Griffin v UHY Hacker Young Partners
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE VOS,Mr Justice Vos |
| Judgment Date | 04 February 2010 |
| Neutral Citation | [2010] EWHC 146 (Ch) |
| Docket Number | Case No: HC09C01180 |
| Court | Chancery Division |
| Date | 04 February 2010 |
[2010] EWHC 146 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Before: Mr Justice Vos
Case No: HC09C01180
Mr Michael Soole QC and Mr Andrew Butler (instructed by Butcher Burns) for the Claimant
Mr Ben Hubble QC (instructed by Mayer Brown International LLP) for the Defendants
Hearing dates: 26 th and 27 th January 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Vos:
Introduction
The Defendant, UHY Hacker Young & Partners (“Hacker Young”), is a firm of Chartered Accountants which operate a turnaround and recovery unit under the name Hacker Young & Partners. Mr Andrew Andronikou (“Mr Andronikou”) is a licensed insolvency practitioner and a partner in Hacker Young.
The Claimant, Robert Griffin (“Mr Griffin”) graduated from Business School in 1995, and became an investment manager, in addition to pursuing other entrepreneurial activities.
In these proceedings, Mr Griffin claims that Hacker Young advised him negligently in relation to the winding up of Saxon Drinks Limited (“SDL”), a company, of which he was sole director. SDL was incorporated on 9 th July 2001, and went into a creditors' voluntary winding up on or about 30 th March 2004. SDL had marketed an apple juice drink called “Saxon 1050”, which was a trademark that Mr Griffin had registered in February 1999. I was told that the “1050” referred to the earliest year in which apple growing in Suffolk is referred to in the Domesday Book (which was itself commissioned in 1085).
Mr Griffin's central allegation is that Mr Andronikou failed to advise him that his conduct might contravene section 216 of the Insolvency Act 1986. That section prohibits the directors of companies that have gone into insolvent liquidation from becoming a director or being involved in the management of a company using a trade name of the liquidated company, without giving notice to creditors or obtaining the leave of the court. It was enacted, in colloquial terms, to strike down the “phoenix phenomenon”, which was seen as one of the main abuses of the privilege of limited liability.
Mr Griffin, to put the matter neutrally, was involved in the incorporation of a company called Brand Central Limited (“BCL”) on 4 th March 2004, which took over the marketing of the Saxon 1050 apple drink from SDL. As a result, on 30 th July 2007, Mr Griffin was convicted by District Judge Day in the Richmond Magistrates Court of contravening section 216(3) of the Insolvency Act 1986 by being a director of “a company known by the prohibited brand name Brand Central Ltd trading as Saxon 1050 without the leave of the court”. He was fined £1,000. His appeal to the Divisional Court (Dyson LJ and Jack J) against this conviction was dismissed on 25 th January 2008.
Mr Griffin claims in these proceedings to recover damages said to flow from the negligent advice (but also flowing from the conviction) including the loss of his 27.3% shareholding in an SEC-registered investment advisory company (worth US$941,850), which he could not retain due to SEC disclosure rules, loss of earnings and earning capacity, the costs of the criminal proceedings, and his personal liability for BCL's debts.
Hacker Young denies Mr Griffin's claim. In particular, it contends that it did not owe Mr Griffin any duty of care and it was not, in any event, negligent. But more centrally, for the purposes of this application, it says that Mr Griffin's claim, even if it were otherwise made out, is barred on the grounds of the maxim “ ex turpi causa non oritur actio”, which has been translated in numerous different ways, but might be said to mean that an action cannot arise from a base or disgraceful cause. I shall refer to this defence simply as “ ex turpi causa”.
Against this background, Hacker Young applied on 21 st September 2009 to strike out Mr Griffin's claim as disclosing no reasonable grounds for bringing a claim and as an abuse of process, or for summary judgment under CPR Part 24.2 as having no real prospect of success. The application has been put by Mr Ben Hubble Q.C., counsel for Hacker Young, purely on the basis of the ex turpi causa defence. It is said that, in the light of two well-known recent House of Lords' authorities on ex turpi causa, this provides a complete defence to all Mr Griffin's claims.
Factual background
It is common ground that I cannot conduct any kind of mini-trial on this application, and that I should, for the purposes of this application, take the facts contained in the Particulars of Claim and in Mr Griffin's witness statement as being true.
SDL ran into financial problems in 2003, because of disputes with its production and bottling contractor, Axis Bottling Limited, and a book-keeper, who removed SDL's books and records.
Mr Griffin first consulted the accountant who had set up SDL, Mr Brian Leighton of Foster Squires (“Mr Leighton”), and he recommended Mr Andronikou. Mr Andronikou advised on 19 th December 2003 and on 25 th February 2004. Mr Griffin alleges that he informed Mr Andronikou that he was intending to set up a new company to take forward SDL's business, and that Mr Andronikou advised about it. In particular, Mr Griffin says that Mr Andronikou advised that “it would not be prudent for [Mr Griffin] to be named as a director of the new company for a period of 6 months or so”.
In due course, BCL was, as I have said, incorporated on 4 th March 2004 by Mr Leighton. Mr Griffin accepts that he became company secretary of BCL, and that a friend of his, Ms Nadine Arsenyev (“Ms Arsenyev”), became a director. On 21 st March 2004, Mr Griffin emailed Mr Leighton to say that he would prefer not to be company secretary “given the circumstances”.
There followed a complex series of changes in the office-holders of BCL that cannot sensibly be untangled on a strike out application. Suffice it to say that Mr Griffin accepts that a series of Forms 288a and 288b recording the appointment and resignation of directors and secretaries of BCL were, at various times, altered and back-dated by various people, including himself. The various changes went on between March and November 2004, but I do not propose to attempt to set out the details in this judgment. The objective appears to have been initially to prevent Mr Griffin being seen to be an officer of BCL (allegedly in accordance with Mr Andronikou's advice), and later to prevent Ms Arsenyev being seen to have been a director for longer than absolutely necessary. Mr Hubble has argued that the back-dating of these forms was part of a plan that Mr Griffin was engaged upon to deceive the creditors of SDL about his involvement in BCL, or at least to continue trading with the Saxon 1050 name.
On 30 th March 2004, the creditors' meeting of SDL took place. It was attended by Mr Griffin as chairman, and he signed the Minutes. It was also attended by Mr Andronikou and Mr Terry Campbell of Hacker Young, and three creditors, Mr Malcolm Slatcher of Axis Bottling Limited, Ms Jannine Baalham of H. Elben Limited, and Mr David Upson of Stoke Farm Orchards. Immediately prior to the meeting, Mr Griffin alleges that Mr Andronikou orally advised him that he should, if asked, deny any involvement in an ongoing drinks business.
According to the minutes of the creditors' meeting, there was some hostile questioning from creditors, and particularly Mr Slatcher. Mr Andronikou said first: “there is no business to take forward”, and “[t]he director has invested a lot of time and money into this Company and no longer wishes to continue with the business as it seems unviable”. When Mr Griffin was later asked directly by Mr Slatcher whether he intended to carry on with Saxon Drinks, he replied “No, I do not intend to carry on in the drinks business”.
Mr Griffin now accepts that this last response was a direct lie, but seeks to excuse himself by saying that he was put in an extremely difficult position by Mr Andronikou having volunteered the misinformation to the creditors first. He says, therefore, that he chose on the spur of the moment to perpetuate a position he knew to be untrue, and that, having done so, he had no choice but to sign the minutes because they were accurate.
On 22 nd November 2004, Mr Griffin was sent (but did not receive) a warning letter from the Insolvency Service adverting to the fact that he appeared to be concerned in the carrying on of a business in the name of Saxon Drinks UK without the permission of the court.
On 9 th March 2005, the Insolvency Service wrote again to Mr Griffin, who actually received its letter. In April 2005, Mr Griffin spoke to Mr Andronikou who said he hoped the matter would go away, but Mr Griffin might have to liquidate BCL.
In March 2006, after it had become apparent that he was subject to an investigation, Mr Griffin gave up his 27.3% shareholding in Open Field Capital LLC (“OFC”), the investment adviser to which I have already referred, to avoid disclosure requirements, on the basis that he could re-acquire it if he was acquitted of any charges that might follow.
In November 2006, Mr Griffin was charged with three offences under sections 206, 208, and 216 of the Insolvency Act 1986.
In August 2007, he was convicted under section 208 (for not providing SDL's books and accounts) and under section 216, as I have said. He was acquitted of the charge under section 206 of the Insolvency Act 1986. The Divisional Court, again as I have said, upheld the section 216 conviction, but it quashed the conviction under section 208.
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