Bottin International Investments Ltd v (1) Venson Group Plc (2) Grant Scriven (3) Clive Lawson Smith (4) Simon Frost
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE BLACKBURNE,Mr Justice Blackburne |
| Judgment Date | 08 December 2006 |
| Neutral Citation | [2006] EWHC 3112 (Ch) |
| Docket Number | Case No: HC03C01009 |
| Court | Chancery Division |
| Date | 08 December 2006 |
[2006] EWHC 3112 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Justice Blackburne
Case No: HC03C01009
(1) Venson Group Plc
(2) Grant Scriven
(3) Clive Lawson Smith
(4)simon Frost
John Wardell QC and Tom Low (instructed by DLA Piper Rudnick Gray Cary) for the Claimant
Christopher Carr QC and Charles Samek (instructed by Wallace LLP) for the Defendants
Hearing dates: 9 th to 12 th, 15 th to 19 th, 22 nd to 26 th May, 6 th to 9 th June, 27 th and 28 th July 2006
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 HON MR JUSTICE BLACKBURNE
Introduction
The claimant, Bottin (International) Investments Limited ("Bottin"), alleges that it was fraudulently induced to invest £10 million in subscribing for one million A Preference Shares in the first defendant, Venson Group plc ("Venson"), equivalent on conversion to 28.57% of Venson's ordinary issued share capital. It seeks to rescind the transaction and recover its investment. In the alternative, it claims damages. In the further alternative it claims damages arising out of what it alleges are breaches of certain warranties contained in the share purchase agreement dated 22 December 1999 ("the SPA") pursuant to which it subscribed its £10 million for the shareholding. It alleges that the second, third and fourth defendants, respectively Grant Scriven ("Mr Scriven"), Clive Lawson Smith ("Mr Lawson Smith") and Simon Frost ("Mr Frost"), were parties to the fraud. Mr Scriven and Mr Lawson Smith are also sued, along with Venson, as parties to the warranties contained in the SPA which it alleges were broken.
At the time of the representations which Bottin claims were made fraudulently in order to induce its investment Mr Scriven was Venson's chairman and chief executive officer, Mr Lawson Smith was Venson's deputy chief executive officer and Mr Frost was Venson's finance director. Mr Frost had been appointed finance director with effect from 19 July 1999 and remained in that position until 31 March 2000. He had provided consultancy services to Venson prior to becoming its finance director. No inference adverse to Mr Frost is to be drawn from the fact that Mr Frost's tenure of his directorship was so short. Mr Scriven continues as executive chairman of Venson and Mr Lawson Smith as its managing director. Mr Scriven and Mr Lawson Smith are both beneficiaries of trusts which have – and at the material time had – an interest in Venson's share capital, in the case of Mr Scriven through a settlement holding approximately 40% of Venson's ordinary share capital, and in the case of Mr Lawson Smith through a settlement holding approximately 31% of Venson's share capital.
Bottin is an investment company registered in Gibraltar controlled by a Mr Dermot Desmond. Mr Desmond, who is from the Republic of Ireland, is a highly successful entrepreneur and investor. Bottin is one of the vehicles through which Mr Desmond makes his investments. International Investment and Underwriting Limited ("IIU") acts as corporate finance adviser to Bottin and Mr Desmond's other investment vehicles. I understand that IIU is also controlled by Mr Desmond. One of IIU's employees is Mr John Bateson. He is an accountant by training. Since 1995 he has been employed by IIU as an investment executive. He has responsibility for researching, negotiating, assessing and advising on investment opportunities which Mr Desmond may wish to exploit and, if an investment results, monitoring the progress of the investment, often as a director of the company in which the investment has been made.
It was on the advice of Mr Bateson that Mr Desmond, through Bottin, was persuaded to invest £10m in Venson. Apart from a single meeting between Mr Desmond and Mr Scriven (attended also by Mr Bateson and a Mr Martin Dooney) on 19 November 1999 at which the decision was made, subject to contract, to invest in Venson, all of the communications and meetings concerning the investment were conducted by Mr Bateson on Bottin's behalf. On completion of its investment, Bottin's shares in Venson became held by IIU Nominees Limited, a nominee company registered in Ireland which as trustee holds shares owned by Mr Desmond's investment vehicles.
The Venson Group
At the time with which this claim is concerned, the Venson group comprised the following trading subsidiaries, all of which were wholly owned by Venson, namely Venson Fleet Management Limited ("VFM"), Venson Professional Contracts Limited ("VPC"), Venson Public Sector Limited ("VPS") and Venson Limited ("V Ireland"). Where appropriate I shall refer to them collectively as "Venson". The group also has a half share in a South African joint venture which did not trade until some time later. In the documentation, this part of the business is usually referred to as Venson International ("VI"). Venson itself did not trade; instead it acted as the holding company for the group and also operated the group head office, Venson House, in Esher, Surrey.
VFM carried on the business of vehicle fleet management in the private sector. VPC carried on the business of contract hire, also in the private sector. It changed its name to Venson Automotive Solutions Limited in March 2000. VPS carried on the business of vehicle fleet management in the public sector. V Ireland, an Irish incorporated company, specialised in fleet management in the Irish Republic.
VPS and the MPS contract
The focus of this litigation is principally, but by no means exclusively, on the activities of VPS. Prior to 1999 it and the other companies in the group had operated on a relatively modest scale. In late 1998 VPS was awarded the contract to repair and maintain the Metropolitan Police Service vehicle fleet over a seven year period starting on 28 April 1999. The formal contract, the MPS contract, was entered into on 4 December 1998 between the Receiver for the Metropolitan Police District and VPS.
The MPS contract was a new venture, as much for the Metropolitan Police Service ("the MPS") as for Venson: it was the first time that the MPS had "outsourced" its transport services to the private sector and the first contract of its kind undertaken by Venson. Indeed, it was the first time that any police service in this country had outsourced the repair and maintenance of its vehicle fleet to the private sector.
In essence, Venson (through VPS) undertook to repair and maintain the whole of the MPS motor car and motor cycle fleet (numbering some 3,000 vehicles) in accordance with a strict scheme of requirements. The contract required Venson to run customised and dedicated technical and repair facilities, some of them in-house but some of them provided by specially approved outside contractors, the so-called preferred service providers ("PSPs"). In broad terms, the cost of routine maintenance, including fair wear and tear repairs, of the vehicles was borne by Venson in return for a fixed monthly fee of (at the material time) £542,154. Accident repairs and so-called "unfair" wear and tear work (ie wear and tear otherwise than in the ordinary course) were to be carried out by Venson or one of the PSPs but with the cost of doing so charged to the MPS.
The contract involved a massive expansion in Venson's activities, including an increase in turnover and staff numbers. Thus, Venson's directly employed staff rose from 43 (in 1998) to 125 (in 1999) and to 195 (in 2000). Most if not all of the staff increase was attributable to the MPS contract. The size and complexity of the operational and financial structures needed to cope with the new contract were considerable. The staff engaged on the contract who worked in-house required security clearance. Special staff training was also needed. A Command and Control Centre had to be set up to co-ordinate vehicle rescue and recovery, maintenance, repair and accident management services. Because a significant part of the fleet comprised vehicles used in emergencies, Venson had to be able to provide a 24 hour, 365 day a year service. New IT and accounting systems had to be acquired and processes set up to handle the huge increase in the volume of paperwork and accounting entries. An accounting system called "Kerridge" was acquired. It became operational on 26 July 1999. Prior to this time and pending the new system becoming operational, Venson had been permitted to use the MPS's own in-house system. There were difficulties in doing so. The result was a backlog of data to be input into the Kerridge system when it became operational. The backlog was eventually cleared so that the system became fully functioning by the end of October or early November 1999.
Initially, difficulties were experienced in getting staff (and PSPs) to differentiate between those items of work, the cost of which was carried by Venson in return for the fixed monthly fee (basically routine maintenance and fair wear and tear items), and those which were not, where the cost was to be reimbursed by the MPS. Difficulties were also experienced in interpreting performance targets (so-called key performance indicators) set by the contract. Depending on whether these targets were met was whether Venson became entitled to performance bonuses or, conversely, to be subject to so-called "service credits", namely penalties.
More practical day-to-day difficulties were also encountered, for example, finding that a vehicle due to be collected for repair/maintenance was not available when the driver was sent to collect it. Another difficulty was that whereas 100 or so supervisory, technical and support...
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