Kings Security Systems Ltd v Anthony Douglas King
| Jurisdiction | England & Wales |
| Judge | Andrew Lenon |
| Judgment Date | 18 February 2021 |
| Neutral Citation | [2021] EWHC 325 (Ch) |
| Court | Chancery Division |
| Docket Number | HC-2017-002379 |
| Date | 18 February 2021 |
[2021] EWHC 325 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice Rolls Building,
Fetter Lane, London EC4A 1NL
Andrew Lenon Q.C. (sitting as a Deputy Judge of the Chancery Division)
HC-2017-002379
Paul Downes QC and Joseph Sullivan (instructed by Teacher Stern LLP) for the Claimant.
Christopher Newman and Fiona Whiteside (instructed by Walker Morris LLP) for the First Defendant.
APPROVED JUDGMENT
Hearing dates 1 – 8, 14 – 15 December 2020, 18 February 2021
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Contents
| I. INTRODUCTION | 2 |
| II. THE WITNESSES | 4 |
| III. THE FACTS | 9 |
| IV. KSSL'S CLAIMS | 52 |
| V. ISSUES ARISING OUT OF THE CLAIM | 55 |
| Issue (1) Did the Range Rover Transaction constitute a bribe? | 56 |
| Issue (2) Did the Range Rover Transaction give rise to breaches of duty? | 61 |
| Issue (3) Was the Range Rover Transaction authorised by the shareholders of KSSL? | 64 |
| Issue (4) Were KSSL's claims within the scope of the Settlement Agreement? | 65 |
| Issue (5) Has the Settlement Agreement been rescinded? | 66 |
| Issue (6) Should Mr King be excused pursuant to section 1157 of the 2006 Act? | 72 |
| Issue (7) Should KSSL's damages claim be dismissed or reduced by reason of TCH's offer of compensation? 73 Issue (8) What remedies is KSSL entitled to? | 75 |
| VI. MR KING'S COUNTERCLAIM | 76 |
| VII. ISSUES ARISING OUT OF THE COUNTERCLAIM | 77 |
| Issue (1): Is the Grainger v Hill tort still part of English law? | 78 |
| Issue (2): Does the evidence establish that the proceedings were brought for an improper purpose? | 85 |
| Issue (3): Has Mr King proved any recoverable losses? | 93 |
| VIII. CONCLUSION | 93 |
I. Introduction
This judgment follows the trial of the claim brought by the Claimant (“KSSL”) against the First Defendant (“Mr King”), its former Chief Executive Officer, and of the counterclaim brought by Mr King against KSSL.
KSSL is a security and surveillance business based in the North of England which was established in the 1960s by James King, Mr King's father. Prior to December 2013, KSSL was a family business, owned and run by the King family. Mr King became Chief Executive Officer of KSSL in 2005, having previously worked for the business in other roles.
In late 2013, KSSL ran into financial difficulties. It obtained funding from outside investors acting through a company called Primekings Holding Limited (“Primekings”) which acquired a majority shareholding in KSSL's parent company Kings Solutions Group Limited (“KSGL”). The King family became minority shareholders.
Following the investment by Primekings, relations between the King family and the two representatives of Primekings on the board of KSSL soured. In 2015, Mr King and other members of the King family brought proceedings in the Chancery Division against Primekings and its representatives claiming rescission of the agreements under which Primekings had acquired its shares and invested in KSGL (“the Misrepresentation Proceedings”). The Misrepresentation Proceedings were brought on the basis that the agreements with Primekings had been procured by fraud, duress and an unlawful means conspiracy.
The trial of the Misrepresentation Proceedings was listed for 20 days before Marcus Smith J in May 2017. On day 10 of the trial, following cross-examination of the Kings' witnesses, the Kings discontinued the claim, apologised to the defendants and agreed to pay their costs on the indemnity basis. Marcus Smith J ordered £1.7 million to be paid on account.
After the conclusion of the Misrepresentation Proceedings, Mr King and KSSL entered into a settlement agreement under which it was agreed, amongst other things, that Mr King's employment was terminated and that KSSL would make an ex gratia payment to Mr King of £70,000 (“the Settlement Agreement”). Soon afterwards, however, the board of KSSL became aware of information suggesting that Mr King had been misusing company funds and KSSL purported to rescind the Settlement Agreement. One of the transactions which came to light in the course of the board's subsequent investigations was an arrangement under which Mr King had between 2015 and 2017 obtained the use of a Range Rover Vogue motor vehicle (“the Range Rover”) from KSSL's fleet supplier, TCH Leasing (a trading style of T.C. Harrison 1960 Limited) (“TCH”), and which, unknown to the board, had been funded by KSSL (“the Range Rover Transaction”).
In these proceedings, which were started in August 2017, KSSL is claiming that the Range Rover Transaction constituted a bribe by TCH and gave rise to breaches of duties on the part of Mr King as a director and employee of KSSL. It seeks damages and other relief including rescission of the Settlement Agreement. The claim against the Second Defendant (“Mr Evans”), its former Chief Operating Officer, was that he dishonestly assisted with Mr King's breaches of duty and that he himself received the use of a second Range Rover in exchange for KSSL paying more to TCH for the use of certain Skoda vehicles. KSSL's claim against Mr Evans was settled in August 2018 with Mr Evans admitting his wrongdoing, apologising for his actions and paying compensation to KSSL.
Mr King denies that the Range Rover Transaction was a bribe, that it entailed any breach of duty or that KSSL is entitled to rescind the Settlement Agreement. He contends that he was unaware that KSSL was funding his use of the Range Rover, and that this was arranged by Mr Evans without his knowledge. Mr King is counterclaiming £70,000 pursuant to the Settlement Agreement together with damages for the tort of abuse of process. This counterclaim is put on the basis that the KSSL's predominant purpose in bringing these proceedings, on which it has incurred some £2.5 million in costs, is an improper one, namely to enable Primekings to acquire the King family's minority shareholding in KSGL at an undervalue and/or to damage Mr King's reputation and his ability to find alternative employment. In response to the counterclaim, KSSL questions whether the tort of abuse of process still exists in English law but, if it does, it denies that these proceedings were brought for any improper purpose or that Mr King has pleaded or proved any recoverable loss.
II. The Witnesses
KSSL called ten witnesses, listed below, all of whom gave evidence from the witness box with the exception of Mr Pownall and Mr Pashley who gave evidence by video link. Mr King gave evidence himself but did not call any other witnesses.
(1) Barry Stiefel
Mr Stiefel has been a non-executive director of KSSL since 2013. He has spent most of his professional life working for the Kirsh Group in senior management positions.
He clearly takes his responsibilities as a director seriously. He made clear that when a decision might give rise to a conflict of interest, he recused himself from the decision-making process. Mr Stiefel said in his witness statement, and I accept, that he has a strong moral sense and sets himself high standards of integrity. He was clearly very upset at being accused of fraud and criminal wrongdoing by Mr King in the context of the Misrepresentation Proceedings and incensed by what he considered to be Mr King's dishonesty in connection with the Range Rover Transaction and his subsequent refusal to acknowledge his wrongdoing. Mr Stiefel did not attempt to conceal the contempt he now feels towards Mr King. Despite these strong personal feelings, I consider that Mr Stiefel was a reliable and honest witness.
(2) Robin Fisher
Mr Fisher is also a non-executive director of KSSL. His background is similar to Mr Stiefel's. He is an experienced businessman and the founder and managing director of Prime Interaction Limited (“Prime”) which invests in UK security sector with finance provided by the Kirsh Group. Like Mr Stiefel, he was clearly angered by the allegations made against him in the Misrepresentation Proceedings and by Mr King's conduct. I consider that he was a reliable and honest witness.
(3) Geoffrey Zeidler
Mr Zeidler has been a non-executive director of KSSL since September 2015 and chairman since May 2016. He has wide experience as a company director in various commercial sectors including the private security industry and acted as Chairman of the British Security Industry Association. He was an impressive witness with a clear sense of his responsibilities as a director and chairman of KSSL. Unlike Mr Fisher and Stiefel, he was not personally involved in the Misrepresentation Proceedings. He gave considered and dispassionate evidence about Mr King's performance as Chief Executive Officer, the termination of Mr King's employment and the reasons for bringing these proceedings. When it was put to him in cross-examination that he was seeking to give false evidence so as to retain his job, he made it clear that he has independent means and does not need the remuneration he is paid by KSSL. He had no reason to give false evidence and, in my assessment, he did not do so.
(4) Robert Forsyth
Mr Forsyth is the Chief Executive Officer of KSSL. He was appointed on 25 May 2017 in succession to Mr King and gave evidence about the investigations into the allegations of unauthorised expenditure by Mr King and Mr Evans. He was an honest and...
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