Kenneth Davies v Stephen Ford
| Jurisdiction | England & Wales |
| Judge | David Holland |
| Judgment Date | 22 September 2021 |
| Neutral Citation | [2021] EWHC 2550 (Ch) |
| Docket Number | Claim No. HC-2017-001469 |
| Court | Chancery Division |
[2021] EWHC 2550 (Ch)
David Holland QC (sitting as a Deputy Judge of the Chancery Division)
Claim No. HC-2017-001469
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
Ben Shaw and Chantelle Staynings (instructed by Dentons UK and Middle East LLP) appeared for the Claimant
The First Defendant appeared in person
Alexander Cook and Daniel Kessler (instructed by Cripps LLP) appeared for the Second and Third Defendants
David Holland QC
CONTENTS
| SECTION | PARAGRAPH NUMBERS |
| Introduction | 1 to 10 |
| The Background Facts | 11 to 12 |
| The Judgment | 13 to 55 |
| The procedural position of Mr Ford | 56 to 58 |
| The Main Protagonists: Mr Davies and Mr Monks | 59 to 74 |
| Issue 1: The Claim against Mr Monks Issues 1(a) and (b) | 75 to 78 |
| Issue 1 (c) | 79 to 91 |
| Issue 1 (d) | 92 to 110 |
| Issue 1 (e) | 111 to 148 |
| Issues 1 (f) and (g) | 149 to 175 |
| Issue 1 (h) | 176 to 183 |
| Equitable compensation payable by Mr Monks to Mr Davies | 184 to 185 |
| Issues 1 (h) and 9 | 186 to 220 |
| The Claims against GBRK Issue 2 | 221 to 230 |
| Issue 3 | 231 to 252 |
| Issue 4 | 253 to 269 |
| Issue 5 | 270 to 275 |
| Issue 6 | 276 |
| Issue 7 | 277 |
| Issue 8 | 278 to 280 |
| Issue 9 | 281 |
| The Position of Mr Ford | 282 to 290 |
| Conclusion | 291 to 293 |
INTRODUCTION
In this claim the Claimant, Mr Davies, as assignee of the company Greenbox Recycling Limited (“GBR”) claims relief against the First and Second Defendants (“Mr Ford” and “Mr Monks”), who were directors of GBR, for breach of fiduciary duty owed by them to GBR and against the Third Defendant, Greenbox Recycling Kent Limited (“GBRK”), for knowing receipt.
On 26 th February 2019 a split trial was ordered. At the initial, or liability, trial the following issues were listed for determination:
(1) whether [Mr Monks] has acted in breach of duty or in breach of contract;
(2) whether [GBRK] is fixed with the relevant knowledge to ground a claim in knowing receipt;
(3) whether the business conducted by [GBRK] is derived from [GBR];
(4) whether [Mr Monks] is in principle entitled to an equitable allowance;
(5) whether [Mr Davies'] equitable claims are barred by [Mr Davies'] lack of clean hands or laches;
(6) whether the Defendant [presumably Mr Monks] should be relieved from liability pursuant to s. 1157 Companies Act 2006.
The order added:
For the avoidance of doubt, the quantum of any equitable or proprietary interest in the Business (as defined in the Particulars of Claim) to which [Mr Davies] may be entitled if he elects for equitable relief shall be the subject of the trial of quantum, not liability.
The liability trial was heard before Adam Johnson QC (as he then was) sitting as a Deputy Judge of the Chancery Division (“the Judge”) in November 2019. In a lengthy and detailed judgment dated 24 th March 2020 (the neutral citation for which is [2020] EWHC 686 (Ch)-“the judgment”), the Judge, in summary: entered judgment in default against Mr Ford for breach of fiduciary duty; held that Mr Monks had been guilty of breaches of fiduciary duty; held that GBRK was liable in knowing receipt.
The resultant order dated 24 th March 2020 (but stamped on 3 rd April 2020) provided as follows:
Relief Consequential on Judgment
1. Mr Monks shall, by 4.00 p.m. on 21 April 2020, pay to Mr Davies the sum of £170,685 in respect of funds belonging to Green Box Recycling Ltd (“GBR”) that Mr Monks converted to his own use, which sum shall be paid subject to partial set-off, as provided in paragraph 14 below.
2. Judgment be entered for Mr Davies (i) against Mr Ford and Mr Monks for equitable compensation; and (ii) against GBRK for knowing receipt.
3. The nature, extent and quantum of (i) equitable compensation payable by Mr Ford and Mr Monks; (ii) any equitable allowance granted to Mr Monks; and (iii) the proprietary and/or personal remedy to be granted to Mr Davies in respect of the business conducted by GBRK be determined at a further trial (the “Quantum Trial”).
The Quantum Trial was heard before me on 14 th to 16 th and 19 th to 26 th April 2021 and this is my judgment on the issues on which determination was sought.
As summarised in his Closing Submissions, Mr Shaw (who appeared with the assistance of Ms Staynings for Mr Davies) described the relief which Mr Davies sought as follows. He has a primary case and an alternative or secondary case.
In his primary case, Mr Davies seeks the following relief against GBRK and Mr Monks:
(1) As against GBRK as knowing recipient, Mr Davies seeks:
i. a declaration that GBRK holds the freehold of the Ashford Site on constructive trust for Mr Davies (as assignee of GBR); and
ii. an account of profits extending to the present day and/or equitable compensation (amounting to the current value of GBRK less the value of the Ashford Site);
As will be seen the “Ashford Site” is a reference to the site, now owned by GBRK, from which it trades. I shall refer to it hereafter as “the Site”.
(2) If such primary relief is granted against GBRK, Mr Davies is, he says, prepared to leave out of the order for relief the very significant sums which have otherwise been extracted from GBRK in the form of dividends, remuneration and benefits (save for the specific categories set out below); and
(3) As against Mr Monks, Mr Davies seeks equitable compensation in the form of restoring to Mr Davies the following sums which have been wrongly extracted from GBRK:
i. sums paid by GBRK to Cripps LLP and/or Counsel acting for Mr Monks/GBRK in connection with the current dispute;
ii. all sums paid or borrowed by GBRK to finance the acquisition by Boite Verte Ltd (“BVL”) of shares in Caja Verde Ltd (“CVL”) from Alan and Charlene Hogg or John Bennett;
iii. all GBRK funds used to finance the purchase and development of Mr Monks' personal property situated at Golford Stables, Golford Road, Golford, Cranbrook (“the Cranbrook Property”).
In his alternative case, Mr Davies seeks the following relief against GBRK and Mr Monks, which, he asserts, broadly reflects the commercial intention of the parties in mid- to late 2010, namely that: GBR would take over the trading operations from the Site; Mr Ford and Mr Monks would be entitled to remuneration of £3,000 per month; and that Mr Davies would exit the business in around 5 years.
(1) As against GBRK as knowing recipient, Mr Davies seeks:
i. a declaration that GBRK holds the freehold of the Ashford Site on constructive trust for Mr Davies (as assignee of GBR); and
ii. an account of profits extending to 31 December 2015 and/or equitable compensation (amounting to the value of GBRK at 31 December 2015); and
(2) As against Mr Monks, Mr Davies seeks equitable compensation in the form of restoring to Mr Davies all sums which were extracted from GBRK for the benefit of Mr Monks (whether in the form of dividends, remuneration or other unauthorised payments) in excess of the sum of £3,000 per month until 31 December 2015.
As against Mr Ford, Mr Davies in any event seeks equitable compensation to restore to Mr Davies all sums which were extracted from GBRK for the benefit of Mr Ford (whether in the form of dividends, remuneration or other unauthorised payments) in excess of an allowance of £3,000 per month until the sale of Mr Ford's shareholding in GBRK on around 6 September 2013.
The issues
The parties were agreed as to the issues which I have to determine. They were helpfully set out in an agreed List of Issues as follows:
Claims against Mr Ford and Mr Monks
(1) How much equitable compensation (if any) is payable by Mr Ford and Mr Monks?
In particular:
(a) Is Mr Monks liable to pay equitable compensation in respect of all business, business opportunities, property, assets, income and benefits obtained by Mr Ford and Mr Monks for GBRK on or before 18 October 2011 (as asserted by Mr Davies)?
(b) Alternatively to (a), is it open to Mr Monks to assert that he is liable to pay equitable compensation only in respect of the seven matters referred to in paragraph 272 of the judgment or is that issue res judicata (as asserted by Mr Davies)? If that issue is not res judicata, is Mr Monks' liability to pay equitable compensation limited to the matters referred to in paragraph 272?
(c) Having regard to the issues determined at the trial on liability, is it open to Mr Monks to argue at the quantum trial that GBR would not have built a waste management business at the Site (the “Counterfactual Defence”) or is that barred by res judicata and/or abuse of process (as asserted by Mr Davies)?
(d) If the answer to (c) is that it is open to Mr Monks to rely on the Counterfactual Defence, is the issue of whether GBR would have built a waste management business relevant to the quantification of the equitable compensation payable by Mr Monks in respect of the seven matters listed in paragraph 272 of the judgment (as asserted by Mr Monks) or is that issue irrelevant to the compensation payable in respect of those matters (as asserted by Mr Davies)?
(e) If the Court finds that it is open to Mr Monks to rely on the Counterfactual Defence and to the extent that the issue is legally relevant, would GBR in fact have built a waste management business at the Site? If so, should the Court impose a restriction on Mr Monks' liability to pay compensation similar to the approach of WARMAN INTERNATIONAL LTD v DWYER [1995] HCA 18, and if so, what should this restriction be and what award is proper compensation?
(f) Is it relevant how much...
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