Instant Access Properties Ltd ((in Liquidation)) v Mr Bradley John Rosser
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 13 April 2018 |
| Neutral Citation | [2018] EWHC 756 (Ch) |
| Date | 13 April 2018 |
| Court | Chancery Division |
| Docket Number | Case No: HC-2014-01959; HC-2015-002392 |
[2018] EWHC 756 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
CHANCERY DIVISION
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
THE HONOURABLE Mr Justice Morgan
Case No: HC-2014-01959; HC-2015-002392
Mark Phillips QC & Daniel Lewis (instructed by Taylor Wessing LLP) for the Claimant
Lance Ashworth QC & Matthew Morrison (instructed by Francis Wilks & Jones) for the First Defendant
The Second Defendant appeared in Person
The Third Defendant did not appear and was not represented
Mark Simpson QC, Isabel Barter & Niamh Cleary (instructed by DAC Beachcroft LLP) for the Fourth Defendant
Edmund Cullen QC & Joseph Farmer (instructed by DAC Beachcroft LLP) for the Fifth Defendant
Jamie Smith QC & Michael Ryan (instructed by DWF LLP) for the Sixth and Seventh Defendants
Hearing dates: 20, 21, 22, 23,24, 27, 28, 29, 30 November, 4, 5, 6, 7, 8, 11, 18, 19 and 20 December 2017
Judgment Approved
| Heading | Paragraph number |
| Introduction | 1 |
| The relevant entities and individuals | 8 |
| A comment on the discretionary trusts | 34 |
| Mr Moore | 37 |
| Mr Rosser | 38 |
| Mrs Gifford | 40 |
| Mr Donnison | 42 |
| Mr Berman | 47 |
| Other witnesses | 48 |
| The various agreements involving IAP, Leadenhall and Darrencrest | 49 |
| The agreement dated 24 October 2003 | 50 |
| The agreement dated 26 November 2003 | 55 |
| The agreements dated 26 March 2004 | 59 |
| The agreement between Darrencrest and Maesbury in October 2004 | 63 |
| The agreement dated 7 October 2004 | 64 |
| The agreement dated 4 April 2005 | 65 |
| The agreement dated 5 September 2005 | 66 |
| The agreements dated 1 August 2007 | 67 |
| The agreement dated 28 August 2007 | 71 |
| A summary of the position under the agreements | 72 |
| The evidence | 74 |
| Findings of fact | 76 |
| The matters to be considered | 198 |
| The pleaded case as to breach of the duties of a director | 199 |
| De facto and shadow directors | 213 |
| The Claimants' case as to de facto and shadow directors | 230 |
| Were Mr Moore and/or Mr Rosser de facto and/or shadow directors of IAP? | 235 |
| The duties of a de jure director | 252 |
| The duties of a de facto director | 254 |
| The duties of a shadow director | 255 |
| Did Mr Moore and/or Mr Rosser owe fiduciary duties to IAP? | 276 |
| The allegation of no or no adequate consideration | 279 |
| The allegation as to obtaining a benefit from a third party by reason of being a director: the law | 309 |
| The allegation as to obtaining a benefit from a third party by reason of being a director: the facts | 315 |
| Conflict of interest in transactions with IAP | 339 |
| Ratification | 358 |
| Negligence | 381 |
| Dishonest assistance of a breach of fiduciary duty | 399 |
| Conspiracy to injure by unlawful means | 402 |
| Section 213 of the Insolvency Act 1986 | 404 |
| Limitation | 416 |
| The overall result | 419 |
Introduction
Between 2003 and going into administration, and then liquidation, in 2008, Instant Access Properties Ltd (“IAP”) received substantial sums by way of commission in relation to sales of residential properties acquired by members of IAP, principally as investments. The commission in question was directly or indirectly received from the developers of those properties. During that period, IAP shared the commission paid by the developers with two other companies, Leadenhall Group Ltd (“Leadenhall”) and Darrencrest Corporation Ltd (“Darrencrest”). As will be explained, at the relevant times, there were three persons who had interests of some kind or other in IAP and who also had interests of some kind or other in Leadenhall and Darrencrest. These three persons were Mr Moore, Mr Rosser and Ms Forth. Mr Moore is the Third Defendant and Mr Rosser is the First Defendant in these proceedings. Ms Forth is not a defendant.
The essential case put forward by IAP and its liquidators in these proceedings is that the arrangements made by IAP with Leadenhall and Darrencrest were a fraud on IAP. It is said that, in effect, IAP gave away for the benefit of Leadenhall and Darrencrest, and for no consideration, commission to which IAP alone was entitled. It is said that this fraud on IAP was committed by Mrs Gifford (the Second Defendant in these proceedings) who was a de jure director of IAP and by Mr Moore and Mr Rosser who are said to have been de facto or shadow directors of IAP. Accordingly, the case is that these “directors” broke whatever fiduciary duties they owed to IAP by giving away its assets to Leadenhall and Darrencrest, in which Mr Moore and Mr Rosser in particular had interests.
IAP and its liquidators also alleged that the purpose of the fraud being committed on IAP was to engage in tax evasion which was said to be unlawful and dishonest. Leadenhall and Darrencrest were both incorporated in the British Virgin Islands and the intention of Mr Moore and Mr Rosser, in particular, was that dividends paid by those companies to their shareholders would not be subject to any significant amount of tax. It was said by IAP and the liquidators that the arrangements made by IAP with Leadenhall and Darrencrest were contrary to the transfer pricing provisions contained in schedule 28AA to the Income and Corporation Taxes Act 1988.
These proceedings were brought on 18 December 2014. The events which were said to have amounted to wrongdoing by the de jure, de facto and shadow directors of IAP had all taken place more than 6 years before that date. The potential limitation defences which might be put forward to these claims obviously influenced the way in which the claims were put. First, the liquidators of IAP brought a claim pursuant to section 213 of the Insolvency Act 1986 which allows a court to order certain persons to contribute to the assets of IAP where those persons have knowingly participated in fraudulent trading by IAP. If that allegation could be established, the liquidators could not be defeated by a limitation defence as the relevant six year period began to run on the liquidation of IAP on 21 December 2008 and the section 213 claim was brought in time (just) on 18 December 2014.
IAP, acting through its liquidators, brought a second claim against the de jure director and against the allegedly de facto and shadow directors and the professional advisers of IAP. IAP alleged a number of breaches of fiduciary duty on the part of the de jure director and the allegedly de facto and shadow directors. It also alleged that the professional advisers had dishonestly assisted those breaches of fiduciary duty and all of the “directors” and the advisers had conspired to injure IAP by the use of unlawful means which had caused loss and damage to IAP. For good measure, IAP contended that the professional advisers had been negligent. IAP obviously faced limitation problems with these claims. However, IAP might have been able to get around these limitation problems if their claims were based on fraud or deliberate concealment.
In these circumstances, the case against the “directors” and the professional advisers was pleaded, and was opened, as a case based upon a fraud or a series of frauds against IAP and against the Revenue.
In their closing submissions, IAP and the liquidators have continued to assert that IAP has been the victim of fraud practised by the various Defendants. However, the allegation that there had been a fraud on the Revenue has effectively disappeared. Further, in the course of discussing the scope of the fiduciary duties of directors and, more particularly, shadow directors, a number of submissions have been advanced which, the Defendants say, were not properly pleaded. Further, IAP and the liquidators have advanced the case that, even if IAP suffered no loss by reason of what has occurred, the allegedly de facto or shadow directors are liable to account for profits made as a result of breaches of their fiduciary duties owed to IAP. Again, the Defendants say that a claim to an account of profits was never pleaded. As will be seen, I will consider the various ways in which IAP and the liquidators have tried to identify a claim against the various Defendants even though a claim for an account for breach of a fiduciary duty, where there was no fraud or deliberate concealment, will face some obvious limitation problems.
The relevant entities and individuals
IAP was incorporated in England and Wales (under the name Abberise Ltd) on 8 April 2002. Its Articles of Association provided that the Regulations contained in the Companies (Tables A to F) Regulations 1985 should apply save as otherwise provided in the Articles. The Articles did not disapply regulation 85 of the 1985 Regulations. Regulation 85 is referred to later in this judgment. Article 13 provided that a director was entitled to vote as a director in regard to any contract or arrangement in which he was interested or upon any matter arising out of such a contract or arrangement and, if he should vote, his vote should be counted and he should be reckoned in estimating a quorum when any such contract or arrangement was under consideration. Article 14 provided that the necessary quorum for the transaction of the business of the directors was two, unless...
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