IVY Technology v Mr Barry Martin
| Jurisdiction | England & Wales |
| Judge | Andrew Henshaw,Mr Andrew Henshaw |
| Judgment Date | 26 September 2019 |
| Neutral Citation | [2019] EWHC 2510 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000477 |
| Date | 26 September 2019 |
[2019] EWHC 2510 (Comm)
Andrew Henshaw QC (sitting as a Judge of the High Court)
Case No: CL-2019-000477
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Dominic Happé (instructed by Malvern Law) for the Claimant
Adam Solomon QC (instructed by Hill Dickinson LLP) for the Second Defendant
The First and Third Defendants did not appear and were not represented
Hearing date: 5 September 2019
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.
Andrew Henshaw QC (sitting as a Judge of the High Court)
Mr Andrew Henshaw QC:
| (A) INTRODUCTION | 2 |
| (B) BACKGROUND FACTS AND IVY'S CLAIMS AGAINST THE DEFENDANTS | 3 |
| (C) GOOD ARGUABLE CASE AGAINST MR BELL | 3 |
| (1) Conspiracy | 4 |
| (a) Conspiracy to make misrepresentations | 8 |
| (b) Conspiracy to breach non-competition covenant | 10 |
| (2) Procuring breach of non-competition covenant | 12 |
| (D) RISK OF DISSIPATION | 13 |
| (E) NON-DISCLOSURE/MISREPRESENTATION | 22 |
| (F) IVY'S FALLBACK POSITION | 26 |
| (G) CONCLUSION | 26 |
(A) INTRODUCTION
This judgment follows a hearing on the return date of a freezing order granted by Knowles J at a without notice hearing on 29 July 2019. The order requires the Defendants not to remove from the jurisdiction or dispose of assets up to the value of £4 million.
The Claimant (“Ivy”) applies for the continuation of the freezing order (substantially in the same form, with minor variations) as against all Defendants and against a Fourth Respondent, Mrs Lisa Martin.
The First Defendant (“Mr Martin”) consented to the continuation of the freezing order against him in varied form. The Third Defendant (“Premier Punt”) did not consent, but issued no application and indicated that it did not intend to appear on the return date. The Fourth Respondent consented to the grant of a freezing order against her in agreed form.
The Second Defendant (“Mr Bell”) applies by notice dated 23 August 2019 for the freezing order to be discharged against him on the bases that:
i) there is no good arguable case against him: he says Ivy's case against him is based entirely on surmise without any direct evidence;
ii) there is no risk of dissipation: Mr Bell's evidence is that he has assets of over £100 million, including assets in this jurisdiction far exceeding £4 million, and he says there is no evidence of any risk of dissipation; and
iii) there was material non-disclosure and/or misrepresentation by Ivy at the hearing before Knowles J.
For the reasons set out below, I have come to the conclusion that the freezing order should be discharged as against Mr Bell.
(B) BACKGROUND FACTS AND IVY'S CLAIMS AGAINST THE DEFENDANTS
The claim arises in connection with the sale of an on-line gambling business known as “ 21Bet” by Mr Martin to Ivy. By a Sale and Purchase Agreement dated 4 April 2019 (“the SPA”) Ivy agreed to buy, and Mr Martin agreed to sell, the shares in five companies who together constituted the business. Mr Bell was not a party to the SPA, but was a 50% beneficial owner of the business (via beneficial interests in the five companies). Ivy alleges that Mr Bell conspired with Mr Martin to make misrepresentations in connection with the sale, and to breach a non-competition covenant in the SPA (“the non-competition covenant”); and that Mr Bell also procured Mr Martin's breach of the non-competition covenant.
In overview, the claims Ivy makes against the Defendants are (adopting Ivy's summary for present purposes) that:
i) Mr Martin made representations as to the financial status of the 21Bet business that were fraudulent, or negligent or within section 2(1) of the Misrepresentation Act 1967, and which induced Ivy to enter into the SPA;
ii) Mr Martin has breached provisions of the SPA, including in particular (a) breach of the non-competition covenant via a competing business, Premier Punt, which is the Third Defendant; and (b) breach of warranties as to the financial status of the business;
iii) Mr Bell is liable for procuring a breach of the Agreement and/or for unlawful means conspiracy to injure Ivy; and
iv) Premier Punt is run by or as a vehicle for Mr Martin, and possibly also Mr Bell, and is liable for procuring a breach of the SPA and/or for unlawful means conspiracy to injure Ivy.
Ivy also submits that, on the basis of Mr Bell's evidence, he was and is involved in the acquisition with Mr Martin of a further competing business, Incentive Gaming Limited (“ Incentive”).
(C) GOOD ARGUABLE CASE AGAINST MR BELL
It is common ground that Ivy has to show a “ good arguable case” against Mr Bell, meaning “ one which is more than barely capable of serious argument, but not necessarily one which the judge considers would have a better than 50 per cent chance of success” ( Ninemia Maritime v Trave Schiffartgesellschaft, The “Niedersachsen” [1983] Lloyd's Rep 600, 605 per Mustill J).
Ivy alleges that in the course of negotiations leading up to the SPA, which started in June 2018, Mr Martin made representations including that (a) the EBITDA (earnings before interest, tax, depreciation and amortisation) of the 21Bet business in 2018 were £1.6 million (based on income stream figures provided on 27 August 2018) and (b) the business was profitable and self-sustaining from its revenue, such that Mr Martin would be able to earn considerable sums under earn-out provisions contained in the draft SPA: a point which Ivy says was discussed by Mr Martin and Mr Bell at a meeting with Ivy in Prague on 1 October 2018.
In addition, Ivy alleges against Mr Martin breach of various representations contained in the SPA itself.
Ivy's pleaded case against Mr Bell (leaving aside a draft amended claim form to which I was referred but for which I was not asked to give permission to amend) is that Mr Bell:
i) “conspired with [Mr Martin] to commit unlawful acts and use unlawful means, namely to make the Representations [i.e. those outlined in the two preceding paragraphs above] to [Ivy] fraudulently and/or negligently and/or within the terms of the Misrepresentation Act 1967 and/or to induce [Ivy] to enter into the [SPA] when [Mr Martin] was in breach of the [SPA] and/or to breach the [non-competition] Covenant”; and
ii) “procured [Mr Martin's] breach of the [non-competition] Covenant”.
I consider each of these in turn below.
(1) Conspiracy
Conspiracy to injure must be pleaded to a high standard, particularly where the allegations include dishonesty:
i) Allegations of conspiracy to injure “ must be clearly pleaded and clearly proved by convincing evidence” ( Jarman & Platt Ltd v I Barget Ltd [1977] FSR 260, 267).
ii) The more serious the allegations made, the more important it is for the case to be set out clearly and with adequate particularity: Secretary of State for Trade and Industry v. Swan [2003] EWHC 1780 (Ch) §§ 22–24; CPR PD 16 § 8.2 in respect of the obligations on a party pleading dishonesty; Mullarkey v. Broad [2007] EWHC 3400 (Ch), [2008] 1 BCLC 638 §§ 40–47 on the burden and standard of proof for such claims and reiterating the well-established principle that an allegation of dishonesty must be pleaded clearly and with particularity (citing Belmont Finance Corp v Williams Furniture [1979] Ch 250, 268).
iii) Unlawful means conspiracy is a grave allegation, which ought not to be lightly made, and like fraud must be clearly pleaded and requires a high standard of proof: CEF Holdings v. Mundey [2012] EWHC 1534 (QB), [2012] IRLR 912 § 74.
iv) Where a conspiracy claim alleges dishonesty, then “all the strictures that apply to pleading fraud” are directly engaged, i.e. it is necessary to plead all the specific facts and circumstances supporting the inference of dishonesty by the defendants: ED&F Man Sugar v. T&L Sugars [2016] EWHC 272 (Comm).
v) As to the substantive elements of the tort:
“To establish liability for assisting another person in the commission of a tort [common design], it is necessary to show that the defendant (i) acted in a way which furthered the commission of the tort by the other person and (ii) did so in pursuance of a common design to do, or secure the doing of, the acts which constituted the tort.
…
The elements of this tort [conspiracy] are a combination or agreement between the defendant and another person pursuant to which unlawful action is taken which causes loss or damage to the claimant and is intended or expected by the defendant to do so (whether or not this was the defendant's predominant purpose).” ( Marathon Asset Management LLP v. Seddon [2017] IRLR 503 §§ 132 and 135)
The conspiracy allegation in the present case includes, but is not limited to, an agreement to make dishonest misrepresentations. It also includes an alternative allegation of an agreement to make representations negligently and/or within the terms of the Misrepresentation Act 1967. There may be some conceptual difficulty about the idea of an agreement to make representations honestly but negligently or (under section 2(1) of the 1967 Act) without reasonable grounds for believing them to be true. However, for present purposes I think it arguable that such an agreement can exist: at least in theory at least one might make an agreement to make statements without due care, even if in practice such an agreement would be hard to distinguish from an agreement to act recklessly (hence potentially falling within the scope of fraudulent misrepresentation).
Another feature of the present case is that the SPA contained at § 15.1...
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