Gap Group North East Ltd v Paul Palmer
| Jurisdiction | England & Wales |
| Judge | Mr Justice Martin Spencer |
| Judgment Date | 01 December 2023 |
| Neutral Citation | [2023] EWHC 3061 (KB) |
| Court | King's Bench Division |
| Docket Number | Case No: QB-2022-000309 |
[2023] EWHC 3061 (KB)
THE HONOURABLE Mr Justice Martin Spencer
Case No: QB-2022-000309
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Crammond (instructed by Sintons LLP) for the Claimant
Ms Romana Canneti (instructed by Kleyman & Co Solicitors Ltd) for the Defendant
Hearing dates: 30th October – 8th November 2023
Approved Judgment
This judgment was handed down remotely at 10.00am on 1 st December 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
THE HONOURABLE Mr Justice Martin Spencer
Introduction
Until January 2022, the defendant was a valued employee of the claimant, which is a company operating in the north-east of England in the sphere of waste collection and processing and resource recovery, with associated operations in haulage and logistics. In December 2021, another company became interested in acquiring the claimant and issues arose in relation to the valuation of the claimant's shares and the amounts that might be paid to the claimant's directors, shareholders and employees in the event of a buy-out. Figures were circulated based upon different valuations of the claimant company and the defendant was aggrieved at the postulated sums which would be forthcoming to him. Matters came to a head over 23/24 January 2022 in advance of which the Defendant had made clear to the claimant's Managing Director, Peter Moody, the sums to which he believed he was entitled. It was made clear to the defendant that such sums would not be forthcoming and on 25 January 2022 he sent an email to 12 recipients, including competitors of the claimant, making allegations of bribery and disclosing confidential information about the claimant. This was the end of the defendant's relationship with the claimant. The present action represents the claimant's claim for damages and an injunction arising out of the defendant's alleged breach of contract, breach of confidence and associated causes of action.
The trial in this matter started before me on Monday, 30 October 2023. After the witnesses for the Claimant had been called, the defendant, Mr Palmer, started to give evidence on Thursday, 2 November 2023. His evidence concluded on Monday, 6 November 2023. At the conclusion of his evidence, his counsel, Ms Canneti, requested a short adjournment so that she could take further instructions. When the court reconvened, Ms Cannetti indicated that the defendant had decided to admit liability. It was my understanding (and that of Mr Crammond, counsel for the claimant) that this constituted an admission of all the allegations of breach of contract, breach of confidence and the associated causes of action, in full. Although, at the start of final submissions on Wednesday, 8 November, Ms Cannetti indicated that, in fact, the admissions made were selective in relation to the allegations of breach, after some discussion she conceded, having taken further instructions, that the position was as had been understood the previous Monday, and that all the allegations set out in the Particulars of Claim were now admitted in full.
In consequence, this judgment is now only concerned with causation and remedy. However, in order to consider those issues adequately, it remains necessary to recount the background facts in some detail.
Detailed Background Facts
The claimant company (hereafter “GAP”) was incorporated in 2015 and subsequently became an umbrella holding company for the various companies within the group which had developed over the previous 15 years or so. Peter Moody, after serving in the Armed Forces for 23 years, set up a waste collection business in 2005, PA Moody Recycling Ltd, which traded as GAP Waste. This involved the collection of waste and the sending it to third-party processors. The business was successful and in around 2008 expanded into haulage: it now has a fleet of over 40 vehicles offering a full haulage and logistics service to clients. GAP also expanded into diverse areas of waste collection, processing and resource recovery.
Mr Matthew Flint was a developer who assisted GAP with a fridge plant which they were acquiring and who was aware that GAP was developing a 5 acre site in Gateshead to deal with Anaerobic Digestion of organic waste. He suggested to Mr Moody a venture involving the development of an Organics arm of the GAP group, and in about 2018 a new arm of the business, GOL (GAP Organics Ltd), was established for this purpose. Mr Flint introduced Mr Moody to the defendant as a suitable person to run GOL. Initially the defendant worked for GOL on a part-time basis whilst he continued to do consulting and other work through his own company, CH4 Sense Ltd (“CH4”). The defendant was issued a 12.5% shareholding in GOL and he became a Statutory Director on 10 October 2018. His salary, in the region of £500 per week, was paid by PA Moody Recycling Ltd on behalf of GOL.
It seems clear that the arrangement was successful and the defendant's relationship with Mr Moody was a close one. This is illustrated by a WhatsApp message from Mr Moody to Mr Palmer on 31 December 2021 describing him as being “part of the family” and his contribution being “immense”. Mr Moody describes the defendant as an “effective operator” who was successful in sourcing and securing feedstock to supply the relevant plants. In February 2020, Mr Moody started to involve the defendant in other parts of the Group: for example, the defendant accompanied Mr Moody on a business trip to Portugal to look at plastic processing equipment which GAP was considering purchasing.
So far as the defendant is concerned, he describes himself as having worked in the business development sector since 1983. In 2011, whilst he was working in the Wastewater Treatment Sector, he was introduced to the Anaerobic Digestion and Biogas (“ADB”) Sector and was introduced to Mr Flint through a Mr David Quigley. In 2013, the defendant set up CH4 to develop new ADB plants and in 2014, he developed a Biogas Plant at High Hedley. He confirms being introduced to Peter Moody and Peter Young of GAP through Mr Flint and agreeing to run GOL, taking a 12.5% shareholding. In the summer of 2019, he started working full-time for GOL. The defendant recounts a conversation he had with Mr Moody when the prospect of a significant external investment in GAP was discussed. He says that he was told that, following confirmation of the investment, his salary, which in the meantime was significantly reduced (£32,000 pa from the usual £64,000) would be restored to £64,000 and he would be granted a 5% shareholding in GAP, together with an increase in his shareholding in GOL. He says that he understood GAP to be worth about £10m (which would make a 5% shareholding worth £500,000).
In 2021, there were two significant developments with regard to GAP. First, a company called Ritchie Bland Energy (“RBE”), through a Mr Ian Bainbridge, became interested in financing a joint venture with GAP. Agreement was reached in November 2021 whereby RBE would invest £2.5m in GAP in return for a 25% shareholding. However, and secondly, a company called ENVA, a leading national provider of recycling and resource recovery services, became interested in acquiring GAP as a buy-out in December 2021.
Earlier, in 2021, Mr Moody, consistently with the understanding that had been reached with Mr Palmer in the summer of 2019, had been considering rewarding not just Mr Palmer but also the other two main managers of GAP, Mark Curry (the Finance Director) and Andy Clark (the Transport Manager) with shares in GAP. This had in fact been written into Mr Curry's contract since January 2020: the offer of employment letter dated 10 January 2020 included the following:
“Following a successful 24 months in post, you will be awarded equity within the company in the form of class B shares. The class B share value which will be between 3% and 5%.”
There was no such written agreement in the case of the defendant, Mr Palmer, but an email from Mr Moody to Mr Bainbridge sent on 4 June 2021 is instructive. It said:
“Paul Palmer is an integral part of GAP Group. He will also be a small shareholder within GAP Group. This is something which was agreed well before any involvement with future/additional funders.” (Emphasis added)
This shows that the same understanding existed in relation to the defendant (and presumably also Mr Clark) as had been agreed in writing with Mr Curry in January 2020, and tends to confirm the defendant's evidence as to the agreement or understanding he had reached with Mr Moody in summer 2019. Indeed, before the involvement of RBE in the summer of 2021, Mr Moody had written an email to Messrs Curry, Clark and Palmer on 2 March 2021 in the following terms:
“Morning Gents,
Had a call yesterday afternoon with both Ward Hadaway [GAP's solicitors] and Tait Walker [GAP's accountants] to discuss the share options for yourselves.
There are several issues which need to be addressed so that we can minimise any tax implications. We need to look at:
1. Share Option Scheme. We started one of these for John Quinn, however, due to the way he left, nothing was actioned. This would be the most tax efficient method of issuing shares. Basically, a valuation on your shares will be agreed with HMRC and a line in the sand is drawn. As it happens, if we use 2019 accounts there will be less value attached than once the 2020 accounts are submitted. There is a significant cost to starting a new share option scheme and I am waiting for the quote to come through before seeing which way we issue the shares.
2. Shares in hand immediately. Given the above, the value will be greater as HMRC will value the...
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