incorporated in 2012. The claimant says this was to import and sell gas blowers which could be used for drying the substrate before the application of the product. Again, this is disputed by the first defendant.
This company, Flame, is now called Seamless Membranes Limited and is the second defendant to the action. Mr Stanway was the sole shareholder and director of this company and its name was subsequently changed on a number of occasions; in October to Rubbeco Seamless Membranes Systems Limited, subsequently to Rubbeco Seamless Membranes Limited, and to its present name. The claimant says there is a significance in terms of his allegations as to appropriation of business in those change of names.
Rubbeco was wound up on 6 March 2015 and dissolved on 2 September 2016. MAL was wound up on 9 November 2015 on the claimant's petition, and the winding up is, if not quite concluded, very nearly so.
Having previously approached the respective liquidators of MAL and Rubbeco and complained about the defendant's conduct, the claimant has now brought a claim against the defendant alleging that there was a joint venture between the claimant and the first defendant. That claim has two limbs; it is that in breach of the agreement, Mr Stanway misappropriated the assets of the joint venture companies by causing improper payments, and secondly that he diverted the business of the joint venture companies for his benefit. Mr Stanway denies both limbs of these allegations very hotly.
This of course is not the trial of the action, although so much evidence has been served one might be mistaken for thinking that it was. This is simply the hearing on notice of the interim injunction application. The parties should understand that nothing I say in this judgment constitutes any ruling on any of the substantive disputes between the parties.
The application before me was initiated by an application notice of 24 March which is supported by Mr Andrew's first affidavit. It followed on an application for third party disclosure which was made in slightly strange circumstances in September 2016 before the claim was actually issued, for disclosure under CPR 31.17 against two banks. The application in question was not served on the first defendant, so the application was made without notice.
Ultimately, at the time that that application came before the master, an undertaking was given to issue the proceedings. The proceedings were then issued in November. The Particulars of Claim are dated 24 March 2017 and the defence was served on 11 May 2017. The application before me was due to be heard on 4 April 2017, an application notice having been issued and brought on on short notice. A consent order dated 31 March 2017 was however agreed, effectively holding the ring until the hearing of the application on notice and setting out directions for service of evidence in relation to that application.
Since then, considerable further evidence has been filed. This includes not merely lengthy affidavits and witness statements but also an extensive table verified by a witness statement in correspondence from Mr Stanway's solicitors, which effectively seeks to respond to Mr Andrews' evidence.
Before me I have therefore the witness statement of the claimant in aid of the third party disclosure application, four subsequent witness statements of the claimant in this application, and an affidavit and a witness statement of the first defendant in this...
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