Lee v Futurist Developments Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hodge QC |
| Judgment Date | 08 November 2010 |
| Neutral Citation | [2010] EWHC 2764 (Ch) |
| Court | Chancery Division |
| Date | 08 November 2010 |
| Docket Number | Case No: 6LV70007 |
[2010] EWHC 2764 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LIVERPOOL DISTRICT REGISTRY
Liverpool Civil and Family Courts
35 Vernon Street
Liverpool
Merseyside L2 2BX
Before: His Honour Judge Hodge QC
Sitting as a Judge of the High Court
Case No: 6LV70007
Miss Lesley Anderson QC (instructed by Brabners Chaffe Street LLP, Liverpool) for the Claimant and Defendants by Counterclaim
Mr Edward Bartley Jones QC (instructed by MSB Law LLP, Liverpool) for the Defendant and Claimant by Counterclaim
Hearing dates: 4 th– 7 th, 11 th– 15 th, 25 th and 26 th October, and 8 th November 2010
His Honour Judge Hodge QC:
This judgment is divided into nine sections as follows: (1) Introduction. (2) The factual background. (3) The witnesses. (4) The applicable law. (5) The Unite introduction fee. (6) A wider corporate opportunity. (7) The alleged misappropriations. (8) The Switch Island agreement. (9) Conclusion.
I: Introduction
By a Part 8 claim form issued in the Liverpool District Registry of the Chancery Division on 15 February 2006 the Claimant, Mrs Jennifer Lee ( Mrs Lee), applies for an order for the sale of a parcel of potential development land on the south- east side of Dunnings Bridge Road, Aintree, Merseyside ( Switch Island) pursuant to the terms of a written Declaration of Trust dated 12 September 2003 under which Mrs Lee and the Defendant, then called Skelhorne Developments Ltd ( Skelhorne), hold that property upon trust for themselves as tenants in common, as to 75% for Skelhorne and as to the remaining 25% for Mrs Lee. Under the terms of the trust instrument itself there is no answer to Mrs Lee's claim. But the trust deed was entered into as part of a “tidying-up” operation following the contemporaneous disposal by Mrs Lee and her husband, Mr Derek Lee ( Mr Lee), the second defendant by counterclaim, of their shareholdings in Skelhorne and Mr Lee's resignation as a director of that company. It is no longer part of Skelhorne's case that Mrs Lee had been a nominee for Mr Lee; but it is now, I think, common ground (and if it is not I find as a fact) that at all times Mr Lee acted as his wife's agent in relation to her shares in Skelhorne, including their disposal, and her entry into the trust deed. Skelhorne asserts that it was induced to enter into that deed by misrepresentations (also amounting to collateral warranties) on the part of Mr Lee which entitle it to have the trust deed set aside. Skelhorne also claims that Mr Lee has misapplied or misappropriated moneys belonging to Skelhorne, that he has profited from his position as a director of that company, and that he has acted in breach of his fiduciary duties as a director. Skelhorne therefore defends the claim; and it counterclaims against both Mr and Mrs Lee, seeking an order rescinding the agreement and declaration of trust, an account, equitable compensation and damages (with compound interest).
Following the service of witness statements dated 5 June 2006 from Mr Mark Simpson ( Mr Simpson) and Mr Gerard Murphy ( Mr Murphy), then (and since 19 September 2002) directors of Skelhorne, Mrs Lee withdrew an application for summary judgment on her claim. Consequently, on 9 June 2006, I made an Order directing that the claim should continue as if it were a Part 7 claim, allocating it to the multi-track, and making consequential directions. The case has been extensively case-managed, with hearings before me on 8 May 2008, 29 May 2009, 8 September 2009, 2 October 2009, 17 February 2010, 3 June 2010, 14 July 2010, and 24 August 2010. During the course of the progression of this case to trial, the defence and counterclaim have evolved through a number of different versions, permission to re-amend having been given most recently at the hearings on 14 July and 24 August 2010 and (as to the form of relief only) on the first day of the trial on 4 October 2010. As part of this process, Skelhorne has alleged that Mr Lee had misappropriated the sums represented by a considerable number of cheques drawn on the company's bank account, only later to withdraw many of these specific charges; and Skelhorne now pursues to trial only those specific allegations of misappropriation identified at paragraph 27 (V) of the current version of its statement of case. However, Mr Bartley Jones argues that the strength of Skelhorne's case should not be affected by the way it has developed over time, submitting that the resolution of the live issues between the parties depends almost entirely upon the view formed by the Court of the evidence and explanations given by Mr Lee, rather than upon the evidence of Mr Simpson and Mr Murphy. He also submits that the mere fact that allegations are now withdrawn does not mean that they were not honestly entertained at the time they were advanced.
The trial began on Monday 4 October 2010. The evidence occupied nine court days, followed (after an adjournment for the sequential service of written closing submissions on behalf first of Skelhorne and then of Mr and Mrs Lee) by a day and a half of oral submissions; and the trial concluded (subject to judgment) at about 4.20pm on Tuesday 26 October. Miss Lesley Anderson QC (who has been involved in the case since 2006) appears for Mr and Mrs Lee. Mr Edward Bartley Jones QC (whose involvement only dates from about the middle of September 2010) appears for Skelhorne. Miss Anderson helpfully produced a chronology and a list of characters, which Mr Bartley Jones was content to adopt as framework documents.
II: The factual background
Skelhorne's counterclaim principally concerns a triangular parcel of land (shown on the plan at exhibit DL1 to Mr Lee's witness statement dated 11 August 2010, and variously referred to as the Grand Central Site or the Skelhorne triangle) to the south of Lime Street main-line railway station in Liverpool, and bounded on the west by Bolton Street (which runs parallel to, and to the east of, that section of Lime Street which lies between The Crown Public House to the north and The Vines Public House to the south), by Skelhorne Street (running from north-west to south- east) and by Copperas Hill (running from south- east to south-west). In December 1996 the north-western part of that site ( Car Park A), which was operated as a surface car park, had been acquired by Freshmoore Developments Ltd ( Freshmoore) for £250,000. Freshmoore had been incorporated on 2 October 1996, effectively as an equal joint venture between Mr and Mrs Lee and Mr Simpson and his wife, Sarah, ( Mrs Simpson). Mr Lee was the sole appointed director of Freshmoore until Mr Simpson was also appointed to act on 25 September 2002. Mr Simpson acted as the sole company secretary until Mrs Hilary Williams ( Mrs Williams), who unfortunately passed away in 2007, was appointed to be an additional company secretary on 19 October 2001. There is an issue as to whether this appointment was made with Mr Simpson's knowledge; although he accepted in evidence that, as a long-standing and trusted confidante of Mr Simpson's late father, he would have had no real objection to her appointment. Freshmoore was dissolved on 4 August 2005.
Perceiving that the Grand Central Site had valuable development potential, Mr Lee and Mr Simpson later combined with Mr Murphy, an apparently wealthy businessman, with a view to acquiring the remainder of the Skelhorne triangle. The vehicle adopted for this purpose was Skelhorne. This was incorporated on 27 January 1998 and it was described on its note-paper (according to Mr Simpson “a bit tongue in cheek”) as “Part of the Lee & Simpson Group of Companies”. Initially, Skelhorne was an equal joint venture between Freshmoore and Mr Murphy. Later, Skelhorne's share capital was increased by the issue of further shares to Mr Murphy, to Mr and Mrs Lee, and to Mr and Mrs Simpson; but until the buy-out of Mr and Mrs Lee's shares on 12 September 2003, Skelhorne was ultimately owned by Mr Murphy (as to 50%), by Mr and Mrs Lee (as to 25%), and by Mr and Mrs Simpson (as to the remaining 25%). In paragraph 9 of his witness statement of 5 June 2006, Mr Simpson acknowledged that Mrs Simpson owned her shares in Skelhorne as his nominee. Mr Lee was the sole appointed director of Skelhorne until 19 September 2002, when Mr Murphy and Mr Simpson were both appointed directors after substantial differences had emerged between Mr Lee and the other two men. Mr Simpson acted as the sole company secretary until 19 October 2001 when Mrs Williams was also appointed to that position. Mr Simpson and Mr Murphy dispute that they were made aware of this appointment at the time. Mr Lee resigned as a director of Skelhorne, and Mrs Williams resigned as its joint secretary, on 12 September 2003 following the sale of each of Mr and Mrs Lee's shareholdings in Skelhorne for £171,000 and of Freshmoore's shareholding for £76,000. Skelhorne changed its name to Futurist Developments Ltd on 23 August 2006. Mr Murphy resigned as a director of Skelhorne on 15 September 2008, and he was adjudged bankrupt on 13 February 2009. His discharge has been suspended indefinitely. Mr Simpson resigned as Skelhorne's company secretary on 15 September 2008 and as a director of Skelhorne on 5 November 2009. By that time (on 2 September 2009) Allied Irish Bank had appointed Law of Property Act receivers over various of Skelhorne's landholdings in Liverpool. The current directors of Skelhorne are Mr Edward Gaskin and Mr Gerard Michael John Murphy, who is Mr Murphy's 27 year old son. All but one of Skelhorne's shares (retained by Mr Simpson) are...
To continue reading
Request your trial
-
Jennifer Jean Lee v Futurist Developments Ltd (Defendant/Part 20 Claimant) Jennifer Jean Lee and Another (Part 20 Defendants)
...11 days in October 2010. On 8 th November 2010 I handed down a reserved written judgment, the neutral citation number of which is [2010] EWHC 2764 (Ch). 3 In summary, I gave judgment for Mrs. Lee on her claim, which was for the sale of potential development land in Aintree held as to 25% fo......