David Ashdown v John Patrick Griffin

JurisdictionEngland & Wales
JudgeLord Justice Henderson,Lord Justice Newey
Judgment Date30 July 2018
Neutral Citation[2018] EWCA Civ 1793
CourtCourt of Appeal (Civil Division)
Docket NumberCase No: A2/2017/3065
Date30 July 2018

[2018] EWCA Civ 1793

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

His Honour Judge Paul Matthews (sitting as a Judge of the High Court)

[2017] EWHC 2694 (Ch)

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lord Justice Henderson

and

Lord Justice Newey

Case No: A2/2017/3065

Between:
(1) David Ashdown
(2) James Pugh
(3) Alex Furness-Smith
Petitioners
and
(1) John Patrick Griffin
(2) Daryl Foster
(3) Peter Christopher Ingram
(4) Kieran Griffin
(5) Addbins Limited
(6) Liam Griffin
Appellants

Mr Paul Sinclair QC (instructed by Joelson JD LLP) for the Appellants

Mr Thomas Grant QC and Mr Ted Loveday (instructed by Lee Bolton Monier-Williams) for the Petitioners

Hearing date: 19 July 2018

Judgment Approved

Lord Justice Newey
1

This is an appeal by the respondents to a petition for relief under section 994 of the Companies Act 2006. On 30 October 2017, His Honour Judge Paul Matthews, sitting as a Judge of the High Court, ordered the first appellant, Mr John Griffin (“Mr Griffin”), to pay the petitioners' costs of the petition and declined to make any order as to costs as between the other appellants and the petitioners. The appellants challenge that decision and ask this Court to order the petitioners to pay their (the appellants') costs of the proceedings.

Basic facts

2

The litigation concerns the affairs of the fifth appellant, Addbins Limited (which changed its name to “Advertising Bins Limited” in August 2014) (“Addbins”). The other parties are all shareholders in Addbins. The three petitioners hold, between them, 13 of the 100 issued shares. All told, Mr Griffin and the second, third, fourth and sixth appellants have 80 shares.

3

Addbins was established to exploit an opportunity which the smoking ban introduced in the summer of 2007 was thought to have created. One of the petitioners and two other individuals came up with the idea of installing bins for the disposal of cigarette butts outside premises such as pubs, restaurants and clubs, where people would be smoking. The bins would be supplied free of charge, but they would carry advertisements for which the company would be paid by the advertisers.

4

Mr Griffin was approached and impressed. It was agreed that Addbins would be formed, and Mr Griffin and the second, third and fourth appellants all became directors of the company as well as lending it £25,000 each. In practice, Mr Griffin was the dominant figure. In his judgment in these proceedings, Mr Edward Bartley Jones QC (sitting as a Deputy High Court Judge) observed that Mr Griffin “was an extremely powerful personality and the bins … were his venture and his alone” (paragraph 17 of the judgment).

5

The high hopes that the parties had for Addbins were neither realised nor well-founded. Having heard expert evidence, Mr Bartley Jones concluded (in paragraph 10 of his judgment):

“however attractive the business model may have looked initially, it was virtually doomed to failure. In simple terms, unless the business model be operated as a local cottage industry producing only pin money then it simply will not work as a viable commercial entity…. Indeed, virtually no third party advertising was ever obtained for any of the bins. In default, therefore, the bins were utilised throughout London to carry adverts for [Addison Lee plc]”

6

Mr Griffin was until May 2013 the chairman of the company mentioned in this passage, Addison Lee plc (“ADL”), the well-known private hire company, and the other individual appellants were also associated with it. As Mr Bartley Jones recounted in paragraph 37 of his judgment:

“Until June 2008, [Addbins] invoiced ADL for advertising on the bins at the rate of £5 per bin per week. Thereafter that fell to £1 per bin per week until August 2008 and then it reduced, again, to 0.50p per bin per week until March 2011. Thereafter, [Addbins] did not invoice, and ADL did not pay, for its use of the bins.”

7

On 7 August 2014, the petitioners presented a petition under section 994 of the Companies Act 2006 on the basis that Addbins' affairs had been, and were being, conducted in a manner that was unfairly prejudicial to their interests. Paragraph (1) of the prayer asked for an order requiring the appellants to purchase the petitioners' shares. There were, as Mr Bartley Jones explained in paragraph 34 of his judgment, two main allegations of unfairly prejudicial conduct:

“(1) that the [appellants] caused or allowed the Company [i.e. Addbins] to provide free, or heavily discounted, advertising space on the bins to ADL thereby, in breach of their fiduciary duties to the Company, greatly benefiting ADL to the detriment of the Company; and

(2) that in order to benefit ADL, the [appellants] pursued a deliberate policy to prevent advertisers being found for the bins so that the bins would be available, solely, for ADL advertisements.”

8

Soon after the petition was presented, ADL, which had been sold to the Carlyle Group in 2013, became disenchanted with Addbins' bins. By December 2014, ADL's general counsel and company secretary was expressing concern about them. On 12 February 2015, he sent an email requiring Addbins to remove all advertisements referring to ADL from the bins within 28 days. “Effectively,” Mr Bartley Jones observed (in paragraph 46 of his judgment), “the Company's business was at an end, with no hope of resurrection”.

9

The petition came before Mr Bartley Jones in July 2015. The trial, which was “broadly on liability only” (paragraph 7 of the judgment), lasted five days and Mr Bartley Jones gave judgment on 3 November. Mr Bartley Jones rejected “without hesitation” the contention that the appellants had directed and manipulated the affairs of Addbins so that third party advertisers were not, and could not be, found. In Mr Bartley Jones' words (at paragraph 68 of his judgment):

“The simple point is that, as clearly appeared from the expert evidence, there were no such third party advertisers in existence in any meaningful way (a very occasional short term third party advertiser might have been found for a small number of the bins). Nor was there any sponsor available other than ADL. If it be said that the directors of the Company could, and should, have caused the Company to pursue potential local advertisers then that was not in accord with the business model to which the Petitioners had agreed (indeed had suggested) and would be a managerial decision of the directors which cannot possibly amount to unfair prejudice.”

10

In contrast, Mr Bartley Jones found the petitioners' other main allegation to have been made out. In this connection, Mr Bartley Jones said this (in paragraph 77 of his judgment):

“However, what Mr Griffin did (and it was he who alone was making all the decisions) was to abandon entirely the best interests of the Company in favour of the best interests of ADL. He unilaterally chose to reduce the price payable per bin per week by ADL from £5, to £1 to £0.50 and then to nothing. He allowed ADL to have the benefit of advertising on the bins from March 2011 onwards without making any payment (indeed he caused the Company to buy at least 7000 new bins which could only have been for the benefit of ADL). Granted the perception of ADL that advertising on the bins was of benefit to it, ADL should have been, and would have been, prepared to pay something for its advertising. For the benefit of ADL (and in part motivated by his contempt for the Petitioners) Mr Griffin allowed ADL to have the bins for free from March 2011. This seems to me to be the grossest possible breach of his duty to act in good faith in the best interests of the Company (as codified in section 172 of the Companies Act 2006).”

11

In the light of that conclusion, Mr Bartley Jones held that the affairs of Addbins had been conducted in a manner which was unfairly prejudicial to the interests of the petitioners and made an order requiring Mr Griffin to “purchase the Petitioners' shares, without minority discount, with a valuation date of 12 February 2015 at a valuation to be determined at a further hearing”. Mr Bartley Jones observed, however:

“the net effect of what I have found and directed … is likely to be that the sums in issue between the Petitioners and Mr Griffin are modest and that the sums payable by Mr Griffin for the Petitioners' shares are sums very substantially less than the sums for which the Petitioners have contended. As it seems to me the Petitioners had grossly unrealistic expectations (1) as to the viability of the business of the Company and (2) the sums which ADL ought to have paid for advertising on the bins. I very much hope that, with a view to saving unnecessary further costs, the Petitioners will abandon those unrealistic expectations and, conversely, that Mr Griffin will abandon his previous attitude of arrogance and intransigence.”

(See paragraph 107 of the judgment.)

12

As to what ADL ought to have paid, the petitioners had alleged that ADL had agreed to pay £2 per bin per week. Mr Bartley Jones did not accept this. He concluded that such a rate was never agreed even informally (see paragraph 33 of the judgment) and was “wholly unrealistic” (paragraph 104).

13

There was a further hearing before Mr Bartley Jones in September 2016 to determine the value of the petitioners' shares. Very sadly, Mr Bartley Jones died in April 2017. As he had not yet given judgment, the valuation issue had to be re-heard before Judge Matthews in October 2017. Following a three-day hearing, Judge Matthews gave judgment on 19 October. He found that “the income which should have been received by [Addbins] from 2012 through to 2015 was £65,000 per annum gross” (paragraph 36 of the judgment), which, after deduction of operating costs of £30,500 per annum, produced a notional profit of £34,500 per annum (paragraph 43). The...

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