Capital Green Recycling Ltd v Steven Nicholas Bird

JurisdictionEngland & Wales
JudgeKeyser
Judgment Date03 April 2023
Neutral Citation[2023] EWHC 760 (Comm)
Docket NumberCase No: CC-2021-CDF-000001
CourtQueen's Bench Division (Commercial Court)
Between:
(1) Capital Green Recycling Limited
(2) One Stop Recycling Limited
Claimants
and
(1) Steven Nicholas Bird
(2) Amy Alison Bird
Defendants

[2023] EWHC 760 (Comm)

Before:

HIS HONOUR JUDGE Keyser KC

sitting as a Judge of the High Court

Case No: CC-2021-CDF-000001

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS IN WALES

CIRCUIT COMMERCIAL COURT (KBD)

Cardiff Civil Justice Centre

2 Park Street, Cardiff, CF10 1ET

Richard Ascroft (instructed by Blake Morgan LLP) for the Claimants

James Pearce-Smith (instructed by Capital Law Ltd) for the Defendants

Hearing dates: 28, 29, 30 November and 1, 2, 5, 6, 7, 8, 15 December 2022

Written submissions: 12, 13 December 2022

Approved Judgment

This judgment was handed down remotely at 12 p.m. on 3 April 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

HIS HONOUR JUDGE Keyser KC

His Honour Judge Keyser KC:

Introduction

1

The second claimant (“OSR”) was incorporated in 2000 and has at all times carried on the business of a scrap metal merchant.

2

Until 16 December 2019 the defendants, Mr and Mrs Bird, who are husband and wife, were the sole directors of OSR and they and Mr Bird's mother, Mrs Bird senior, owned the entire issued share capital of the company.

3

By a share purchase agreement dated 16 December 2019 (“the SPA”) Mr and Mrs Bird and Mrs Bird senior sold the majority of the issued share capital in OSR to the first claimant (“CGR”). Mr and Mrs Bird retained a minority shareholding in OSR.

4

CGR had been incorporated on 20 November 2019 for the purpose of buying the shares in OSR. Its directors were Mr Shyam Chhabria (who resigned as a director on 20 December 2019) and his son Mr Nirmal Chhabria, both of whom were and are resident in the United Kingdom, and Mr Sanjeev Gupta, who was and is resident in Singapore. Those three persons were also the directors of and persons with significant control of The Capital Green Group Limited, which had been incorporated on 19 November 2019 and was the person with significant control of CGR.

5

In these proceedings, CGR alleges that Mr and Mrs Bird were in breach of warranties contained in the SPA and that it was induced to enter into the SPA by misrepresentations made fraudulently or at least negligently by Mr and Mrs Bird. It claims damages for breach of warranty and for fraudulent or negligent misrepresentation. CGR also says that its investigations as majority shareholder since completion of the SPA have shown that Mr and Mrs Bird, as the directors of OSR, had previously approved the payment to themselves of dividends from OSR to which they were not entitled. Accordingly, OSR claims equitable compensation in respect of those wrongful payments. For their part, the Birds deny the claims and make some limited cross-claims that I shall deal with shortly.

6

From this point on, I shall for convenience, and without signifying any disrespect, refer to the central individuals as they were referred to at trial. Mr and Mrs Bird are respectively Steve and Amy and together the Birds. Mr Shyam Chhabria and Mr Nirmal Chhabria are respectively Shyam and Nirmal. Mr Sanjeev Gupta is Captain, a nickname he was first given by the man of the same name who is well-known as the founder of Liberty House Group (and whom, for the sake of clarity, I shall call Mr Gupta). 1

7

The remainder of this judgment will be structured as follows. First, I shall set out a narrative of the background and of what I consider to be some relevant facts leading up to the entry into the SPA. Second, I shall set out the provisions of the SPA that are relevant to this case. Third, I shall set out some further narrative regarding events after the completion of the SPA. Fourth, I shall discuss in turn the heads of claim and cross-claim.

8

Although the judgment contains a lengthy narrative and refers to various specific pieces of evidence, it will make no explicit mention of a great deal of the material adduced at trial. I have had regard to all of the evidence, but I only refer to such of it as seems to me to be of particular importance.

9

I am grateful to Mr Ascroft and Mr Pearce-Smith, counsel respectively for the claimants and the defendants, for their helpful submissions and for the pleasant, though forceful, way in which they conducted the case.

The Facts: Before the Share Purchase Agreement

Steve, Amy and OSR

10

Steve left school without any qualifications and before long had found employment in the scrap metal trade, becoming over time a highly experienced and accomplished trader both in this country and around the world. One of the companies with which he did business had a scrap yard in the East End of London, and it was there that he met the owner's daughter, Amy, whom he subsequently married. Amy is perhaps the central figure in the case. She stayed on at school to get some GCSEs but has no greater formal education. She spent some time in her youth as a model. However, in evidence she described herself, with obvious enthusiasm, as “a scrap girl”. When she and Steve started trading via OSR in Birmingham in 2009, he did the buying and selling and she, though without any formal training, took responsibility for the accounting, financial and compliance aspects of the business, while at first also commuting from their home in Birmingham to work at the family company in London in order to help make ends meet. As the business expanded, the basic division of responsibilities remained: Steve did the buying and selling, and Amy had oversight of the office, though she also assisted in the trading and ran the home and a family of five young children. The manner of her evidence at trial, as well as the substance of the other evidence, leaves no doubt but that she is a person of very high intelligence and considerable ability. An important question in this case is whether these qualities were deployed under cross-examination in order to convey or to conceal the truth.

11

OSR's business grew rapidly. In 2016 it moved, for the third time, to a larger site comprising some 5 1/2 acres 2. By now, it had some 42 employees in the yard and the office. A full-time operations manager was taken on in 2017 to take on responsibility for the yard staff, maintenance and day-to-day compliance. There were several departmental managers, including Denise Haywood, the Accounts Manager. External consultants were engaged to ensure regulatory compliance and to deal with HR matters. A firm of accountants, Garratts, was engaged to prepare financial statements and quarterly management accounts. OSR's own office used two relevant software programmes. Sage was used for accounting; it was administered by Ms Haywood with the assistance of Summer Connolley and Sarah Boucher, who were responsible respectively for the sales ledger and the purchase ledger. Fred Metal and Waste Recycling software (FRED) was used to record loads passing through the site, whether sales or purchases, and posted its data directly to Sage. Amy's various responsibilities included liaison with the departmental managers, including Ms Haywood. She was proficient in the use of both Sage and FRED.

12

In late 2016 OSR ordered a new, large shear, which was capable of cutting up roughly twice as much scrap per hour as the previous shear. This was a long-term investment, designed to make OSR's operations more efficient, but it came at a significant cost. The price of the shear was nearly £2,000,000 and the necessary groundworks cost roughly £500,000. Further, delivery of the shear was delayed by several months until September 2017, and in the meantime the company had been increasing its stock in anticipation of increased production. These things placed considerable pressures on OSR's cashflow position.

13

OSR's business was funded by a number of finance agreements, in addition to operating leases of equipment. There was a simple loan from Funding Circle, a multi-asset loan from Close Bros and a stock-based loan from Growth Street. OSR also had an invoice-discounting facility, initially with HSBC Bank, then with Aldermore Bank, and from June 2018 with Bibby Invoice Discounting Limited (“Bibby”). This facility (“the Bibby Facility”) was a confidential invoice-discounting facility pursuant to an Invoice Finance Agreement dated 28 June 2018, which incorporated Bibby's Recourse General Conditions. It involved the assignment to Bibby of all existing Debts (as therein defined; in effect, all invoices rendered by OSR and unpaid) on the date of the Invoice Finance Agreement and the automatic assignment to Bibby of all Debts coming into existence thereafter. Bibby would make prepayment of Approved Debts at a rate of 88% for domestic sales and a rate of 80% for export sales. The Bibby Facility was subject to a funding limit of £2,500,000 and was supported by a debenture granted by OSR and by personal guarantees given by Steve and Amy. The warranties given by Steve and Amy in clause 6.2(A) of the Recourse General Conditions included warranties that the goods the subject of any Debt had been delivered to OSR's customer and that OSR had given Bibby complete and accurate details of the Transaction and the Debt. The operation of the Bibby Facility gives rise to a central issue in the case.

Shyam and Nirmal

14

Shyam has more than four decades of experience in the scrap metal industry. He has run his own business and has worked for TATA Steel in India and in the metal scrap division of Liberty Steel. When he gave evidence he came across as a pleasant and dignified man, though his involvement in the events relevant to this case was more limited than that of his son.

15

Nirmal has impressive business credentials. He graduated in Accountancy and Finance in Mumbai and with an MBA from Cardiff University. Thereafter he held roles in several large companies, including SIMEC Group and...

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