Kenneth Davies v Stephen Ford

JurisdictionEngland & Wales
JudgeDavid Holland
Judgment Date22 September 2021
Neutral Citation[2021] EWHC 2550 (Ch)
Docket NumberClaim No. HC-2017-001469
CourtChancery Division
Between:
Kenneth Davies
Claimant
and
(1) Stephen Ford
(2) Richard Monks
(3) Green Box Recycling Kent Limited
Defendants

[2021] EWHC 2550 (Ch)

Before:

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

1

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.

2

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.

3

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.

4

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”).

5

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.

6

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.

7

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”).

8

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.

9

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

10

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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1 cases
  • Asertis Ltd v Mr Dale Heathcote
    • United Kingdom
    • Chancery Division
    • 10 October 2022
    ...were subjected to careful analysis by Mr David Holland QC, sitting as a deputy High Court Judge, in Davies v Ford and others [2021] EWHC 2550 (Ch). His conclusion is to be found at paragraphs 106 – 41 At paragraph 106 he said this: “To my mind, what these authorities [show is that equitabl......

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