GHLM Trading Ltd v Anil Kumar Maroo and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 23 January 2012 |
| Neutral Citation | [2012] EWHC 61 (Ch) |
| Docket Number | Case No: HC09C00778 |
| Court | Chancery Division |
| Date | 23 January 2012 |
[2012] EWHC 61 (Ch)
Mr Justice Newey
Case No: HC09C00778
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building, Royal Courts of Justice
7 Rolls Buildings, London EC4A 1NL
Mr Paul Greenwood (instructed by Stewarts Law LLP) for the Claimant
Mr Sami Rahman (direct access) for the 1 st, 2 nd and 3 rd Defendants
Hearing dates: 10–14, 17–21 and 24–26 October and 2–3 November 2011
Introduction
These proceedings arise out of an agreement which the First Defendant, Mr Anil Maroo, made with a Mr Braj Binani in February 2005. The agreement involved Mr Binani taking over a Spanish clothing business through the acquisition from Mr Maroo's wife, who is the Second Defendant, of the Claimant, GHLM Trading Limited ("GHLM"). Mr Binani invested £1 million at the outset, and he subsequently made substantial loans to GHLM. Mr and Mrs Maroo, however, continued to be GHLM's only directors.
In the event, the clothing business was unsuccessful, and Mr Binani came to lose confidence in Mr Maroo. By May 2007, Mr Binani had decided that the business should be closed down. Mr and Mrs Maroo were eventually removed as directors of GHLM in early 2009.
GHLM now seeks relief as against the Maroos and, to a lesser extent, the Third Defendant, Brocade International Limited ("Brocade"), a company of which the Maroos are directors and Mrs Maroo the sole shareholder. Various claims are put forward. They include (a) a claim in respect of sums said to be owing on the directors' loan account (in particular, on the basis that credit entries on the account have not been justified), (b) a claim that a sale of stock to Brocade shortly before the Maroos were removed as directors of GHLM involved breaches of duty on the part of the Maroos, (c) a claim to recover sums paid to the Maroos by way of remuneration on the basis that they failed to disclose wrongdoing and (d) a claim concerning a Mercedes car. Relief in respect of the sale of stock to Brocade is also sought against a Mr Jose Paulo Loureiro, the Fourth Defendant.
I also have before me a counterclaim by the Maroos and Brocade, notably for (a) outstanding remuneration and (b) failure to supply stock which (it is said) was sold to Brocade.
Narrative
Mr Binani is currently the non-executive chairman of the Binani group, which has businesses in India, the Middle East, Africa and China and a net worth in excess of US$1 billion. The group produces and trades in commodities, in particular non-ferrous metals, cement and glass fibre.
The Binani and Maroo families, which come from the same community in Mumbai, have known each other for many years. An uncle of Mr Maroo was a friend of Mr Binani's father and is a director of a company in the Binani group. Mr Maroo himself knew Mr Binani's brother at college.
Mr Maroo first incorporated a British company in 1996, when Brocade was formed. Both he and his wife were appointed as directors, and the latter became the company's sole shareholder. The company traded in textiles. In 1998, Mr and Mrs Maroo moved to the United Kingdom from Dubai to concentrate on the business.
The Maroos acquired another British company in 2002. The company in question, Giant Eagle International Limited ("Giant Eagle"), was incorporated on 3 December 2002, and Mr and Mrs Maroo became directors and shareholders. Mr Maroo has described the company as providing textile management, design and supervision services.
GHLM, the Claimant, was incorporated in England and Wales in 2001. Mr and Mrs Maroo became directors in 2003, and all the issued shares were initially held by Mrs Maroo. Mr Maroo has explained that the company would organise the production of garments for new clients.
In 2003, the Maroos incorporated a Spanish company, Majestique Apparels SL ("Majestique"), with a view to carrying on a clothing business in Spain. Mr and Mrs Maroo were designated as the company's joint "administradores" (or directors) and subscribed for all the shares.
In 2004, it was agreed that the Spanish venture would be pursued in conjunction with a Mr Amir Kapadia, who, I gather, had previously run a grocery business in the United Kingdom. Frost Designs SL ("Frost Designs") was incorporated in Spain on 3 June 2004 in pursuance of the scheme. The shares were split equally between, on the one hand, the Maroos and, on the other, Mr Kapadia and his son Rafique, and the two families also had equal board representation.
At about this time, leases were taken of two shops in Madrid. On 5 May 2004, Majestique agreed to lease shop premises in Calle Conde de Penalver ("the Goya Shop"). The lease was for a period of five years from 1 July 2004, but Majestique was entitled to terminate after the first year on six months' notice. The rent was subject to annual review by reference to the consumer price index. Although Majestique was the named lessee, the shop was used by Frost Designs.
On 16 June 2004, a second lease was entered into, by Frost Designs itself. This lease related to shop premises in Calle Fuencarral ("the Fuencarral Shop"). The lease was for a 10-year term, but Frost Designs had the benefit of a break clause entitling it to bring the lease to an end on 90 days' notice after the first year. The rent was once again to be revised annually by reference to the consumer price index.
Trading began in the autumn of 2004, under the name "Frost London". The Goya Shop appears to have opened in October 2004, and the Fuencarral Shop in November. Frost Designs would buy all its stock from Majestique.
By December 2004, however, Mr Kapadia was expressing dissatisfaction. On 4 December, he told Mr Maroo in an email that he was "really upset at the way things are made to operate here in Madrid". He referred to debts which he had had to bear, commenting that he did "not run any business where people have to chase me for money and I have to keep on lying or make excuses to them that I am fully aware are stalling tactics" and that he had "had to put in [another €21,000] to keep my name clear". He also said this:
"I do not know where the money Sterling Pounds 250000 that I have given you has gone, I cannot see what I have got for it, ONE SHOP in Goya, which is like paid for. I got Detecsa to stall his payments for so long, Please find me a builder that will do so much work and not be … paid a penny yet!!!!."
In October 2004, Mr Kapadia sought accounting and administrative assistance from a Mr Rami Panday. Mr Panday, an English-qualified chartered accountant, is a partner in Eurorevision, a firm of accountants and auditors in Madrid.
Some time in the second half of 2004, Mr Maroo approached Mr Binani for, and was given, a loan, apparently to fund liabilities in connection with shipments to Brocade. Mr Maroo was not able to repay the loan on time, but asked Mr Binani whether he would participate in a business venture. At this point, one of Mr Binani's daughters, Nidhi (now Mrs Singhania), was soon to graduate from university, and Mr Binani thought that she could gain from experience in a small London-based company. He therefore said that he wished to explore Mr Maroo's proposal, and in January 2005 Mr and Mrs Maroo visited Spain with Mr Binani, his daughter and his wife. In the course of the visit, the Binanis went to the Goya and Fuencarral Shops.
On 2 February 2005, Mr Maroo met Mr Binani at the latter's office in Mumbai; Mr Rajesh Bagri, a cousin of, and adviser to, Mr Binani, was also present. Mr Binani and Mr Bagri both said in evidence, and I accept, that the meeting was not a particularly long one (no more than about an hour) and did not involve in-depth discussion of detail. Mr Maroo proposed a joint venture in respect of the Spanish business, but Mr Binani said that he was not interested in joint ventures. It was ultimately agreed that Mr Binani would buy the business and invest £1 million in it, that Mr Maroo would be the managing director at a remuneration of €120,000 a year and that Mrs Maroo would work for the business at a remuneration of €72,000 a year. Amongst the other points agreed was that Mr Maroo would receive 10% of the net profits before tax in the event of a sale of the business.
The remuneration agreed for Mr and Mrs Maroo compared favourably with their incomes in previous years. For example, Mr and Mrs Maroo's tax returns show them to have had a total income of £51,452.22 in the year ended 5 April 2004. In cross-examination, Mr Maroo confirmed that he and his wife were receiving about £50,000 to £60,000 a year in 2002–2004.
At some point, Mr Maroo provided Mr Binani with a document headed "Project profile for the establishment of a chain of retail stores in Spain". This described "Existing operations" in these terms:
" 'Frost London' is a registered brand that is selling clothing in Spain and is presently targeting the 16 – 30 age group for both men and women.
It retails through its own 2 stores located in Central Madrid and through several nominated stores all over Spain. Imports are cleared in Barcelona and brought for distribution from its warehouse cum office in San Sebastin de los Reyes – on the outskirts of Madrid."
Under the heading "Future restructural expansion", the "Project profile" said this:
"It is proposed to expand above operations and restructure them to achieve the following objectives:
[a] Establish additional 16 stores in Spain/Portugal.
[b] Enlarge clothing range to cater to a...
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