Stephen Dawson v Laura Bell
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lord Justice Sales,Lord Justice Longmore |
| Judgment Date | 19 February 2016 |
| Neutral Citation | [2016] EWCA Civ 96 |
| Docket Number | Case No: A2/2015/0300 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 February 2016 |
[2016] EWCA Civ 96
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
BRISTOL DISTRICT REGISTRY
MERCANTILE COURT
HH JUDGE HAVELOCK-ALLAN QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Tomlinson
and
Lord Justice Sales
Case No: A2/2015/0300
Mr Seb Oram (instructed by John Hodge Solicitors) for the Appellant
Mr Matthew Mason (instructed by Direct Access) for the Respondent
Hearing date : 9 February 2016
This case concerns the unravelling of the parties' business and property interests following the breakdown of their personal relationship and the termination of their relationship in business together. After a nine day trial of the Claimant's claim and the Defendant's counterclaim in the Mercantile Court at Bristol His Honour Judge Havelock-Allan QC found that £22,241 was due to the Claimant on his claim and £55,230.44 was due to the Defendant on her counterclaim. After netting-off and due allowance for interest, the upshot was a judgment for the Defendant in the sum of £32,989.44 together with interest quantified at £5,970.20. The Claimant appeals with permission of the single Lord Justice.
The story of the development, collapse and dissolution of the parties' relationship, and of their property and business interests, is complex. It is fully set out in a careful and comprehensive reserved judgment delivered by the judge on 21 May 2014. As that judgment is apparently not available electronically through the Bailli website I append it hereto as Annex A to my judgment. In circumstances which I shall later describe the judge issued an Addendum to his Approved Judgment in September 2014, and I append that too as Annex B.
In the light of the foregoing resort may be had to the two annexed judgments for the full facts of the case. I need attempt no more than a very brief summary before turning to the issues argued on the appeal.
The Defendant, Laura Bell, was, when she first encountered the Claimant, a dominatrix. The Claimant, Stephen Dawson, first contacted her in the autumn of 2001 having seen her in commercial videos on her femdom website. The Defendant was at that time living in a flat in London at 16 Masters Lodge, Johnson Street, Tower Hamlets with her then social partner, Steven Giles. Mr Giles helped the Defendant shoot the adult videos in which she appeared. These were sold to a distributor in the USA and some of the material was made available on line. The Defendant also provided personal services of the femdom variety to clients who visited her at the Masters Lodge address.
The Claimant had a full time job as a salesman or sales manager which, he says, earned him as much as £60,000 per annum in salary and commission. But he had an interest in female domination and as a side line he ran a fetish website with a Mistress Directory, although this had no video content. After receiving from him some emails, which the Defendant says were like fan mail, she met the Claimant around the beginning of 2002 when he became a client of her female domination services. By mid-2002 their relationship had turned from that of supplier and customer into a more personal one. Around the same time the personal relationship between Mr Giles and the Defendant came to an end. Mr Giles continued working on the filming side of the Defendant's business and remained living at Masters Lodge, but the Claimant replaced him as the Defendant's social partner.
In 2004 the Claimant and the Defendant incorporated Adwelsh Media Limited ("AML"), with the Defendant holding 51% and the Claimant 49% of the shares. The Claimant and the Defendant were the only directors. AML was set up to market adult videos through the internet, on a website called The English Mansion ("TEM").
The website was a success and by August 2004 the parties decided to purchase the lease of a flat in Bristol at 9 Brewhouse, Georges Square ("the Brewhouse"). The flat was purchased in the Claimant's sole name.
In July 2005 the parties decided to live all of the time at Masters Lodge and let the Brewhouse.
On 1 August 2005 the parties entered into a Declaration of Trust ("the First Declaration of Trust") which provided that the lease of the Brewhouse was held by the Claimant for the Defendant absolutely as to £100,000 or one third of the net proceeds of sale, whichever was the greater, and as to the balance of the net proceeds of sale for the Claimant absolutely.
In January 2006 the Defendant sold the flat at Masters Lodge.
On 4 August 2006 the Claimant and the Defendant purchased another property, Little Lodge, in Gloucestershire, in their joint names as tenants in common.
The personal relationship between the Claimant and the Defendant came to an end in December 2007.
As a result, the Claimant moved into the Brewhouse and paid all of the mortgage and service charges on the Brewhouse, and also continued to pay half of the mortgage outgoings on Little Lodge.
In or around August 2008 the parties transferred the Brewhouse into their joint names and on 1 August 2008 another Declaration of Trust was signed ("the Second Declaration of Trust") to this effect.
The Claimant maintains that he signed the Second Declaration because the Defendant told him that he would still be entitled to half the net profits of AML and so both of them would be comfortably off for the foreseeable future.
In or around August 2008 the Defendant became aware that a class of B shares had been created when AML had been incorporated, of which 100 shares had been issued in the name of the Claimant. She then began to examine the accounts of AML and concluded that there had been an imbalance in the dividends which had been paid to the Claimant and the dividends which had been paid to her. As a result, she insisted that a series of balancing payments be made to her.
The Claimant says that the Defendant reinforced her insistence by, for the first but not the last time, making threats to remove AML's video library, take the TEM website down and "smash the hard drive" if he did not agree. The judge found that these were in fact empty threats, as the Claimant well knew. Apart from the fact that the threatened steps would have killed, or at least seriously wounded, the goose laying the golden egg for both of the parties, most of the film library was held on the host servers in the USA and the Claimant had a duplicate copy of the master tapes on a second hard drive which he kept in a safe at the Brewhouse — [81]. In any event the Claimant agreed that the balancing payments should be made and for a time this restored the trust and confidence in their business relationship.
Later in 2008 Mr Paul Hatcher joined AML to assist with the IT and to act as a cameraman and film editor. Mr Hatcher began a personal relationship with the Defendant not long after he joined the company. He moved into Little Lodge at the beginning of 2011.
The Defendant suggested that Mr Reding, who had so far been AML's IT Manager, was to be allocated some shares in AML in recognition of his contribution to the business. The proposal was to cancel the B shares and to increase the ordinary shares from 100 to 1,000, of which 501 would be allocated to the Defendant, 481 to the Claimant and 18 to Mr Reding. On 11 December 2008 a Shareholders' Agreement and a Sale Agreement was signed by the Defendant, the Claimant and Mr Reding. Drafts of those agreements were sent by the Defendant to the Claimant nearly three weeks before the meeting at which they were signed. Those drafts had been prepared by a solicitor, a Mr Ian McColl of Gregg Latchams. Although the Claimant may have been unaware before the meeting whether Mr McColl was acting for the company or for the Defendant, it was made unequivocally clear to him at the outset of the meeting that Mr McColl was acting for the Defendant alone. The judge also found that Mr McColl had explained to the Claimant on the telephone in advance of the meeting that he was acting for Laura Bell, and not for him. Both the Claimant and Mr Reding were told at the meeting that if they had any concerns about the documents which they were to be asked to sign, they should take legal advice.
The Shareholders' Agreement contained detailed provisions in clause 3 as to what was to happen if a shareholder wanted to dispose of his or her shares. A Transfer Notice had to be given to the other shareholders, who had the right to acquire the shares at a price to be agreed or determined by an accountant's valuation. Clause 4, headed "Events of Default", specified a number of circumstances in which a shareholder would be deemed to have served a Transfer Notice e.g. upon death or bankruptcy. Clause 4.1.5 stated that in the case of the Claimant only, he would be deemed to have served a Transfer Notice upon "his ceasing to be a director of the Company". The Claimant says he did not notice this provision when he signed the Agreement and it was not specifically drawn to his attention either at the meeting, or when the Defendant sent him the drafts beforehand.
On 27 May 2009 the Claimant and the Defendant signed another Declaration of Trust ("the Third Declaration of Trust"), providing that in future Little Lodge was to be held by them as tenants in common in the shares £201,000 for the Defendant and £16,000 for the Claimant, and that if the net sale proceeds were insufficient to generate these sums, they were to be reduced pro-rata.
Shortly thereafter, the parties agreed to reduce Mr Reding's salary...
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