Kevin Hellard and Another v Horacio Luis De Brito Carvalho
| Jurisdiction | England & Wales |
| Judge | Mr John Randall |
| Judgment Date | 25 September 2013 |
| Neutral Citation | [2013] EWHC 2876 (Ch) |
| Docket Number | Case No. No 10416 of 2011 |
| Court | Chancery Division |
| Date | 25 September 2013 |
In the Matter of HLC Environmental Projects Limited (in Liquidation)
And in the Matter of the Insolvency Act 1986
[2013] EWHC 2876 (Ch)
Mr John Randall QC
(Sitting as a Deputy High Court Judge)
Case No. No 10416 of 2011
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
The Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A 1NL
Miss Blair Leahy (instructed by Norton Rose Fulbright LLP, Solicitors, of 3 More London Riverside, London, SE1 2AQ) appeared on behalf of the Applicants
Mr Thomas Roe and Mr Alexander Halban (instructed by Kapoor & Co, Solicitors, of 6th Floor, Vista Office Centre, 50 Salisbury Road, Hounslow, Middlesex, TW4 6JQ) appeared on behalf of the Respondent
Hearing Dates 23-24, 26, and 29-30 July 2013
THE DEPUTY JUDGE:
In these proceedings, which are brought by means of the so-called 'misfeasance' procedure provided by s.212, Insolvency Act 1986 (" IA86"), the liquidators of HLC Environmental Projects Ltd (respectively "the Applicants" and "the Company") seek financial relief against its principal director, Mr Horacio Luis De Brito Carvahlo ("the Respondent") in respect of a number of payments which he caused the Company to make between 30 November 2005 and 27 October 2008. The Respondent is by origin Portuguese, but married an English lady and lives here.
The only causes of action relied on are breaches of the Respondent's duties owed to the Company as a director. Insofar as the payments were made before 1 October 2007 ("pre-codification"), the general duties in question arose at common law. In respect of the 8 payments made thereafter ("post-codification"), which represent the majority in value (though not number), the general duties owed were those laid down by the codifying provisions of the Companies Act 2006 ("CA06"), Part 10 Chapter 2 (being ss.170–181).
At the outset of the trial, I refused the Applicants permission to amend their pleadings to add an alternative claim alleging a preference under ss.239–241, IA86, for the reasons I gave at the time.
The evidence
Mr Kevin Hellard, a licensed insolvency practitioner and one of the Applicants, made 2 witness statements, and was not required to be cross-examined on them. Some of the events of which the other witnesses spoke took place some time ago, and I have borne that in mind in evaluating their evidence.
Ms Iris Pinhão Capucho, a portfolio manager at Caixa Capital — Sociedade de Capital de Risco SA of Lisbon ("Caixa") was called by the Applicants. She was a straightforward and direct witness, whose evidence I found to be entirely credible.
The Respondent is an experienced businessman, with an assertive manner, who gave substantial parts of his evidence quite forcefully. He demonstrated a tendency to say — with great apparent conviction — whatever he thought at that moment was most likely to assist his cause. One example of this during his evidence was when he launched into a detailed explanation of his supposed understanding of the Call and Put Option Agreement, which I shall find below was simply embroidery, in attempted support of what he must have realised was an unconvincing denial of a basic understanding of this agreement. An example of this during his dealings with the Applicant liquidators is provided in a letter he wrote to them on 21 April 2011, where in the final paragraph he volunteered an explanation of why Mr Ferro was paid (in total) £55,000 by the Company, which was at odds not only with the truth but also with his own attempted explanations of the same given on other occasions of which I know, beforehand and afterwards. Some of the several occasions on which he became (apparently) confused in his oral evidence appeared to me to be the result of his having given some unsupportable and ill thought through answer a few minutes earlier. On a number of occasions his answers were demonstrably inaccurate for very simple reasons, such as when he denied having been directly aware that Norddeutsche Landesbank Girozentrale ("NordLB") were complaining that they had not been provided with enough information to support the application for renewal, when in fact (which he appeared not to have noticed) he had been copied into the very e-mail (21 August 2006, 10:09) which made that quite clear. The Respondent's evidence on matters in dispute must, therefore, be approached with considerable caution if uncorroborated by other independent testimony or contemporaneous documents.
Mr Armando Ferro is a Portuguese mechanical engineer, who has worked as a project manager and project director for over 20 years. He had been employed by HLC Engenharia e Gestão de Projectos SA ("Engenharia") before moving to work in the UK from (initially) August 1999, and remained in its employment for some time thereafter. He moved to the UK on a permanent or indefinite basis with his family in or about December 2000, and worked as project manager on Engenharia's 'turn-key' contract for the provision of the Neath Port Talbot MREC. In 2003 or 2004 he became an employee of HLC Henley Burrowes Limited, and then in 2006 an employee of Biodiesel Energy Trading Limited ("Biodiesel"), another company within the overall HLC Group. He was never employed by the Company, but served as a director of it between 18 October 2002 and 4 September 2006. He gave his evidence in a straightforward way, and appeared unperturbed by the fact that his evidence differed from that of the Respondent on some points. He was a reliable witness, whose evidence I generally accept, and prefer to that of the Respondent where they differ.
Mr Ramesh Radia is a chartered accountant, who (or whose firm) has worked for the Respondent for almost twenty years. Although he was called as a witness of fact, Mr Radia's witness statement contained a number of wide-ranging endorsements of the Respondent and his relevant conduct, roundly acquitting him of more or less all the Applicants' allegations against him (see e.g. paragraphs 6, 50 & 71 thereof). This may be attributable in part to ill judgment or an excess of zeal on the part of the solicitor who assisted in its preparation, but Mr Radia as a chartered accountant of long-standing should have known better than to go along with it, and their presence and content in any event demonstrate a significant lack of independence. Mr Radia displayed a rather mild manner in the witness box, and I think it likely that he can be somewhat overawed by the far more forceful Respondent. Mr Radia appeared to pick his words carefully while giving evidence, and I detected two aspects to this: one a proper concern not to say anything he believed to be inaccurate, but alongside that a desire to word his answers in such a way as to help the Respondent's cause as much as possible, and avoid giving any evidence which appeared likely to harm it (e.g. his answers with regard to the absence of any reference to the liability to FRIE Grupo in the Company's accounts). Thus, Mr Radia was — whether or not sub-consciously — a somewhat partisan witness, and his evidence on any matter in dispute should therefore be approached with some caution reflecting that.
Mr Stephen Evans, another chartered accountant, is a founder partner in the firm of William Evans & Partners of London W1. He undertook work for the Respondent or his companies from late 2000 onwards (although he had first met him a decade or so earlier), and acted as a non-executive director of HLC (Neath Port Talbot) Limited (" HLC NPT") from then until its entry into Administration in September 2005. Although he gave his evidence in an impressive manner, and was I believe trying to assist the court with his answers, his recollections were not always reliable. For example, when invited to agree that by 2004 or thereabouts Wrexham Council had come to prefer WRG to the HLC Group he responded "I wouldn't say that", a response which he then developed, whereas that was what he himself had (accurately, as I find) said in paragraph 34 of his first witness statement. His attempt to reconcile his earlier answer when that paragraph was put to him was not impressive. And on no objective view of the terms set out in the (pre-amendment) letter of 17 August 2005 and in the agreement of 11 December 2007 could they be said to bear no relationship to one another, as Mr Evans suggested in his oral evidence. I have not found evaluating Mr Evans' evidence overall easy, but I conclude that some aspects of it have been shown to be unreliable, and, bearing in mind that the more significant inaccuracies would all have tended (had they been correct) to support the Respondent's position, that he — probably sub-consciously — presented his evidence in the manner which most assisted his client.
Dealing with some of Mr Evans' more significant inaccuracies now, the interim arrangements introduced by the agreement of 21 July 2006 (to which I will come) were just that, and did not materially alter the substantive terms provided for in August 2005 and implemented in December 2007. Mr Evans' recollection that payment of the Company's net entitlement from the Waste Recycling Group ("WRG") direct to NordLB formed part of the agreement of 21 July 2006 or the negotiations for it was mistaken. That agreement expressly provided for payment to the client account of the Company's solicitors (clause 8.1.5(d)). The direct payment provision which Mr Evans must have had in mind formed part of the agreement of 11 December 2007, and was not (as I shall discuss more fully below) something to which NordLB had any legal entitlement. The most Mr Evans can have been remembering with any accuracy from 2006 is one or other of the possibilities (which I...
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