Docklock Ltd v C Christo & Company Ltd
| Jurisdiction | England & Wales |
| Judge | Tom Leech |
| Judgment Date | 19 February 2021 |
| Neutral Citation | [2021] EWHC 308 (Ch) |
| Date | 19 February 2021 |
| Court | Chancery Division |
| Docket Number | Case No: BL-2018-001310 |
[2021] EWHC 308 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (CH D)
Royal Courts of Justice
Strand, London, WC2A 2LL
Tom Leech QC (sitting as a Judge of the Chancery Division)
Case No: BL-2018-001310
Mr Reuben Comiskey (instructed by Boyes Turner LLP) for the Claimant
Mr Paul Letman and Mr Kavish Shah (instructed by Carter Perry Bailey LLP) for the Defendant
–21 December 2020 and 4 January 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.
Tom Leech QC:
I. The Parties
This is the trial of a claim for an account which follows the conclusion of divorce proceedings between Mr Christakis Christoforou and his former wife Ms Ibtissam Christoforou. Those proceedings were resolved by an order made on 15 May 2017 (the “ Moylan Order”) and a settlement agreement described as the Waiver of Claims and Indemnity Agreement dated 26 October 2017 (the “ WCIA”). In this judgment I will refer to Mr Christoforou as “ Chris” and the former Mrs Christoforou as “ Betty”. I will also refer to their second son, Mr Nicholas Christoforou, who gave evidence, as “ Nicholas”. Counsel referred to them in this way both orally and in writing and I adopt the same terms.
The Claimant, Docklock Ltd (“ Docklock”), is a property company which owns a substantial number of residential and commercial properties. The residential properties are let on assured shorthold tenancies and the commercial properties on commercial leases at a rack rental. Nicholas's evidence was that the value of Docklock's property assets was upwards of £30m and that it owned 14 freehold properties with 45 residential flats and 7 commercial tenancies consisting of both office accommodation and retail. Chris also described Docklock as “the jewel in the crown”.
On 1 July 1985 Docklock was incorporated and it is common ground that Chris and Betty each owned 50% of the issued share capital of Docklock until the date of the Moylan Order. During the divorce proceedings a number of issues appear to have been raised about the ownership of the shares in Docklock but these were ultimately resolved by the Moylan Order and were not relevant to any of the issues which the Court had to decide in this action.
On 23 June 1986 Chris was appointed to be a director together with his father, Mr Panayiotis Christoforou. On 1 November 1987 Panayiotis resigned and on 23 November 1987 Betty was appointed to be a director in his place. On 2 March 2010 Nicholas was also appointed to be a director and immediately afterwards, on 3 March 2010, Chris then resigned as a director. It is common ground that since 3 March 2010 Betty and Nicholas have been the two directors of Docklock.
The Defendant, C Christo & Co Ltd (“ Christo”), is a property management company. In 1985 Chris started trading as “Christo & Co” and in 2010 he transferred his business to Christo. It is common ground that after incorporation he was the sole director and legal and beneficial owner of the entire issued share capital of Christo and that Betty was the company secretary. On 1 April 2009 Chris resigned as a director and Nicholas was appointed to be a director. On 29 November 2010 Chris was appointed to be a director again. It is also common ground that both Nicholas and Betty were removed as director and secretary respectively following service of the divorce petition.
Christo occupies premises on the Ground Floor and part of the First Floor at 66–70 Parkway London NW1 7AH (“ 66–70 Parkway”), which was originally owned by Docklock and then by Counterclaim Ltd (“ Counterclaim”). Where I refer to 66–70 Parkway below I refer either to the premises occupied by Christo or, depending on the context, the whole building.
It is common ground that once the sale had taken place Docklock retained no interest in 66–70 Parkway. It is also common ground that before the sale Christo had no formal written lease or licence of 66–70 Parkway. At one stage of the divorce proceedings there had been an issue whether Christo had rights of occupation protected under the Landlord and Tenant Act 1954 (the “ 1954 Act”). Although the parties called expert evidence in relation to the letting value of 66–70 Parkway, it was unnecessary for me to resolve the terms on which Christo occupied the premises.
Christo managed Docklock's property portfolio for many years until about 23 September 2016. This action is concerned with the 23 month period from 1 October 2014 to 1 September 2016 to which I will refer as the “ Relevant Period”. Mr Mark Forrester was Christo's Head of Property Management Services for over 34 years until he left the business in 2020. He and a team of five members of staff were responsible for managing Docklock's properties. Mr Eamonn Comerford was one of those staff members and Mr Deepak Thapa was Christo's internal accountant. He was referred to in a number of memos as “ Deepak” and I refer to him in the same way.
II. General Background
On 4 June 2014 Betty issued a divorce petition against Chris. The petition was not served until 19 October 2019 and before serving the petition Betty obtained both non-molestation and occupation orders against Chris on a without notice basis, which excluded him from the matrimonial home. On 23 October 2014 the parties reached an agreement which was intended “to hold the ring as the divorce matrimonial proceedings got underway” (as Roberts J described it in a judgment handed down on 30 September 2015).
It was common ground that the final version of the agreement was not concluded for some time but it was also common ground that it was intended to take effect immediately. Clauses 1 to 4 dealt with the payment of substantial funds into a new account at the Berenberg Bank in Switzerland and provided for the legal costs of both parties to be funded from that account. Clause 7 provided that Chris would maintain the status quo in relation to Betty's funding of her day-to-day living expenses and clause 9 provided as follows:
“The Husband and Wife undertake to each other and to the court (and agree that these undertakings will be incorporated into a formal undertaking which will be lodged with the court): 9. They will not cause, or take any steps to cause, any of the companies of which they are a director or shareholder (whether legally or beneficially) to deal with (whether by sale, charge, pledge of title deed or documents or otherwise), dispose of, dissipate or diminish the value of any property, or any other asset held by any of the companies other than in the ordinary course of business.”
Throughout the Relevant Period Betty lived at 28 Cheyne Walk London NW4 3QJ (“ 28 Cheyne Walk”). Before the service of the divorce petition Chris had been living in Cyprus. In October 2014 he returned to England and he was permitted by Docklock to live in Flat B 73 Parkway London NW1 7PP. On 14 July 2016 he also took over the occupation of Flat A after it became vacant when the previous tenant, Mr Boitteau, moved out. I refer to both flats together as “ 73 Parkway”.
One feature of the background is that for much of the Relevant Period, it was unclear to the parties whether Docklock and its assets (and the other family companies and assets) would be awarded to Chris or to Betty. For the purposes of one issue, I will have to consider more precisely when it became clear that the Court would award Docklock to Betty and I return to this point below.
It is also common ground that for a number of years Docklock had paid the salaries of both Mr Forrester and Nicholas himself. On 7 November 2014 Chris sent a memo to Mr Forrester, Deepak and Nicholas instructing them that as of 1 November 2014 Mr Forrester's salary should be transferred to Christo and that Christo should reimburse Docklock for the costs which it had incurred for their car leases. In a second memo dated 7 November 2014 Chris also wrote to Nicholas raising a number of other points. The third related to the car leasing costs:
“You have committed Docklock to a Car Hire Agreement for the sum of £559 per month for 3 years and an initial outlay payment in excess of £5,000. This sum should now be paid out of Christo & Co and it will be considered part of your earnings. In conclusion I would ask that you no longer mix the financial affairs of Christo & Co with Docklock Ltd. Docklock Ltd is a financially independent entity from Christo & Co the only relationship is that you hold a directorship in Christo & Co as you do in Docklock. If you are not prepared to comply then please advise as it will be necessary to take immediate steps to prevent unauthorised funds being extracted from Docklock.”
On 30 January 2015 a board meeting of the directors of Docklock took place at which Betty and Nicholas were both present. Paragraph 3 of the minutes of the meeting which were signed by both of them recorded the following resolutions:
“In the circumstances it was resolved unanimously that the Company should take the following initial steps to protect its interests:
3.1 In relation to the flat situated at Flat 2, 73 Parkway, London NW1 7PP owned by the Company and currently occupied by CC free of any rental or any other payment obligation, the Company should serve notice on CC requiring him to vacate the flat in one month's time with a view to letting the flat for a market rental, and at the same time to provide CC the opportunity to continue residing in the flat subject to the terms of a tenancy agreement to be agreed between the parties, entailing the payment of a fair market rental capable of being justified objectively.
3.2 That the Company should serve notice on Christo & Co requiring...
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