Manoudakis v Easygroup Holdings Ltd
| Jurisdiction | England & Wales |
| Judge | MR BOWERS |
| Judgment Date | 20 October 2011 |
| Neutral Citation | [2011] EWHC 3614 (QB) |
| Docket Number | Case No: TLQ/11/0617 |
| Court | Queen's Bench Division |
| Date | 20 October 2011 |
[2011] EWHC 3614 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr J Bowers Qc
(Sitting as a Judge of the High Court)
Case No: TLQ/11/0617
MR ANDREW MILLER (instructed by Messrs Debenhams Ottaway) appeared on behalf of the Claimant
MR MICHAEL CLARK (instructed by Messrs Travers Smith) appeared on behalf of the Defendant
Approved Judgment
Introduction
The claimant was in 1995 employed by Sir Stelios Haji-Ioannou as Finance Director of easyJet Airline Company. He was one of the first employees of that ground breaking venture.
In about 1999, however, prior to easyJet's flotation on the London Stock Exchange, Sir Stelios informed the claimant that he wanted him to move to a new company, easyGroup (UK) Ltd ("EGUK") that was being set up as a private company to spearhead the development of the 'easy' brand other than as an airline. These were interests to which Sir Stelios attached the 'easy' philosophy such as cruises and cinemas.
Sir Stelios told the court that he had discussed the claimant with Mr Webster, then Chief Executive of easyJet, who had suggested that the claimant was not the best person to be Finance Director of easyJet once it was floated.
The relationship between the two men, that is the claimant and Sir Stelios, went back to their respective fathers. The claimant's late father had been a senior captain in the shipping fleet owned by Sir Stelios's father.
Since leaving active management of easyJet, Sir Stelios has pursued interests all over the world, including in the USA, Greece, New York and the Far East and he has travelled constantly.
The claimant took up his role as Chief Financial Officer of EGUK—which it should be said is not the defendant in this case—in about August 1999. From about January 2003 to June 2004 the role of Chief Financial Officer of EGUK was undertaken by Mr Steven Hall who was also a director of that company and the claimant held the role of Chief Operations Officer of EGUK. Mr Hall gave evidence in this trial.
Following Mr Hall's departure from EGUK in June 2004, the claimant resumed the role as Chief Financial Officer of EGUK and continued in this position until the termination of his employment on 1 March 2006, in circumstances to be referred to below.
Sir Stelios was a director and shareholder of EGUK and is a director of the holding company, which is the defendant. The address of the defendant is given in the consultancy agreement as Monaco.
As a director, the claimant clearly owed fiduciary duties to EGUK, but not fiduciary duties to the defendant. The claimant was also responsible, amongst other things, for ensuring compliance with the easyGroup business rules, which changed throughout the relevant period and will be referred to below.
Importantly, Sir Stelios was the claimant's sole line manager for the purposes of authorising expenses. They sat at the relevant time physically close together in the centre of a relatively small open plan office in a building called the Rotunda in Camden Town, which was the base of most, if not all, of the staff of EGUK. Sir Stelios was naturally not present there as often as was the claimant. Indeed, Sir Stelios said that he could only be present in England for 90 days a year to preserve his tax status and that he was meticulous about sticking to those rules.
The Issues
The claimant issued a claim form on 7 June 2010 for the sum of £57,500 and interest. He said that this was owing by the defendant under a consultancy agreement.
The defendant, the holding company, advances its defence to the claimant's claim in a somewhat indirect way on the basis of two implied terms. Firstly, the defendant asserts that it was a condition precedent to the defendant's liability under the consultancy agreement that these are the claimant had not committed any breaches of fiduciary duty to EGUK or alternatively had prior to entering into the consultancy agreement disclosed the defendant any breaches of fiduciary duty. Secondly, it is said that the claimant warranted that he had not committed any breaches of fiduciary duty or had, prior to entering into the consultancy agreement, disclosed to the defendant any breaches of fiduciary duty on his part.
Essentially, the defendant claims to be entitled to avoid this payment obligation under the consultancy agreement on the grounds of the claimant's breach of fiduciary duty as a director of EGUK—I re-emphasise not the defendant—in using his EGUK company credit card for personal expenditure whilst he was employed by EGUK and breach of his duty of disclosure to EGUK and to the defendant and that is failing to disclose his use of the EGUK company credit card.
The defendant alleges that the claimant was under a duty to disclose his alleged wrongdoing of breach of fiduciary duty and, therefore, as he was under a duty to speak, his silence constituted an implied representation that he was not in breach of his duties. Paragraph 10 of the defence pleads that if he had disclosed his breach, EGUK and the defendant would not have entered into either of the two agreements, that is the compromise agreement or the consultancy agreement.
It should be noted that the allegations made here are not those normally made in these sorts of cases of fiduciary duties. Firstly, no allegation is made by the defendant that the claimant at any time acted dishonestly or fraudulently. That was made clear in the response to request for further information (3D at page 34 of the bundle). The closest it comes is to say that the claimant did not act in good faith. Secondly, the defendant makes no allegation that at any time the claimant made any secret profit. The situation is thus far from the circumstances of cases such as Tesco Limited v Pook [2004] IRLR 618, which was pressed upon me by Mr Clark on behalf of the defendant. I should also emphasise that the claimant's position has been throughout the correspondence leading up to the claim form and since, that he has been willing to pay any sums owing for personal expenditure, there being a dispute about how much that is and I will return to that later.
The main issues then before me are, in effect, knowledge and authorisation in relation to the use of the credit card for personal expenditure.
The defendant also pleaded but later dropped as a separate implied term the suggestion that the claimant should not rely on his own wrong, but that concept does permeate many of the issues in the case.
By way of relief the defendant seeks, firstly, damages for breach of the implied term, that is the defendant's liability for fees under the consultancy agreement; secondly, damages for misrepresentation pursuant to section 2.1 and 2.2 of the Misrepresentation Act 1967; and, thirdly, a declaration that the consultancy agreement has been validly rescinded or an order for rescission.
The defendant accepts that there were no express policies within EGUK about the use of the credit cards as such until 2010 (see response 3C to the request for further information at page 34 of the bundle). The defendant, however, says that this meant that there was no difference between treatment of expenses for the purposes of the credit card or payment by a cash or cheque. In my view, the defendants are correct so to state.
I should also record that there is a dispute about the amount now owing for personal use.
Chronology of emails about the use of the credit card for personal expenses.
Prior to 2000, the claimant possessed an easyJet credit card whilst working for easyJet; he had used for both company and personal expenditure.
It is necessary to review how the rules on personal expenses developed within EGUK and what was said in certain relevant emails between members of the management of EGUK. The claimant was either the recipient or copied into almost all of these e mails. I do this chronologically starting in 2000.
EGUK was a rather smaller operation when launched than easyJet had been, but the practice of use of credit card for personal purposes continued within EGUK. It is quite clear that several members of EGUK management wanted the system to be changed, but in my view they did not pursue it to the end, that is banning the use of the credit card or indeed taking the credit card away from the claimant.
In my view, it is typical of the low key approach that was taken during this period that Mr Vincent on 25 April 2001 writes to the claimant as follows:
"Hi Nick,
This is a subject I have managed to forget to bring up with you as it is not major. However, it may be a sensitive issue with auditors, IR etcetera. You are using the credit card for a lot of personal purchases. In fact, we are now aware that your St Albans mansion has a number of Argos furniture items. It would be much better if you could use your own credit card. It would save tremendous time in analysing the card and we wouldn't have to ask for money for repayment which we don't like doing."
The claimant responded some three hours later, saying:
"I don't have a mansion in St Albans; nonetheless I will take your point."
Two matters arise from that interchange. Firstly, Mr Vincent did not see the matter as a "major" one and I think that characterised the position of the EGUK throughout, including indeed Sir Stelios. Secondly, the claimant appeared to agree that this should not continue, but he was allowed to continue.
On 5 November 2002, Mr Macleod, the group...
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