Berryland Books Ltd v BK Books Ltd & Others
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge QC |
| Judgment Date | 24 July 2009 |
| Neutral Citation | [2009] EWHC 1877 (Ch) |
| Docket Number | Case No: HC 07 C03302 |
| Court | Chancery Division |
| Date | 24 July 2009 |
[2009] EWHC 1877 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 3SR
His Honour Judge Hodge QC
sitting as a Judge of the High Court
Case No: HC 07 C03302
Mr Ben Quiney (instructed by Morgan Walker) for the Claimant
The Defendants appeared as litigants in person (in the case of the First Defendant acting by the Second Defendant, its director, pursuant to permission given under CPR 39.6)
Hearing dates: 2 nd, 3 rd, 6 th, 7 th, 8 th, 9 th, 10 th, 13 th, 14 th, 21 st, 24 th July 2009
His Honour Judge Hodge QC:
The parties
In the course of this judgment, I shall refer to various individuals by the names which were applied to them during the course of the trial. No discourtesy is thereby intended. The claimant ( Berryland) is a company involved in the publication and sale of children's books. It was incorporated in England on 12 February 2004 following discussions between the second defendant ( Indiren), a Malaysian national aged 46, and three Indian directors ( the Standard directors) of an Indian printing company, Standard Press (India) Private Ltd ( Standard). Indiren held 30% of the shares in Berryland and the Standard directors together held the remaining 70%. All four were appointed directors of Berryland, and Indiren was the company secretary. Indiren was the only director based in England and he exercised all day-to-day management responsibilities, making all decisions regarding the production and sale of Berryland's books. Indiren was effectively in full control of Berryland save that from time to time the Standard directors would request financial information and attend board meetings. Standard invested significant sums of money in Berryland, and Indiren provided the hands-on graft and experience which the venture needed. Indiren appears to have regarded the moneys provided by Standard as an investment in the company; the Standard directors, at least from about March 2006, appear to have regarded them as “borrowed capital”. Following a board meeting on Monday 13 November 2006, Indiren wrote a letter tendering his resignation as a director of Berryland with immediate effect.
Indiren disputes that he was ever an employee of Berryland, and it is common ground that he had no written contract of employment. Since Indiren accepts that he owed to Berryland the usual (and more onerous) fiduciary duties of a director, whether he was also an employee is relevant only to the question whether he remained subject to an employee's duty of fidelity after his resignation on 13 November 2006. In response to observations from the bench during closing submissions, it is now acknowledged by Berryland, in the light of the approved minutes of a meeting of Berryland's board of directors that took place on 12 October 2006, that, whatever the position before that date, Indiren cannot be treated as an employee of Berryland after that date, and thus he was not an employee at the time of his resignation on 13 November 2006. Initially, Indiren had not been remunerated for his considerable contribution to the establishment and development of Berryland's business. On 19 March 2006 Indiren sent an email to Chiran, one of the Standard directors, notifying him that since he (Indiren) was spending a lot of his time managing Berryland and handling all the administrative, financial and purchasing matters, from 1 March 2006 he would be paying himself a salary of £3,000 per month on the basis that this was all the company could afford. Chiran replied by email some 10 days later indicating that “the Board” had decided not to allocate remuneration to any of the directors because Berryland was a very new company. Indiren immediately responded by email on 31 March 2006 stating that, as Chiran had not got back to him, he had proceeded to pay himself £3,000 per month with effect from March 2006, and strongly disagreeing with the decision to refuse him any remuneration. Indiren indicated that, as the only executive director and the MD/CEO of the company, he would not work without appropriate remuneration for his time. He indicated that there were two options to move forward: either he was bought out of the company for 30% of Standard's total investment of £280,000, equating to £84,000; or he would buy out Standard's shareholding entirely based on a mutually agreed figure. Chiran's immediate email response was to state that he was “really upset” to hear that Indiren had withdrawn £3,000 as remuneration from Berryland since this was a “violation of Board's decision”; and to empower him to draw only £1,000 per month as remuneration for another three months. Chiran indicated that, in due course, the remuneration payable to Indiren would be decided by the other directors of the board; and that Indiren's proposal for a transfer of shares or a takeover of the company would be discussed by Chiran with the other directors, but only after his return to India in the middle of April. Indiren's evidence was that Chiran subsequently agreed orally that he (Indiren) should receive remuneration at the rate of £2,000 per month. This was (at least at one time) disputed by Berryland; but I find as a fact that this was agreed by Chiran, as confirmed by the approved minutes of the meeting of the board of Berryland held on 12 October 2006 and chaired by Chiran. In the course of this board meeting, the other board members, at the behest of Mr Baskaran (an Indian accountant, attending as an alternate director, who gave evidence before me), rejected a proposal by Indiren that he should receive a salary of £4,500 per month from October 2006, and resolved instead that Indiren should repay the salary previously drawn by him without the proper approval of the board; and that, if Indiren failed to refund this, it was to be recovered from Chiran, who was said to have “authorised this salary amount without the Boards approval”. By the time of this board meeting, Indiren was deeply unhappy about his business relationship with the Standard directors, and with the questions that they were asking him about Berryland's finances and his running of its business. In my judgment, it was the tensions and deteriorating relationship between Indiren and the Standard directors, first revealed by these email exchanges between Indiren and Chiran in March and April 2006, and thrown into sharp focus by the 12 October board meeting, which are the root cause of the events which have led to this litigation.
The third defendant ( Helen), a UK national, is married to Indiren. She was appointed, as a salaried employee of Berryland, to the role of business development manager from its establishment in February 2004. Due to her child-care commitments, she always worked flexi-time, and, initially, on a part-time basis; but with effect from April 2005 she received a substantial increase in her monthly salary and worked on a full-time basis to the extent that her family commitments permitted this. Helen had some prior work experience in the field of publishing; but (although she had to be pressed to reveal this in cross-examination) her previous work experience in children's publishing was limited to some six months in Singapore about 15 years before she began working for Berryland. Helen submitted her resignation from Berryland by email dated 9 November 2006. Under the terms of the written contract Helen had signed in January 2004, her employment was terminable on 1 month's written notice. In her email, Helen gave the contracted period of notice, but she asserted that, because she was owed a substantial amount of accrued holiday leave, she was entitled to leave immediately. However, she indicated that she was prepared to continue working until Friday 17 November. In fact, because of delays on the part of Berryland in supplying her P45 and making her final salary payment, it was not until 5 December 2006 that Helen purported to respond, by email, to requests she had received from Berryland for details of its accounts and supplier contacts. Helen's written contract contained no post-termination restraints.
The fourth defendant ( Sophie), a UK national, was appointed as a salaried employee of Berryland to the role of UK sales manager with effect from 18 April 2006. She had no previous experience in publishing. Due to child-care responsibilities, she worked flexi-time, and only spent part of her time in Berryland's office. She resigned by letter dated 8 November 2006, stating that she would work her 4 weeks' notice, less any outstanding annual leave. (As with Helen, Sophie's written contract of employment, dated 10 April 2006, required her to serve 1 month's written notice; and it too contained no post-termination restraint.) UK sales formed only a relatively small part of Berryland's business. International sales were the responsibility of Sean Buckley ( Sean). He acted as Berryland's Vice-President, International Sales, from 1 August 2004 under a written contract (terminable on 3 months' notice) dated 8 July 2004. He ceased to work for Berryland on 20 October 2006, having given one month's notice on 20 September 2006.
The fifth defendant ( Ramasan), a Malaysian national aged 40, is a friend of Indiren. He is a doctor of medicine, and practises as an obstetrician and gynaecologist. He has never had any involvement in publishing. The fifth defendant ( BK Books) was incorporated on 8 June 2006. Initially, Ramasan was the sole director and shareholder. It is not clear precisely how many shares were issued to him. On or about 1 March 2007, for no consideration, Ramasan transferred his entire shareholding to Indiren, who was then appointed a director of BK Books. Ramasan remained...
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