Hotel Portfolio II UK Ltd ((in Liquidation)) v Andrew Joseph Ruhan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 04 July 2022 |
| Neutral Citation | [2022] EWHC 1695 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2018-000226 |
and
[2022] EWHC 1695 (Comm)
Mr Justice Foxton
Case No: CL-2018-000226
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
James Pickering QC and Samuel Hodge (instructed by Spring Law Limited) for the Claimants
The First Defendant in person
Sebastian Kokelaar and Stephen Ryan (instructed by Richard Slade & Company) for the Second Defendant
Joshua Viney (instructed by Clintons) for Ms Richardson
Hearing dates: 21 and 22 June 2022
Draft Judgment to the parties: 27 June 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Monday 04 July 2022 at 10:00am.
A INTRODUCTION
This judgment addresses consequential issues arising from my judgment handed down on 23 February 2022 ( [2022] EWHC 383 (Comm): “ the Judgment”). The unfortunate delay since the Judgment was caused by the difficulties of finding a slot of sufficient length for which the parties were available and when I was sitting in the Commercial Court. That extended period has allowed the parties to seek to narrow the issues. A number of the points previously in issue have now been resolved, but a significant number of issues remain outstanding. The topics which I now have to determine are:
i) What declarations, if any, should be made to give effect to the Judgment?
ii) HPII's application to join Grenda Investments Ltd (“Grenda”) to the Judgment (for the purpose of binding Grenda to the findings in the Judgment) under CPR 19.2.
iii) What the parties described as quantum issues:
a) The principal amount for which judgment should be entered against the Defendants.
b) The time for payment.
c) Whether interest should be awarded on a simple or compound basis, at what rate and (if compound interest is to be ordered), with what rests?
iv) Costs and related issues:
a) Should the costs order be joint and several?
b) What sum should the Defendants be ordered to pay by way of a payment on account of costs?
c) The time for payment.
d) Whether I should order interest on costs.
v) Applications for permission to appeal and what, if any, conditions should be imposed on any permission granted.
vi) The position so far as Ms Richardson is concerned.
B WHAT DECLARATIONS, IF ANY, SHOULD BE MADE?
The applicable principles
Both parties relied on the summary of the relevant principles given by O'Farrell J in Office Depot International (UK) Ltd v UBS Asset Management (UK) Ltd [2018] EWHC 1494 (TCC), [49]:
“49. As between the parties to a claim, the court can grant a declaration as to their rights, or as to the existence of facts, or as to a principle of law, where those rights, facts, or principles have been established to the court's satisfaction. The court should not, however, grant any declarations merely because the rights, facts or principles have been established and one party asks for a declaration. The court's power to grant declaratory relief is discretionary. The court has to consider whether, in all the circumstances, it is appropriate to make such an order: Financial Services Authority v Rourke [2001] EWHC 704 per Neuberger J:
‘It seems to me that when considering whether to grant a declaration or not, the court should take into account justice to the claimant, justice to the defendant, whether the declaration would serve a useful purpose and whether there are any other special reasons why or why not the court should grant the declaration.’”
The court will only grant declaratory relief where the terms of the declaration sought are specified with sufficient precision: Oxfordshire County Council v Oxford City Council [2006] UKHL 25, [92]–[93] (Lord Scott).
The parties' cases
HPII sought eight declarations on the basis that they were necessary and would serve a useful purpose:
i) Declaration 1: that from the moment of the Cambulo Madeira Transaction, in the subsequent sale of the Hyde Park Hotels, and in the investment of the profits, Mr Ruhan retained a secret beneficial interest in the Hyde Park Hotels and their proceeds of sale.
ii) Declaration 2: that Mr Stevens, Euro Estates, Cambulo Madeira and CLGD held their interests in property and corporate entities relating to the Hyde Park Hotels as Mr Ruhan's secret nominees.
iii) Declarations 3 and 5: as at the time of the Cambulo Madeira Transaction and as at the date of the sale of the Lancaster Gate and Kensington Hotels, Mr Ruhan was in fraudulent breach of his fiduciary and statutory duties.
iv) Declaration 4: from the moment of the Cambulo Madeira Transaction, the Hyde Park Hotels were beneficially held by Mr Ruhan on constructive trust for HPII and thereafter the relevant net proceeds of sale to which Mr Ruhan (through his nominees) was prima facie entitled were beneficially held by Mr Ruhan on constructive trust for HPII.
v) Declaration 6: that Mr Stevens dishonestly assisted Mr Ruhan's breaches of fiduciary duty as referred to in declarations three and five.
vi) Declaration 7: that Phoenix and Grenda were set up as nominee entities for Mr Ruhan and held assets beneficially for Mr Ruhan (with various sub-declarations as to the nature of Grenda's participation in certain transactions).
vii) Declaration 8: that at the time of the Geneva Settlement, Mr Stevens and Phoenix were acting as Mr Ruhan's nominees such that any benefits they stood to receive pursuant to the Geneva Settlement (including the shares in Minardi and any money paid pursuant to the Loan Note) were to be received and held for the ultimate benefit of Mr Ruhan.
HPII argues that it would be convenient, useful, and appropriate to grant all the declarations sought and that the proposed declarations accurately sum up the key conclusions of the Judgment and make definitive pronouncements, in clear and precise terms, as to important matters addressed within it. It contends that making the declarations will promote certainty as to the Judgment's conclusions, which will be of use in relation to enforcement and other post-judgment matters.
For his part, Mr Stevens (who, through Mr Kokelaar, took the lead on this aspect of the argument for both Defendants) says that the court should only grant declarations where there is a good reason for doing so. He argues that the declarations sought by HPII do not serve any useful purpose. It would not be appropriate for the court to make declarations simply to clarify the terms of the Judgment, and in many respects the declarations sought extend beyond the matters determined in the Judgment or are vague and imprecise in their terms.
Proposed declarations 3, 5 and 6
I am satisfied that declarations in these terms would serve no useful purpose (and Mr Pickering QC was unable to suggest one) and I am not willing to make them. The breaches of fiduciary duty committed by Mr Ruhan and the dishonest assistance in those breaches on the part of Mr Stevens appear clearly from the Judgment and the monetary relief ordered.
Proposed declarations 1, 2, 4 and 7
One complexity in this case was that the business dealings in which Mr Ruhan (with the assistance of Mr Stevens) was involved were conducted with the involvement of a significant number of corporate entities. In the submissions and evidence in the case, there was an understandable tendency to refer to interests in “the Hyde Park Hotels” without specific consideration of the precise ownership structure through which the buildings and the land they were sitting on were held. However, it would not be appropriate to grant declarations on that basis. Further, the court was required to consider the various business dealings and the entities involved in them in two very different contexts:
i) First, the court was concerned with the issue of whether Mr Ruhan had in fact breached his fiduciary duties to HPII, and in what respects. In particular, this required me to determine whether Mr Ruhan breached the fiduciary's duty not to place themselves in a position where their interest and duty conflict, by dealing with the company in their own interest; whether Mr Ruhan breached the fiduciary's duty not to make an unauthorised profit from property which is subject to the fiduciary relationship; whether Mr Ruhan was in breach of his duty under s.317 of the Companies Act 1985 because he was directly or indirectly interested in a proposed contract with HPII without disclosing that interest and whether there had been a breach of s.320 of the Companies Act 1985 on the basis that Mr Ruhan had acquired non-cash assets of HPII without the requisite approval.
ii) Second, the court reviewed a number of transactions whose role in the case was evidential, HPII relying on them for what they showed about the nature of Mr Stevens' relationship with Mr Ruhan (for example that entities notionally controlled by Mr Stevens were providing funding for Mr Ruhan's projects).
So far as the first of these two categories is concerned, it was necessary for me to consider and make a determination as to the role in which Cambulo Madeira acquired rights under the BSA (the contract with HPII under which the transfer of the relevant assets took place and which was alleged to constitute the self-dealing with HPII)....
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