Nova Karen Gowers v Benjamin Daniel Gowers and Another
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HOLMAN |
| Judgment Date | 09 November 2011 |
| Neutral Citation | [2011] EWHC 3485 (Fam) |
| Court | Family Division |
| Date | 09 November 2011 |
| Docket Number | Case No: FD08D02760 |
[2011] EWHC 3485 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
The Royal Courts of Justice
Strand
London
WC2A 2LL
The Honourable Mr Justice Holman
Case No: FD08D02760
and
MISS ANN HUSSEY QC appeared on behalf of the Wife
MR CHRISTOPHER MCCOURT appeared on behalf of the Husband
MR PETER SHAW appeared on behalf of City Docs Limited
The issue and essential facts
During financial proceedings between a husband and a wife, a company, with which the husband and is very closely connected but does not own, paid £500,000 into court. District Judge Gibson later ordered that that sum shall be paid out directly to the wife as the first instalment of a total lump sum of £900,000. The question is whether the district judge could, or should, have done so. The facts are complex but I intend to summarise them as briefly as possible. I will omit much detail and lack some precision, but the following account is sufficiently accurate for the purpose of what I need to decide.
Both parties are now aged around 40. They co-habited from 1990, married in 1996 and separated in 2008, when the husband moved in with another woman with whom he now has a settled relationship and another child. The parties themselves have five children, now aged between 17 and 4. All the wealth was generated during the marriage.
A company called City Docs Limited (CDL or 'the company') was incorporated in December 2000. Its main business was and is to supply photocopying, document storage and associated services to large firms of solicitors and similar businesses. The husband was clearly the founder of, and main driving force behind, the company. He was formerly its chairman and, although currently personally bankrupt, is still employed by the company. The actual corporate structure is as follows. In 1998 the husband, as settler, established in the United Kingdom the Melvin Isaacs discretionary settlement ('the trust'). The discretionary beneficiaries are the husband himself and any children of his. The current trustees are Mr John Nugent, a partner in a firm of solicitors, Gisby Harrison in Cheshunt, Hertfordshire; and Mr Christopher Hindley, FCCA, who is also the accountant to the company. At paragraph 6, line 15 of her judgment dated 16 th September 2010 (which I will call her 'first judgment'), now at bundle page 20, District Judge Gibson said, 'There is no evidence of the trust distributing monies.'
The trust owns 100 % of the issued shares in Peach Holdings Limited ('Peach'). Peach owns 70% of the currently issued shares in CDL. A man called Mr Paul Barker, who was, and remains, a director of the company, owns 15% of the issued shares. A man called Mr Richard Doye owns the remaining 15%. Mr Doye was formerly a salesman for the company and a director, but is now in litigation with the company.
The former managing director of the company, Mr Paul Mankoo, claimed to have certain share options in the company which would, if exercised, reduce the above percentage shares. The finding of the district judge in relation to Mr Mankoo at paragraph 28, lines 10 and 11 of her first judgment, now at bundle page 41, was that '…Mr Mankoo has a source (sic, but query cause) of action against the company rather than at the moment he has an actual share holding in (it).' The company owns or owned certain subsidiaries, but the only one of any importance or significance to this case was Trilantic International Limited ('Trilantic').
CDL owned 100% of the issued shares in Trilantic, but a number of people had, or claimed to have had, share options. Mr Nigel Murray claimed 30% and Mr Michael Favelle claimed 3%. It was said that a further 17% remained to be assigned between various individuals involved in the running of CDL and Trilantic, including the husband himself. The overall conclusion of the district judge on this aspect, at paragraph 36 of her first judgment, now at bundle page 47, was, however, that '…It is rather more definite in relation to this 33% [viz the claimed shares of Murray and Favelle]' but 'In relation to the rest of the staff it is simply too vague.' She therefore clearly treated CDL as owning 67% of Trilantic and being entitled to 67% of the net proceeds of the sale of Trilantic.
For several years CDL was highly successful and profitable, and it is clear that the husband both worked very hard to develop and drive the company forward and also drew considerable sums from it. He was never a shareholder in it and such sums could only ever lawfully have been paid, either as salary or advances of salary and other emoluments, or as loans. The district judge said at paragraph 43 of her first judgment that the company 'was to a degree a cash cow.' She found, at paragraphs 20, line 13, now at bundle page 34, and 42, lines 16 and 17, now at bundle page 52, that the husband had borrowed £370,000 from the company, none of it yet repaid. At paragraph 38, line 15, now bundle page 49, she gave the different figure of £345,000 but seems, at that point, to have overlooked a further £25,000 loan. Either way, the overall sum was considerable.
But the district judge also found, and it is not in issue, that recently CDL has faced rising costs and stiff competition and its situation is much more precarious, see paragraph 21 of her first judgment, now at bundle pages 34 and 35. CDL currently employ about 80 people and continue to trade, but the district judge said at paragraph 43, now bundle page 53, that '…The accounts show that the profit margins have been eaten away and that it is not in a very good position…you cannot get blood out of a stone…' However, CDL did have one very valuable asset in its shares in Trilantic. These were sold at arm's length in October 2010 for US$10 million, payable as to US$6 million in October 2010 and US$2 million in each of October 2011 and 2012.
At paragraph 10, lines 15 to 18 of her first judgment, now at bundle page 25, the district judge said, '…The major areas of dispute are whether the husband will benefit from, and to what extent, the sale of Trilantic. This will determine if a lump sum … order is appropriate because both parties agree there is no other substantial capital.' As to this, the district judge made the following crucial findings in her first judgment: At paragraph 38, now bundle page 49, she said:
'As I have found in effect the husband is CDL in the sense that he seems certainly to be able to deal with the finances in a very haphazard manner, obtaining loans. He is no longer a director but it still seems that monies for tax and monies direct to his landlord have been paid even into Miss Coetzer's account [Miss Coetzer being the lady with whom he now lives]. He was, of course the founder of the company and he is, of course, also the chairman. I think overall it worked out as £345,000 he had had off CDL. It would be inexplicable to have this level of lending and a level of payment to third parties were he to be an employee. But it seems as chairman and founder that he has been able to do this.'
At paragraph 45, now bundle page 55, the district judge said, 'In terms of the resources, the capital relates to the sale of Trilantic and to my finding that CDL is in fact an alter ego of the husband, but the money available, I think, should first of all be used to discharge the liabilities [viz of the company].' At paragraph 50, on bundle page 59, the district judge said: 'It is also clear to me that as the major shareholder, the chairman of CDL and the founder of the company, the husband has been able to obtain monies from CDL and I think that he will be able to obtain some of the proceeds from Trilantic…'
Those findings were made and the first judgment was given on 16 th September 2010, after a hearing lasting several days. At that date, however, the sale of Trilantic had not actually been finalised; and as the above passages and account indicate, the district judge recognised that other debts and liabilities (including considerable corporation tax) would need to be paid, and that the actual amount receivable by the company or through the corporate structure by the husband was at that stage unclear. She said at paragraph 52, now bundle page 60, 'So in relation to the order, I do not think I can make lump sum orders for specific amounts because I do not know what amounts will come in…' Her decision at that date was in effect to adjourn or defer actual quantification of the lump sum until the amount received, or receivable, by the husband was more clear.
The sale of Trilantic was in fact completed during October 2010 and a substantial cash sum was about to be received by CDL. It was actually received on 4 th November 2010. The wife's solicitors were very concerned to preserve this, and during October and November 2010 there was a considerable exchange of correspondence, now in a separate correspondence bundle, between Ashley Wilson, the solicitors on behalf of the wife, and Gisby Harrison in Cheshunt. At that time Gisby Harrison acted as the solicitors both for the husband personally in his matrimonial affairs and also for the company. It is said that there was a 'Chinese wall' between Mr Nigel Tatum, the partner acting on behalf of the husband in the matrimonial affairs, and Mr David Goldberg, the partner acting on behalf of the company.
Unfortunately the roles became blurred and in many parts of the correspondence letters from Gisby Harrison which were clearly written by Mr Tatum (see his reference initials and his personal email address on many of the letters) made statements or commitments on behalf of the company. Indeed an 'undertaking' signed on behalf of the company by Mr Paul Barker, a director, on 6...
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