Energenics Holdings Pte. Ltd (a company registered in the Republic of Singapore) and Another v Ronendra Nath Hazarika
| Jurisdiction | England & Wales |
| Judge | HH Judge Pelling |
| Judgment Date | 13 June 2014 |
| Neutral Citation | [2014] EWHC 1845 (Ch) |
| Docket Number | Case No: HC11C00780 |
| Court | Chancery Division |
| Date | 13 June 2014 |
[2014] EWHC 1845 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Manchester Civil Justice Centre
1 Bridge Street West
Manchester M60 9 DJ
His Honour Judge Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: HC11C00780
Mr. H. Boeddinghaus (instructed by Penningtons Manches LLP and Spenser Underhill Newmark LLP) appeared on behalf of the Claimants.
Mr. W. McCormick QC and Mr. A. Briggs (instructed by Carter-Ruck) appeared on behalf of the Defendant.
Hearing dates: 7–9 and 12 May 2014 (Rolls Building, London)
HH Judge Pelling QC:
Introduction
In these proceedings as they are now constituted there are two claims advanced by the Claimants being:
i) A claim by the First Claimant ("EHPL") for damages for breach of contract; and
ii) A claim by the Second Defendant ("NL") for an account of profits or equitable compensation in respect of alleged breach of fiduciary duty or dishonest assistance in breach of fiduciary duties or knowing receipt of trust monies.
The trial took place between 7–9 and 12 May 2014. I heard oral evidence called on behalf of the Claimants from Messrs Nayan and Nakul Jagjivan (whose role I describe further below), Mr Stuart Anderson, a director of Energenics Europe Limited ("EEL"), a company that became a subsidiary of EHPL in the circumstances that I explain below, and Mr Douglas Hall FCA who gave some expert accounting evidence concerning EHPL's damages claim. The Defendant gave evidence in answer to the claims. I had hoped to hand down judgment earlier than this but the parties' representatives were only available to attend a hearing on 13 June 2014. Although the Judgment is being handed down in Manchester, the trial took place at the Rolls Building in London.
In relation to the claim for damages for breach of contract, the Defendant maintains that it is unsustainable. It is submitted that no evidence in support the wasted expenditure claim has been adduced and thus that element of the claim must fail (something that is not now in dispute), and the alternative way in which the claim is put – which is to claim losses allegedly suffered by EEL as the loss suffered by EHPL – is unsustainable as a matter of law given the way in which the claim has been pleaded and the evidence that has been adduced to prove the claim. This led Mr McCormick QC to submit at the start of the trial that I should strike out this element of the Claim. I ruled that this was not appropriate because there was no formal application for such relief, such an application could have been made many months and indeed years ago but had not been and because it would be better in the circumstances for all the factual evidence to be heard and all relevant findings to be made before reaching a conclusion on the point of law that the Defendant relies on. I reached this conclusion because if I acceded to Mr McCormick's submission and there was a successful appeal from such a decision, the parties would be faced with the avoidable cost and inconvenience of a further trial, whereas if all relevant findings of fact have been made that outcome could be avoided even if ultimately Mr McCormick's legal submissions succeed before me but fail in any appeal.
Factual Background
EHPL is a company incorporated in accordance with the laws of Singapore. Its sole shareholder is Mr Nayan Jagjivan. He and his brother Mr Nakul Jagjivan are directors of EHPL. Its business is carried on either exclusively or principally through a network of subsidiaries and other companies in which it has interests in the alternative energy sector. Those subsidiaries currently include EEL. EEL was formerly known as Oxonica Energy Limited ("OEL") and before that as RMBKNE5 Limited.
NL is a company incorporated in accordance with the laws of the Commonwealth of Dominica. Its sole commercial purpose is to hold (and receive royalties in respect of) the intellectual property rights relating in particular to lipophilic-coated fuel additives designed to enhance the efficiency and cleanliness of diesel engines ("IPR"). Prior to the commencement of these proceedings its shares were held as to 400 each by the Defendant and Mr Bryan Morgan and as to 200 by Mrs Anne Morgan. As a result of the events to which I refer below, NL became owned as to 80% by EHPL and as to the balance by the original shareholders in the same ratio that they held all the shares previously. Following the settlement of these proceedings as between the Claimants and Mr and Mrs Morgan in February 2012, their shares in NL were transferred to EHPL. In consequence it owns in excess of 90% of NL. The Defendant owns the balance of the shares.
It is the Claimants' case that the Defendant was a de facto director of NL from 30 November 2001 (the date of its incorporation) until 9 October 2009. The Defendant strenuously denies that such was the case. He was, he maintains, a minority shareholder whose focus was to develop the commercial exploitation of the IPR. He maintains that he left the management of NL entirely to Mr Morgan. His case is that he did so not least because he was down to September 2005, a statutory director of Oxonica Materials Limited and he had undertaken to that company that he would not participate in the management of NL until he ceased to be a statutory director of that company. It is common ground that the Defendant was a de jure director of NL from 9 October 2009 until 26 June 2011.
The Defendant was employed by EHPL as its Chief Executive Officer ("CEO") and sole director from 5 September 2006 until 4 August 2009 and continued as its CEO thereafter until the final quarter of 2010 when (on EHPL's case) he was dismissed in December 2010 following the discovery of alleged misappropriation by the Defendant or when (on the Defendant's case) he resigned in October 2010. The Defendant's case is that since then Nayan Jagjivan and Nakul Jagjivan have maintained a vendetta against him that has resulted in both this litigation and in no less than five separate claims being brought against him in Singapore. This belief on the part of the Defendant led to a number of very charged responses from him in the course of his cross examination by Mr Boeddinghaus.
The background events relevant to these claims are as follows. The IPR is concerned with a lanthanide additive (Cerium Oxide) to diesel fuel. The additive reduces fuel consumption and thus fuel costs and greenhouse gas and other exhaust emissions. The difficulty with lanthanide additives historically has been that they could cause abrasion and blockages within engines. The solution that was developed initially by the Defendant, and then the Defendant and Mr Morgan together, involved coating nanoparticles of Cerium Oxide with lipophilic coatings which could then be used to manufacture a liquid suspension of such nanoparticles suitable for addition to diesel fuel. The IPR is the formal embodiment of the solution they arrived at.
Mr Morgan had formed Celox Limited ("Celox") in 1996 to carry out business in an allied area. The Defendant joined Celox as a director in 1999 and ultimately in 2001 Mr Morgan and the Defendant assigned their interest in the IPR to Celox and Celox was then substituted as applicant in a European Patent Application originally issued in the name of the Defendant and Mr Morgan. It was first this application and then the patent that was granted on this application in 2005 that constituted the IPR.
In or about July 2000, Celox developed a commercial relationship with a company that ultimately came to be called Oxonica Limited ("Oxonica"). The purpose of this relationship was to enable Celox to benefit from the expertise that Oxonica claimed to have in the field of nanoparticle technology. Thereafter there was a debate as to how the relationship between Celox and Oxonica should be formalised. The detail surrounding this debate is immaterial for present purposes. However it was agreed in principle that Oxonica would exploit the IPR commercially in return for various payments to Celox including a royalty, a profit share and initial and milestone capital payments. A risk was identified that Celox might become involved in litigation commenced by Nanophase Inc., a US based supplier of the raw material which the IPR exploited. The Defendant's evidence was that in order to avoid any risk to Celox's main asset (the IPR) from such litigation, he and Mr Morgan decided to transfer the IPR to a new corporate entity. This was not disputed and I accept it. In fact Celox did become involved in such litigation ("Nanophase Litigation") and Mr Morgan incurred some personal expenditure in funding the defence of that claim. Later he sought to recover those costs from NL. His recovery of those costs from NL is the foundation of one of NL's claims in these proceedings. The Defendant's evidence was that he left it to Mr Morgan to handle the incorporation of an appropriate corporate entity to hold the IPR and that it was Mr Morgan who chose the Commonwealth of Dominica as the jurisdiction in which it was to be incorporated. I accept that evidence. There is no evidence to contrary effect. Why Mr Morgan chose that jurisdiction is not at all clear but I consider it is likely that he chose it because he considered it to be tax efficient. On 30 November 2001, NL was incorporated and on 3 December 2001 Celox assigned the IPR to NL.
At about the same time Oxonica incorporated RMBKNE5 Limited. The purpose of this was to enable NL to licence RMBKNE5 Limited to use the IPR in return for a royalty and other financial benefits. The licencee could as easily have been Oxonica but those controlling Oxonica decided against...
To continue reading
Request your trial
-
Richard Pease v Henderson Administration Ltd
...losses and/or that his losses are the same as PeaseCo's losses. Mr Oudkerk relied on the judgment of HHJ Pelling QC in Energenics Holdings Pte Ltd v Ronendra Nath Hazarika [2014] EWHC 1845 (Ch) at [60]–[71] for the propositions that (a) a parent cannot assume that it has suffered pound-for-......