GE Commercial Finance Ltd v Gee
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MAY,LORD JUSTICE MOORE-BICK |
| Judgment Date | 18 July 2006 |
| Neutral Citation | [2006] EWCA Civ 1109 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 July 2006 |
| Docket Number | B5/2005/2378 (A) , B5/2006/0448 |
[2006] EWCA Civ 1109
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
MR JUSTICE TUGENDHAT (B5/2005/2377, B5/2005/2378, B5/2005/2378 (A) )
MASTER WHITAKER (B5/2006/0448)
Royal Courts of Justice
Strand
London, WC2
Lord Justice May
Lord Justice Moore-Bick
B5/2005/2378 (A) , B5/2006/0448
B5/2005/2377, B5/2005/2378,
THE APPELLANTS APPEARED IN PERSON.
MR N TOZZI QC (instructed by Messrs Hammonds, London, EC2M 4YH) appeared on behalf of the Respondent
Judgement
1. On 28 September 2005, after a 27 day hearing, Tugendhat J gave judgment in favour of the claimants, GE Commercial Finance Ltd, against the first and second defendants, David Gee and Kevin Smedley, for £16,044,000 with interest of some £4.8 million. The judge made an order for costs in favour of the claimants and ordered these two defendants to make an interim payment towards those costs of £500,000. The main applications before the court today are applications by each of these applicants for permission to appeal against Tugendhat J's judgment and order.
The claimants' claim was for fraudulent misrepresentation and conspiracy to defraud. The claimants were represented before the judge by leading and junior counsel and solicitors. As the costs order indicates, they spent a lot of money on the claim. They had accountancy expert evidence. Mr Gee was represented by a relatively experienced junior counsel and solicitors. Mr Smedley represented himself, although I think he had had solicitors at an early interlocutory stage. He called an accountant, whose evidence in the event dealt more with quantum than liability. There were masses of documents.
As will appear, Mr Smedley on his own evidence scarcely had a defence to the claim. His main ground of appeal, I think, is that the trial was not fair because he was not represented against the big guns trained against him by the claimants. Mr Gee scarcely contended that Mr Smedley had not been fraudulent. Mr Gee's defence was that he was an operational managing director who was unaware of the details of the various companies' finances and unaware of the fraud that Mr Smedley was found to have perpetrated on behalf of their companies.
The judge disbelieved Mr Gee comprehensively. Grounds of appeal settled on his behalf by counsel contend that the judge was wrong to make this finding. Mr Gee now represents himself. In proposed amended grounds of appeal he contends, on much the same lines as Mr Smedley, that his trial was unfair for inequality of arms and inadequate case management. As will appear, in my judgment these proposed appeals are hopeless and I would refuse permission. There are pending criminal charges against both applicants. There are also pending director's disqualification proceedings and bankruptcy proceedings have been initiated.
Tugendhat J refused permission to appeal, but he granted both applicants an extension of time for service of their notices until 27 October 2005. On 16 January 2006, rather over six months ago, Scott Baker LJ considered Mr Gee's and Mr Smedley's applications. Scott Baker LJ refused Mr Gee's application, saying that all the grounds are against findings of fact and no arguable basis is put forward for overturning those findings. As to Mr Smedley's application, Scott Baker LJ adjourned it for oral hearing on notice with a stay granted until that hearing. Mr Smedley was encouraged to seek assistance from the free representation unit, as his complaints were lacking in particularity, and a skeleton argument from GE was requested, which this court now has. Mr Smedley has told us this morning that he has made some effort to get pro bono representation, but that this has faltered, among other things because counsel wants help from solicitors and solicitors have not been prepared to take the case on, apparently saying that they have a conflict of interest. Mr Gee's solicitors subsequently requested an oral hearing, and his application has been listed for today.
On 2 March 2006 Mr Smedley applied for a final third party debt order against him to be set aside. On 22 March 2006 Scott Baker LJ adjourned this application to be listed with the other applications, adding, however, that he could see no basis for setting aside the third party debt order. On 21 April 2006 solicitors for Mr Gee in the criminal proceedings wrote to the court, asking that both the appeal hearing and the DTI proceedings should be stayed until the conclusion of the criminal proceedings, due to begin in about May 2007. On 2 May 2006 Mr Gee's solicitors for the appeal wrote to agree with this, as did Mr Smedley's solicitors in the criminal proceedings. On 23 May 2006 Pill LJ directed that the listing for today of all three applications should stand. On 7 June 2006 Mr Smedley applied to be permitted to adduce additional evidence. This application also has been listed for hearing today.
Mr Gee has written to the court on two occasions recently, asking for an adjournment of the appeal application and for a stay. The basis of this, which Mr Gee renews today, is that those now representing him in the criminal trial are turning up material which may have some relevance to his appeal. In my judgment that is no basis whatever for delaying the consideration of the applications that are now before the court. Nor do I think, in so far as Mr Smedley makes a similar application, there is a proper ground for delaying today's applications because he has yet to obtain pro bono representation for them. He has had, as I say, six months in order to do that. In reality all the ancillary applications are largely redundant if the permission applications fail, as I consider they should .
Mr Gee obtained a Batchelor of Arts Degree in Business Studies in 1973 and a Master of Science Degree in Logistics in 1996. He began his career working for two large road transport companies, and then in 1979 started what was to become the City Truck Group ("CTG") , the business of which was transport and distribution by trucks. In 1983 Investors in Industry, the well-known private equity firm, was an investor in CTG. At the time of the events under consideration, Mr Gee was the group executive Chairman of CTG and held 80% of its shares, with 3I holding the other 20%. Mr Smedley, the second defendant in the action, had first met Mr Gee at university in the early 1970's, and they became close friends. Each was the best man at the other's wedding. Mr Smedley was the group finance director of CTG, although not a shareholder, from 1991. There was a third defendant, who by the time of the hearing had settled with GE, and there was a fourth defendant, Kevin Ritchie, Mr Smedley's assistant, who had joined the business in 1989 as a school leaver and had obtained no qualifications beyond GCSEs and one A level.
CTG Group consisted of four subsidiaries, City Logistics Ltd, City Truck Rentals Ltd, City Trucks Ltd and City Truck Group Services Ltd. They go by acronyms of those names. The first three of these were trading companies, and CTGSL provided financial and administrative services to the trading companies. The managing director and finance director of each of the four subsidiaries were Mr Gee and Mr Smedley respectively.
In 1999 or early 2000 CTG had entered into an invoice discounting agreement with a subsidiary of the Royal Bank of Scotland, Royal Bank Invoice Finance Ltd. Toward the end of 2000 CTG was looking to change providers of this facility, and on 1 February 2001 CTL, CTRL and CLL entered into an invoice discounting agreement with GE, with purchases of debts limited to £25,000,000 at any one time.
The details of the claim relate to the details of the arrangement by which these three companies would notify debts to GE as undifferentiated block figures and on notification, GE would release funds. This can be seen as the transaction whereby a package of specific debts was sold to GE. GE would however require regular reports whereby these were broken down into descriptions of specific debts. GE claimed essentially that Mr Ritchie was providing false supporting documentation at the behest of Mr Smedley, and, they said, ultimately Mr Gee.
One way in which non-existent debts were sold to GE was allegedly by manipulating CLL's self-bill accounts. CLL had an arrangement with some large customers whereby the customer would raise the invoice, CLL would record a provisional invoice on a so-called ZZ account for the customer, and the provisional invoice was intended to be reversed by credit note when the real invoice came in. GE alleged that this was deliberately not done so that CLL could sell fictitious debt to GE.
Further, the trading companies were responsible for collecting on the debts and remitting the proceeds to GE by depositing them in a GE account. GE alleged that on many occasions the trading companies simply put payments received for previously notified debts into their own bank account, rather than paying them over to GE. GE's agreement also placed a limit on the amount of the debt which they were willing to purchase from the three companies at any one time; that is £25,000,000. Therefore when payments were made to the GE account, they were recorded as payments for a specific debt and the amount received would then be subtracted from the outstanding total.
GE claimed that as the amount of fictitious debt built up, there was the problem that no matching payments were coming in. Therefore, they alleged, Mr Ritchie, Mr Smedley and Mr Gee began deceiving them at the...
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