Quarter Master UK Ltd ((in Liquidation)) v Pyke and Others
| Jurisdiction | England & Wales |
| Judgment Date | 15 July 2004 |
| Neutral Citation | [2004] EWHC 1815 (Ch) |
| Docket Number | CASE NO. HC03C02836 |
| Court | Chancery Division |
| Date | 15 July 2004 |
[2004] EWHC 1815 (Ch)
Mr Paul Morgan QC, Sitting as a Deputy Judge of the High Court
CASE NO. HC03C02836
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr. Jeremy Goldring (instructed by Isadore Goldman) for the Claimant
Mr. Dominic Happé (instructed by Pictons) for the First and Second Defendants
The Third Defendant was not represented
Hearing Dates: 5 th to 8 th May 2004 and 11 th June 2004
The Principal Claim
The principal claim in this action is by Quartermaster UK Limited ("UK"), for an account of profits, against two of its directors, Mr Pyke and Mr Newson, for breach of their fiduciary duties as directors in respect of the arrangements which they made (on behalf of Affinity Limited ("Affinity") a company controlled by them) with Carlsberg-Tetley in December 2001 and/or January 2002.
The Facts
I will begin by describing the principal individuals and companies involved in this matter. The Second Defendant Mr. Newson had been involved in the brewing industry for some years before 1990. At one time he worked for Allied Brewers. In around 1990, Mr. Newson wanted to go into business on his own account and for that purpose, in September 1990, formed a company known as Association of Licensed Free Traders Limited ("ALFT"). He formed ALFT with the First Defendant, Mr. Pyke. Before 1990, Mr. Pyke had not been involved in the brewing industry or licensed trade but had been employed in various positions in relation to insurance and finance.
Mr. Newson described the original business of ALFT as that of a buying group in the licensed trade. It seems that it operated on a membership basis where the members were licensees who paid a membership fee to ALFT. In return the members had the advantage of being in a buying group which could negotiate on their behalf with the brewer suppliers.
Mr. Pyke and Mr. Newson formed the Third Defendant, Affinity, in January 199All of the shares in Affinity were owned by Mr. Newson and Mr. Pyke and they were the sole directors. Affinity carried on what has been described as a funds transfer business. This business appears to have involved the collection of monies due from, for example, licensees to the brewer suppliers. As will be seen, Affinity had an important contract with Carlsberg-Tetley Brewing Limited ("Carlsberg-Tetley") but its activities were not restricted to a funds transfer business in accordance with that contract. Affinity also collected fees on behalf of the British Travel Agents Accommodation Register ("BTAAR").
In April 1995, Mr. Newson and Mr. Pyke formed UK, the Claimant company. In the most recent published accounts of UK before February 2001, Mr. Newson is shown as the secretary of the Company but not a director and Mr. Pyke is shown as the sole director. However, in relation to the period from February 2001, Mr. Newson appears to have accepted that he was a director of UK and, in any event, from June/July 2001, Mr. Newson was appointed joint managing director of UK. After the formation of UK, that company effectively took over most of the business previously run by ALFT. UK was formed because the name Association of Licensed Free Traders was no longer suitable for all of the customers of that company who were then to become customers of UK. It is not clear precisely what happened to the membership scheme previously run by ALFT but it seems that by February 2001, the activities of ALFT were not significant. The group buying activity of ALFT were carried on by UK after its incorporation in 199For this purpose, UK employed staff who were described as being active "in the field" or as "sales staff". These staff were in contact with the licensees who bought from the brewer suppliers. The brewer suppliers also had sales staff who dealt with the licensee so there may have been some degree of overlap between the activities of the staff of UK and the staff of the brewer supplier. UK carried on a group buying business which was not restricted to dealing in beer and other alcoholic drinks but extended to dealing in crisps, and other food stuffs and, further, various kinds of insurance services. In the accounts of UK for the year ended 30 th September 2000, the principal activity of the company was described as being the provision of a purchasing service to the hotel, catering and licensed trades.
UK/Affinity appeared to have had the benefit of a contract with Carlsberg-Tetley before January 2000. Copies of any written contract before that date were not available at the trial and the first copy written agreement in evidence was the one entered into in January 2000. Although UK was the company that carried on the group buying business and Affinity was the company which carried on the funds transfer business, the contract entered into in January 2000 with Carlsberg-Tetley was made with Affinity rather than UK. The contract consists of one side of one page only and the terms of the contract are not particularly clear as to what was to happen under the contract. The contract is headed "Agreement for Supply of Product". The agreed product was stated to be "all alcoholic and non-alcoholic beverage". The customer group was stated to be the name of the group and its outlets with whom agreed products and prices for a term had been agreed. Carlsberg-Tetley agreed to supply all products requested where possible by the group and its outlets. The agreed price was to be the price laid down in the Carlsberg-Tetley price list. Payment for the products ordered by the customer group or its outlets was to be made by the 24 th day following the month of delivery. Payment was to be by direct debit transfer from the group or its outlets direct to Carlsberg-Tetley or via a central billing arrangement with the customer group or outlet and the group or outlet's agent. The agreement stated that the Carlsberg-Tetley current standard terms and conditions for supply of goods would apply. A copy of those standard terms and conditions was not provided at the trial.
It is necessary to consider the period which was to be the subject of the contract with Carlsberg-Tetley. The agreement defines "Agreement Period" as meaning:
"…. that period of time commencing at start date of a set of agreed prices and ends upon termination of that agreed date."
The contract refers to the possibility of termination as follows:
"Termination of this contract for supply to the group and or any outlet can be terminated with 28 days notice in writing by either party."
One interpretation of the contract with Carlsberg-Tetley is that the contract would continue until it was terminated by 28 days written notice by one party to the other. However, the definition of "Agreement Period" refers to a period of time commencing at a date which can apparently be ascertained and ending on a date which can apparently be ascertained. Other parts of the contract also refer to prices being agreed for a term. The evidence of Mr. Newson and Mr. Pyke, and also the evidence of Mr. White who was at the relevant time an employee of Carlsberg-Tetley and a signatory of the agreement of January 2000, was that the Carlsberg-Tetley financial year ran to the 4th (or possibly the 6 th) January and that prices were agreed, at the longest, for a period which would end on the 4 th (or possibly the 6 th) January. Accordingly, the agreement which was entered into in January 2000 was referable to prices which were agreed for a period to the 4 th (or possibly the 6 th) January 2001. When one reached the agreed date in January 2001, the contractual rights and obligations recorded in the written agreement would simply come to an end. No notice of any kind required to be given. Accordingly, if Carlsberg-Tetley were dissatisfied with the performance of Affinity, the other party to the contract, all Carlsberg-Tetley had to do was to allow the period of the contract to expire in January 2001. Conversely, if Carlsberg-Tetley were satisfied with the working of the arrangement, Carlsberg-Tetley would negotiate with Affinity a new set of prices and terms to govern the next period from 7 th January in one year to the 4 th or 6 th January in the following year. If a new set of prices and terms was agreed in this way, it was not in practice thought to be necessary to sign a further written agreement but simply to proceed on the basis that the written agreement which had previously been signed would continue to apply to the new set of agreed prices and terms.
In view of the evidence of Mr. Newson, Mr. Pyke and Mr. White and on the true construction of the wording of the written agreement of January 2000, I hold that the contractual relationship recorded in that agreement would come to an end on the 4 th (or possibly the 6 th) January in any year unless the parties had negotiated a further set of prices and terms by way of a renewal for a further year. Although there was no further written agreement in January 2001, there was no dispute that the arrangement with Carlsberg-Tetley continued through 2001 on the terms of the written agreement signed in January 2000. Accordingly, consistently with the above findings, the arrangements which were in place between Affinity and Carlsberg-Tetley in 2001 would have come to an end by effluxion of time on the 4 th (or possibly the 6 th) January 2002 unless the arrangements were renewed with Carlsberg-Tetley and Carlsberg-Tetley was not under any obligation to agree renewed terms.
In summary therefore, by October 2000, Mr. Newson and Mr. Pyke owned and controlled UK and Affinity and, for what it was worth, ALFT. Those companies between them carried on a group buying business and a funds transfer business and one of the important customers was Carlsberg-Tetley.
In October 2000,...
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