Halcyon House Ltd v Caroline Baines and Others

JurisdictionEngland & Wales
JudgeHis Honour Judge Richard Seymour
Judgment Date11 July 2014
Neutral Citation[2014] EWHC 2216 (QB)
Docket NumberCase No: HQ12X04893
CourtQueen's Bench Division
Date11 July 2014

[2014] EWHC 2216 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

His Honour Judge Richard Seymour Q.C.

(sitting as a Judge of the High Court)

Case No: HQ12X04893

Case No. HQ12X03627

Between:
Halcyon House Limited
Claimant
and
(1) Caroline Baines
(2) Susan Mogridge
(3) Mint Lettings and Management Limited
Defendants
Between:
(1) Susan Mogridge
(2) Caroline Baines
Claimants
and
Nicola Low
Defendant

Simon Forshaw (instructed by Heckford Norton) for Halcyon House Ltd. and Mrs. Low

James Purnell (instructed by SA Law LLP) for Mrs. Baines, Mrs. Mogridge and Mint Lettings and Management Ltd.

Hearing dates: 10, 11, 12, 13, 16, 17, 18, 19, 20, 23 and 24 June 2014

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.

His Honour Judge Richard Seymour Q.C.:

Introduction

1

The two actions with which this judgment is concerned arise out of most unhappy family discord. The defendant in action HQ12X03627 ( "the Harassment Action"), Mrs. Nicola Low, is the mother of the second claimant in that action, Mrs. Caroline Baines. Mrs. Baines is the first defendant in action HQ12X04893 ( "the Halcyon Action"). The claimant in that action, Halcyon House Ltd. ( "Halcyon") was, until June 2010, a company in which Mrs. Baines held 45% of the issued shares, Mrs. Low held 10% of the issued shares and Mr. Jeremy Low, who is the son of Mrs. Low and the brother of Mrs. Baines, held the remaining 45% of the issued shares. As a result of an agreement ( "the Compromise Agreement") in writing made in June 2010 Mrs. Baines ceased to hold any issued shares in Halcyon, her shares being transferred to her mother.

2

In 2010 Mrs. Low was the postmistress in Knebworth, Hertfordshire and ran the local post office. The business of Halcyon was conducted from offices above the post office.

3

Halcyon was incorporated on 19 November 2003, apparently to carry on a business originally established in about 1974. Its business, certainly by about December 2003, was that of the letting and management of residential property. Mrs. Low acquired the issued shares of Halcyon in about December 2003, and the shares were then redistributed as between her and her children in the way which I have recorded. In her witness statement dated 7 February 2014 at paragraph 6 Mrs. Low explained that one of the reasons for acquiring Halcyon was to provide for Mrs. Baines "a secure job and reasonable income". At paragraph 7 of that witness statement Mrs. Low continued, inter alia:-

" Caroline was appointed the Managing Director (and was also, in this capacity an employee with a salary). I was the Chairman, and Jeremy was a director. The arrangement was that Caroline would run the business on a day-to-day basis but would provide regular information and reports to me and Jeremy. There would be monthly meetings between the three of us (as the Board of Directors)."

4

In other words, the business of Halcyon was, essentially, to be run by Mrs. Baines, to provide her with a job and an income, but with her mother and her brother having a financial interest in the business. As I have noted, Mrs. Low had other business interests, not least the post office in Knebworth. Mr. Low also had other business interests. From about the end of 2008 he has been employed as a director by the Royal Bank of Canada Capital Markets department of Royal Bank of Canada Europe Ltd.

5

In her cross-examination Mrs. Low emphasised on a number of occasions that, until the events giving rise to the claims made in the Halcyon Action, her intention had been that, in the fullness of time (that is to say, after the death of Mrs. Low) Mrs. Baines should acquire all of the shares in Halcyon and conduct its business entirely for her benefit. Mrs. Low envisaged, it seemed, compensating her son for his interest in Halcyon by giving him an interest in a flat owned by Mrs. Low.

6

Against that background it was difficult to see what was the purpose of the Halcyon Action. As I shall explain, what actually happened was that on 21 April 2010 Mrs. Baines caused Mint Lettings and Management Ltd. ( "Mint"), the third defendant in the Halcyon Action, to be incorporated. The business of Mint is the same as the business of Halcyon, residential property letting and management. Mint started to trade in about July 2010. Some 16 individual landlords who, prior to the commencement of the business of Mint, had been clients of Halcyon, thereafter transferred their affections to Mint. Mint also acquired the business of managing three blocks of apartments, respectively called Dunsters Mead, Willowdene and Nursery Gardens, which had previously been managed by Halcyon. Broadly what was contended in the Halcyon Action was that Mint had acquired the business of former clients of Halcyon by misuse of confidential information of Halcyon; in breach of implied terms of the contracts of employment of Mrs. Baines and Mrs. Susan Mogridge, the second defendant in the Halcyon Action and the first claimant in the Harassment Action; in breach of alleged fiduciary duties of Mrs. Baines and Mrs. Mogridge, and so forth. It was contended that an amount of £25,400 which had been paid to Mrs. Baines by Halcyon under the Compromise Agreement was, in the circumstances, repayable by Mrs. Baines. The position of Mrs. Baines was, in essence, that she had caused Mint to be incorporated because she feared that her mother and her brother were trying to force her out of Halcyon, and when it seemed that they were likely to succeed in that objective, she made arrangements to try to carry on the business which she had carried on through Halcyon using the new vehicle Mint. She denied misusing any confidential information of Halcyon. Although Halcyon has continued to trade, with limited success, if it was in fact the case that Mrs. Low acquired Halcyon to provide a job and an income for her daughter, and that she intended that, in due course, the entire benefit of Halcyon would be vested in Mrs. Baines, there was no obvious reason for the commencement of the Halcyon Action other than spite. However, the motivation for the action is not material to the merits of the claims made in it, so in this judgment I address those merits.

7

Mrs. Mogridge was employed by Halcyon from 10 March 2008 until 15 July 2010. She was one of only two full-time employees, apart from Mrs. Baines, at the end of 2009 and the beginning of 2010. The other full-time employee at that point was Mrs. Elaine Washbrook. Mrs. Mogridge gave notice of resignation of her employment by Halcyon on 16 June 2010, and that notice took effect on 15 July 2010. Mrs. Mogridge was then employed by Mint as from 25 July 2010, and she continues in that employment.

8

It appeared that the only document produced on behalf of Halcyon which was relevant to the employment of Mrs. Mogridge was a letter dated 12 February 2008 written by Mrs. Baines, which was in these terms:-

" To confirm our conversation of this morning, I am pleased to offer you the position of full time administrator here at Halcyon House Ltd.

The working hours will be from 9am to 5pm, Monday to Friday, and your starting salary will be GBP 17000.00 per annum.

Holiday entitlement is 20 days per annum plus bank holidays and I can confirm that there will not be a problem with you taking time off in May for your friends [sic] wedding.

I very much look forward to confirming a starting date with you, and to working together in the near future.

Should you have any questions, please do not hesitate to contact me."

9

Halcyon was only ever a small business. At paragraph 16 of her witness statement dated 7 February 2014 Mrs. Low explained that in 2009 it had about 140 clients who let out properties and some 180 tenants with which it dealt. The unaudited financial statements of Halcyon for the year ended 30 November 2008, of which a copy was adduced in evidence, recorded a turnover in that year of £159,170 which generated a profit before tax of but £27,367. The balance sheet of Halcyon as at 30 November 2008 recorded total assets less current liabilities of only £13,660. The figures for the next financial year, ending on 30 November 2009, were slightly better in relation to turnover and profit, but worse in relation to net assets. The turnover increased to £178,665, generating a profit before tax of £36,19However, the balance sheet as at 30 November 2009 showed an excess of assets over current liabilities of but £1,834. The alteration in net assets was largely due to a significant increase in current liabilities and the payment of a dividend of £40,000 out of cash held at bank. Unhappily there was a substantial deterioration in the financial position of Halcyon in the year ended 30 November 2010, according to the unaudited financial statements of which a copy was adduced in evidence. Turnover was down to £150,779, so not much worse than in the year ended 30 November 2008, but there was a loss on ordinary activities before tax of £29,523. This was due to a significant increase in administrative expenses during the year, from £141,682 in the year ended 30 November 2009 to £180,733. That increase was essentially attributable to a payment of £25,400 in that year to Mrs. Baines as compensation for loss of office pursuant to the terms of the Compromise Agreement, and to an increase in legal fees incurred of some £20,000. There was also an increase in net current liabilities, from £30,564 to £48,168, and that had the effect that there was a net deficiency of assets over current liabilities of £22,826. Halcyon was therefore balance sheet insolvent, and that seemed to have continued to be the position from 30 November 2010 until the trial.

10

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