Portfolios of Distinction Ltd v Laird
| Jurisdiction | England & Wales |
| Judge | Mr L Henderson QC |
| Judgment Date | 03 August 2004 |
| Neutral Citation | [2004] EWHC 2071 (Ch) |
| Docket Number | Case No HC 94C00197 |
| Court | Chancery Division |
| Date | 03 August 2004 |
[2004] EWHC 2071 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London WC2A 2LL
Mr L Henderson Qc
Case No HC 94C00197
Mr Jonathan Russen (instructed by Orchard, 6 Snow Hill, London EC1A 2AY) for the claimant
Mr Grant Armstrong (instructed by Hunt & Coombs, 35 Thorpe Road, Peterborough
PE3 6AG) for the defendants
Hearing dates: 7 and 8 July 2004
APPROVED JUDGMENT
I direct pursuant to CPR PD 39A para 6.l that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
INTRODUCTION AND BACKGROUND
I have before me an application for summary judgment and an interim payment in a derivative action brought by the claimant, Portfolios of Distinction Limited ("POD"), which owns 49 per cent of the shares in the second defendant, CM2 Services Limited ("Services"). The main target of these proceedings, and the principal defendant, is the first defendant, Donald Ian Laird ("Mr Laird"), who owns the remaining 51 per cent of the shares in Services and was at all material times a director (and for most of the relevant period the sole director) of Services. The other defendants are either companies controlled by Mr Laird or some of the trading styles of unincorporated businesses which he carries on, or has in the past carried on, in his personal capacity under a confusing plethora of names which all include the term "CM2".
The background to the claim, in barest outline, is a business venture between POD and Mr Laird which involved the purchase of books of debt, or "debt portfolios", from blue-chip companies with funds subscribed by investors to whom the scheme was marketed on the basis that they would achieve an improbably high return on their investment within a short period, typically a return of 100 per cent in 12 months. The basic idea was that the books of debt would be purchased on the open market for a small percentage ( say 1 per cent) of their face value; that Mr Laird would use his expertise in debt collection to supervise and arrange for collection of the debts over a two-year period; and that the uncollected residue of the debts would then be sold on to an outside purchaser at the end of the two years. It was hoped that the sums collected would enable investors to be repaid their initial investment plus a return of up to 100 per cent, over 12 months. The venture would make its own profits both at the front end, by allocating books of debt to investors at a price considerably higher than the price for which they had been purchased, and from realisations in excess of the amounts needed to repay investors their "guaranteed" return, together with a final return at the back end when the books of debt were sold on (although I should say there may be an issue whether this final element of return was intended to benefit the investors or the venture).
There is disagreement between POD and Mr Laird about some fundamental features of the business agreement between them, which was made orally and is not embodied in any written document. However, it is at least common ground that Services was incorporated in January 2003, and that Mr Laird was appointed sole director of the company. It also seems that he, or nominees for him, were the sole shareholders in Services until 4 April 2003, when POD paid £49,000 to acquire a 49 per cent shareholding in the company. No steps were taken to allot or register the shares acquired by Services, and at one stage Mr Laird contended that the £49,000 had been paid to acquire a share in the business rather than a holding of shares. However, in March 2004 POD took proceedings in the Companies Court to establish its entitlement to the shares, and as I understand it Mr Laird now accepts that POD has been, or at least should be treated as having been, a 49 per cent shareholder in Services since 4 April 2003.
POD is a company engaged in providing what it describes as "a complete property investment service" for its clients. The principal directors and (I assume) shareholders of POD are a husband and wife team, Mr Alan Churchill and Ms Wendy Dowling, who carry on business through the medium of POD and a sister company, Turningpoint Seminars Limited ("TPS"). Before the business venture with Mr Laird, POD's property investment service had nothing to do with the debt market, but involved the location and purchase for clients of properties to let together with ancillary services such as the arrangement of mortgages, furnishing the properties, and letting and managing the properties. TPS is engaged in the business of providing seminar programmes where delegates learn how to buy and manage their own buy to let portfolios.
The new business venture was marketed to clients of POD and TPS, and was also advertised in the press. It is common ground that in the course of 2003 a total of nearly 200 investors paid a total of about £3.2m for the acquisition of debt portfolios, and that for some months at least some investors received the monthly payments which they had been promised. However, towards the end of 2003 the monthly payments stopped, and on 16 December Mr Laird wrote to investors advising them that all transactions were "frozen" He himself resigned as a director of Services on 16 December. The only other director of Services at any time was Mr Churchill, who was appointed a director on 12 November 2003 and resigned a few weeks later on 8 December.
Although Services was ostensibly the company with which the investors contracted, the evidence shows (and it is not now disputed) that, astonishingly, it never had a bank account of its own. Instead, the application form sent to prospective investors, if not in its original form then at least from about June or July 2003 onwards, required cheques to be made payable to "CM2", with a warning appended that "Any deviation from this will result in your cheque being returned and your position being jeopardised". It is in any event common ground that all the investors' cheques which were made payable to "CM2", together with a good number which were made payable to Services or to other CM2 entities, were in one way or another paid into a personal business account of Mr Laird's with Lloyds TSB. The number of this account was 2571353, and its designation was "Mr D I Laird" [trading as] CM2 Enquires" ("the CM2 Enquires Account").
There is also no dispute that the debt portfolios which were purchased were not purchased in the name of Services, but were instead purchased through the instrumentality of Mr Laird with money from the CM2 Enquires Account. The named purchaser in the earlier contracts is "CM2 Limited", and in the later contracts is "CM2 Enquiries". There is no company registered in England and Wales with the name "CM2 Limited", but there is a Scottish company of that name, and although it has confirmed that it has nothing to do with Mr Laird, Mr Laird claims that he was trying to acquire its corporate name for his personal use, but was unable to do so because the price asked was too great. "CM2 Enquiries", not to be confused with "CM2 Enquires", is one of Mr Laird's many "CM2" trading styles.
Mr Laird's own case is that he thereby purchased the debt portfolios, using money subscribed by the investors, for his own personal benefit, and that he then sold on to Services what he describes as the "right to collect the debt" for sums greatly in excess of what he had paid for them. The purchase price was again provided by the investors, whose money was therefore used twice over before the "right to collect the debt" (whatever that may mean) ended up with Services. In response to court orders for the disclosure of documents, Mr Laird has disclosed what he alleges to be sale agreements made between CM2 Enquiries (ie himself) and Services. These are on any view extraordinary documents. Not only are they all suspiciously uniform in appearance, but they are framed in obscure and puzzling language, they are all signed by Mr Laird on behalf of Services, and they also leave a space for him to execute the document again in his personal capacity trading as "CM2 Enquiries", although he has not in fact signed his name twice. Furthermore, each agreement contains a stamp duty certificate to which is added the following sentence:
"This and other future transactions will not need to be sanctioned by any other party involved in or shareholder of CM2 Services Limited."
In paragraph 105 of his second affidavit sworn on 9 February 2004, Mr Laird expressly admits "having made £850,000 as a result of the purchase of the books of debt and the sale of them on to 'investors' introduced by CM2 Services Limited". It will be noted that Mr Laird here refers to an onward sale to investors, not to Services. However, in his most recent witness statement, dated 18 June 2004, he says that the correct figure is some £913,000, and that this represents "the profit between my purchase of the debt and its sale to [Services]" (para 66). He goes on to claim that this figure "represented the upfront costs of collecting" the debts and "was well within industry standards guidelines" (ibid). I cite these passages to show the scale of the profit that Mr Laird admits he has made, and also to give just one example of the contradictions and confusions that abound in his evidence.
THE CONTRACTUAL DOCUMENTS
At this point, it will be helpful to examine in a little more detail the documents on the basis of which investors participated in the acquisition of debt portfolios and contracted, or ostensibly contracted, with Services.
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