Belmont Finance Corporation Ltd v Williams Furniture Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE BUCKLEY,LORD JUSTICE GOFF
Judgment Date17 February 1977
Judgment citation (vLex)[1977] EWCA Civ J0217-4
Docket Number1969 B. No. 5821
Date17 February 1977

[1977] EWCA Civ J0217-4

In The Supreme Court of Judicature

Court of Appeal

On Appeal from the High Court of Justice Chancery Division Group B (Mr. Justice Foster)

Before:

Lord Justice Buckley

Lord Justice Orr

and

Lord Justice Goff

1969 B. No. 5821
Belmont Finance Corportion Limited
Plaintiff
(Appellant)
and
Williams Furniture Limited (formerly Easterns Limited)
First Defendant
City Industrial Finance Limited
Second Defendant
James Peter Grosscurth
Third Defendant
Andreas Demetri
Fourth Defendant
Kenneth Maund
Fifth Defendant
John Sinclair Copeland
Sixth Defendant
Archie Spector and
Seventh Defendant
Frank Victor Smith
Eighth Defendant

MR. MICHAEL MILLER Q.C. and MR. M. J. ROTH (instructed by Messrs. Sidney Pearlman & Greene, Solicitors, London) appeared on behalf of the Plaintiff (Appellant).

MR. N. C. H. BROWNE-WILKINSON Q.C. and MR. G. BRIAN PARKER (instructed by Messrs. Freshfields, Solicitors, London) appeared on behalf of the First and Second Defendants (Respondents).

MR. NICHOLAS STEWART (instructed by Messrs. Gentle Mathias & Co., Solicitors, London) appeared on behalf of the Fourth and Sixth Defendants (Respondents).

MR. GERADL GODFREY Q.C. and MR. IAN McCULLOCH (instructed by Messrs. Arram Fairfield & Co., Solicitors, London) appeared on behalf of the Seventh Defendant (Respondent).

LORD JUSTICE BUCKLEY
1

On 30th July last Mr. Justice Foster dismissed this action at the close of the plaintiff's case upon the submission of the defendants that there was no case to answer in relation to an alleged conspiracy and that it was not open to the plaintiff upon the Statement of Claim to seek relief on the basis of constructive trust.

2

The facts are these: before the transaction out of which the action arose took place, the second defendant, a wholly owned subsidiary of the first defendant, owned all the issued shares of the plaintiff; the third, fourth, fifth and sixth defendants owned between them all the shares in a company called Maximum Finance Ltd. (to which I shall refer as "Maximum"); another company called Cityfields Properties Ltd, was a wholly owned subsidiary of Maximum; the seventh and eighth defendants were at all relevant times directors of the plaintiff.

3

The third, fourth, fifth and sixth defendants wished to acquire the share capital of the plaintiff; for this purpose they required finance. The form which the transaction took was in essence this, that under a written agreement of 3rd October 1963, the third, fourth, fifth and sixth defendants sold all their shares in Maximum to the plaintiff at the price of £500,000 and bought all the issued shares of the plaintiff from the second defendant for £489,000. If the share capital of Maximum was worth £500,000, there would have been nothing wrong with this, but the plaintiff asserts that the shares of Maximum were not worth more than about £60,000, and that to the extent that the plaintiff did not get value for money it was giving the third, fourth, fifth and sixth defendants financial aid for the purchase of its own shares, in contravention of the Companies Act 1948, section 54.

4

The action is brought in the name of the plaintiff by a Receiver appointed out of court under debentures issued by theplaintiff. The plaintiff is now in compulsory liquidation and the Receiver has prosecuted the action under the direction of the Companies Court.

5

On account of the way in which the case went, the learned judge has heard the evidence of the plaintiff's side only; he has heard no evidence of, or on behalf of, any defendant. He made no findings of fact; in view of his judgment it was unnecessary for him to do so. He dealt with the case upon the plaintiff's pleading and on that alone he held that since the agreement is alleged to have formed part of the alleged conspiracy, and since the plaintiff was a party to the agreement, the plaintiff was a conspirator; so he held that the claim in conspiracy failed in limine on the ground that one party to a conspiracy to do an unlawful act cannot sue a co-conspirator in relation to that act.

6

He also held that on the statement of claim it was not open to the plaintiff to claim relief against the defendants on a basis of constructive trust.

7

It is common ground that for the purposes of this appeal we must assume that the plaintiff will be able to establish all the allegations in its statement of claim. When considering the statement of claim, two questions have to be kept in mind: First, on the allegations contained in it, was the judge right in holding that the plaintiff could not maintain its claim to relief on the basis that the defendants had conspired to the damage of the plaintiff? Secondly, on those same allegations and having regard to the form of the endorsement on the writ and the Prayer for relief in the statement of claim, is the plaintiff entitled to any relief on the basis of constructive trust? The plaintiff asks us to hold that the judge was wrong in holding that the plaintiff could not succeed on the conspiracy point and that the constructive trust point was not open to the plaintiff on the statement ofclaim. If he was right on the latter point, the plaintiff says that the judge should have allowed an amendment of the statement of claim, which in fact he refused.

8

The endorsement on the writ is in precisely the same form as the claim to relief in the statement of claim, to which I shall come in due course. The statement of claim pleads the agreement which I have mentioned, the effect of which was as follows: by the agreement (a) the third defendant agreed to sell and the plaintiff agreed to buy all the issued share capital of Maximum for £500,000; that is clause 2.(b) Such sale to be completed on 11th October 1963; that is clause 3. (c) Subject to and upon the completion of that sale, the second defendant agreed to sell and the third defendant to buy all the share capital of the plaintiff for £489,000 (clause 4) subject to adjustment as provided by clause 5. (d) The last mentioned sale to be completed immediately after the completion of the sale of the share capital of Maximum; that is clause 6.

9

I pause there to say, in parenthesis, that it is important to notice the close relationship between the two transactions, the purchase of the plaintiff's share capital being conditional upon the sale of the Maximum shares having been completed, and itself to follow immediately after the completion of the sale of the Maximum shares.

10

(e) Upon completion of the sale of the share capital to the plaintiff the second defendant agreed to subscribe at par for 230,000 5% redeemable preference shares of £1.00 each in the plaintiff, and to reconstitute the board of the plaintiff in accordance with nominations by the third defendant; and the third defendant agreed to subscribe at par for 20,000 5% redeemable preference shares and 50,000 ordinary shares, all of £1.00 each, of the plaintiff; that is clause 2.

11

There then follow some provisions of a subsidiary character, which I need not read; then by clause 13 the third defendant warranted the correctness of the balance sheets of Maximum and Cityfield Properties Ltd, and certain ancillary matters designed to ensure that those balance sheets should substantially represent the state of those two companies at the completion of the sale of the share capital to Maximum.

12

(g) The third defendant further warranted that the aggregate net profits before tax of Maximum and its subsidiaries, for the period 22nd May 1962 to 31st May 1968 should not be less than £500,000; that is clause 13 (h) (i). (h) Such last-mentioned warranty being secured by a deposit of the whole listed share capital of a company called Rentahome Ltd — clause 13 (h) (ii). (i) the first and second defendants gave the third defendants certain warranties relating to the plaintiff and certain indemnities — clause 14. (j) The first defendant guaranteed to the third defendant the second defendant's due performance of the agreement. That agreement is incorporated by reference into the statement of claim.

13

The statement of claim proceeds to contain the following allegations: I do not read them in the language of the pleader, but in an abbreviated form, with the exception of certain paragraphs towards the end. It is alleged (a) that the fourth, fifth and sixth defendants were associates of the first defendant and active participants in negotiating and procuring the agreement; paragraph 5. (b) That the seventh and eighth defendants and another were at all material times until 11th October 1963 directors of the plaintiff; paragraph 6. (c) That the terms of the agreement were approved at a board meeting of the plaintiff on 3rd October 1963, which was attended by the seventh defendant and one other director of the plaintiff; paragraph 8. (d) That ata board meeting of the plaintiff held at noon on 11th October 1963, at which the seventh and eighth defendants and another director of the plaintiff were present as directors, it was resolved that the plaintiff should purchase from the third, fourth. and fifth defendants the issued share capital of Maximum for £500,000; paragraph 9. (e) That the purchase was completed at that board meeting; paragraph 9 (A), (f) That the board meeting was attended by the third, fourth, fifth and sixth defendants, by an accountant employed by the first defendant and its secretary and by the third defendant's solicitor; paragraph 9 (B). (g) That on or about 11th October 1963 the second defendant resolved to sell the issued share capital of the plaintiff to the third defendant or as he should direct and that that transaction was completed on 11th October 1963, the 200,000 issued shares in the plaintiff company being transferred as to 116,668 to the third defendant, as to 41,666 to the fourth defendant and as to 41,666 to the fifth defendant; that is paragraph 9 (A).

14

(h) That at a further board meeting of the plaintiff held...

To continue reading

Request your trial
219 cases
3 firm's commentaries
  • Claims By Insolvent Companies Against Fraudulent Directors
    • United Kingdom
    • Mondaq UK
    • 27 July 2015
    ...treat the director/agent as notionally having transmitted the knowledge to the company (Belmont Finance Corporation v Williams Furniture [1979] Ch 250; cf Bank of India v Morris [2005] BCC In the Canadian case of Livent Inc v Deloitte & Touche [2014] ONSC 2176, the court also found that......
  • High Court Grants Permission To Plead Fraud In LIBOR Claim
    • United Kingdom
    • Mondaq UK
    • 13 January 2016
    ...of any allegation of fraud to be set out". Relying on a long line of established authority including Belmont Finance v Williams Furniture [1979] Ch 250 and Three Rivers v Bank of England [2001] UKHL 16 the court was clear that "an inference of dishonesty...must be pleaded and proved". Thus,......
  • Accessory Civil Liability
    • British Virgin Islands
    • Mondaq Virgin Islands
    • 27 August 2008
    ...cases of "knowing assistance" are concerned with the furtherance of fraud. In Belmont Finance Corporation Ltd. v. Williams Furniture Ltd. [1979] Ch. 250, the Court of Appeal insisted that, to hold stranger liable for "knowing assistance," the breach of trust in question must be a fraudulent......
9 books & journal articles
  • THE EFFECTIVE REACH OF CHOICE OF LAW AGREEMENTS
    • Singapore
    • Singapore Academy of Law Journal Nbr. 2008, December 2008
    • 1 December 2008
    ...2 Ch 276; Consul Development Pty Ltd v DPC Estates Pty Ltd(1975) 132 CLR 373; Belmont Finance Corporation Ltd v Williams Furniture Ltd[1979] Ch 250 (CA); Belmont Finance Corporation Ltd v Williams Furniture Ltd (No 2)[1980] 1 All ER 393 (CA); Re Montagu’s Settlement Trusts[1987] 2 WLR 1192.......
  • Tort Law
    • Singapore
    • Singapore Academy of Law Annual Review Nbr. 2007, December 2007
    • 1 December 2007
    ...cases of Chong Hon Kuan Ivan v Levy Maurice (No 2)[2004] 4 SLR 801 (‘Chong Hon Kuan Ivan’) and Belmont Finance (No 1) v Williams Furniture[1979] Ch 250 (‘Belmont Finance’), because the factual matrix of those cases did not specifically involve the charge of conspiracy being brought against ......
  • THE ROLE OF LAW IN PLEADINGS
    • Singapore
    • Singapore Academy of Law Journal Nbr. 1998, December 1998
    • 1 December 1998
    ...Tang Liang Hong[1997] 2 SLR 641, at paras 78—79. 59 See s 59(1)(a)—(d) of the Evidence Act, Cap 97; Chee Choong Wah v R[1955] MLJ 54. 60 [1979] Ch 250, at 269. 61 [1928] 1 KB 421. 62 Also see Whall v Bulman[1953] 2 QB 198. 63 [1978] 1 WLR 455. 64 [1956] 2 All ER 866. 65 Ibid, at 869. 66 [19......
  • Attribution in Company Law
    • United Kingdom
    • The Modern Law Review Nbr. 77-5, September 2014
    • 1 September 2014
    ...by the insolvent company against its9ibid at [139], [144], [157] and [168].10 ibid at [109].11 ibid.12 ibid.13 ibid at [110]–[111].14 [1979] Ch 250.15 [1984] QB 624.16 n 1 above at [227]–[230].Attribution in Company Law© 2014 The Author. The Modern Law Review © 2014 The Modern Law Review Li......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT