Mullarkey and Others v Broad and another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LEWISON,Mr Justice Lewison |
| Judgment Date | 03 July 2007 |
| Neutral Citation | [2007] EWHC 3400 (Ch) |
| Docket Number | Case No: 38 C 05 |
| Court | Chancery Division |
| Date | 03 July 2007 |
[2007] EWHC 3400 (Ch)
Mr Justice Lewison
Case No: 38 C 05
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr Christopher Brockman (instructed by Ivor Goodman) for the Claimants (Days 1 and 2); thereafter the Claimants appeared in person
Mr John Broad appeared in person
Hearing dates: 19, 20, 21, 25, 26 June 2007
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.
THE HONOURABLE MR JUSTICE LEWISON
Introduction 2
Background 3
Are the claimants entitled to bring the claim? 4
London 5
Southern 6
Sedgemere 7
Limitation 7
Pleading and proving intentional wrongdoing 8
The pleaded allegations of fraud against Mr Broad 10
Mr Rawlinson 11
–20 Mill Road 12
Gentlesound Ltd 14
Capital Design and Advertising Ltd 15
ABF Associates Limited 15
GSL Design & Print Limited 15
Loans to unknown third parties 16
Concealing Southill's indebtedness 17
Result 19
Introduction
Mr Mullarkey, Mr Goodman and Sedgemere Estates plc (“Sedgemere”) allege fraudulent misfeasance by Mr John Broad (“Mr Broad”) as a director of Southill Finance Limited (“Southill”), which went into creditors' voluntary liquidation on 6 January 1995. Southill was originally incorporated as First Guardian Finance Ltd, but to avoid confusion I will call it Southill throughout. A claim arising out of the activities of Southill was also made against Mr Broad's son, Mr Ian Broad; but that claim was compromised very shortly before the trial began. The allegations of misfeasance concern:
i) The transfer by Southill of a property 18 -20 Mill Road, Burgess Hill, West Sussex without payment to Mr Mullarkey and Mr Broad causing a loss of at least £88,000 plus interest.
ii) The payment of sums by Southill to Mr Broad and his son Ian and/or companies connected to them, namely:-
a) The sum of £36,941 paid to Gentlesound Limited;
b) The sum of £13,195 paid to Capital Design and Advertising Limited;
c) The sum of £45,543 paid to GSL Design & Print Limited.
d) The sum of £2,823 paid to ABF Associates Limited;
e) The unexplained sum of £296,778 paid to unidentified recipients.
As well as denying the allegations of misfeasance, Mr Broad also says that the three claimants have no right to bring the claim. A claim may be brought by a creditor of the company concerned. It is common ground that neither Mr Mullarkey nor Mr Goodman were creditors of Southill when it went into liquidation. However, they bring their claim as assignees of the rights of Sedgemere Estates (London) Limited (“London”) and Guardian Foundations (Southern) Limited (“Southern”). They have recently taken an assignment of the rights of Sedgemere. Mr Broad says that none of these companies was a creditor of Southill when it went into liquidation.
Mr Brockman of counsel appeared on behalf of the claimants for the first two days of the trial. But at the start of the third day he appeared only to say that his instructions had been withdrawn; following which he himself withdrew. Thereafter the claimants appeared in person. Mr Goodman presented their case. Mr Broad appeared in person throughout the trial.
The events with which this claim is concerned took place many years ago. Some of the claims involve detailed figurework. Not only are the financial and other records incomplete and in some cases inconsistent with each other, but also, not surprisingly, the witnesses could not recall the details of what the figures represented after this lapse of time.
Background
Guardian Subsidence Control Limited (“GSCL”) was incorporated in about 1979. Mr Broad became involved with GSCL in or about 1981. By 1985, Mr Broad controlled 55 per cent of the issued share capital of GSCL, those shares being held by Republic Capital Holdings Limited (itself a wholly owned subsidiary of Sears Field Limited a company controlled by Mr Broad and in which he held a majority shareholding). Mr Mullarkey held the remaining 45 per cent of the issued share capital in GSCL. GSCL was the holding company of a group of companies known as the “Guardian Subsidence group”. The “Guardian Subsidence group” provided property subsidence control services (e.g. underpinning). The “Guardian Subsidence group” provided its services through a series of operating subsidiaries covering particular geographical areas.
First Guardian Finance Ltd (later to be called Southill Finance Ltd) was incorporated on 16 October 1984. At that time GSCL owned its entire issued share capital. Mr Mullarkey and Mr Broad were the first directors of Southill. Part of its intended purpose (although not one that was fully realised) was to use funds available from the operating companies within the Guardian Subsidence group to buy plant and machinery for use of those operating companies, and thus keep finance costs “in house”. This appears to be supported by the minutes of a meeting held on 2 July 1990. It was also intended that Southill would make property and other investments with surplus funds. This seems to be borne out by Southill's purchase of 18–20 Mill Road.
On 11 May 1987, Broad & Mullarkey Limited (“BML”) was incorporated. The entire issued share capital of BML was owned equally by Mr Mullarkey and Mr Broad. On 1 December 1988 Guardian Foundations Limited, (later to be called Sedgemere Estates Plc) (“Sedgemere”) was incorporated. Sedgemere's then entire issued share capital consisted of 2 ordinary shares of £1 each, both of which were held by BML. From about 1988, Sedgemere acted as the parent company of a group of companies known as the “Guardian Foundations group”. The “Guardian Foundations group” also provided property subsidence control services. The “Guardian Foundations group” initially provided its services through a series of unincorporated operating divisions but, subsequently, provided its services through a series of operating subsidiaries covering particular geographical areas.
From about 1989, the business of the “Guardian Subsidence group” was gradually wound down over a period of several years and new property subsidence control business was thereafter conducted by the “Guardian Foundations group”.
In 1990, GSCL transferred the entire issued share capital in Southill to BML. Consequently, Southill ceased to be a member of the “Guardian Subsidence group”. Certain operating subsidiaries in the “Guardian Foundations group”, particularly Guardian Foundations London Limited (later renamed Sedgemere Estates (London) Limited) (“London”) and Guardian Foundations Southern Limited (“Southern”), generated cash surpluses from their trading activities. On the other hand, Sedgemere as the parent company in the “Guardian Foundations group”, which did not trade but which provided the head office facilities for the entire “Guardian Foundations group”, was substantially overdrawn. Monies from the cash rich subsidiaries was transferred to Southill; and from Southill to operating companies (and the parent company) that were in need of cash. Southill began to fulfil a treasury management function to the “Guardian Foundations group”. In the exercise of its treasury function for the “Guardian Foundations group”, Southill would receive loans from London and Southern and would provide loans to Sedgemere. One of Mr Broad's sons, Ian Broad, was an employee and, from 1991, a director of Southill. The treasury management function provided by Southill was performed by Ian Broad. Southill charged Sedgemere, as the holding company in the “Guardian Foundations group”, for Ian Broad's services in providing that treasury management function. According to Mr Broad and Mr Ian Broad, this function was undertaken at the insistence of Barclays Bank plc, the bankers to the “Guardian Foundations group”. There is some evidence to support this claim. However the transfers of money were intermittent and on some occasions did not appear to have any real purpose since the money ended up, after a circular journey, in much the same place as that from which it began. Mr Broad recognised that Southill did not have real justification for its existence and that, he said, is why it stopped trading in 1993.
On 26 January 1990, Sedgemere was re-registered as a public limited company. In or about 1991, Sedgemere issued 39,998 ordinary shares of £1 each to BML and 2500 ordinary shares of £1 each to each of four directors of operating subsidiaries of the “Guardian Foundations group”. Consequently, BML then held 80 per cent of the issued share capital of Sedgemere and a director of each of four operating subsidiaries of the “Guardian Foundations group” held 5 per cent of the issued share capital of Sedgemere.
Until 1992 the operating subsidiaries within the “Guardian Foundations group” included Southern and London. However, in 1992, in preparation for a proposed, but never realised, floatation of the “Guardian Foundations group”, the entire issued share capital in Southern was transferred to Associated Energy Services PLC (“Associated Energy”) in return for an issue of shares by Associated Energy to Sedgemere. As a consequence of that issue of shares, Sedgemere held 69.8 per cent of the issued share capital of Associated Energy.
In 1993, the financial affairs of the “Guardian Foundations group” and Southill were reorganised. According to Mr Broad, that reorganisation resulted in the repayment of all loans made by London and Southern to Southill and the repayment of all loans made by Southill to Sedgemere. By 1994, following that reorganisation, he...
To continue reading
Request your trial
-
Bristol Groundschool Ltd v Intelligent Data Capture Ltd and Others (Defendants/ Part 20 Claimants) Alexander John Whittingham (Defendant to Part 20 Claim)
...1 WLR 1476, and which has been confirmed in subsequent cases such as Abou-Rahmah v Abacha [2007] WTLR 1 at (Arden LJ at [69]) and Mullarkey v Broad [2007] All ER (D) 33 (Lewison J at [36]), affirmed by the Court of Appeal [2009] All ER (D) 143. 196 In my judgment: (i) The 2001 Agreement was......
-
James Richard Scott Brearley v Higgs & Sons (A Firm)
...had not been put to Mr Brearley in cross-examination and was not supported by evidence from Mr Bailey or Mr Casha. He referred to Mullarkey v Broad [2007] EWHC 3400 (Ch) at [44] and [45], confirming the need to plead dishonesty clearly and distinctly and put any charge of dishonesty square......
-
National Bank Trust (a company incorporated in Russia) v Ilya Yurov
...of England [2001] UKHL 16 at [181] (Lord Millett); JSC BTA Bank v Ablyazov & Zharimbetov & Others [2013] EWHC 510 (Comm) at [76] and Mullarkey v Broad [2007] EWHC 3400 (Ch) at [47]. (4) Documentary evidence ( Kekhman [67]–[77]). It is now widely accepted that memories are fallible, people......
-
Manolete Partners Plc v Hayward and Barrett Holdings Ltd
...standing. There is authority for the proposition that an assignee of a creditor has standing to make an application using the gateway: Mullarkey v Broad [2007] EWHC 3400 (Ch) [15, 32]. The rationale is in my view plain. If a debt is assigned, the assignee becomes a creditor, and a creditor......
-
Insurance Law Reform by Degrees: Late Payment and Insurable Interest
...fraud were reviewed by Lewinson J in John Francis Mullarkey, IvorGoodman, Sedgemere Estates Plc vJohn Peter Broad, Ian Peter Broad 2007 EWHC 3400 (Ch) at[40]-[47]. Also see Bar Standards Board Handbook (2nd ed, 2015), r C9(2)(c) and SRA HandbookCode of Conduct (v 17, 2016), IB (5.7)(b).496 ......