Charles Nathan Saatchi v Rahul Chandrakant Gajjar
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 12 December 2019 |
| Neutral Citation | [2019] EWHC 3472 (Ch) |
| Date | 12 December 2019 |
| Docket Number | Case No: CR-2019-004628 |
| Court | Chancery Division |
[2019] EWHC 3472 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
7 The Rolls Building
London EC4A 1NL
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs SITTING AS A JUDGE OF THE HIGH COURT
Case No: CR-2019-004628
Hugh Norbury QC AND Mark Wraith (instructed by PETERS & PETERS SOLICITORS LLP) for the APPLICANT
Jack Watson (instructed by MISHCON DE REYA LLP) for the FIRST RESPONDENT
Hearing dates: 29 November 2019
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.
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs SITTING AS A DEPUTY HIGH COURT JUDGE OF THE CHANCERY DIVISION
Chief ICC Judge Briggs sitting as a Judge of the High Court: Introduction
There are two applications before the court. The first is for permission to continue a derivative claim pursuant to section 261(1) of the Companies Act 2006 (the “Act”) in respect of causes of action vested in the Second Respondent, Triptych Logistics Limited (“the Company”), against the First Respondent, Rahul Gajjar.
The second application is made pursuant to CPR r. 25.1(c)(i) and s. 37(1) of the Senior Courts Act 1981 for a proprietary injunction against Mr Gajjar including ancillary disclosure and document preservation orders. An undertaking has been provided pending the handing down of this judgment which concerns the first application only.
The background
Mr Saatchi is well-known as one of two brothers who owned and ran a successful advertising agency, and for presiding over the Saatchi Art Gallery in London. The Company was incorporated at a time when Mr Saatchi was concerned with reducing running costs of the Gallery prior to its sale in December 2018.
There is no dispute that the majority of Mr Saatchi's art is owned by the Conarco Partnership (the “Partnership”) which is a partnership between Mr Saatchi and Conarco Limited (“Conarco”). Mr Saatchi is the sole shareholder of Conarco. The Partnership is branded as The Saatchi Gallery Group. Mr Tickner, a partner at Peters & Peters Solicitors LLP, explains that “Mr Saatchi was the owner, through Marchill LLP (a limited liability partnership made up of Mr Saatchi and Marchill Limited), of the Saatchi Gallery in London until December 2018, when it was sold”.
There is no dispute that Mr Gajjar began working for the Partnership in or around June 2003 and was initially responsible for overseeing the financial administration and book-keeping of the Saatchi Gallery. Mr Gajjar's role expanded over the years to that of “Finance Director and Chief Operations Officer of The Saatchi Gallery Group” but he worked for a number of other related companies such as Formend Limited (“Formend”), Conarco, and was Company Secretary for Marchill Investments LLP (“Marchill”). Marchill later funded the Gallery.
Mr Gajjar directly worked with Mr Munasinghe, Mr Saatchi, Anca Miculas, and Niall Heffernan. Mr Heffernan has produced a witness statement in support of the second application. Mr Munasinghe is said by Mr Tickner to have been the financial controller of the Saatchi Gallery Group. Mr Heffernan was admitted as a Fellow of the Association of Chartered Certified Accountants in 1985 when he became a registered auditor. His evidence is that he has been providing professional services to Mr Saatchi in connection with his finances and investments since the early 1980s. Anca Miculas was the management accountant.
The Saatchi Art Gallery required logistical services. At times, part of the art collection had to be stored and transported to various destinations. This was undertaken by specialist third party providers. In early 2010 Mr Gajjar approached Mr Saatchi with a proposal to reduce the cost of these activities. By an e-mail sent on 26 February 2010 Mr Gajjar attached a spreadsheet entitled “Storage & Transport Costs & New Facility Costs”. There is a dispute as to whether the spreadsheets sent to Mr Saatchi by Mr Gajjar produced accurate information. It is said by Mr Tickner that Mr Munsasinghe analysed the data in June 2019 and found that the costs of storage and transport by third parties as shown in the spreadsheets were inaccurate and had been inflated by Mr Gajjar. It is suggested that Mr Saatchi was misled about cost savings. This is denied by Mr Gajjar. The proposal led to the incorporation of the Company on 26 May 2010 which, initially at least, was intended to act as a vehicle for reducing the storage and transport overheads. It had a share capital of £10,000 and Mr Gajjar was appointed the sole director. Mr Gajjar and Mr Saatchi equally hold the entire shares in the Company.
Much of the remaining evidence is controversial. As an example, soon after incorporation, the Company lent Mr Gajjar £10,000. Mr Gajjar's evidence is that he wanted a loan for a car deposit and that Mr Saatchi had said to him to: “take what I needed” and that “there was no discussion of any timeframe for repayment.” Mr Saatchi does not accept he gave Mr Gajjar carte blanche to take what he “needed”.
It is appropriate to briefly mention the form of the evidence at this point. Mr Tickner has produced 5 witness statements in support of the applications. His statements provide the background to the claims, his opinion on the evidence produced by Mr Gajjar and provide responses to Mr Gajjar's evidence on behalf of Mr Saatchi. An example relates to the failure of Mr Gajjar to pay for his allotted shares in the Company. Solicitors acting for Mr Gajjar, Mishcon de Reya, wrote stating that the outstanding sum was treated as a loan and accepted that the purported loan of £10,000 remains outstanding. Mr Tickner states that Mishcon de Reya also “assert that it was subsequently orally agreed between Mr Saatchi and Mr Gajjar that it only falls to be repaid on sale of the CSRG warehouse property…. Mr Saatchi rejects this assertion.” Other terms are used such as “Mr Saatchi recollects”. The background evidence is valuable although Mr Gajjar comments that Mr Tickner has provided a one-sided version that does not provide a full history of their business relationship. The evidence in Mr Tickner's witness statement of what Mr Saatchi has told him is hearsay. His opinion evidence is inadmissible. The importance of witness statements from the main protagonists should not be underestimated. They are required to evaluate whether to decide to grant or refuse permission to continue with a derivative claim. During the hearing the court was informed that Mr Munasinghe and Mr Saatchi, who Mr Tickner relies upon as sources for his knowledge information and belief, would provide a statement, signed with a statement of truth, stating that references in Mr Tickner's statement to their instructions to him are true and accurate. By contrast Mr Gajjar provides a witness statement signed with a statement of truth. I shall lend such weight as is appropriate to the evidence before the court.
The Company 2012–2018
According to Mr Tickner, Mr Saatchi recollects that in 2012 Mr Gajjar had suggested that costs could be saved by purchasing a warehouse for storage, rather than leasing. Mr Saatchi was keen to save costs. It is accepted that Mr Gajjar raised the idea that if a warehouse was purchased it could generate an income by renting unused space. Mr Tickner states: “Mr Saatchi had reservations about the proposal as he had no experience of buying commercial property but was content to put his trust in Mr Gajjar's judgment.” Such trust is consistent with the evidence of Mr Heffernan. He says: “Mr Saatchi relies on his advisers and senior employees like Mr Gajjar to make clear to him material differences between any legal arrangements and the underlying economics and commercial reality.” It is also consistent with the evidence that Mr Saatchi broke with his tradition of using only one of the “big four” accountants to audit and deal with his personal and business finances. Although Mr Tickner's evidence is that Mr Saatchi does not know the circumstances in which an alternative accountant was engaged, Mr Heffernan's evidence contradicts this position. He says Mr Gajjar's had advised that the appointment of John Savva & Co would save costs. It is not disputed Mr Gajjar produced a lease versus ownership analysis and explained to Mr Saatchi: “that the purchase of a property would be more beneficial”. It is not disputed that Mr Savva recommended that a company be incorporated for the purpose of holding any property.
In any event CSRG Ltd (the initials of Mr Saatchi and Mr Gajjar) was incorporated on 4 October 2012.
Mr Gajjar says he discussed the idea with Mr Heffernan, but Mr Heffernan does not recall the discussions. In an e-mail dated 7 March 2013 timed at 22:21 Mr Gajjar wrote: “I absolutely understand Charles and hence why this is a big decision which I am more than happy for you to drive me nuts with!”. This supports Mr Gajjar's contention that Mr Saatchi was fully aware of the arrangements and had some involvement in the decision making. Mr Gajjar explains in the e-mail: “20,000 sqft of space should house everything comfortably and safely with adequate space for manoeuvring. The property in question is 21,434 sqft…….all other costs such as rates, utilities etc would stay the same. So the saving between renting and buying would be between £170k–£260k pa.” As regards the Company and use of the proposed purchase he said “As you know Triptych is owned 50% by both you and I. Both put in £10k each 3 years ago and as mentioned above, nothing has been taken out and is being run on a “cost plus small margin” basis. You are the main client and no...
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