Kew Green Group Ltd v Jameson Lamb
| Jurisdiction | England & Wales |
| Judge | Mr Justice Kerr |
| Judgment Date | 30 May 2023 |
| Neutral Citation | [2023] EWHC 1289 (KB) |
| Court | King's Bench Division |
| Docket Number | Case No: QB-2022-003928 |
[2023] EWHC 1289 (KB)
Mr Justice Kerr
Case No: QB-2022-003928
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Thomas Croxford KC and Sean Butler (instructed by KWM Europe LLP) for the Claimants
Paul Nicholls KC (instructed by DAC Beachcroft LLP) for the First, Second, Third and Seventh Defendants
The Fourth, Fifth and Sixth Defendants did not appear and were not represented.
Hearing date: 16 and 17 May 2023
Approved Judgment
This judgment was handed down remotely by circulation to the parties' representatives by email and will be released for publication on the National Archives caselaw website. The date and time for hand-down is 11am on 30 May 2023.
Introduction and Summary
Four of the seven defendants bring the present application to strike out or for summary judgment in respect of large swathes of the claims against them brought by their former employers, the two claimant hotel management companies (together, the claimants or, collectively, Kew Green). The claims are wide ranging.
There are claims for breaches of three different contracts, breaches of fiduciary duties, inducing or procuring breaches of contract, conspiracy to cause harm by unlawful means, knowingly assisting breaches of fiduciary duty, knowing receipt of trust property, the return of sums paid, equitable compensation and an account of profits. There is a counterclaim for sums unpaid.
The first and second defendants, Mr Lamb and Mr Pritchard, are former senior managers employed by one of the Kew Green companies. As such, they were directors of numerous Kew Green companies. The third and seventh defendants (respectively, Axiom and JLAP Investments) are corporate vehicles used by Messrs Lamb and Pritchard in 2020 after they ceased to be employees of Kew Green and resigned their directorships of Kew Green companies.
The correct approach where such an application is brought is too well known to be repeated at length. The applicable CPR rules are rule 3.4 and rule 24.2. The correct approach is found in authorities such as Easyair Ltd v. Opal Telecom [2009] EWHC 339 (Ch) per Lewison J (as he then was) at [15], dealing with summary judgment.
There must be grounds for bringing a claim. Its prospects must be more than fanciful. I must not conduct a mini-trial. I can look at uncontradicted accounts and documents. I take the facts and the law at their highest in the claimants' favour. If a decisive short point of law or construction is suitable for summary determination, I should grasp the nettle and decide it. But if disclosure or testimony is needed to decide a point, there should be a trial on that point.
Facts
The following brief account is of facts which are either uncontroversial or matters of record, or are facts pleaded or given in written witness statements by the claimants and assumed in their favour for present purposes to be true and correct. I include facts pleaded or put in written evidence by the defendants only to the extent that they are accepted by the claimants.
Messrs Lamb and Pritchard are experienced hotel management executives and longstanding (since 24 February 2002) employees of Kew Green. Their terms of service were most recently set out in service agreements dated 23 January 2015 ( the service agreements). I shall return to those terms shortly. They included standard loyalty and fidelity clauses, confidential information obligations and six month post-termination restrictive covenants.
On 31 May 2015, the fourth, fifth and sixth defendants (with whom I am not directly concerned) entered into service agreements with Kew Green. They are not party to the present application. In the main action, they are sued because of their roles in a hotel management business subsequently set up by Messrs Pritchard and Lamb, which trades through Axiom.
Kew Green's business is quite substantial. In recent years it has been party to about 20 hotel management agreements ( HMAs) covering about 70 hotels, all or nearly all in the United Kingdom. The average duration of an HMA is about three years, subject to renewal. The longest has a term of five years. Some are for a fixed term, others are terminable on three months' notice. Paragraph 4 of the amended reply and defence to counterclaim ( the reply) pleads that as at 31 January 2020, Kew Green was managing 31 hotels.
In December 2017, Kew Green entered into several HMAs with a company called Starwood Capital ( Starwood), which was buying a portfolio of seven Hilton hotels. Collectively, these are referred to as the Dragonglass Management Contract. Under that contract, Starwood required certain investment by the Kew Green management “core team” of their own money, to contribute to the cost of the portfolio of hotels.
Mr Lamb informed Kew Green's principal shareholder, CTS Metropark Limited ( CTS) that the required investment was 2.8 to 4.8 per cent of the acquisition costs. CTS did not invest. Three core team member individuals were to do so instead. They were Mr Pritchard, a Mr Stephen Desmond and the sixth defendant, Mr O'Keeffe. A company called Dragonglass Bidco Limited was incorporated on 24 January 2018 to facilitate that investment.
The terms on which Kew Green consented to the investment were set out in a “Deed of Undertaking” entered into in February 2018 ( the 2018 Deed). The amount invested by the Kew Green managers, between them, was to be £1.725 million, about 2.89 per cent of the equity in the acquisition by Starwood. Any further investment by the managers in Starwood's project would require the prior consent of Kew Green which would have a right of “first refusal”.
The investment was, it was agreed, to be made by the three members of the core team and also in part by Mr Lamb. The four investors were named as “the Managers” in Schedule 2 to the 2018 Deed. Mr Lamb was described as director and executive chairman; Mr Pritchard, as director and CEO. That investment was then made in April 2019. Kew Green, led by Messrs Lamb and Pritchard, began to manage the seven Hilton hotels and develop business relations with Starwood's management.
By, at the latest, early to mid-2019, Messrs Lamb and Pritchard formed an intention to “set up in competition” (as it is pleaded) with Kew Green. During the first part of 2019, they caused to be inserted into HMAs with certain client hoteliers (for example, Almarose (or Aprirose) in January 2019 and Intriva, in June 2019) a “ key manager” provision entitling the client to terminate the HMA if Mr Lamb or Mr Pritchard should cease to be employed by Kew Green.
An email of 9 July 2020 from Starwood to a lawyer, a Mr Paul Hastings, suggested that Starwood was happy for a key manager provision to be inserted into its proposed HMA with Kew Green, as that would benefit Starwood and could help Messrs Lamb and Pritchard when the level of their bonuses was decided upon.
On 1 August 2019, Messrs Lamb and Pritchard jointly wrote to Kew Green giving the required six months' notice of resignation from their employment, effective from 31 January 2020; though they said “we will continue to act as directors of the Company in the meanwhile”. They cited their frustration that they had not achieved sufficient growth of the business since it was taken over in 2015, reductions in their remuneration and that of other senior managers; and the failure in discussions to agree a more satisfactory package.
On 1 August 2019, the day Messrs Lamb and Pritchard gave notice of resignation, Starwood entered into a new HMA with Kew Green. It contained the previously envisaged key manager clause entitling Starwood to terminate should Mr Lamb or Mr Pritchard cease to be employed by Kew Green.
On 28 August 2019, Mr O'Keeffe wrote and sent to Mr Lamb a short draft document called “Project XXX”, an “internal discussion document” with some rudimentary ideas about what appeared to be a plan to undertake their own hotel management business and to replace Kew Green, in particular in respect of the management of Starwood's hotels. It appears to be the twentieth version of the draft document. Kew Green does not have the 19 earlier versions.
Following discussions and with legal advice available to both sides, Mr Pritchard and Mr Lamb each entered into a settlement agreement (under section 111A of the Employment Rights Act 1996) on the same terms. I shall return to those terms shortly. Broadly, they provided for the two of them to continue their normal duties until the termination date, 31 January 2020; and to provide certain services as consultants for a period thereafter.
From 11 November 2019, Mr Lamb (copying Mr Pritchard) emailed various professional advisers, hotel sales agents, lawyers, accountants and consultants informing them of their intention to set up a new management company to manage and co-invest in hotels in the UK and EU and that they intended to start the new business in the new year, i.e. in 2020.
They also informed at least two of Kew Green's existing clients, during November 2019. One of them was Almarose, with whom a meeting was proposed to “talk through our plans”. They also informed a major real estate company called CBRE of their plans, in December 2019.
On 31 January 2020, the employment of Messrs Lamb and Pritchard terminated at the end of their six month notice period. From that date, they resigned as directors of the relevant Kew Green companies. No written agreement for consultancy services was signed at that stage, but a later consultancy agreement with JLAP Investments...
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