James William Ritchie v Ardafrevesh Kolah
| Jurisdiction | England & Wales |
| Judge | Jones |
| Judgment Date | 30 June 2021 |
| Neutral Citation | [2021] EWHC 1765 (Ch) |
| Docket Number | Petition Nos. CR-2018-006649 & CR-2021-000474 |
| Court | Chancery Division |
[2021] EWHC 1765 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES (Ch D)
IN THE MATTER OF (1) GO DPO EU Compliance Limited (2) GO DPO EU Recruitment Limited (3) GO DPO EU Advisory Services Limited and (4) EU Compliance and Recruitment Ltd
AND IN THE MATTER OF The Companies Act 2006
INSOLVENCY AND COMPANIES COURT JUDGE Jones
Petition Nos. CR-2018-006649 & CR-2021-000474
Mr Harry Hodgkin (acting under the Public Access Scheme) for the First Petitioner
Mr Anthony Jones (instructed by LawBite) for the Second and Third Petitioners
Ms Kira King (instructed by Balfour Manson) for the First Respondent
The Second Respondent did not attend and was not represented
Hearing dates: 19, 20, 22, 27–30 and 5 April 2021
This Judgment was handed down remotely by circulation to the parties' representatives by email and released to Bailii
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.
………… CHJ 30/6/21 …………….
INSOLVENCY AND COMPANIES COURT JUDGE Jones
I.C.C. Judge
A) Introduction
There are two s.994 Companies Act 2006 Petitions before me concerning the following four companies (together to be called “the Companies”):
a) EU Compliance and Recruitment Ltd (“the Initial Company”) which was the first incorporated, on 13 October 2014. The Petitioner, Mr Ritchie, holds 169 shares. The First and Second Respondents, Mr Kolah and Mr Verrian, hold 415 shares each. It owns and licences the registered trade mark name and logo “GO DPO”.
b) GO DPO EU Compliance Limited (“Compliance”) which was incorporated on 2 June 2015 to carry out the business of General Data Protection Regulations (“GDPR”) training. Of the Petitioners, Mr Ritchie holds 2,225 of the issued shares, Mr Foss 300, Mr Hickley 800 and Mr Harvey 400. Mr Kolah and Mr Verrian, hold 2,771 shares each. In addition, Mr Jeremy Stern and Mr Ritchie Mehta hold 500 shares each.
c) GO DPO EU Recruitment Limited (“Recruitment”) which carried on the business of the recruitment and provision of GDPR resources, permanent or interim placements. It was incorporated on 2 June 2015 and dissolved on 27 February 2018. The registered shareholdings are: Mr Ritchie 18 shares and Mr Kolah and Mr Verrian 41 each. Mr Ritchie in his Petition claims an agreement with Mr Kolah and Mr Verrian that the shares would be held equally but that was not pursued.
d) GO DPO EU Advisory Services Limited (“Advisory”) which was incorporated on 29 February 2016 to provide GDPR advisory and consultancy services. It was dissolved on 6 March 2018. Mr Ritchie, Mr Kolah and Mr Verrian are registered with equal shareholdings (32 shares each) and Mr Foss with 4 shares.
e) The Petitions assert an agreement that it would “capture provision of any GO DPO services related to GDPR and Data Protection not otherwise captured” by the other three companies.
Mr Ritchie's petition seeks an order that Mr Kolah and Mr Verrian purchase his shares in Compliance. He alleges they have diverted business and revenues from the Companies both before and after his purported and wrongful dismissal as a director of each of the Companies on or about 14 August 2017. That diversion includes the business carried on by a company they incorporated on 9 August 2017, GO DPO EU Consultancy Services Limited (“the New Company”). He estimates that a sum in the region of £1 million should be disgorged. His Petition claims an account and enquiry, a declaration that he remains a director and chief financial officer of the Initial Company and Compliance and that he remain so for the other two Companies once they are restored to the register. He seeks a declaration that the dissolution of Recruitment and Advisory was in breach of fiduciary duty.
Mr Foss and Mr Hickley in their Petition seek the same or equivalent relief as Mr Ritchie together with the payment of management fees and expenses owed to them by the Initial Company and/or Compliance. They contend that their case differs in that they played no part in the events relied upon by Mr Kolah and Mr Verrian to justify Mr Ritchie's purported dismissal. Their case is that their neutrality upon the issue reflects the approach they took during the material events of August 2017.
Mr Kolah and Mr Verrian do not dispute receipt of various payments from the Companies (either directly or through service companies) and from third parties but contest the allegations of diversion including the claim concerning the New Company. They assert that insofar as the payments challenged were derived from the Companies, their work and remuneration had been properly authorised. Insofar as the payments were derived from other sources, they were entitled to carry out this work by agreement with the shareholders and directors. They have a cross-petition which seeks ratification of Mr Ritchie's removal as a director of the Initial Company and Compliance or seeks an order for his removal. They rely upon his transfer of sums to his corporate vehicle without authority. They also rely upon various breaches of fiduciary duty including his failure to permit access to Compliance's on-line bank account statements and his freezing of its bank accounts.
Mr Mark Harvey is also named as a Petitioner but he has taken no part in the proceedings and there is an issue whether he authorised his name to be added. That is an outstanding matter for the purposes of costs and was adjourned at the pre-trial review until they become an issue to be determined. The other shareholder/investors in Compliance, Mr Jeremy Stern and Mr Ritchie Mehta, have not been joined but are aware of the petitions. Their views will need to be sought if final decisions upon relief may affect their rights but this trial is principally concerned with liability.
The parties have been represented by counsel at trial except for Mr Verrian who did not attend and was not represented. The court received an email from him on the Friday before the Monday's first day of trial referring to his inability to attend for medical reasons. The court responded, copying in all parties, to the effect that it was for him to decide whether to apply for an adjournment. If he did, he would need to provide medical evidence disclosing his current medical condition, the prognosis and an opinion as to whether he is able to participate in a remote hearing trial (with or without assistance or special measures to assist him). In addition that if he did not wish to attend but wanted his witness evidence to be read, he should make a written request. If so and should the court decide it would be read as a statement without being tested by cross-examination, the court would take into consideration the absence of that testing when considering its evidential weight. It was also noted that should he not attend and not ask for his statement to be admitted, the other parties should refer to Rule 32.5(5) the Civil Procedure Rules if they may be considering relying upon the statement.
Mr Kolah had to change counsel during the trial because of ill health. I addressed this in an oral judgment delivered on Thursday 22 April when I decided to adjourn the trial to 27 April 2021. Ms King was instructed to act on his behalf for the remainder of the trial. This led to the exceptional course of Mr Kolah being cross-examined before the Petitioners and their witnesses. It was to provide time for Ms King to be fully prepared and was on the bases of: agreement; confirmation on behalf of Mr Kolah that proceeding in that manner was not considered prejudicial to his interests; and it being recognised that application(s) could be made to recall Mr Kolah should that prove appropriate following cross-examination of the Petitioners' witnesses.
I must commend Ms King for the skill she has demonstrated by so quickly mastering her brief. I am grateful for the approach of assistance and openness Mr Hodgkin and Mr Jones have adopted in these circumstances in accordance with the traditions of the Bar. I should also record that all counsel have provided considerable assistance to the court within the context of presenting their cases with great skill.
B) An Overview
It is fair to observe that the statements of case when considered together are dense and convoluted. Whilst I have borne the statements of case in mind throughout, I will refer to them only to the extent necessary when addressing the facts and stating my decisions. Concerned that complexity might prevent the parties from seeing the wood for the trees, during the pre-trial review I directed there should be a list of issues for trial. Two lists have been provided but for the purposes of bringing shape to the case, I will set out the following overview.
There are four inter-connected, key topics. First, whether Mr Kolah and Mr Verrian diverted business and revenues before their decision to remove Mr Ritchie as a director on or about 14 August 2017. Second, whether the dismissal of Mr Ritchie was lawful and in any event whether it was justified by reason of his breach(es) of duty and in particular his transfer of Compliance's funds to his own company. Third, whether business and revenues were diverted by Mr Kolah and Mr Verrian after the removal of Mr Ritchie as a director. Fourth whether the formation and use of the New Company results in claims against Mr Kolah and Mr Verrian.
Based upon the outcome of those topics, the Petitioners will need to satisfy the court on the balance of probability that the affairs of the relevant...
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