Michael Anthony Tuke v Derek Hood
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs,Mr. Justice Jacobs |
| Judgment Date | 26 October 2020 |
| Neutral Citation | [2020] EWHC 2843 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2016-000799, CL-2018-000106, CL-2018-000109 |
| Date | 26 October 2020 |
and
[2020] EWHC 2843 (Comm)
Mr Justice Jacobs
Case No: CL-2016-000799, CL-2018-000106, CL-2018-000109
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Alexander Wright and Edward Jones (instructed by Wilmot & Co Solicitors LLP) for the Claimant
Derek Hood as a litigant in person
James McWillams (instructed by Dechert LLP) for the Interested Party
Hearing dates: 18 th and 19 th March, 13 th, 14 th, 15 th, 16 th, 20 th, 21 st, 22 nd, 23 rd, 28 th and 29 th July 2020.
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.
| Contents | Paragraph number |
| A: The parties and the claim | 1 |
| B: The witnesses | 19 |
| C: Overview of the relevant events | 37 |
| D: Legal principles | 131 |
| D1: Agency | 131 |
| D2: Deceit | 138 |
| D3: Dishonest assistance in breach of fiduciary duty | 149 |
| D4: Knowing receipt | 176 |
| D5: Conversion | 182 |
| D6: Exemplary damages | 186 |
| E1: The XKSS purchase | 194 |
| E2: The AC Aceca purchase | 231 |
| E3: Mercedes Gullwing purchase | 278 |
| E4: Group C part-exchange transaction | 292 |
| E5: Aston Martin exchanged for Jaguar XK 120 | 395 |
| E6: Broadspeed and Mark II Jaguar part exchanged for Mark II and XK 150S | 433 |
| E7: C Type part exchanged for Costin Lister and Allard | 461 |
| E8: XKSS part exchanged for Lister Knobbly | 491 |
| E9: GT 40(s) part exchanged for Ferrari TR 250 replica | 557 |
| E10: XK 120 (JWK registration) part exchanged for E type Lightweight | 591 |
| E11: Gullwing | 622 |
| E12: Conclusion | 634 |
| F: Loss of investment opportunity | 637 |
| F1: The issues and the parties' arguments | 637 |
| F2: Discussion | 649 |
| G: Conclusions | 683 |
| G1: Individual transactions | 684 |
| G2: Loss of investment opportunity | 685 |
| G3: Compound Interest | 686 |
| G4: Exemplary Damages | 687 |
| G5: Conversion, account of profits, knowing receipt | 688 |
A: The parties and the claim
In December 2009 Mr. Michael Tuke (“Mr. Tuke”), the claimant in these proceedings, visited the showrooms of a classic car business, JD Classics Ltd. (“JDC”). Mr. Tuke had enjoyed a successful career in orthopaedic engineering, and had recently sold his business to Johnson & Johnson (“J&J”) for a figure in excess of £ 60 million. He had identified classic cars as a potential investment which would achieve returns greater than those then available, in the aftermath of the global financial crisis, from placing funds on deposit with banks.
JDC was at that time a leading retailer of classic cars, and a market leader in terms of volume and values achieved. It sponsored leading classic car race meetings such as those which take place each year at Goodwood and Le Mans. In addition to retail, its business included car restoration. Potential buyers of classic cars, and lenders, would often be impressed by the workshops, which were all on site. JDC was a market maker and to some extent set prices which others followed. A car which was presented at JDC, and which had been restored or partially restored or prepared for sale by JDC, might command a 15% higher value than cars purchased from other retailers: the company was at the top end of retail. At that time, and indeed subsequently, it appeared to be a very successful business.
JDC had been founded and built up by Mr. Derek Hood. Until August 2016, when the business was acquired by a private equity-led consortium, Mr. Hood was either the sole or majority owner of the company, and controlled its business. At the time of his meeting with Mr. Tuke in 2009, he was clearly a man of considerable drive and energy and a very persuasive salesman. He was, and remains, extremely knowledgeable about classic cars, having spent more than 30 years in the business.
At that meeting, Mr. Tuke agreed to buy 4 classic cars which he had seen on his visit, for a total sum in excess of £ 4 million. Thereafter Mr. Tuke's dealt with JDC over a number of years in a large number of transactions, some of which involved a degree of complexity. There were essentially three phases to the parties' dealings.
First, there was an “acquisition” phase. This began with the showroom visit in December 2009 and ended in September 2010. During that time, Mr. Tuke bought from 21 classic cars from JDC for a total sum in the region of £ 20 million. 7 of these cars were extremely expensive, costing in excess of £ 1 million each: Ford GT 40 race car (£1,400,000); Jaguar C-Type (£ 3,000,000); Jaguar XKSS (£ 3,456,000); Jaguar XK 120, registration number JWK 651 (£ 1,200,000); Mercedes Gullwing (£ 1,800,000); Jaguar Lightweight E-Type (£ 2,941,175); Allard J2X (£1,300,000). The prices for the remaining cars under £ 1 million varied.
The acquisition period came to an end because Mr. Tuke no longer had sufficient liquid resources to buy further cars, and indeed needed to sell cars in order to meet tax liabilities arising on the sale of his business to J&J and also because the possibility arose, in around of April 2010, of Mr. Tuke buying back part of his business which J&J no longer wished to operate.
Secondly, there was a phase between September 2010 and April 2011 culminating in the “Group C” transaction. During this time, Mr. Tuke, via JDC, was seeking to sell cars in order to raise money. This was generally unsuccessful, save for the “Group C” transaction which Mr. Hood presented to Mr. Tuke in January 2011. It ultimately involved Mr. Tuke selling 4 of the previously acquired cars for £ 4 million, but at the same time agreeing to buy 5 Jaguar “Group C” racing cars for £ 10 million. (Group C was a category of motorsport introduced by the FIA in 1982.) Of the £ 10 million, Mr. Tuke borrowed £ 8 million from Close Asset Finance (or an associated Close company) (“Close”). The balance of £ 2 million was financed from the sale of the 4 cars. Through this series of agreements, Mr. Tuke therefore raised £ 2 million, less certain commissions and charges. However, it resulted in Mr. Tuke having to meet significant interest payments, as well the capital repayments which were required from August 2011 onwards.
The Group C transaction is a pivotal transaction as far as the present claim is concerned. Mr. Tuke claims that he was misled into entering into the transaction, and that it brought significant financial problems in its wake.
Thirdly, there was a phase (following the Group C transaction) between June 2011 and July 2013 when Mr. Tuke sold 14 cars by way of part exchange transactions. These included nearly all of the most expensive (£ 1 million plus) cars which had been acquired during the acquisition phase. A further expensive car, the Gullwing, was sold for cash in December 2013.
Against this background, Mr. Tuke seeks damages or equitable compensation or an account of profits exceeding £40 million against the Mr. Hood. His claims are brought in deceit, dishonest assistance in breach of fiduciary duty, knowing receipt and conversion. The trial was concerned with three separate consolidated claims which Mr. Tuke had commenced at various times against both JDC and Mr. Hood. There are 12 individual transactions which are in issue. These comprise: (i) three of the purchase transactions during the acquisition phase; (ii) the Group C transaction; and (iii) 8 part-exchange transactions, albeit that one (relating to a Bugatti) has been settled.
The present trial of 3 consolidated claims has taken place in the context of a further action which was heard by Lavender J. in March 2018: Michael Antony Tuke v J.D. Classics Ltd. [2018] EWCH 755 (QB). In that action, Lavender J. decided, in relation to the purchase transactions during 2010, that JDC was authorised by Mr. Tuke to act, agreed to act, and either did act, or purported to act, as agent for Mr. Tuke in negotiating and concluding the purchase of cars by Mr. Tuke in 2010: see paragraph [63] of his judgment. In relation to the Group C transactions and the other sale transactions which took place from 2011 onwards, Lavender J. held that Mr. Tuke appointed JDC as his agent to negotiate and conclude the sale of cars and receive payments on his behalf: see [170]. That agreement remained in force throughout each of the subsequent sales transactions: [170].
That decision therefore established, as between Mr. Tuke and JDC, the existence of an agency relationship between Mr. Tuke and JDC in relation to all of the transactions with which I am concerned. The case led to the production by JDC to Mr. Tuke of extensive documentary material relating to the various transactions, but Lavender J. was not concerned with the financial consequences of the finding of the existence of the agency relationship. Moreover, the claim was against JDC alone. Mr. Hood was the individual who gave instructions and signed statements of truth and gave witness statements in connection with those proceedings, but he was not a party to them. The findings of Lavender J. do not therefore, as Mr. Wright accepts, formally bind Mr. Hood: i.e. they do not give rise to an issue...
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