Stephen John Hunt (Liquidator of Marylebone Warwick Balfour Management Ltd) v Richard Balfour-Lynn
| Jurisdiction | England & Wales |
| Judge | Prentis |
| Judgment Date | 06 April 2022 |
| Neutral Citation | [2022] EWHC 784 (Ch) |
| Docket Number | Case No: CR-2019-003186 |
| Court | Chancery Division |
[2022] EWHC 784 (Ch)
ICC JUDGE Prentis
Case No: CR-2019-003186
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT (ChD)
RE: MARYLEBONE WARWICK BALFOUR MANAGEMENT LIMITED (reg.nr. 02944316) (in liquidation)
AND RE: THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Lexa Hilliard QC (instructed by Wedlake Bell LLP) for the Claimant
Daniel Lewis (instructed by Sylvester Amiel Lewin & Horne LLP) for Michael Bibring
Jagtar Singh and Richard Aspland-Robinson in person
The First, Fourth, Sixth and Seventh Respondents did not appear.
Hearing dates: 25–28 and 31 January, 1–2 and 7–9 February 2022.
Introduction
Between September 2002 and August 2010 £27,706,849 of PAYE and NICs otherwise due to HMRC in respect of the Respondents' remuneration for their services to Marylebone Warwick Balfour Management Limited (the “Company”) was avoided and paid to them. This is the trial of the application issued by the present liquidator, Stephen Hunt, on 10 May 2019 contending that the entry into the avoidance scheme (the “Scheme”) and/ or its continuation was in breach of the Respondents' fiduciary duties, and/ or that the payments were transactions defrauding creditors within the meaning of section 423 Insolvency Act 1986 (“IA86”); and making other connected claims. At its height it is averred that the Respondents are jointly and severally liable for the £38,701,750 which is the debt admitted on HMRC's proof in the liquidation. The trial has proceeded only against Jagtar Singh, Michael Bibring and Richard Aspland-Robinson, the remaining Respondents having agreed a Tomlin Order with Mr Hunt sealed on 22 October 2021; so the claims against them are stayed on confidential terms. The other recipients under the Scheme, Paul Harries, Stephen Rodwell, Simon Leadbetter, Keval Pankhania, Ian Cave and Clive Hillier were named as respondents on the application notice as issued, but removed before its service.
The Company, its parents, and its liquidation
The styling of the Marylebone Warwick Balfour companies derived from their being an amalgamation in 1994 of the business interests of Richard Balfour-Lynn, a businessman who had latterly operated in the field of property development through Warwick Balfour Properties Ltd, and John Harrison, a chartered surveyor who had been operating in the same field through Marylebone Estates Ltd. They were childhood friends, and were joined in the founding of the Marylebone Warwick Balfour companies by Joseph Shashou who had been working with Mr Balfour-Lynn. What became the Marylebone Warwick Balfour Group began as a residential investor and developer with a block of student housing on High Holborn.
The Company was incorporated on 30 June 1994 as Marylebone Warwick Balfour (Consultancy) Limited under number 02944316, changing to its present style on 13 December 1994, to provide management services to what has here been styled “Plc 1”, Marylebone Warwick Balfour Group plc, and other group companies. Plc 1 was the Company's parent until 1 July 1997, when Plc 1 changed its name to Marylebone Warwick Balfour Holdings Limited.
The name change was consequent on a merger between Plc 1 and the Company's new parent, “Plc 2”, which became effective on that date, with Plc 2 adopting Plc 1's style as Marylebone Warwick Balfour Group plc. Until then, since incorporation on 8 November 1996 Plc 2 had been known as Ex-Lands Properties plc. From 1 July 2008 until 20 June 2019 it became MWB Property Limited, and for entry into liquidation the next day it changed its name to Office Properties PL Limited.
As part of the arrangements which led to the inception of the Scheme, on 24 May 2002 the Company's parent changed again, to Servco (General Partner) Limited (“Servco GP”), the general partner of Servco Limited Partnership (variously “Servco Partnership”, “ServeCo” and “ServCo”). Servco Partnership had been registered on 26 March 2002 as Asset and Property Services Limited Partnership, being renamed on 14 May 2002. The limited partners were the Respondents and Jayne McGivern. Of the £700 capital which they provided Mr Aspland-Robinson and Ms McGivern invested £56 each, the others £98 each. Servco Partnership remains in existence. Servco GP entered MVL on 12 July 2013 and was dissolved on 17 October 2019. Its liquidator was Lane Bednash.
The 2002 transfer did not effect any change in the Company's principal activity recorded in its annual accounts to 30 June of that year, being the supply of management services. However, its accounts to the next year-end added “property development” to those services. There was no change in this until its last-filed accounts, those to the year-end 30 June 2011, by when the principal activities were “acting as a holding company and the supply of management services”.
On 24 July 2009 Servco GP sold its shares in the Company, apparently completing on 12 January 2010, to a newco, Servco Services UK Limited (“Servco UK”), itself owned by the Respondents. Servco UK also entered MVL on 12 July 2013 with Mr Bednash as liquidator, and was dissolved on 15 October 2019.
The Company entered CVL on 14 May 2013 with Mr Bednash as liquidator. He filed his final account on 3 March 2016 and pursuant to section 201 IA86 it was dissolved on 3 June 2016. His final report confirms that HMRC had been desirous of funding a claim against the Company's directors “but following extensive investigation and liaising with duly instructed solicitors, barristers and tax experts, I determined that no such claim could be brought”. While solicitors and barristers had been found on a CFA basis for a claim against BDO neither HMRC nor another funder could be found.
HMRC was not content. On 3 June 2017, by order of 24 May 2017 the Company was restored into voluntary liquidation on the application of Mr Bednash supported by HMRC on the basis that Mr Hunt would be appointed liquidator. On 30 December 2017 Stephen Hunt and Adam Harris filed at Companies House notice of their appointments as liquidators, apparently on 15 May 2017 by the High Court of Justice. Mr Harris ceased to act on 2 January 2018.
Aside from HMRC there are no material creditors in the liquidation.
The directors of the Company
Over its life the Company had 15 directors. I will say more about their roles later, as it is Mr Hunt's view that at the material times when the active Respondents were not formally appointed directors of the Company they were de facto directors, and/ or in the case of Mr Singh a shadow director.
Their relationships are best described by what they did for Plc 2 as the main operational company; they were reflected in their roles at the Company.
The Respondents were the core of the senior management team at Plc 2. The exception is Mr Aspland-Robinson, who was not a director of Plc 2 but was a director of one of its subsidiaries, MWB Business Exchange plc (“Business Exchange”). “The Respondents” as used at trial and adopted here must be understood generally not to include Mr Aspland-Robinson.
Mr Balfour-Lynn was the Chief Executive of Plc 2, overseeing the operational side of the Group and, as the Defence states, “with responsibility for the direction of the Group, the co-ordination of the areas of activity, its financial strategy and liaison with the shareholders”. In their evidence the Respondents were united in their view of him as a charismatic if autocratic leader. As the original founders he, Mr Shashou and Mr Harrison were the main shareholders in Plc 2, holding about 25% of its shares between them. He was a registered director of the Company from 30 June 1994 until 28 October 2003, and again from 21 December 2005 until 31 March 2012.
Mr Shashou and Mr Harrison were responsible for particular divisions of the business. Mr Shashou, a real estate man, ran the hotel and mixed-use development and investment programmes, Mr Harrison the commercial and leisure property businesses, with some involvement in other areas. They were each directors of the Company over the same dates as Mr Balfour-Lynn, except that Mr Shashou's final departure was 28 March 2011 and Mr Harrison's 21 September 2010.
Mr Bibring was another whose de jure directorship was interrupted on 28 October 2003, his having commenced on 24 January 1997 and re-commenced on 21 February 2005, holding office until liquidation. He qualified as a solicitor in 1979, and was a partner at Finers where he was head of its property department until being persuaded by Mr Balfour-Lynn, a client, to join Group in 1997. “I did not fulfil the role of group legal counsel at MWB but was involved in various commercial and development aspects of the business. My role varied considerably as our business evolved but throughout my time at MWB I was principally involved in all development activity”. Although remaining on the solicitors' roll, he ceased to practise law on joining the Group, but would recommend solicitors and other advisers. As at 1 May 2002 he was Legal and Commercial Director. He describes himself now as a property developer.
Mr Singh was registered director from incorporation on 30 June 1994 until 23 September 2005. He was a Fellow of the Association of Chartered Certified Accountants who joined Hill Samuel in 1980 and Lombard Odier & Cie in 1985. In 1988 he joined Warwick Balfour and began his association with Mr Balfour-Lynn. Together with Andrew Blurton he was Plc 2's Joint Finance Director: an unusual arrangement,...
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