Mental Health Care (UK) Ltd v Edward Lupen Healthcare Ltd
| Jurisdiction | England & Wales |
| Judge | Pelling |
| Judgment Date | 09 January 2019 |
| Neutral Citation | [2019] EWHC 1 (Ch) |
| Docket Number | Case No: C40MA058 |
| Court | Chancery Division |
| Date | 09 January 2019 |
[2019] EWHC 1 (Ch)
IN THE HIGH COURT OF JUSTICE
PROPERTY AND BUSINESS COURTS IN MANCHESTER
CIRCUIT COMMERCIAL COURT
Manchester Civil Justice Centre
Manchester M60 9DJ
HIS HONOUR JUDGE Pelling QC
SITTING AS A JUDGE OF THE HIGH COURT
Case No: C40MA058
Ms Lesley Anderson QC (instructed by Knights PLC) for the Claimant
Dr Richard Wilson QC (instructed by Bond Adams LLP) for the First and Second Defendants
The Third Defendant did not appear and was not represented.
Hearing dates: 3–7, 10–14,17–19 and 24 September and 11 October 2018
Approved Judgment
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.
HIS HONOUR JUDGE Pelling QC SITTING AS A JUDGE OF THE HIGH COURT
HH Judge Pelling QC:
Introduction
Parties
The claimant (“MHC”) was a wholly owned subsidiary of Castlebeck Care (Teasdale) Limited (‘Castlebeck’) until November 2012, when its shares were acquired by Mr. Michael Adey-Jones, who is referred to universally in these proceedings and, therefore, in this judgment, as Mr. Adey. It is a company that provides private residential and healthcare services for service users and patients with autism, learning and mental health disabilities from various sites in England and Wales either itself and through its various subsidiaries.
The first defendant (“ELHL”) is a company of which the second defendant (“DM”) is the sole director and shareholder.
DM is a registered medical practitioner and consultant psychiatrist. He was MHC's Medical Director between October 2011 and 4 April 2016. Between May 2012 and 4 April 2016, DM was authorised to approve registered medical practitioners for Approved Clinician status for the purpose of compulsorily admitting someone with a mental disorder to a hospital as required by s.12(2) of the Mental Health Act 1983. Between about August 2012 and 4 April 2016, DM was also MHC's Responsible Officer within the meaning of the Medical Profession (Responsible Officer) Regulations 2010 (“2010 Regs”.). In that capacity, DM was responsible for the evaluation of the fitness to practise of every medical practitioner with a prescribed connection to MHC – see Reg. 11 of the 2010 Regs. This task included carrying out regular appraisals of such practitioners and maintaining records of medical practitioners' fitness to practice evaluations including records of appraisals. Between 2014 and 4 April 2016, DM was also MHC's ‘ Caldicott Guardian’ – responsible for protecting the confidentiality of patient and service user information and advising on when it is appropriate to share such information. The role included “ … representing and championing information governance requirements and issues at Board and management team level”.
ELHL is DM's service company through which his services were ostensibly provided to MHC. I say ‘ ostensibly’ because a major issue in these proceedings is whether in fact that was how DM's services were provided or whether, as DM contends, the Consultancy Agreement on which MHC relies in these proceedings was a sham, void and of no effect because DM was in reality employed under a contract of employment between him and MHC.
There are two consultancy agreements on which MHC relies in support of its contention that at all times DM was a free-lance practitioner who provided his services to MHC through ELHL. DM signed the first on 11 October 2011 and Mr. David Beattie signed it on behalf of MHC (then a wholly owned subsidiary of Castlebeck) on 14 October 2011 (“1 st Consultancy Agreement”). The second consultancy agreement is dated (erroneously) 17 July 2011, was made between MHC and ELHL and was supposedly entered into in substitution for the 1 st Consultancy Agreement. It is common ground that this agreement was signed only sometime in 2014 (“2 nd Consultancy Agreement”). It is this agreement on which MHC relies in these proceedings but which ELHL and DM maintain is a sham, void and of no effect. MHC's case is that DM is jointly and severally liable with ELHL for any breach of the 2 nd Consultancy Agreement.
The relationship of MHC with DM and ELHL came to an end on 4 April 2016 as a result of what MHC maintains was the termination of the 2 nd Consultancy Agreement. DM characterises the ending of his relationship with MHC as a summary dismissal because, as I have said, he maintains that that he was an employee.
The third defendant (“WIT”) is a limited company whose business was the provision of nurse re-validation products and services. It is now in liquidation and did not appear and was not represented at the trial. Its main importance in this litigation is that MHC maintains that DM had a commercial or financial interest in it at a time when it entered contractual relations with MHC. I explain the significance of this further below.
Claim in Summary
MHC contends that ELHL and DM have acted in breach of various duties that it alleges arise:
(a) As contractual duties under the terms of the 2 nd Consultancy Agreement;
(b) As fiduciary duties allegedly owed by DM by reason of him allegedly being a de facto director of MHC and/or by reason of DM's role as Medical Director; Responsible Officer and/or Caldicott Guardian;
(c) At common law; and/or
(d) As a consequence of the regulatory duties owed by DM to MHC by reason of his roles as MHC's Medical Director or Responsible Officer or Caldicott Guardian;
by failing to declare to MHC DM's alleged financial and commercial interests in various companies with which MHC entered into agreements for the provision to it of the services and products that I describe in more detail below. MHC alleges that in consequence, ELHL and/or DM are liable in damages to MHC. MHC also alleges that ELHL and/or DM are liable in damages in tort and/or as conspirators, and/or DM is liable to pay equitable compensation for accessory liability in respect of ELHL's alleged breaches of fiduciary duty, in each case for the same sums as are claimed as damages for breach of duty.
Dr Wilson QC, counsel for DM and ELHL, submits that if I conclude that in fact DM was an employee then it necessarily follows that the 2 nd Consultancy Agreement is a sham, void and of no effect and in consequence the claim must be dismissed. It is common ground that if the 2 nd Consultancy Agreement is a sham, MHC will not be able to rely on its terms to found this claim. Dr Wilson argues that if the 2 nd Consultancy Agreement is valid, DM is not personally liable for any breach of the 2 nd Consultancy Agreement that might be proved because he was not a party to it. MHC has not pleaded an alternative case that DM owed the duties relied on or some of them under or by virtue of any contract of employment between him and MHC if (contrary to its case) he was an employee. Whilst arguing that (i) DM was not MHC's employee and (ii) the 2 nd Consultancy Agreement is not a sham, Ms Lesley Anderson QC, counsel for MHC, submits that these points are immaterial to the outcome of these proceedings. She submits this is so given the alternative ways in which MHC's claim has been pleaded and given in particular MHC's case that DM was a de facto director of MHC. Ms Anderson submits that whichever route succeeds, the result is the same. She maintains that in reality the employment issue is material only to some Employment Tribunal proceedings commenced by DM against MHC that are stayed pending determination of these proceedings.
In my judgment there are three issues that should be resolved ahead of all others. The first is whether the 2 nd Consultancy Agreement is a sham and void. The second is whether DM can be liable in law for any breaches of the 2 nd Consultancy Agreement that might have been proved. The third is whether, as MHC asserts, DM was at all material times a de facto director of MHC. Although MHC's pleaded case is that either DM or ELHL was a de facto director, the case that ELHL was a de facto director was not pressed at trial. This is unsurprising given the terms of the 2 nd Consultancy Agreement and the factual basis on which the de facto directorship allegation is advanced, which depends exclusively on the alleged personal involvement of DM in the general management of MHC. If I conclude that DM was a de facto director of MHC then it will be necessary for me to decide whether DM owed MHC any of the alleged fiduciary duties on which it relies in these proceedings. It will then be necessary to make factual findings relevant to the alleged breach of those duties.
MHC's alternative case — that ELHL and/or DM owed relevant fiduciary and other duties to MHC by reason of DM being its Medical Director and/or its Responsible Officer and/or its Caldicott Guardian — arises only if I conclude that the 2 nd Consultancy Agreement is void and of no effect or MHC's case that DM is jointly and severally liable with ELHL for breach of the 2 nd Consultancy Agreement should be rejected and DM was not a de facto director of MHC.
There are various other allegations made against ELHL and DM in relation to alleged misuse of confidential information, a failure to obtain and maintain insurance cover and in relation to DM's management of a patient known in these proceedings as ‘ Patient X’. It is not necessary for me to summarise these at this stage. They are relatively insignificant both in terms of the monetary value attributed to them and the time taken up at trial in investigating them. I address them at the end of this judgment.
Re-validation
The General Medical Council (‘GMC’) was at all times material to these proceedings, and is, the primary regulator for medical...
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