GE Commercial Finance Ltd v Gee
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE TUGENDHAT,Mr Justice Tugendhat |
| Judgment Date | 28 September 2005 |
| Neutral Citation | [2005] EWHC 2056 (QB) |
| Docket Number | Case No: HQ02X02622 |
| Court | Queen's Bench Division |
| Date | 28 September 2005 |
[2005] EWHC 2056 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Tugendhat
Case No: HQ02X02622
Mr Nigel Tozzi QC and James Bowling (instructed by Hammonds) for the Claimant
Mr Steven Thompson (instructed by Max Engel & Co) for the 1 st Defendant
Mr Smedley and Mr Ritchie appeared in person
Hearing dates: 4th May—13th July
Approved Judgment
Judgment and that copies of this version as handed down may be treated as authentic.
City Truck Group Ltd ("CTG") is a company that until January 2002 carried on a very substantial business operating more than 1000 trucks and associated activities. David Gee had built the business up since the late 1970s. He owned 80 per cent of the share capital of CTG, the balance being held by 3i. He was described in the accounts as the Group Executive Chairman, and in large measure he managed the business himself.
On 10 January 2002 Administrators were appointed on the application of the Claimant ("GE"). For the preceding period of about eleven months companies in the group had received funds for the business from GE under agreements entered into on 1 st February 2001. Under these agreements GE discounted debts from debtors of the three trading companies up to a maximum of £25m. GE is a finance company. It is a subsidiary of The General Electric Company, incorporated in the USA. It was formerly called GE Capital Commercial Finance Ltd. Its offices are in Tunbridge Wells. As a result of information obtained in the two weeks preceding 10 th January 2002, GE declined to make further payments under those agreements, with the result that the CTG companies were unable to pay their debts.
The companies in the CTG group ceased trading in March 2002, and parts of the business were sold. The Administrators anticipate a shortfall on sums advanced by GE before costs of administration of about £14 million. After allowing for the costs of the administration, GE claim that they will have suffered losses between £16 and £16.3 million in connection with their agreements with companies in the CTG group.
This is a claim by GE for damages for the tort of deceit or fraudulent misrepresentation and, or in the alternative, the tort of conspiracy, against Mr Gee, Mr Smedley and Mr Ritchie. A claim on the basis of a breach of trust is not pursued on the footing that GE consider that it adds nothing to the other claims. Mr Smedley is described in the accounts as Group Finance Director. He is a chartered accountant and was from 1991 the finance director and company secretary of the main companies in the CTG group. Mr Gee and Mr Smedley met at university and are nearing retirement age. Mr Ritchie is a young man who was appointed a Financial Controller to City Trucks Ltd ("CTL" or "Trucks") in 1996 and who describes his own role as "a general factotum" to Mr Smedley (Mr Gee describes him as Mr Smedley's assistant). He obtained no formal qualifications after leaving school. The third defendant was Mr Steel. He was a director of City Truck Group Services Ltd ("CTGSL") with responsibility for arranging the finance on assets purchased. Following an agreement between GE and the Third Defendant, the claim formerly advanced against him has been discontinued.
Mr Tozzi QC represented GE. Mr Thompson has represented Mr Gee. Mr Smedley and Mr Ritchie have appeared in person at the hearing. There are other pending proceedings, both criminal and civil, relating to the events the subject of this action. The lack of representation and the existence of the other proceedings have given rise to submissions as to how these proceedings should be conducted. I shall refer to these at the end of this judgment.
THE BUSINESS OF THE CTG COMPANIES
GE entered into funding agreements with three trading subsidiaries of CTG, namely City Logistics Ltd ("CLL" or "Logistics"), CTL and City Truck Rentals Ltd ("CTRL" or "Rentals"). It did not enter into any agreement with the fourth subsidiary, CTGSL. Mr Gee was Managing Director and Mr Smedley the Finance Director of all four. There were two non-executive directors of CTG, Mr Andrew and Mr King. Mr Andrew's background is in accounting and Mr King's in banking.
The business of CTL, CTRL and CLL is as follows:
i) CTL provided workshop facilities, contract maintenance, parts, service, and breakdown control. It accounted for about 15% of CTG's annual turnover. Frank Andrew was the Chairman of CTL, and in addition to Mr Gee and Smedley, Peter Banwell, Allan McKee and Nigel Bailey were directors of CTL.
ii) CTRL, as its name suggests, was a truck rental business. It also accounted for about 15% of CTG's annual turnover. In addition to Mr Gee and Mr Smedley, CTRL had one other director, Gary Lowther.
iii) CLL provided distribution services and it is said that it accounted for 60% to 70% of CTG's annual turnover. CLL was itself divided into various divisions, namely City Transport East, City Transport West, Foodchain, City Freight North, City Freight South, Warehousing, City Worldwide, City Support Services and Managed Contracts. Managed Contracts were for large clients who sub-contracted their logistics operations to CLL. Those clients included Alcan Aluminium ("Alcan"), Akcros Chemicals ("Akcros"), British Gypsum, Douwe Egbert, LDH and Resin Express. In addition to Mr Gee and Mr Smedley, CLL had 5 other directors, Richard Griffiths, Tony Noonan, Colin Rust (who was the general manager of City Transport West), Tony Ware and Phil Constable (who was the general manager of City Transport East).
iv) CTGSL provided financial and administrative services to CTL, CTRL and CLL. These included the provision of IT, arranging insurance, asset financing of trucks, and asset management. In addition to Mr Steel, CTGSL had one other director, Nigel Mockford.
The operations of CTG were carried out at a number of locations across the UK. For present purposes the most significant were as follows:
i) Newport Pagnell: CTG's main administrative offices were at Newport Pagnell (sometimes referred to as City House). Mr Smedley and Mr Ritchie were both based there. Mr Steel was also based in Newport Pagnell as from October 2001. A number of other relevant employees worked at the Newport Pagnell office, namely: a lady who I shall refer to as AB, the Chief Group Accountant for CTG until she left in January 2001; Julie Cartwright, the Credit Control Manager for CTG; Paul Murphy, an Accounts Controller for CTGSL; Tamlyn Roberts (from June/July 2001), a credit controller for CLL; Wendy Gibb, a credit controller for CTRL; Elaine Attrill, a credit controller who dealt with cash receipts and allocations for CTL, CTRL and CLL; a credit controller who dealt mainly with CTL, but also with CLL; a credit controller for CLL; and the Purchase Ledger Manager.
ii) Birch (near Manchester): The City Freight business of CLL operated out of sites based in Birch, Spennymoor and Northampton. Relevant employees based at Birch included: Kim Hogan, the financial controller of CLL; Tony Noonan, a director of CLL responsible for the City Freight business; Malcolm Grocott (until May 2001), responsible for City Worldwide;
iii) Northampton: The Northampton site was the base for the City Transport East division of CLL. Mr Gee was based here, as was: Mr Gracey, the Management Accountant for CLL; Richard Griffiths; Tony Ware, the Commercial Director of CLL; Tamlyn Roberts (until about July 2001 when she moved to Newport Pagnell); and the Fuel Manager for CLL.
According to its audited Report and Accounts for the year ended 31 December 2000, CTG had a turnover in that year of £99m, up from £64.8m in the previous year. The extent to which these audited accounts are reliable depends in part on the allegations in this action, which include a case that there was fraud in 2000. The 2000 accounts were not signed until 21 December 2001, only days before the Administrators were appointed. The Directors' Report states that 2000 was a highly successful year with profits over £3m. The auditors' report is unqualified.
In the accounts for 2000 trade debtors were said to be just under £22m (£12.7m in 1999). The turnover is not broken down so as to show the respective contributions of CTL, CTRL and CLL, but un-audited accounts for those companies dated April 2001 suggest that their respective figures for the year ended 31 December 2000 were:
| Company | Turnover | Trade Debtors |
| CTL | £14m | £2.6m |
| CTRL | £12.9m | £2.8m |
| CLL | £56.5m | £12m |
The claims in this action are not claims for breach of contract, which would in any event be available only against the companies concerned. The claims are for the torts of deceit and conspiracy against individuals. It is alleged that as a result of these, GE made payments to the companies in reliance on representations made to them by or on the authority of the individual defendants, and that GE suffered loss in consequence. In order to understand the nature of the alleged deceit and losses, it is necessary to understand the contractual framework under which GE was entitled to, and did receive information and make payments to the companies.
THE CONTRACTUAL FRAMEWORK
In about 1999 or 2000 CTG entered into an invoice discounting facility with Royal Bank Invoice Finance Ltd ("RBIF"). The precise terms of that facility are not relevant, but by the end of 2000 the sums advanced by RBIF were approaching £15m. Towards the end of 2000 CTG was looking for a replacement for RBIF. Mr Steel, whose role included arranging truck finance for CTGSL, raised this with a contact at GE European Equipment Finance ("EEF"), who in turn introduced GE.
The initial contact with GE was...
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