Schott Kem Ltd v Bentley
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE NEILL,LORD JUSTICE GLIDEWELL |
| Judgment Date | 23 February 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0223-7 |
| Docket Number | 90/0167 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 February 1990 |
[1990] EWCA Civ J0223-7
Lord Justice Neill
and
Lord Justice Glidewell
90/0167
1988 S. No. 6366
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. MARTIN THOMAS Q.C., sitting as a Deputy High Court Judge)
Royal Courts of Justice.
MR. CHARLES HOLLENDER (instructed by Messrs. Frere Cholmeley) appeared on behalf of the (Plaintiff) Respondent.
MR. IAIN PURVIS (instructed by Messrs. Knight & Sons of Newcastle under Lyme) appeared on behalf of the (Defendants) Appellants.
This is an appeal from an order of Mr. Martin Thomas Q.C. sitting as a deputy High Court judge, dated 12th June 1989, whereby it was ordered that certain defendants in the action should make interim payments to the plaintiff company (Schott Kem Limited) pursuant to R.S.C. Order 29, rules 11 and 12, in the following amounts:
| Mr. Bentley | £75,000.00 |
| Mr. Buckley | £75,000.00 |
| Mileforge Limited | £50,000.00 |
| Mr. Anderson | £10,000.00 |
| Scientific Glass (Drainline) Limited | £75,000.00 |
| Mursa (General Engineering) Limited | £12,471.03 |
These six defendants are respectively the first, second, fourth, sixth, seventh and ninth defendants. No orders were sought or made against the third, fifth or eighth defendants. The appeal is brought by leave of the judge.
The plaintiff's cross-appeal, also by leave of the judge, seeks substantially larger sums by way of interim payments against each of these six defendants.
On 8th August 1989 Lord Justice Dillon granted a stay of execution of the judge's order to the extent of one half of the sums which each of these six defendants had been ordered to pay.
Background to these proceedings
The plaintiff company (Schott Kem) is wholly owned by Schott Glass Limited which is the principal trading subsidiary in the United Kingdom of Schott Glasswerke of Mainz in the Federal Republic of Germany. Schott Kem are plumbing contractors who carry out plumbing work mainly, I understand, in the public sector and who have a special expertise in the installation of glass drainline. Glass drainline is pipework made of glass which is used primarily in hospitals and by public authorities in works where provision has to be made for the disposal of corrosive waste material.
At all material times until 21st October 1988 Mr. Bentley and Mr. Buckley were employed as joint managing directors of Schott Kem under written service agreements dated 16th February 1987. Both these defendants had had links, however, with Schott Glasswerke since 1975 when the German company bought a majority interest in Schott Kem (then called Kembal Supplies and Services Limited) which was owned by Mr. Bentley and Mr. Buckley.
In April 1987, that is, shortly after the date of the service agreements, a new policy was adopted at Schott Kem at the insistence of Schott Glasswerke whereby future plumbing contracts were to be accepted only if the gross profit obtainable on the contract was not less than 30 per cent. The reason for this new policy was that overheads in the United Kingdom had risen to a figure which made contracts with a lower profit margin uneconomic.
The new policy led to difficulties, however, between Mr. Bentley and Mr. Buckley on the one hand and the management in Germany. Moreover, it is clear that 1987 was not a good year for Schott Kem. Early in 1988 a working group was set up to try to find solutions to the low profitability of Schott Kem. In the meantime, however, in November 1987 Mr. Bentley and Mr. Buckley had bought a controlling interest through a nominee company in SGD.
In the spring of 1988 three important developments took place:
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(a) At the beginning of February 1988 SGD began to send out unsolicited letters to prospective customers for plumbing work using information provided by Mr. Bentley and Mr. Buckley.
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(b) At a meeting of the working group on 9th March 1988 at Stafford it was decided to run down Schott Kem's general plumbing activity over a period.
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(c) Also in March 1988 Mr. Bentley and Mr. Buckley made a proposal to Dr. Schott, who had become the Chairman of Schott Kem in 1982, that they should take over a portion of Schott Kem's business through a company to be formed by themselves. It is clear, however, that neither at the time when this proposal was made nor in the subsequent discussions and negotiations did Mr. Bentley and Mr. Buckley disclose their interest in SGD nor did they reveal that SGD was already seeking plumbing work.
Negotiations continued until the end of June 1988 and various options were discussed whereby a company to be formed by Mr. Bentley and Mr. Buckley might take over the Schott Kem plumbing business. On 30th June the proposal was finally rejected.
By this time, however, the German directors including Dr. Schott had become very suspicious of the activities of Mr. Bentley and Mr. Buckley and were also much concerned by the rapidly deteriorating financial position of Schott Kem itself. The German directors decided to carry out an investigation into the past activities of Mr. Bentley and Mr. Buckley.
In July 1988 redundancies were declared in Schott Kem and Mr. Bentley and Mr. Buckley were told that their futures were under review.
By August 1988 the investigations which were being carried out appeared to suggest that Mr. Bentley and Mr. Buckley had been making fraudulent claims for expenses. In the following month it came to the notice of Dr. Van Den Broek, the General Manager of Schott Glass, that a company called Mileforge was competing for business with Schott Kem and that Mr. Buckley was the contact man for that company at Schott Kem's own premises. It subsequently came to light that Mileforge Limited (Mileforge) had been incorporated by Mr. Bentley and Mr. Buckley through nominee directors and shareholders on 11th July 1988.
Matters came to a head in October 1988. On 21st October both Mr. Bentley and Mr. Buckley were dismissed. Before that Anton Piller orders had been granted against these two defendants and also against Mileforge and the third and fifth defendants.
The writ in the present proceedings was issued on 10th October 1988 and has been subsequently amended to include further defendants and further claims.
In broad terms the case for Schott Kem is that Mr. Bentley and Mr. Buckley, while still directors of Schott Kem, dishonestly diverted contracts for the supply and installation of pipework and for large-scale plumbing work from Schott Kem to Mileforge and to SGD, being companies which were owned and controlled by Mr. Bentley and Mr. Buckley. It is alleged that these two defendants were assisted by Mr. Anderson who was employed by Schott Kem until 31st August 1988 as Contracts Manager.
I shall have to return later to consider in more detail the various heads of claim with which this appeal is concerned. At this stage it is sufficient to note that there are five relevant claims to which the following headings can be given:
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(1) The Chelsea contract
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(2) The Hastings contract
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(3) The Drainline contracts
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(4) The Mursa claim
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(5) Stolen material
It is also to be noted that Schott Kem rely on various causes of action including conspiracy to defraud, breach of contract and misuse of confidential information. They also claim an account of profits obtained from diverted contracts.
Before turning to consider the claims in more detail, however, I must first examine the power of the court to order interim payments and the general submissions which have been put forward on behalf of the appellants as to the limitations on the exercise of that power.
The power to order interim payments
The power to makes Rules of Court to enable a court in which any proceedings are pending to make an order requiring a party to the proceedings to make an interim payment was first conferred by section 20 of the Administration of Justice Act 1969. The court has no inherent power to order an interim payment: Moore v. Assignment Courier Ltd. [1977] 1 W.L.R. 638. This section gave effect, with modifications, to recommendations which had been made in the Report of the Winn Committee on Personal Injuries Litigation.
The power to make rules was first exercised in 1970 in relation to actions for damages for death or for personal injury. In 1977 Order 29 was extended to provide for interim payments in actions for possession of land. In 1980, however, Order 29 was further amended and the power to make interim payments in pending proceedings is now very wide. The statutory basis for the jurisdiction is contained in section 32 of the Supreme Court Act 1981. It is not necessary, however, to refer to section 32 of the 1981 Act and I can turn at once to the relevant rules contained in Part II of Order 29.
By Order 29, rule 9, an interim payment is defined in relation to a defendant as "a payment on account of any damages, debt or other sum (excluding costs) which he may be held liable to pay to or for the benefit of the plaintiff."
Order 29, rule 10 (as far as is material), provides:
"(1) The plaintiff may, at any time after the writ has been served on a defendant and the time limited for him to acknowledge service has expired, apply to the Court for an order requiring that defendant to make an interim payment.
(2) An application under this rule...
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