Kenneth Davies v Stephen Ford
| Jurisdiction | England & Wales |
| Judge | Sir Launcelot Henderson,Lady Justice Asplin,Lady Justice Macur |
| Judgment Date | 17 February 2023 |
| Neutral Citation | [2023] EWCA Civ 167 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2021-003244 |
[2023] EWCA Civ 167
Lady Justice Macur
Lady Justice Asplin
and
Sir Launcelot Henderson
Case No: CA-2021-003244
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
CHANCERY DIVISION
David Holland KC (sitting as a Deputy Judge of the Chancery Division)
Royal Courts of Justice
Strand, London, WC2A 2LL
Ben Shaw and Chantelle Staynings (instructed by Dentons UK and Middle East LLP) for the Appellant
The First Defendant did not appear and was not represented
Alexander Cook and Daniel Kessler (instructed by Cripps LLP) for the Second and Third Respondents
Hearing dates: 13 – 15 December 2022
Approved Judgment
This judgment was handed down remotely at 11.00 a.m. on 17 February 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Introduction and Background
This appeal and cross-appeal are from various aspects of the order made by Mr David Holland KC, sitting as a deputy judge of the High Court in the Business and Property Courts of England and Wales, on 17 November 2021 (“the Quantum Order”), after the trial by him of all issues relating to quantum in a split trial over some nine days in April 2021 (“the Quantum Trial”). Mr Holland, to whom I will generally refer as “the Judge”, handed down his judgment (“the Quantum Judgment”) on 22 September 2021: see [2021] EWHC 2550 (Ch). A further hearing to deal with consequential matters took place on 17 November 2021, when the Quantum Order was made.
The earlier trial relating to liability (“the Liability Trial”) was heard by Mr Adam Johnson KC (now Adam Johnson J, “the Liability Judge”), also sitting as a deputy High Court judge, between 11 and 18 November 2019. He handed down his lengthy and comprehensive judgment, running to 414 paragraphs and some 90 pages, on 24 March 2020 (“the Liability Judgment”): see [2020] EWHC 686 (Ch). The relief consequential on the Liability Judgment was contained in an order of the same date (“the Liability Order”).
The substituted claimant in the litigation (and the appellant in this court) is Mr Kenneth Davies (“Mr Davies”). Mr Davies is a businessman, who (in the words of the Liability Judge at [13]), has “a somewhat chequered history”. On 15 September 2010, he gave undertakings in disqualification proceedings brought against him under the Company Directors Disqualification Act 1986 (“ CDDA 1986”), on the grounds of his alleged unfitness to act as a company director. The undertakings were given, and accepted by the Secretary of State, for the period of 11 years from 8 October 2010, and thus fall within the period of 10 to 15 years' disqualification normally reserved for the most serious cases. The proceedings had resulted from the collapse and liquidation of a company called Ashford Recycling Centre Limited (“ARCL”). The misconduct of which Mr Davies accepted he was guilty included causing ARCL to trade while insolvent, and failure to maintain or preserve adequate accounting records: see the Liability Judgment at [90]. At around the same time, Mr Davies left England and went to live in Dubai.
The present case concerns a different venture in the skip hire and waste recycling business, which Mr Davies intended to carry on through a company which he incorporated on 1 March 2010 called Greenbox Recycling Limited (“GBR”). Mr Davies' position in the Liability Trial was that he intended GBR to take over an existing business of that nature (“the Business”), which operated from premises near Ashford in Kent (“the Ashford Site”) and was run at the time through a company called Skip It (Kent) Limited (“SIK”): see the Liability Judgment at [1].
The Liability Judge was unable to make any precise findings about the structure and history of the Business. As he recorded, at [25]:
“Precisely how [ the Business] was structured historically … remains obscure despite extensive cross-examination on the topic. This reflects a theme running through Mr Davies' case, which is that his various business operations were run with a high degree of informality – indeed, one might say, with a complete disregard for any necessary formality – all of which makes it difficult to identify with any real clarity what the state of the Business was at any given point in time.”
Despite these difficulties, however, the Liability Judge considered that he was “entitled to assume that something corresponding to the Business was being conducted by SIK from the Ashford Site from late 2007 or early 2008 onwards”: see [26].
In very broad terms, Mr Davies' case in the Liability Trial was that, after he had gone to live abroad, the Business, which he had intended to be transferred to and operated by GBR, was dishonestly diverted, by the two original directors of GBR, to another company which they had incorporated on 7 January 2011 called Greenbox Recycling (Kent) Limited (“GBRK”). The directors of GBR who formed GBRK were Mr Stephen Ford (“Mr Ford”) and Mr Richard Monks (“Mr Monks”). They are respectively the first and second defendants in the present proceedings, which (as I shall explain) were eventually begun by a claim form issued by the liquidators of GBR on 22 May 2017. The third defendant is GBRK.
Mr Ford had been appointed a director of GBR on 28 September 2010, and Mr Monks on 30 November 2010. By late November 2010, they were each 10% shareholders in GBR, with Mr Davies holding the remaining 80% of the shares: see the Liability Judgment at [2]. According to Mr Davies ( ibid), this structure:
“reflected his intention to entrust Mr Ford and Mr Monks with the growth and development of the waste management business at the Ashford Site, while he stepped back from any day-to-day involvement because of various personal difficulties which had affected him during 2010, and moved abroad.”
As to GBRK, Mr Ford and Mr Monks were the initial shareholders and directors on incorporation, but Mr Ford resigned as a director after a few days on 15 January 2011, and he later sold his shares to Mr Monks in 2013: see [3]. Presumably for that reason, Mr Ford played no active part in the proceedings after they were served on him, and he failed to file any acknowledgment of service. This led in due course to Mr Davies issuing an application for default judgment against Mr Ford, which was adjourned to be dealt with at the Liability Trial.
On the first day of the trial, the Liability Judge refused an application by Mr Ford, appearing in person, for permission to file a defence and participate belatedly in the proceedings: see the Liability Judgment at [407] to [411]. It was then agreed to defer the question of what relief should be granted against Mr Ford until the conclusion of the Liability Trial, when (in the light of the Liability Judge's findings against Mr Monks) a default judgment was entered against Mr Ford for equitable compensation: see [412] to [413], and paragraph 2 of the Liability Order.
The position of Mr Monks in the Liability Trial was summarised by the Liability Judge, at [6]:
“As to Mr Monks, his position (broadly) is that the decision to incorporate GBRK in early 2011 was a response to the state GBR was in at the time. He says that the waste management business formerly carried on at the Ashford Site was never in fact transferred to it, and so it never had ownership of the Business; he says that although he became a director, he never became bound by any contract of employment with GBR; he says that by early 2011 GBR was insolvent (or close to insolvency) and for various reasons was not able to trade lawfully; and he says that in the circumstances he and Mr Ford were concerned about potential personal liabilities to which they might be exposed because of the physical state of the Ashford Site. Mr Monks also says that GBR had effectively been abandoned by Mr Davies, who had misled him (Mr Monks) in various ways, including by saying he was terminally ill and by failing to disclose that he (Mr Davies) was the subject of proceedings under the Directors Disqualification Act, which resulted in him being disqualified as a director for a period of 11 years with effect from 8 October 2010. In short, Mr Monks says that he and Mr Ford were justified in doing what they did in early 2011, and in reality had no choice about it given the situation they were left in by Mr Davies.”
The Liability Judge then outlined the key events in the history from 2011 until the commencement of the present proceedings in 2017:
“7. After GBRK had been operating for several months, GBR was struck off the register and dissolved on 18 October 2011. It is common ground that, at the time, neither Mr Ford nor Mr Monks had taken steps to resign as directors of GBR. In the period since then, GBRK has grown to be a successful business (its accounts for 2018 show that for the six months between 1 July and 31 December 2018, it had turnover of £3,592,689 and made profits before tax of £364,329). Mr Monks' position is that this is the result of the hard work he and others have put in, and of the capital they have invested.
8. In the meantime, Mr Davies says that although he continued to feel aggrieved about the way he had been treated, he was not in a position to do anything about it because he lacked the necessary funds to do so. Much later, in 2016, he says that position was remedied, and he then petitioned for the restoration of GBR to the register under ss 1029 and 1032 Companies Act 2006 …, and for its winding-up on the just and equitable ground under s 122(1)(g) Insolvency Act 1986 …. On 23 January 2017, Ms Deputy Registrar Jones made the Orders sought, restoring GBR to the...
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...contrast the contrary reasoning of the same judge, by then sitting in the Court of Appeal after hearing full argument in Davies v Ford [2023] EWCA Civ 167, paras 77–82, in which he followed the decision of the Court of Appeal in the present case, suggests that it was the concession rather ......