Mr Hitendrakumar Patel v Mr Michael John Parker
| Jurisdiction | England & Wales |
| Judge | Nicola Rushton |
| Judgment Date | 31 July 2023 |
| Neutral Citation | [2023] EWHC 1979 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2023-000067 |
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[2023] EWHC 1979 (Ch)
Nicola Rushton KC
(Sitting as a Deputy Judge of the High Court)
Case No: BL-2023-000067
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
Fetter Lane
London, EC4A 1NL
David Turner KC and Stuart Benzie (instructed by Laytons LLP) for the Claimant and the Part 20 Defendant
Robert Mundy (instructed by George Green LLP) for the Defendant/Part 20 Claimant
Natalie Kearney (instructed by Bartons) for the Proposed Second and Third Defendants
The Proposed Fourth Defendant was not represented and did not attend
Hearing dates: 11–12 July 2023
Approved Judgment
This judgment was handed down remotely at 10 a.m. on 31 July 2023 by circulation to the parties or their representatives by email and by release to the National Archives.
Nicola Rushton KC:
Introduction
In this case the Claimant, Mr Hitendrakumar Patel (“ Mr Patel”) is bringing a claim essentially for fraud against his former business associate, the Defendant, Mr Michael Parker (“ Mr Parker”), arising out of a failed joint venture between the two of them to acquire and develop a site for a bariatric hospital in Battersea, London, in 2020–2021.
The claim was issued in the Technology and Construction Court on 22 July 2022 and was transferred to the Business List of the Chancery Division by an order of Mrs Justice O'Farrell of 19 December 2022.
There are before the Court 3 interim applications from Mr Patel:
i) For delivery-up of documents, now limited to documents required for the maintenance of accounting records and preparation of the statutory accounts for the company, Smart Hospitals Limited (“ SHL”);
ii) For permission to join 3 new defendants and to re-amend the Amended Particulars of Claim (“ APOC”); and,
iii) For summary judgment and/or strike out of Mr Parker's counterclaim, which relates to a personal guarantee executed by Mr Parker. This third application is also made by the Part 20 Defendant, Smartway PW. Holdings Limited (“ Smartway”).
This is the sequence in which the applications were presented, over the course of a two-day hearing on 11–12 July 2023 and, with one small exception, the order in which I will deal with them in this judgment.
Factual background
Sometime in mid to late 2020 Mr Parker approached Mr Patel with a proposal to acquire office premises at a site Mr Parker had identified at Oyster Wharf, Lombard Road, London (“ the Hospital”) and develop them into a bariatric hospital.
There is no dispute that Mr Patel and Mr Parker entered into an oral joint venture agreement (“ the JVA”) in about December 2020, agreeing among other things to set up a “PropCo” to own the site and an “OpCo” to lease the premises, develop them and operate the hospital. While there is some dispute about how their respective financial contributions were to be made and funded, in principle their contributions and interests were to be 50:50, and Mr Parker was to manage the development.
Consequently, two companies were set up in January 2021: DDET Properties Limited (“ DDET”) as the PropCo and SHL as the OpCo. Mr Patel and Mr Parker are the two directors of both companies, and have been throughout. Half the shares of DDET are owned by Mr Patel's two children and half by the Proposed Fourth Defendant, Echo Tango (Holdings) Ltd (“ ETH”). ETH is owned by Mr Parker's two sons, who are also its directors. As to SHL, half the shares are held by Smartway and half, again, by ETH. The directors of Smartway are Mr Patel's wife Kirti Patel and his mother, Bhanumati Patel, who are also shareholders. They and Mr Patel are registered as persons with significant control.
At the start of the project Mr Parker estimated to Mr Patel that the cost of the conversion would be around £3.4m, to which they agreed to contribute equally, i.e. £1.7m each. There is a dispute as to whether they also agreed to contribute 50:50 to the £3.5m cost of purchasing the Hospital (Mr Patel's case), or whether it was always intended that Mr Patel would finance the purchase, to then be refinanced with a commercial lender (Mr Parker's case). In any event, shortly before the purchase was due to take place, Mr Patel and Mr Parker agreed that it would be financed by a secured loan from Smartway to DDET. Mr Patel says this came about because Mr Parker said at the last minute that he did not have his half of the funds for the purchase.
Contracts were exchanged for the purchase of the Hospital by DDET on Friday 19 March 2021 with completion taking place on Friday 26 March 2021, for a price of £3,480,000.
Between exchange and completion, late in the evening of 19 March 2021, Mr Josh Cocklin, the Chief Executive of Smartway, sent an email to Mr Parker and Mr Patel which attached 4 draft agreements, described in that email. These were: (a) the facility agreement between Smartway and DDET; (b) a debenture in favour of Smartway over DDET's assets; (c) a legal charge in favour of Smartway over the Hospital; and (d) a personal guarantee by Mr Parker in respect of the facility agreement. The facility was for £3.66m. Mr Cocklin has acted extensively on behalf of Mr Patel throughout this matter, and has provided several witness statements in support of the 3 applications.
Mr Parker signed that personal guarantee (“ the Personal Guarantee”) on Tuesday 23 March 2021 at a meeting with at least Mr Cocklin, which it is now agreed took place at Smartway's offices. His signature was witnessed by Nicole Lyons, an employee of Smartway. There is a significant dispute between the parties as to the circumstances leading up to Mr Parker's execution of the Personal Guarantee and whether it is valid and enforceable, on which I will expand below in relation to the third application. Among other things, there is a dispute over whether Mr Patel was present or whether Mr Parker spoke to him on the telephone during that meeting.
Following the purchase of the Hospital, Mr Parker commenced the development works. SHL as OpCo was to carry out the development, and Mr Patel says that it was agreed that SHL would employ the contractors and be invoiced for goods and services. Mr Parker says it was agreed that another company, of which he is the sole director, Echo Tango (Trading) Limited (“ ETT”), the Proposed Third Defendant, would be engaged as a main contractor, so contracts relating to the works would generally be with ETT.
Certainly in practice, all payments in connection with the development were made to and from ETT's bank account. However Mr Patel says this was because Mr Parker claimed to be unable to access SHL's bank account and asked that until he could, all contributions and payments be made through ETT's account, to which Mr Patel agreed as a temporary measure. Of the invoices said to relate to the development works which are now available and in the bundle, some have been rendered to SHL and some to ETT.
On 22 June 2021 the accountant to SHL and DDET, Mr Rohit Khandia (“ Mr Khandia”), raised a concern by email to Mr Parker and Mr Patel that all assets be purchased only in the name of SHL, even if payments were made through ETT's bank account. Mr Patel replied, asking Mr Parker to do this.
Substantial contributions towards the cost of the works were made by Smartway, which Mr Patel says were made on his behalf in accordance with the JVA. On 4 May 2021 Smartway paid £350,000 into ETT's account (by a payment of £250,000 and another of £100,000). On 2 June 2021 Smartway made a further payment into ETT's account of £500,000. There is also evidence that on about 9 August 2021 Mr Patel or Smartway made a further payment of £818,832.79 in respect of hospital equipment, direct to a supplier, Karl Storz.
Mr Cocklin says that in June 2021 Mr Parker asked Mr Patel to contribute a further £850,000, but that he and Mr Patel wanted more transparency on expenditure before Mr Patel did so. On 23 July 2021, a meeting took place between Mr Parker, Mr Patel and Mr Cocklin at which Mr Parker claimed he had contributed about £1.2m so far to the works, via ETT and ETH.
Between July and September 2021 Mr Cocklin says he became increasingly concerned as to whether Mr Parker had in fact made these contributions, whether the funds contributed by Smartway/Mr Patel were being spent solely on SHL's works and how the finances were being managed by Mr Parker, especially since Mr Cocklin had no visibility on them because all transactions were still being made through ETT's account. He says he struggled to get Mr Parker to provide copies of relevant financial records as he requested.
In August 2021 Mr Parker provided a spreadsheet to Mr Cocklin which was said to set out expenditure on the project up to July 2021, and totalled £1,460,109.58 including VAT, plus copy invoices and redacted bank statements from ETT's account. A further document produced by Mr Parker suggested he had spent a further £282,415.07 and had contributed £200,000 through ETH. Mr Cocklin says Mr Patel's trust in Mr Parker began to break down after analysing these documents since they included various items which clearly did not appear to be expenditure related to SHL's business.
Mr Patel and Smartway made no further contributions to the project. The development stalled and a proposal from Mr Parker that he buy out Mr Patel came to nothing.
On 16 May 2022, Mr Patel's solicitors, Laytons, wrote to Mr Parker saying that Mr Patel was rescinding the JVA.
Shortly thereafter in July 2022 Mr Patel issued this claim against Mr Parker, in which he...
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