Kynixa Ltd v Hynes and Others
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE WYN WILLIAMS,Mr Justice Wyn Williams |
| Judgment Date | 15 July 2008 |
| Neutral Citation | [2008] EWHC 1646 (QB),[2008] EWHC 1495 (QB) |
| Docket Number | Case No: HQ07X02129 |
| Court | Queen's Bench Division |
| Date | 15 July 2008 |
[2008] EWHC 1495 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Wyn Williams
Case No: HQ07X02129
Mr Michael Duggan (instructed by Messrs Paris Smith & Randall LLP Law Solicitors)
for the Claimant
Mr Jeffrey Bacon (instructed by Messrs Plexus Law Solicitors) for the Defendants
Approved Judgment
Hearing dates: 27 th February 2008 to 19 th March 2008
and 4 th April 2008.
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.
Mr Justice Wyn Williams :
In these proceedings, the Claimant seeks relief against the Defendants arising out of alleged breaches of express and implied terms of contracts of employment concluded between the Claimant and each Defendant. Further, in relation to the First Defendant and Second Defendant, the Claimant seeks relief arising out of alleged breaches of express terms of an agreement which, in this judgment, I will refer to as “the shareholder agreement” and alleged breaches of fiduciary duties by which, it is said, these two Defendants were bound. The trial before me has been concerned only with the issue of liability i.e. whether the Claimant has established against the Defendants a breach or breaches of the agreements and fiduciary duties to which I have referred.
The evidence before me has been detailed and, in many important respects, conflicting. It is as well to state at the outset, however, that I have no intention of reviewing factual issues and making findings upon them unless I consider that they are important to the resolution of the main issues in this case. To adopt any other approach would make this judgment much longer and even more burdensome than it is bound to be.
Inevitably there will be references in this judgment to extracts from witness statements. The principal witnesses in the case are Mr. Biden, Dr. Bonikowski and the three Defendants. Each of these persons made a number of witness statements. In this judgment reference to a witness statement in respect of any of these persons is a reference to the witness statement which was made by them in January 2008 and which was usually described in the hearing as their main witness statement for trial.
With those introductory remarks I turn, first, to a description of the more important background facts. In the main, this section of my judgment will focus upon facts which are not controversial between the parties.
RELEVANT BACKGROUND FACTS
The Claimant is a specialist provider of rehabilitation and case management services for persons who have suffered injury, usually as a consequence of an accident at work or on the road. The Claimant began providing these services in 2001. At that time it was (as it still is) controlled by two men Mr. Michael Biden and Dr Edmund Bonikowski. In the remainder of this judgment they will be referred to as MB and EB.
EB is an experienced consultant physician and general practitioner. In the 1990s he developed an interest in rehabilitation. In the words of Mr Duggan, Counsel for the Claimant, the Claimant is the brainchild of EB. MB is a very experienced businessman who has held senior positions in international companies. In February 2001 MB and EB entered into a joint venture agreement. The agreement was, in summary, to carry on a business of providing rehabilitation and case management services and the Claimant was the vehicle chosen for the provision of those services. By the terms of the joint venture agreement EB became a 83.33%shareholder in the Claimant and MB became a 16.67%shareholder.
The Claimant was registered in February 2001. As I understand it, it began to provide its services more or less straightaway. At the outset it was understood that EB would be much more actively involved in operating the business of the Claimant; he became its chief executive officer; MB was appointed its Chairman. The basis of the agreement between MB and EB was that they wanted to build a business with a capital value. They did not see the Claimant simply as a vehicle to establish a private practice for EB.
From its inception, as I understand it, the Claimant also had one non-Executive Director. That was Mr Christopher Langford, a chartered accountant.
In its early days and, indeed, thereafter, the Claimant targeted work from solicitors and insurers who were involved in personal injury litigation or potential litigation.
On 20 November 2001 the Claimant's Board of Directors agreed that a person named Steve Williams should be appointed a director of the Claimant with responsibility for business development in the insurance sector. The Board also resolved that he should become a shareholder. On 21 November 2001 the Claimant and Steve Williams entered into a written agreement which was called a business development agreement. It is clear from its terms that this agreement was intended to be short-lived and replaced, after a probationary period, by a different contract between the Claimant and Mr Williams. On 31 March 2002 the Claimant and Mr Williams entered into a written contract which was called a service contract.
Meanwhile on 19 December 2001 the Claimant's Board of Directors had resolved to recruit the Second Defendant. EB and the Second Defendant had met each other in or about 1997 when they were both working for the National Health Service. As I understand it the Second Defendant was then a nurse specialising in the care of those suffering from Parkinson's disease and/or other serious neurological diseases. It is clear that EB had formed a favourable impression of her skills. The prospect of the Second Defendant becoming an employee of the Claimant came about in late 2001. The Second Defendant was then working in a responsible post for the NHS in a hospital in Barnet. However, her home was in West London and she had to juggle the care of her child as well as holding down her job. Employment with the Claimant was attractive to the Second Defendant because the Claimant operated from premises in Ealing. Following discussions in the early part of 2002 a contract of employment was concluded between the Claimant and the Second Defendant. The contract was made in writing and it is dated 13 February 2002. The contract provided that the Second Defendant should take up her appointment with the Claimant on 5 June 2002 and that is what occurred. The contract specified that the Second Defendant was employed in the capacity of clinical services manager and her remuneration was a basic salary of £40,000 per annum and an entitlement to participate in any bonus scheme for “the managers employed by the company introduced by the directors…….”
In 2003 David Imber became a director and shareholder of the Claimant. His responsibility was vocational rehabilitation. Further, additional non-executive directors were appointed, namely Roy Hurley and Heather Lawrence. Also in 2003 the Second Defendant became a shareholder. I deal with the details of her acquisition of shares later in this judgment.
On 23 November 2003 the Directors of the Claimant approved a new Memorandum and Articles of Association. At or about the same time a document entitled “Shareholders and Subscription Agreement relating to Kynixa Limited” (hereinafter called “the shareholder agreement”) was signed by the then existing shareholders. At that stage those persons were MB, EB Steve Williams, David Imber, Chris Langford, Heather Lawrence, Roy Hurley and the Second Defendant. The document is long and, in places, complicated and in due course it will be necessary for me to consider, in detail, some of its provisions. At this stage it suffices that I record that it was intended to and did supersede the joint venture agreement which had been signed by MB and EB at the commencement of the business. I should also record at this stage that the signatories to the agreement apparently intended and understood that new shareholders would become bound by the terms of this agreement. The existing shareholders proceeded on the basis that any new shareholder would sign a document which was entitled “Deed of Adherence” and which would have the effect of binding that shareholder to the terms of the shareholder agreement. An example of the Deed of Adherence (which was incomplete in the sense that it was undated and the name and address of the shareholder was left blank) was an attachment to the shareholder agreement.
In April 2004 the Second Defendant received a substantial pay rise. It is common ground that this was, at least in part, motivated by the recognition that she was a valued, indeed, very valued, employee by this stage.
In or about July 2004 the Claimant appointed the company known as Partners in People Limited as human resources consultant. I will need to consider why they were instructed and what they were instructed to do later in this judgment. It suffices that I record at this stage that in November 2004, following work undertaken by Partners in People, a document entitled “Statement of Principal Terms and Conditions” (hereinafter called “SPTC”) was formulated and issued to employees of the Claimant. Further a document entitled “Employee Handbook” (“the Handbook”) had been composed and this was also circulated to the Claimant's employees.
While the work of Partners in People was in gestation the Third Defendant became an employee of the Claimant. She signed a contract of employment on 12 August 2004 and she commenced her employment on 6 September 2004. Her job title in the contract was “Relationship Manager.”
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