Hawkes v Cuddy and Others (Nos 1 & 2)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tuckey,Lord Justice Maurice Kay,Lord Justice Chadwick,Lord Justice Stanley Burnton,Mr Justice Blackburne,Lord Justice Moore-Bick |
| Judgment Date | 24 April 2009 |
| Neutral Citation | [2009] EWCA Civ 261,[2009] EWCA Civ 291,[2007] EWCA Civ 1072 |
| Docket Number | Case No: A3/2008/0272,Case Nos: A3/2008/0272, 0283, 0282,Case No: A3/2007/1885 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 April 2009 |
[2007] EWCA Civ 1072
Lord Justice Chadwick,
Lord Justice Tuckey and
Lord Justice Maurice Kay
Case No: A3/2007/1885
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION, BRISTOL DISTRICT REGISTRY
(HIS HONOUR JUDGE ALLEN QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Counsel Name (instructed by Insert Solicitor's name and address if available) appeared on behalf of the Appellant.
Counsel Name (instructed by Insert Solicitor's name and address if available) appeared on behalf of the Respondent.
Lord Justice Chadwick
These are adjourned applications for permission to appeal from orders made on 27 July 2007 by HHJ Havelock-Allan QC, sitting as a judge of the Chancery Division in Bristol District Registry. Those orders were made in proceedings brought under section 459 of the Companies' Act 1985, as it then was, in relation to Neath Rugby Limited (“the company”). The shareholders of that company are Mr Frederick Hawkes and Mrs Simone Cuddy: they each own one share. Mrs Cuddy claims to hold the share registered in her name as trustee for her husband, Mr Michael Cuddy. Mr and Mrs Cuddy are respondents to a petition presented by Mr Hawkes on 4 May 2007. Mr Hawkes is respondent to a cross-petition issued by Mrs Cuddy on 13 June 2007. The company has been joined as respondent to both petition and cross-petition. It took part in the argument before the judge; but, although represented by counsel on a watching brief on this appeal has taken no part in the argument before us.
The background to the proceedings is fully set out by the judge, which he delivered on 23 July 2007, [2077] EWHC 1789 (Ch.). It is unnecessary to rehearse the underlying facts at length in this judgment. It is sufficient to summarise the position.
(1) Neath Rugby Limited (the company) was incorporated on 9 May 2003 under the name 'Neath Swansea Rugby Limited'. It is the owner and manager of Neath Rugby Football Club (which I shall call 'the club'). The company acquired the assets of the club from the Welsh Rugby Union (“WRU”) in January 2004.
(2) The club itself was founded as long ago as 1871 as a traditional members' club run by a committee; and it continued as such until 1998. At that date it was in financial difficulties with substantial debts. WRU mounted what was, in effect, a rescue.
(3) On 28 May 1998, WRU established a private company, Gower Park Limited, to undertake the day-to-day running of the club. On 30 September 2001, Mr Cuddy was appointed a director of Gowerpark. On 16 October 2003, Gower Park went into creditors' voluntary liquidation, with an estimated deficiency of some £750,000.
(4) The company was incorporated pursuant to an agreement—which the judge referred to as the Hawkes/Cuddy Agreement—made between Mr Hawkes and Mr Cuddy in early 2003. That agreement was reached against the background of the club's financial difficulties, in the WRU rescue, and the reorganisation of Welsh Rugby by the WRU by the establishment of a new professional league comprising regional sides. The WRU had specified that the regional sides must be owned by an existing local club or clubs. One such regional side was the Neath and Swansea Ospreys, owned equally by the club and Swansea Rugby Football Club Limited.
(5) The terms of the Hawkes/Cuddy Agreement were summarised by the judge at paragraph 23 of his judgment. He said this:
“The, following terms of the Hawkes Cuddy Agreement, reached sometime between January and the beginning of April 2003, are common ground. 1. Mr Hawkes and Mr Cuddy would each assume personal liability to repay half of the debt of £180,000 owned by Neath FRC to WRU. 2. They would establish, as joint co-owners, a new corporate entity, Newco, to purchase the assets of Neath RFC from the WRU and, thereafter, to own and manage the club. 3. Mr Hawkes would own one share in Newco, and Mr Cuddy would own the other share. 4. Mr Hawkes and Mr Cuddy would each be entitled to nominate one of the two directors of Newco. 5. Mr Hawkes would become a director of Newco and Mr Cuddy would nominate Mrs Cuddy as the other director. 6. Mr Hawkes would concentrate on management of Neath RFC. 7. Mr Cuddy would concentrate on the management of the regional side, Neath Swansea Ospreys, and for that purpose would be nominated by Newco to act as one of the two directors of the new entity, being established to clearly manage Neath Swansea Ospreys. 8. Any payments to be made by Newco should be authorised by Mr Hawkes and Mr Cuddy.”
(6) The entity established to own and manage Neath Swansea Ospreys was South West Wales Rugby Limited (“SWWRL”), which later changed its name to Neath Swansea Ospreys Limited. It was incorporated on 10 April 2003. Mr Cuddy was appointed a director. The other director, nominated by Swansea, was Mr Roger Blythe. Following incorporation of the Neath company—the “Newco” envisaged in the Hawkes/Cuddy Agreement—Mr Hawkes and Mrs Cuddy were appointed directors of that company.
The reason why Mrs Cuddy, rather than her husband, was registered as the holder of the Cuddy share in the company—and the reason why she, rather than her husband, was appointed director of the company—was that there was concern, arising from advice given by a Swansea solicitor, Mr Newman, that Mr Cuddy might be acting in contravention of section 216 of the Insolvency Act 1986 if he were to be a director of, or to take part in, a creation or management of the company. Section 216 of the Insolvency Act 1986 was in these terms so far as material:
“(1) This section applies to a person when a company—the liquidating company—has gone into insolvent liquidation on or after the appointed day, and he was a director or shadow-director of the company at any time during the period of 12 months, ending with the day before it went into liquidation. (2) For the purposes of this section, a name is a prohibited name in relation to such a person if (a) it is a name by which the liquidating company was known in any time of that period of 12 months, or (b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company. (3) Except with leave of the court, or in such circumstances as may be prescribed, the person to whom this section applies shall not at any time, in the period of five years, beginning with the day on which the liquidating company went into liquidation (a) be a director of any other company that is known by a prohibited name; or (b) in any way, whether directly or indirectly, be concerned or take part in the promotion formation or management of any such company.”
I need read no more of that section. The concern that Mr Cuddy might be acting in contravention of section 216 of the 1986 Act was founded on the fact that, as I have said, Mr Cuddy was or had been a director of Gowerpark; Gowerpark was expected to go into insolvent liquidation, (as it did in October 2003); and it was thought that Gowerpark had traded as Neath RFC.
From the start of the 2003/2004 season, Mr Hawkes was engaged in running the company and the club, and Mr Cuddy with Mr Blythe was engaged in running Neath Swansea Ospreys. Mrs Cuddy played no active part in the affairs of the company; Mr Cuddy attended a few board meetings in her place. Over the years 2004 to 2006 the relationship between Mr Hawkes and Mr Cuddy became strained, to the point where there was a mutual breakdown of trust and confidence. The judge explained the problem, as he saw it, at paragraph 51 of his judgment:
“In short, it would appear that Mr Hawkes believes that Mr Cuddy is intending building himself an empire at the Swansea Ospreys at the expense of Neath. If it is permissible to mix avian metaphors, Mr Hawkes sees the Ospreys team as a cuckoo in the nest which will come to dominate the affairs of Swansea and Neath to the detriment of both local clubs. Mr Cuddy, on the other hand, believes that Mr Hawkes resents the growth of regional rugby and the lion's share of WRU funding which it now receives. He is hostile to the ambitions of the Ospreys and will do his best to undermine their success.”
By March 2007, if not earlier, the position in relation to the affairs of the company had reached deadlock. Mrs Cuddy was refusing to sign the company's 2004/2005 statutory accounts. That refusal led in due course to prosecution, conviction and fine, in proceedings before the Cardiff Magistrates. It is alleged that she was blocking payments due to the company's suppliers by refusing to sign cheques. It was in those circumstances that a petition, under section 459 of the Companies Act 1985, was presented on behalf of Mr Hawkes on 4 May 2007. The section is in these terms, so far as material:
“459(1) A member of a company may apply to the court by petition for an order under this Part on the ground that company's affairs are being or have been conducted in a manner which is unfairly prejudicial to the interests of its members generally, or some part of its members including at least himself, or that any actual or proposed act or omission of the company, including an act or omission on its behalf, would be so prejudicial.”
The section has been replaced by section 994 of the Companies' Act 2006, in much the same terms. Nothing turns on that. Section 461(1) of the 1985 Act provides that:
“If the court is satisfied that a petition under this part is well-founded it may make such order as it think fit for giving relief in respect of the matters complained of.”
Then section 461 (2) there are a number of examples of the sort of order that a court may make on a petition; but...
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