Aston Risk Management Ltd v Mr Lee Jones
| Jurisdiction | England & Wales |
| Judge | Cawson |
| Judgment Date | 20 March 2023 |
| Neutral Citation | [2023] EWHC 603 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2020-MAN-000067 |
[2023] EWHC 603 (Ch)
HHJ Cawson KC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: BL-2020-MAN-000067
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BISINESS LIST (ChD)
Manchester Civil Justice Centre
1 Bridge Street West,
Manchester M60 9DJ
Louis Doyle KC (instructed by Fieldfisher LLP) for the Claimant
The First Defendant appeared in person on behalf of himself and the Fifth Defendant
Hearing dates: 30 January to 3 February, and 6 and 8 February 2023
Approved Judgment
Remote hand-down: This judgment was handed down remotely at 10.30 am on Monday 20 March 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
HHJ Cawson QC
HHJ Cawson KC:
Contents
| Introduction | 1 |
| Key participants in events | 6 |
| Narrative background | 7 |
| Witnesses and approach to the evidence | 132 |
| Was Mr Jones a de facto director of ASS? | 145 |
| Legal principles | 145 |
| ARM's case | 154 |
| Mr Jones' case | 159 |
| Conclusion as to Mr Jones' status as a de facto director | 164 |
| Did Mr Jones act in breach of his fiduciary duties as a de facto director | 171 |
| Introduction | 171 |
| Legal principles | 172 |
| Burden of proof | 185 |
| Solvency | 194 |
| Payments to Neutrino | 203 |
| Payments to Cumulo | 243 |
| Alleged wrongful transfer of assets shortly prior to administration | 255 |
| ARM's case against Neutrino | 281 |
| Overall conclusion | 291 |
Introduction
This is a claim brought by the Claimant, Aston Risk Management Ltd (“ ARM”), as assignee of the claims of Audiological Support Services Ltd (“ ASS”) and its liquidators, against the First to Sixth Defendants.
The claims as against the Second, Third, Fourth, and Sixth Defendants were compromised at the commencement of the trial as originally listed in October 2022. This development necessitated an adjournment of the trial as against the First and Fifth Defendants, which ultimately took place between 30 January 2023 and 8 February 2023.
The principal issues for determination as between ARM and the First and Fifth Defendants are the following:
i) Whether the First Defendant acted as a de facto director of ASS;
ii) If so, whether the First Defendant acted in breach of his fiduciary duties as a de facto director of ASS in:
a) Causing ASS to make a series of payments to the Fifth Defendant between 23 May 2014 and 26 November 2014 totalling £594,352.03, which it is alleged were only supported by properly authorised invoices totalling £148,558.31, resulting in an overpayment of £445,766.72;
b) Causing ASS to make a series of payments to the Sixth Defendant between 27 June 2014 and 24 November 2014 totalling £74,543.43, which it is alleged were only supported by properly authorised invoices totalling £25,120, resulting in an overpayment of £49,423.43;
c) Causing ASS, shortly prior to it entering into administration on 18 December 2014, to dispose of a number of assets collectively comprising its business and undertaking to Audiological Measurement and Reporting plc (“ AMR”) without regard to ASS's ownership thereof and without payment;
iii) Whether any of the payments referred to in subparagraph (ii)(a) above constituted a transaction at an undervalue within the meaning of s. 238 of the Insolvency Act 1986 (“ IA 1986”), or a preference within the meaning of s. 239 IA 1986;
iv) Whether the Fifth Defendant is liable to account to the Claimant as a constructive trustee for having knowingly received the monies referred to in subparagraph (ii)(a) as applied by the First Defendant in breach of his fiduciary duties owed to ASS.
The First Defendant appeared in person on behalf of himself and the Fifth Defendant, a company of which he has at all relevant times been the sole director. At a Pre-Trial Review on 16 December 2022, and in consequence of submissions made by the First Defendant in respect of a health condition at a time when there was a significant increase in community rates of Covid 19 and influenza, I directed that the First Defendant might attend the trial, which would otherwise continue to be held face-to-face and in person, by video link. The trial satisfactorily proceeded on this basis with the First Defendant being able to fully participate therein, including by cross-examining witnesses, giving his own evidence, and making submissions over the video link.
Mr Louis Doyle KC appeared on behalf of the Claimant.
Key participants in events
The key participants in the events behind the present claim are the following:
Narrative Background
| Aston Risk Management Ltd (“ ARM”) | The Claimant, to which company the claims the subject matter of the present proceedings were assigned by a Deed of Assignment dated 14 July 2017 and made between ASS (1), ASS's liquidators, Mr Dickinson and Mr Snowden (2) and ARM (3) (“ the Assignment”). |
| Audiological Support Services Ltd (“ ASS”) | Company incorporated on 10 April 2012 by Clinton Jones. Entered into administration on 18 December 2014 pursuant to an order of that date. Entered into creditors' voluntary liquidation on 7 August 2015, and dissolved on 15 July 2020. |
| Audiological Support Group Ltd (“ ASG”) | Parent company of ASS following its incorporation on 2 May 2015. Returns to Companies House show it as holding 100% of ASS's share capital, on account of 4% never being allotted to Prof Lutman as said to have been originally intended. |
| Richard Moose (“ Mr Moose”) | A director of ASS until his resignation on 6 June 2014. Appointed a director of ASG on 4 March 2016. Witness for ARM. |
| Colin Sayer (“ Mr Sayer”) | A director of ASS until his resignation on 6 June 2014. Appointed a director of ASG on 4 March 2016. Witness for ARM. |
| Lee Jones (“ Mr Jones”) | The First Defendant. Sole director, and ultimate owner, together with Mrs Jones, of Neutrino. |
| Richard Kilburn (“ Mr Kilburn”) | The Second Defendant. A certified accountant and owner and director of the Sixth Defendant. Witness for ARM. |
| Clinton Jones | The Third Defendant. An audiologist. A director of ASS and ASG. |
| Professor Mark Lutman (“ Prof Lutman”) | The Fourth Defendant. Professor of Audiology at the University of Southampton, 1995 – 2012; Emeritus Professor thereafter. One of the authors of the guidelines for diagnosis and quantification of noise induced hearing loss (“ NIHL”) commonly used by medical experts in the UK Courts (the CLB Guidelines). A director of ASS |
| Mark Lutman Consultant Ltd | Company through which Prof Lutman provided services to ASS. |
| Neutrino Networks Ltd (“ Neutrino”) | The Fifth Defendant. Sole director, Mr Jones. Ultimate owners, Mr and Mrs Jones. |
| Cumulo Accountancy and Taxation Ltd (“ Cumulo”) | The Sixth Defendant. Owned and controlled by Mr Kilburn. |
| Mobile Doctors Ltd t/a Quindell Health Services (“ QHS”) | Company with which ASS entered into agreement dated 16 December 2013 for provision of audiological reports in relation to NIHL claims. Member of the Quindell group of companies (“ the Quindell Group”) forming subsidiaries of Quindell Portfolio plc. |
| Peter Laithwaite (“ Mr Laithwaite”) | Board director, Quindell Group. |
| Tom Pennington (“ Mr Pennington”) | Senior manager at QHS. |
| Helen Furby (“ Ms Furby”) | Project manager, Quindell Group. |
| Mark Evans (“ Mr Evans”) | Solicitor with Silverbeck Rymer, a firm within the Quindell Group at the relevant time. Had some responsibility on behalf of QHS with regard to quality of NIHL reports produced by ASS. |
| ZuuZuu Ltd (“ ZuuZuu”) | Company through which pension fund connected to Mr Sayer (Abbey Pension Fund) advanced money to the ASS by way of loan agreement dated 10 February 2014. |
| Susan Jones (“ Mrs Jones”) | Wife of Mr Jones. |
| Alex Jones | Son of Mr and Mrs Jones. |
| Audiological Measurement and Reporting plc (“ AMR”, aka “ Measurement”) | Company incorporated on 10 November 2010, when Mr Jones and Jones Associates (Investments) Ltd (owned/controlled by Mr Jones) were appointed directors, the latter resigning on 14 October 2011. Sole shareholders throughout were Mrs Jones (one share) and Creditas Capital (Portfolio 2) Ltd (“ Portfolio 2”) (incorporated 24 November 2014, dissolved 2 October 2018, sole director and shareholder Mr Jones). Clinton Jones, Prof Lutman and Mr Pinn appointed directors of AMR on 23 December 2014. Dormant in year to 30 November 2013. Turnover for period from 1 December 2014 to 31 December 2015: £4,026,653. Entered into administration in June 2016. |
| James Snowdon (“ Mr Snowden”) | Insolvency practitioner, partner in Carter Backer Winter (“ CBW”). Appointed Joint Administrator of ASS on 18 December 2014. Liquidator of ASS as from 7 August 2015. Ceased to act as Liquidator on 29 March 2020. Witness for ARM. |
| John Dickinson (“ Mr Dickinson”) | Insolvency practitioner, partner CBW. Joint Administrator of ASS with Mr Snowdon. Liquidator of ASS as from 7 August 2015. |
| David Pearce (“ Mr Pearce”) | Director, Quindell Group |
| David Ravech | Chairman, Quindell Group |
| Creditas Capital (Portfolio 1) Ltd (“ Portfolio 1”) | Corporate vehicle in ownership of Mr Jones and Mr Kilburn for purpose of holding shares in ASS's parent, ASG. Referred to as “ Party B” in Heads of Agreement (Confidential Terms Sheet) dated 25 April 2014. Mr Jones and Mr Kilburn sole directors (but not shareholders). One of two issued shares held by each of Creditas Capital plc (controlled by Mr and Mrs Jones) and Cumulo (controlled by Mr Kilburn). Re-named Audiology Investments (Portfolio 1) Ltd on 8 December 2014, ten days prior administration of ASS. |
| ... |
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