Francis Wessely and Peter Hughes-Holland (Joint Liquidators of Laishley Ltd, (in Liquidation)) v Richard White
| Jurisdiction | England & Wales |
| Judge | Paul Matthews,HHJ |
| Judgment Date | 14 June 2018 |
| Neutral Citation | [2018] EWHC 1499 (Ch) |
| Date | 14 June 2018 |
| Court | Chancery Division |
| Docket Number | Case No: 1223 of 2010 |
[2018] EWHC 1499 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
INSOLVENCY AND COMPANIES LIST (ChD)
Bristol Civil Justice Centre
2 Redcliff Street, Bristol, BS1 6GR
HHJ Paul Matthews
(sitting as a Judge of the High Court)
Case No: 1223 of 2010
Daniel Lewis (instructed by Lester Aldridge) for the Applicants
Christopher Brockman (instructed by Moore Blatch) for the Respondent
Hearing dates: 12–13 June 2018
Judgment Approved
Introduction
This is my judgment on the trial of the claim made by application notice issued on 23 May 2016 by the liquidators of Laishley Limited (“the company”) against the respondent, the managing director of the company, for equitable compensation in respect of alleged breaches of fiduciary duty in executing two deeds of release on behalf of the company in relation to building contracts in May 2010. The company had ceased trading during the week of 10 May 2010 because of its financial situation, and went into administration on 9 June 2010. The company was placed into creditors' voluntary liquidation on 13 May 2011. The applicants were first of all the joint administrators, and then the joint liquidators. The second applicant has now retired from practice and a block transfer order has been made appointing Nicholas Simmons in his place. I was invited to and did make an order at the commencement of the trial for the substitution of Mr Simmons in place of the second applicant.
The company was engaged in the construction industry as a building contractor, and at the time of ceasing to trade was performing a number of building contracts. This claim relates to two of them. One was the construction of a new health centre at Birsted Green, Bognor Regis, for the contract employer, Health Investments No 2 Ltd. The other was the conversion of an office building into a letting hotel at Farnborough for the contract employer Imperial Property Company (Farnborough) Ltd. A director of Health Investments No 2 Ltd was Alistair Keith, who coincidentally was a consultant to Imperial Property Company (Farnborough) Ltd. The respondent had dealt with Mr Keith for some 15 years on a number of projects, and trusted him implicitly. Unfortunately, Mr Keith died in 2015 and so was unable to give evidence in this matter.
In relation to each of the two contracts I have referred to the respondent on behalf of the company executed a deed of release, by which both the employer and the company were released from future performance under the respective contract. But the employer was also released from liability in respect of any payment obligations which had by then accrued but which remained unpaid.
The relevant clauses (identical in each deed) stated:
“1. The parties agree that on and from the date of execution of this Deed
1.1. The Employer releases and discharges the Contractor from further performance of the Contractor's obligations under the Building Contract
1.2. The Contractor releases and discharges the Employer from further performance of the Employer's obligations under the Building Contract and from all claims and demands whatsoever arising out of or in respect of the Building Contract whether arising prior to on or subsequent to the date of this Deed
2. Nothing in this Deed shall operate to discharge the Contractor from any liability in respect of duties performed prior to the execution of this Deed”
The applicants allege that the entry into these deeds of release by the company at the instance of the respondent constituted a breach of his duties owed to the company, causing it losses of two distinct kinds. The first is the loss of the contract itself. The second was the loss of the right to any stage payments or retentions to which the company had by then become entitled.
As I have said, this claim was issued on 23 May 2016. The deed of release in relation to Bersted Green is dated 14 May 2010, and that relating to Farnborough is dated 20 May 2010. No point is taken on limitation, but on any view these are stale claims. The dangers of leaving claims until the last minute are vividly illustrated here by the fact that I must resolve this dispute without the evidence of Mr Keith, who was intimately concerned in it. In addition, of course, memories dim over time and the accuracy of recollection can be compromised. On a number of important occasions during the evidence the answer given to a particular question was “I do not remember”. This is inevitable when witnesses are being asked to recall events now some 8 years and more ago.
Witnesses
I had the benefit of witness statements from the first applicant, Michael Edginton, the respondent and Graham Marsden, all of whom were tendered for cross-examination before me. I have already explained the positions of the first applicant and the respondent. Michael Edginton is a chartered surveyor and a director of Acasta Consulting Ltd, which is a company providing surveyor services. He became aware of the affairs of the company in December 2009 when Acasta began to assist the Bank of Scotland in relation to the development project being carried out by the company's sister company Laishley Developments Ltd (“LDL”). The two companies had common directors and shareholders. LDL was in financial difficulty and needed additional funding. The building contractor on that project was the company, to whom Laishley Developments Ltd owed a considerable sum of money. Mr Marsden is a director of Health Investments No 2 Ltd. He met the respondent for the first time in April 2010 in connection with the Bersted Green contract, through his colleague Alistair Keith, who knew the respondent and the company over several years.
I give here my impressions of the witnesses. The first applicant was a matter-of-fact and straightforward witness, if slightly distant. He had no memory for details. It was clear that most of the documents he signed were in fact prepared by others, and he simply approved and signed them. He was careful and exact in his evidence, and I have no doubt that he was telling me the truth in relation to what he said.
Mr Edginton spoke volubly and in complex and technical ways. But he did not always understand the question and sometimes got the wrong end of the stick. Frequently he did not answer the question asked at all but a different one. At other times he would answer a question very literally. For example, at one point he was asked why he had sent certain parties certain documents. He replied that he had sent them those documents “because they had signed a confidentiality agreement”. I am sure that he was trying to assist the court. But I found his evidence confusing and difficult to follow in places. Sometimes he changed his evidence in short order, occasionally in successive sentences. Whilst I am sure he was telling the truth as he saw it, I am afraid I cannot place a great deal of reliance on his evidence unless it is corroborated elsewhere.
Mr Marsden was straightforward, businesslike, precise and convincing as a witness. He was transparently honest and I accept everything he says.
The respondent was a quiet witness, initially a little nervous, but clear and firm in his evidence. He came across as straightforward. He was aware of the limitations of his memory and what he could properly tell me, and he admitted immediately if he was found to be wrong. I consider that he was an obviously truthful witness and I accept what he told me as true.
No permission was given for any party to adduce expert opinion evidence. As a result, no expert witness was called as such. But before me there was a debate as to the admissibility of some parts of Mr Edginton's evidence, and indeed of one point which the respondent himself made. I shall have to return to this issue later.
Facts found
Background
In these circumstances, I find the following facts. The respondent is an experienced carpenter and joiner, without any academic qualifications, but with some 34 years of building experience as a contractor. He spent 11 years with a company called Wiltshire Southern, and then in 1987 with a colleague from that firm he bought the company (which was incorporated on 2 October 1985). The colleague retired in 2006. The company offered contractor services in general construction and civil engineering under JCT contracts. Its annual turnover was approximately £8-£10 million by 2005. But, like the rest of the construction industry, the company was hit hard by the aftermath of the financial crisis of 2008–9. The respondent was managing director of the company and responsible for the management team and contract procurement. Before the company got into financial difficulty, and entered administration in 2010, and liquidation in 2011, he had never previously been involved in an insolvency process.
During his time at the company the respondent developed a long lasting professional relationship with Alistair Keith, an experienced quantity surveyor. He was the employer's agent on the Farnborough contract, which was entered into on 9 October 2009. Mr Keith had introduced Mr Marsden to the respondent. The company entered into a building contract with Mr Marsden's company, Health Investments No 2 Ltd, on 15 April 2010. Mr Keith was also the employer's agent for this contract. Copies of neither of these 2 contracts were available to me at the trial. At the time of the financial crisis affecting the company, the company was working also on four other contracts.
Financial problems
The catalyst for, if not the cause of, the company's problems was the development project being carried out by the company's sister company LDL, to which I have already referred. The...
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