Bishopsgate Contracting Solutions Ltd v David Thomas O'Sullivan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Linden |
| Judgment Date | 30 July 2021 |
| Neutral Citation | [2021] EWHC 2103 (QB) |
| Docket Number | Case No: QB-2019-004644 |
| Court | Queen's Bench Division |
[2021] EWHC 2103 (QB)
Mr Justice Linden
Case No: QB-2019-004644
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Paul Chaisty QC (instructed by Mishcon de Reya LLP) for the Claimant
Mr Simon Forshaw (instructed by Howard Kennedy LLP) for the Defendant
Hearing dates: 5, 6, 7, 10, 11, 12, 20 May 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE
Introduction
From April 2007 until his resignation with effect from 9 June 2017, the Defendant was an employee of Munnelly Support Services Limited (“MSSL”), a company which formed part of a family business known as the Munnelly Group, of which Mr Philip Munnelly was the head. The business of the Munnelly Group is labour supply, logistical support and waste management, and it operates largely in the construction sector.
From 2012, when he was Financial Controller of MSSL, on the instructions of Mr Munnelly, the Defendant was involved in the incorporation and development of the business of a group of companies which were referred to in these proceedings as the Bishopsgate Group. This group included the Claimant. The Defendant did increasing amounts of work for the Bishopsgate business and, at the time of the events which are the subject of these proceedings, he described himself as its Managing Director.
The case against the Defendant is that at all material times, in addition to his employment by MSSL, he was a de facto director and/or an agent of the Claimant. It is alleged that, in or around mid-2016, Mr Munnelly repeatedly gave a clear oral instruction to the Defendant that he was not permitted to provide or extend credit to any new client of the Claimant without Mr Munnelly's consent, and that this instruction was agreed by the Defendant and had contractually binding effect.
In October 2016, the Defendant authorised the provision of unsecured credit of up to £250,000 to a new client of the Claimant, G-Force Groundworks Limited (“G-Force”) and, over the following months, he permitted the level of credit to grow so that it stood at £578,072 when he left MSSL. It is said that the Defendant did so without the knowledge or consent of Mr Munnelly, and therefore contrary to this instruction and negligently and that this was in breach of contract and of his duties as a de facto director and/or agent.
G-Force subsequently went into administration in August 2017 and the Claimant wrote off a debt of £481,727. The Claim is therefore in this sum.
At the beginning of the trial, Mr Chaisty QC confirmed that the Claimant's pleaded case alleges three particulars of breach of duty, which are pleaded at paragraph 32 of the Amended Particulars of Claim (“APOC”). These are:
i) Providing/extending credit to G-Force;
ii) Failing to ensure the payment of the sums owed by G-Force; and
iii) Deliberate concealment of his actions in relation to G-Force.
Mr Chaisty also stated that, contrary to the impression given by his skeleton argument, the allegation of deliberate concealment was pursued. The matters which it was alleged the Defendant deliberately concealed were:
i) The grant of credit to G-Force; and
ii) The growth of G-Force's debt and the size of the problem.
Mr Chaisty confirmed that the duties of which the Defendant was alleged to be in breach were pleaded at paragraph 24(a)-(g) APOC which, he said, were “taken largely…from the Companies Act”.
Mr Chaisty's case was refined in the light of the oral evidence in respects which I will come to.
The Defendant says that he did all of his work in his capacity as an employee of MSSL and owed duties to that company, but not to the Claimant of which he was neither a de facto director nor an agent. He denies that there was any instruction or agreement that he would not extend credit to new clients without Mr Munnelly's authorisation. He also says that Mr Munnelly was well aware that G-Force was a client and that credit had been extended to it. He denies that his actions were negligent and that he concealed his dealings with G-Force. In the alternative, he argues that if it is found that he was a de facto director and that he acted in breach of his duties as such, he nevertheless acted honestly and reasonably at all material times and should therefore be relieved from any liability pursuant to section 1157 of the Companies Act 2006.
The trial
The Claimant called Mr Munnelly (Chief Executive Officer and director of Munnelly Group plc), Mr Geoffrey Vine (Finance Director of Munnelly Group Plc) and Mr Patrick Sexton (senior consultant at West Coast Haulage Limited and former statutory director and nominee shareholder of the Claimant for Mr Munnelly). The Defendant gave evidence and he called Mr Daniel Madadi (former Head of IT of the Munnelly and Bishopsgate Groups and Operations Manager of MSSL) and Mr Gary Pegg (who described himself as a former finance director/financial accountant working for the Claimant and other Bishopsgate companies).
I allowed a week after the close of the evidence for Counsel to prepare written submissions before making their oral submissions.
Observations about the credibility of the witnesses
I found Mr Munnelly to be a highly unreliable witness, for reasons which will become increasingly apparent as I explain more about the case below. At this stage, suffice it to say that his evidence in chief began with supplemental oral evidence which, in my view, he had made up in order to address a fairly obvious weakness in his account. He was then cross-examined for approximately an hour before the end of the court day, in the course of which he was asked about whether he had paid Mr Sexton £500,000 when the shares in the Claimant were transferred back to him in 2018, and if so why, given that Mr Munnelly was the owner of the shares in any event. Mr Munnelly said that he had made a payment to Mr Sexton but refused to say how much it was, and he gave explanations for the payment such as that it was “for all the trouble that he had been put through”.
At the end of the court day, in the usual way, I told Mr Munnelly that until he resumed his evidence the next morning “you must not discuss your evidence under any circumstances with anyone”. Overnight, it came to the Defendant's attention that Mr Munnelly had nevertheless discussed his evidence with Mr Sexton (and, quite possibly, the evidence which Mr Sexton was to give). The following exchanges with Mr Forshaw ensued at the beginning of the second day of the trial:
“Q. Last night after you left court, Mr. Munnelly, you telephoned Mr. Sexton, did you not?
A. No, I did not telephone Mr. Sexton.
Q. You telephoned him and you wanted to know how my client knew that the shares in [the Claimant] had been sold for £500,000
A. No, I mean, we talked about going to a race meeting on 3 Saturday.
Q. You did telephone him then?
A. I had a conversation, but not about this. I had a conversation about racing….
Q. I want to be absolutely clear about this, Mr. Munnelly. It is a matter of some importance. When I first asked you, you said you had not telephoned him. You have now accepted that you did telephone Mr. Sexton. Did you or did you not speak to him about this issue?
A. No, I did not speak to him about this issue.
Q. Not at all?
A. No.
Q. Did you talk to him about the case at all?
A. Did I speak to him about the case? No, not really.
Q. “Not really”; what does that mean?
A. Well, I do not know. He said, “How are things going?” I said, “Yes, it seems to be all right.” That was it.
Q. You were told at the close of your evidence yesterday by the judge, in clear terms, not to speak to anybody about the case, were you not?
A. I did not. I did not, as I said, I did not have a — he asked me how things were going, and I did mention that there was some sort of mention about this deal.
Q. So you did discuss the shares with him last night?
A. I said the deal was discussed, yes, I did.
Q. So you discussed your evidence with him?
A. I did not discuss my evidence with him…”
The combination of untruthfulness, evasiveness and obfuscation which is apparent from these exchanges was representative of Mr Munnelly's qualities as a witness and it continued throughout his evidence. He admitted, in the course of his evidence, that he had declared that if the Defendant went anywhere near the clients of the Munnelly and Bishopsgate groups he would “have the house from over his family's heads” and it appeared that he was determined to achieve this objective, however poor an impression of his own honesty and competence he gave in the process.
It is also relevant to note that Mr Munnelly came across as overbearing and liable to be irrational or simplistic, and he may well have been seen in this way by colleagues. This observation is based not just on how he presented as a witness, but also on what was hinted at by other witnesses. He appeared to me to be someone who probably needed to be “managed” by his colleagues and this may well have played a part in what happened in this case, particularly in Mr Vine's dealings with Mr Munnelly on the subject of the issues with G-Force.
Mr Vine had been Mr Munnelly's right hand man for many years. He appeared to be an intelligent man and, as will be...
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