Stephen John Hunt (as Liquidator of Systems Building Services Group Ltd) v Mr Brian Michie

JurisdictionEngland & Wales
CourtChancery Division
JudgeBarber
Judgment Date21 Jan 2020
Neutral Citation[2020] EWHC 54 (Ch)
Docket NumberCR-2017-005997

[2020] EWHC 54 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY AND COMPANIES LIST (ChD)

IN THE MATTER OF SYSTEM BUILDING SERVICES GROUP LIMITED (IN LIQUIDATION)

AND IN THE MATTER OF THE INSOLVENCY ACT 1986

Royal Courts of Justice

7 The Rolls Building

Fetter Lane

London

EC4A 1NL

Before:

ICC JUDGE Barber

CR-2017-005997

Between:
(1) Stephen John Hunt (As Liquidator of Systems Building Services Group Limited)
(2) System Building Services Group Limited-In Liquidation (Acting by its Liquidator)
Applicants
and
(1) Mr Brian Michie
(2) System Building Services Limited
Respondents

Raj Arumugam (instructed by Devonshires Solicitors) for the Applicants

Cheryl Jones (instructed by Solomons Solicitors) for the Respondents

Hearing dates: 2, 3 and 4 October 2019

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

ICC Judge Barber

1

This is the application of System Building Services Group Limited (the ‘Company’) and its liquidator, for the following relief, namely:

(1) a declaration that the First Respondent, Mr Brian Michie, holds the property known as 55 Crown Road, Billericay, Essex CM11 2 AD (‘the Property’) on trust for the Company, together with consequential relief;

(2) a declaration that the First Respondent, by causing or allowing the Company to make payments totalling £19,000 to CB Solutions UK Limited just days after the Company had entered administration, was in breach of his duties as a director, together with consequential relief pursuant to s.212 IA 1986;

(3) an order that the Second Respondent pay the Applicants the sum of £169,537 alternatively £100,135.51 on the grounds of want of consideration, unjust enrichment and/or monies had and received;

(4) a declaration that the First Respondent was indebted to the Company in the sum of £137,674.59 as at 12 July 2012 and an order that the First Respondent repay such sum with interest.

Background

2

The Company was incorporated on 10 August 2000 under the name of System Building Services (London) Limited. The First Respondent, Mr Michie, was appointed a director of the Company on the same day. The principal activity of the Company was that of ‘passive fire protection, fire stopping and intumescent coating’. It commenced trading in April 2002 from a property known as Old Truman's Brewery, Brick Lane, London. On 18 April 2011, the Company changed its name from System Building Services (London) Limited to System Building Services Group Limited.

3

The Company was placed into administration on 12 July 2013. Mrs Gagen Sharma was appointed administrator. The unsecured creditors recorded in the Statement of Affairs dated 5 September 2012 were estimated at £1,062,715.43. The administration was converted into a CVL on 3 July 2013 and Mrs Sharma served as liquidator.

4

The Company was dissolved on 24 February 2016, but was restored on the application of Mr Hunt, the First Applicant, on 25 April 2017. Mr Hunt was appointed liquidator of the Company by order dated 3 May 2017.

5

The backdrop to the restoration of the Company to the register is that, in 2014, judgment was handed down in Top Brands v Sharma [2014] EWHC 2753, in which Mrs Sharma was found liable for misfeasance under s.212 IA 1986 on the grounds that she had negligently and/or in breach of fiduciary duties misapplied monies whilst acting as an office-holder of a company known as Mama Milla Limited (‘MML’). It is not alleged that Mr Michie knew of any investigations or complaints regarding Mrs Sharma at the time that he instructed her.

6

In Top Brands v Sharma, judgment was entered against Mrs Sharma in the sum of £548,074.56 (‘the Sum’). At paragraph 173 of his judgment, HHJ Simon Barker had concluded as follows:

‘On my findings, the Sum, which should have been available for distribution to creditors, was paid out … by [Mrs Sharma] to third parties in circumstances where, (1) inadequate steps were taken by [Mrs Sharma] to ascertain MML's state of affairs at liquidation, (2) inadequate, if any, consideration was given by [Mrs Sharma] to the material available as to MML's trading, assets and liabilities, (3) no attempt was made by [Mrs Sharma] to obtain important missing information, (4) inadequate instructions were given by [Mrs Sharma] to the solicitor [advising her], who advised that repayment could be made, (5) inadequate thought was given by [Mrs Sharma] to new circumstances and evidence as they presented themselves…, (6) inadequate enquiries were made by [Mrs Sharma] as to the payees of the Sum before payment, and (7) [Mrs Sharma] failed to notice, before making payments out, that the indemnity in fact obtained was not in the required form.’

7

The judgment of HHJ Barker was upheld by the Court of Appeal on 10 November 2015 ( [2015] EWCA Civ 1140). On 30 June 2016, Mrs Sharma was adjudged bankrupt and on 8 August 2017 she gave an eight-year Bankruptcy Restrictions Undertaking to the Secretary of State.

8

Following the conclusion of the Top Brands proceedings, Mr Hunt took over 44 of Mrs Sharma's appointments under a Block Transfer Order dated 17 June 2016 and numerous other appointments following restoration applications. A number of Mrs Sharma's former cases have since been re-opened. In this case, Mr Hunt's investigations have resulted in the current application.

The Respondents

9

Mr Michie was a registered director of the Company from incorporation until 6 May 2003, then re-appointed as a director on 13 September 2007. He was also the Company's Secretary from 7 May 2010. He was the Company's sole shareholder from 20 June 2011 and the Company's sole director from 16 April 2012.

10

The Second Respondent, Systems Building Services Limited (‘SBSL’), was incorporated on 1 June 2012, on the advice of Mrs Sharma. Its business was stated to be ‘fire service activities’. The managing director of SBSL at the date of incorporation was Mr Paul Metcalfe, a friend of Mr Michie. As put by Mr Michie at paragraph 27 of his statement: ‘He and I knew each other and we did discuss the proposed purchase by [SBSL] of the Company's work in progress.’

11

Mr Michie was not initially a director of SBSL; in oral evidence he explained that he ‘knew it were best not to’, as ‘it was a similar sounding company’. Whilst not a director of SBSL initially, however, he was a full time employee of SBSL from the outset; in oral testimony he explained that he acted as its contracts and sales manager. He became a 65% shareholder in SBSL in January 2014 and a de jure director of SBSL in November 2014. In November 2016 his shareholding in SBSL rose to 100%, before dropping to 90% in April 2017. As at the date of trial, he was sole director of SBSL.

The Evidence

12

For the purposes of the trial I have read and considered the following witness statements and their respective exhibits, namely:

(1) the third and fourth witness statements of Mr Hunt dated 4 June 2018 and 20 February 2019 respectively; and

(2) Mr Michie's witness statement dated 21 December 2018.

13

I also read and considered the expert valuation report dated 21 February 2019 of Mr Lee Charters (who was appointed as single joint expert by order dated 16 November 2018), and other documents set out in a bundle agreed for use at the hearing, to which reference will be made where appropriate.

14

I heard oral evidence from Mr Hunt and Mr Michie. Mr Charters, the expert, was not called as a witness. Prior to trial, directions had been given by an order dated 16 November 2018 that the ‘evidence of the single joint expert be given at the trial by written report of the expert, unless otherwise ordered by the Court. The parties have liberty to apply in relation thereto.’ I was taken to no evidence to suggest that any party exercised their liberty to apply in this regard.

Missing Company documentation

15

As explained in Mr Hunt's fourth witness statement, prior to his appointment as liquidator of the Company, his staff had attended Mrs Sharma's offices and had taken receipt of all working files and books and records available at those premises for all 44 appointments under the Block Transfer Order dated 17 June 2016 and all 57 anticipated appointments which were then subject to restoration applications. Subsequently, Mr Hunt's staff also recovered further working files and books and records relating to the Block Transfer Order appointments from Mrs Sharma's external storage facility. Some files were missing. Notwithstanding requests made by Mr Hunt's staff for delivery up of the missing files, Mrs Sharma has not been able to account for the missing records in relation to the Company or those in respect of a number of other appointments.

16

In relation to the Company, Mr Hunt only ever received from Mrs Sharma (1) the liquidation working files and liquidation electronic files, not the working files or any records for the period of the administration and (2) some, but not all, of the Company's books and records. In particular, the books and records of the Company passed over to Mr Hunt included no electronic data, no invoices or contracts for any of the projects apparently taken over by SBSL, and none of the dividend vouchers since exhibited to Mr Michie's statement. The records were clearly incomplete. There is no allegation in these proceedings that Mr Michie failed to comply with his duties to deliver up all Company documentation to Mrs Sharma in 2012 and his unchallenged evidence was that he did deliver up all such documentation. The fault for any missing Company documentation, therefore, cannot be laid at Mr Michie's door. I shall address the impact of the missing Company documentation where appropriate during the course of this judgment.

Mrs Sharma

17

The Respondents were critical of Mr...

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