Mark Julian O'Brien v Simon Phipps
| Jurisdiction | England & Wales |
| Judge | Cadwallader |
| Judgment Date | 15 May 2023 |
| Neutral Citation | [2023] EWHC 1153 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-LIV-000027 |
[2023] EWHC 1153 (Ch)
HHJ Cadwallader SITTING AS A JUDGE OF THE HIGH COURT
Case No: BL-2021-LIV-000027
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LIVERPOOL
BUSINESS LIST (ChD)
Liverpool Civil and Family Courts
35 Vernon St, Liverpool L2 2BX
Stephen Connolly (instructed by Escalate Law Ltd) for the Claimant
Mark Harper KC and Nick Taylor (instructed by DTM Legal) for the Defendant
Hearing dates: 6, 7, 8, 9, 10 March 2023
Introduction
The claimant, Mr O'Brien, and the defendant, Mr Phipps, are businesspeople, and were also close friends for many years: indeed, Mr Phipps described them as being ‘like brothers,’ and Mr O'Brien did not disagree. They worked, often together, in the insurance industry, particularly in the motor insurance industry. They used a number of corporate vehicles. It is common ground that when they were in business together, they operated in some sense on the basis of equality (the precise sense, and the significance to be attached to it, is at issue). They were by no means always successful. In 2010 or 2011 a business opportunity arose in the United States of America, and Mr Phipps put a great deal of time and effort into a company incorporated in the state of Kentucky known as Shortfall Cover LLC (“Shortfall”) which had been incorporated to realise that opportunity. A Mr Jeremy Coll was also involved. There is an issue as to the extent if any to which Mr O'Brien was involved. Mr Phipps' shareholding in Shortfall was eventually sold in May 2020 for a substantial consideration. By that time, he and Mr O'Brien had fallen out. These proceedings commenced in September 2021. They are primarily concerned with Mr O'Brien's claim that Mr Phipps held his shareholding in Shortfall upon an express oral trust as to half for Mr O'Brien, such trust having been declared by Mr Phipps at a meeting in about August 2013 at a Harvester restaurant in Stoke-on-Trent. Accordingly, he claims half the net proceeds of sale of the shares. Mr Phipps says that nothing of the kind took place, while alleging by contrast that at a much earlier stage, in about late 2010 or early 2011, he had merely made a bare and non-binding promise to Mr O'Brien in respect of the Shortfall project along the following lines: “Don't worry, if we make any money, I will look after you”, or words to substantially the same effect.
Moreover, Mr Phipps alleges that there was a binding agreement (referred to in these proceedings as the Profit and Loss Sharing Agreement) between him and Mr O'Brien that the profits and losses they made and suffered together would be shared equally. He counterclaims for various alleged breaches of that agreement; Mr O'Brien denies that there was a binding agreement to that effect, and responds that Mr Phipps was himself in breach of that agreement in various ways if there was found to be one.
Trial
The hearing of the trial took place over 5 days. For the claimant, I heard oral evidence from Mr O'Brien, Chris Sharpe (who worked at Insure Online Ltd, one of their companies), and Elaine Sandland (a bookkeeper). Mr O'Brien's evidence was confused, inconsistent and anxious. My impression upon which however I have not placed much reliance, is that he thought he was telling the truth although, for the reasons which appear below, many of his recollections were inconsistent and must have been inaccurate. I found Mr Sharpe's evidence plausible and, to a degree, corroborative of the evidence of Mr O'Brien; but given that the events which he was describing were so long ago, I found it more useful as an indication of his general impression of the relationship between the parties, than as evidence on specific events. I found Miss Sandland's evidence as to general matters to be plausible and useful: in particular, her description of funding as complicated, and of ‘money flying all over the place’, while the UK businesses were ‘scraping round for funds to pay staff’. She produced a number of spreadsheets, and attempted explanations of them, which, however, I did not find helpful: most of them seem to have been prepared ad hoc for particular purposes which could no longer be reconstructed with confidence, and on the basis of primary information which was no longer available.
For the defendant I heard oral evidence from Mr Phipps, Mr Coll, and David Skelton (an information technology manager). Mr Phipps' evidence was given in a more polished way than that of Mr O'Brien, but cross examination revealed certain difficulties in his account too. The claimant had hoped to have the evidence of John Beaumont, but he provided no statement or draft statement, and there was no opposition to his application to be released from his witness summons, so he did not attend. I found I was not assisted by Mr Skelton's evidence generally, nor in particular his evidence about listening to recorded telephone calls. I refer to Mr Coll's evidence below.
I had the benefit of full skeleton arguments from counsel, an agreed case summary and list of issues and, after the conclusion of the evidence, an agreed chronology and written closing submissions from both sides, and short written submissions from both sides in clarification or correction of the other's closing submissions. Because of time limitations, and at the suggestion of the parties, there were no oral closing submissions and, in view of the quality of the written material before me, none were necessary. In preparing this judgment, I have reviewed the entire trial bundle, my notes of the oral evidence and the opening remarks of counsel, and the relevant authorities. I have considered all the points made to me, notwithstanding that I have not explicitly referred to all of them in this judgment
The issues
The Claimant's case
The issues between the parties are, of course, defined by the statements of case, and it is worth summarising how the claimant's case as to the creation of this trust is put in the particulars of claim. The claimant's case is that he and Mr Phipps had consistently acted on the basis that they were equal business partners through a variety of companies and means (though not partners in the strict legal sense). They had co-owned a company called Insure Online Ltd, which had operated in its own name in the field of motor — related insurance products and, when the financial services authority revoked its authority to conduct such business, they had operated its business through an FCA/FSA company belonging to Mr Coll and his wife Claire called JD Concepts Ltd with their agreement. After Insure Online Ltd was wound up on or around 3 February 2009, Mr O'Brien and Mr Phipps mainly carried out their business through F & I Online Ltd which, however, entered creditors' voluntary liquidation on 4 March 2014.
Against that background, in or about 2010 Mr O'Brien, Mr Phipps and Mr Coll discussed the possibility of setting up a business in the USA to provide repatriation insurance for individuals who died when abroad on holiday or business. Mr Phipps and Mr Coll went to the USA to explore the possibility and discovered a gap in the market for Return to Invoice Gap insurance.
In a number of conversations over a period the three of them orally agreed to set up a business in the USA to exploit that opportunity on the basis that two US businessmen, a Mr James Hill (referred to throughout the Particulars of Claim as ‘Hall’) and a Mr Terry Hawkins, and would be given 20% of the shareholding for their business experience and support, Mr Phipps and Mr Coll would undertake the day-to-day running of the company, but Mr O'Brien would be kept informed and would be involved in all major decisions, while he would remain in the UK and run the UK insurance businesses in order to support the new company with loans from those businesses and from the individual parties, and, importantly, that the balance of the shareholding would be held in equal shares between the three of them. This was described as “the Initial Understanding”. It is not an allegation of a declaration of trust.
Shortfall was then incorporated on 21 January 2011 to exploit that opportunity, and Mr Phipps told Mr O'Brien that, subject to the 20% shareholding of Mr Hill and Mr Hawkins, Mr Phipps, Mr O'Brien and Mr Coll were equal shareholders; and Mr O'Brien thought that he was being kept fully informed, and he worked in the UK businesses and they provided financial support to Shortfall, Mr Phipps and Mr Coll. But shortly before a meeting in August 2013 at a Harvester restaurant in Stoke-on-Trent at which Shortfall's business was to be discussed, Mr Phipps told Mr O'Brien that the balance of the shares were held by Mr Phipps and Mr Coll equally, and that none were held by Mr O'Brien. During the meeting which followed, Mr Phipps agreed with Mr O'Brien that the balance of the shareholding should be split equally three ways, but Mr Coll claimed he was entitled to half of it. Mr Phipps then expressly stated that, consistently with the business relationship that had always existed between himself and Mr O'Brien, half of his shareholding, at the very least, belonged to Mr O'Brien. In reliance on that, Mr O'Brien agreed with Mr Phipps that they would continue to work together with Mr Coll, reserving their rights as to any additional shares held by Mr Coll.
It is the conversation at that meeting in 2013, and in particular, the express statement by Mr Phipps that half of his shareholding belonged to Mr O'Brien, upon which Mr O'Brien relies as a declaration of trust of Mr Phipps' shares in Shortfall in his favour.
The defendant's case
The defendant's case, in his defence and counterclaim, is that he and Mr O'Brien were involved in various business ventures on the basis of a relationship whereby it was agreed they would share equally in...
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