Moyses Stevens Flowers Ltd v Flower Station Ltd
| Jurisdiction | England & Wales |
| Judge | Master Brightwell |
| Judgment Date | 05 January 2024 |
| Neutral Citation | [2024] EWHC 4 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-001489 |
[2024] EWHC 4 (Ch)
Master Brightwell
Case No: BL-2021-001489
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Richard Hoyle (instructed by Fox Williams LLP) for the Claimant
Simon McLoughlin (instructed by Ingram Winter Green LLP) for the Defendants
Hearing dates: 1 November, 18 December 2023
Approved Judgment
This judgment will be handed down remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:00am on Friday 5 January 2024
This judgment concerns two applications. The first is an application dated 23 June 2023, by which the claimant seeks orders striking out the defences raised by the first defendant to the claimant's claim for an account, alternatively an order for summary judgment. The second is an application by the defendant dated 10 November 2023, seeking orders declaring the meaning of a recital to an earlier order made on 14 April 2023, alternatively permission to withdraw that recital in the event that it constitutes an admission or a concession (“the Recital Application”).
The claim concerns the contractual relationship between two companies, the claimant, Moyses Stevens Flowers Ltd (“MSFL”) and the first defendant, Flower Station Limited (“FSL”). As their names suggest, both companies carry on business in the sale of flowers. Until around August 2020 the two companies were in the common ownership and control of two individuals, Mr Spasoje (Spalé) Marcinko, and Mr David Cohen, who was joined to the claim as the second defendant by a consent order made on 4 August 2022.
It is common ground that while the companies were in common ownership each would pay expenses on behalf of the other company. It also seems to be agreed that there was an obligation on the part of each company to repay the sums which had been incurred on its behalf by the other. In the re-amended defence and counterclaim of the first defendant, it is admitted that in the period from 2012 to around August 2020 MSFL and FSL each paid debts and met liabilities owed by the other on the other's behalf. MSFL pleads in the amended particulars of claim there was an implied agreement for repayment of the sums so paid by FSL to MSFL. Alternatively, MSFL claims that it is entitled to an order in restitution for repayment of the sums paid, or to an order for money had and received by FSL. I am told that MSFL believes it may recover up to £2.5m on the taking of an account, a suggestion rejected by the defendants.
It is common ground that, for the period from August 2019 onwards, no account has been taken and that such an account is now required. MSFL however claims an entitlement to an account from 31 January 2016 until completion of the agreement for the separation of the companies and then from completion onwards. FSL itself counterclaims an entitlement to an account for the financial periods ending 2020 and 2021.
FSL's re-defence pleads that, at the end of their respective financial years (MSFL's financial year ending on 31 January and FSL's financial year ending on 31 August), including for the years ending in 2016, 2017, 2018 and 2019, DJP prepared draft accounts for MSFL for Mr Marcinko to consider and approve, and prepared draft accounts for FSL for Mr Cohen to consider and approve. DJP are the chartered accountants said to have been instructed by both companies, Donald Jacobs & Partners.
Paragraph 4(d) to (g) of the re-amended defence and counterclaim says this:
‘(d) In preparing the Claimant's and FSL's draft accounts, DJP took instructions from Mr Marcinko and/ or Mr Cohen in relation to the identification and treatment of debts and liabilities met by each of the companies on behalf of the other and the necessary adjustments were made in the course of preparing the companies' draft accounts.
(e) For the avoidance of doubt, both Mr Marcinko and Mr Cohen knew that DJP were preparing both the Claimant's and FSL's accounts and that debits and credits appearing (or forming the basis for entries) in the relevant year end's accounts for the Claimant would be reflected in the relevant year end's accounts for FSL (and vice versa).
(f) The Claimant's accounts for the years ending 2016, 2017, 2018 and 2019 were prepared by DJP and approved by Mr Marcinko.
(g) When Mr Cohen approved FSL's accounts for the years ending 2016, 2017, 2018 and 2019 he was satisfied that they gave a true and fair view of the assets, liabilities, financial position and profit or loss of FSL. FSL assumes that Mr Marcinko will say that he was similarly satisfied in relation to the Claimant's accounts for those years (as he was required to be in order to comply with his duty as director of the Claimant under inter alia sections 393 and 414 of the Companies Act 2006).’
In paragraph 10(a), FSL then pleads as follows:
‘An account in relation to each of the years ending 2016, 2017, 2018 and 2019 has already been carried out on behalf of the Claimant (and FSL) and agreed by Mr Marcinko and Mr Cohen on behalf of the Claimant and FSL, with the assistance of the companies' accountants, and which accounting process resulted in the preparing, approval by Mr Marcinko and Mr Cohen and filing at Companies House of the Claimant's and FSL's respective company accounts.’
The defence of estoppel by representation is pleaded at paragraph 10(d):
‘By Mr Marcinko agreeing the accounts for the Claimant in each of the years 2016, 2017, 2018 and 2019 in the circumstances set out herein (and, in particular, in paragraph 3 and 4 above) and by approving and filing at Companies House, the Claimant (and/or Mr Marcinko on behalf of the Claimant) represented to FSL that the accounts for those years and treatment of the liabilities met by each company on behalf of the other was finally agreed.’
This defence of estoppel by representation is then supported by a plea that the defendants relied on those representations and it is said that it would be unconscionable and inequitable in the circumstances if MSFL were allowed now to deny that its and FSL's respective accounts for the relevant years had not been finally agreed for and on behalf of MSFL and FSL.
The plea of reliance is put in the following terms, at paragraph 10(d)(ii):
‘FSL (and Mr Cohen on its behalf) relied on those representations in (i) preparing, approving and filing its own accounts at Companies House for each of the years 2016, 2017, 2018 and 2019 (ii) carrying on its business (including with the Claimant) in the period(s) that followed (iii) dealing with third parties in the period(s) that followed (including on behalf of the Claimant) and on the understanding that the Claimant's and FSL's respective accounts for the years ending in 2016, 2017, 2018 and 2019 represented a true and fair view of the assets, liabilities, financial position and profit or loss of each of the companies and (iv) continuing in those ways without taking alternative or any other (more formal) steps finally to determine the accounting position as between the Claimant and FSL.’
FSL also pleads at paragraph 10(e) that MSFL is estopped by convention from now contending that the accounting position between the parties is other than is set out in their respective year-end accounts for the relevant years. This plea is also supported by an allegation that the accounting position between the parties was agreed, that FSL relied on that convention, and that it would be unconscionable and inequitable if the claimants were allowed now to resile from the convention, FSL having changed its position in reliance on the convention, as pleaded at paragraph 10(d)(ii) (set out above).
The procedural history of the claim is as follows:
i) The claim form was issued by MSFL against FSL alone on 26 August 2021. A defence was filed in November 2021 (the document does not state the date in November when it was signed, but I am told its date is 17 November 2021).
ii) MSFL made a Part 18 request of FSL on 21 November 2021.
iii) FSL replied to the Part 18 request on 24 January 2022, indicating that its response to requests 7, 8 and 9 were sufficiently dealt with the defence, a position maintained until the 14 April 2023 hearing.
iv) After two consent orders first making and then extending a stay for the purpose of mediation, a further order was made by consent on 4 August 2022, by which MSFL was granted permission to add David Cohen as the second defendant and to amend the claim form and particulars of claim. The new claim added by amendment is an alternative claim that Mr Cohen acted in breach of fiduciary duty as a company director of MSFL or in breach of his common law or other equitable duties to take reasonable skill and care in the discharge of his accounting functions on behalf of MSFL and not to exceed his authority in the discharge of those functions.
v) A costs and case management conference was held before Deputy Master Linwood on 10 January 2023. The defendants disinstructed their solicitors shortly before that hearing, and Mr Cohen represented both defendants. Case management directions were given to a trial of a preliminary issue, being limited to issues of liability, with the taking of an account and any issues of quantum to be determined separately. The issues of liability will include the question whether the account between the companies has been agreed or settled and, if so, whether Mr Cohen is liable to MSFL pursuant to the claim added by amendment.
vi) The trial is listed for 5 days, including one day of pre-reading time, to begin in a window from 22 to 24 April 2024.
vii) After the CCMC, on 3 March 2023...
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