Suzy Belinda Hughes v Nigel Richard Weiss and Another
| Jurisdiction | England & Wales |
| Judge | H.H. Judge Keyser Q.C. |
| Judgment Date | 15 August 2012 |
| Neutral Citation | [2012] EWHC 2363 (Ch) |
| Docket Number | Claim No. 2LS30181 |
| Court | Chancery Division |
| Date | 15 August 2012 |
[2012] EWHC 2363 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
Leeds Combined Court Centre
Oxford Row
Leeds LS1 3BG
His Honour Judge Keyser Q.C.
sitting as a Judge of the High Court
Claim No. 2LS30181
HUGH JORY (instructed by Walker Morris of Kings Court, 12 King Street, Leeds, LS1 2HL) for the Claimant
NEIL BERRAGAN (instructed by the First Defendant) for the First Defendant
Hearing date: 11 July 2012
Introduction
This is an application by the claimant, Ms Suzy Hughes, under section 261 of the Companies Act 2006 ("the Act") for permission to carry on against the first defendant, Mr Nigel Weiss, derivative claims in respect of causes of action that are vested in the second defendant, Iuvus Limited ("Iuvus").
By way of background, Ms Hughes is a qualified barrister and before the matters giving rise to these proceedings she carried on, through a limited company, the business of providing legal advice in the field of commercial leasing. Mr Weiss is a solicitor and, at a time when he was a partner in a firm of solicitors in London, he provided legal services to Ms Hughes's company.
Ms Hughes and Mr Weiss decided to go into business together. On 18 February 2005 Iuvus was incorporated as the vehicle of a joint venture between them for the provision of commercial legal consultancy services in the field of asset finance (there is a dispute between them as to whether the services extended to project finance). They became the two directors of Iuvus, each holding one of the two issued shares. It was agreed that, at least initially, they would each draw the same small salary from the company and supplement that income by receiving equal dividends at such times and in such amounts as might be appropriate. The venture was an equal quasi-partnership.
The relationship between Ms Hughes and Mr Weiss had become strained by the autumn of 2006. It is unnecessary for the purposes of this judgment to explore the problems in detail; one of them, however, was that Mr Weiss felt that Ms Hughes was not "pulling her weight" and that he was responsible for bringing in the greater part of the company's income but was not being commensurately rewarded. By the summer of 2007 it was clear that the joint venture could not continue. On or about 21 June 2007 Ms Hughes and Mr Weiss agreed to terminate their quasi-partnership and to go their separate ways. That brought an end to the business of Iuvus, though it remained in existence as a dormant company and Ms Hughes and Mr Weiss continued to be the only members and directors. On 26 July 2011 Iuvus was dissolved after it had failed to file annual returns, and its assets of a little more than £15,000 vested in the Crown as bona vacantia. With a view to bringing these proceedings, Ms Hughes has procured the restoration of Iuvus to the register.
In these proceedings Ms Hughes seeks to advance three claims that, if they are valid, vest in Iuvus. She alleges that Mr Weiss:
(a) Wrongfully transferred £100,000 out of Iuvus's bank account and into his own personal bank account and has thereafter failed to return it or any part of it or to account for it;
(b) In breach of his fiduciary duties to Iuvus, carried on business in competition with Iuvus, whether on his own account or on the account of a company in which he was interested;
(c) In breach of fiduciary duty, diverted payment of invoices from Iuvus to himself and thereafter failed to account for the receipts.
The claim form was issued on 3 April 2012 and was accompanied by particulars of claim drafted by counsel. On the same day Ms Hughes issued an application for permission to continue with the derivative claim under section 261 of the Act and rule 19.9A of the Civil Procedure Rules 1998.
On 16 April 2012 the application was considered on paper by HH Judge Behrens sitting as a judge of the High Court. He did not dismiss the application under section 262 (2) but gave directions.
The evidence before me has consisted of two witness statements from Ms Hughes and one from Mr Weiss. Although I have had regard to it all, I shall refer to it and to the more detailed history of the parties' business relationship only to the extent necessary to outline the parties' competing cases and to explain my conclusions. An extended narrative is unnecessary, as the course of events is well known to the parties.
I am grateful to Mr Jory and Mr Berragan, whose written and oral submissions have been of great assistance.
The Pleaded Claims
The derivative claims are summarised in paragraph 5 above and I shall explain them a little more fully below. Each of those claims is free-standing; but both the particulars of claim and Mr Jory's submissions make clear that it is her case that the three matters complained of were part of "a course of conduct designed to give [Mr Weiss] control over the Company's funds" (particulars of claim, paragraph 9). The thrust of the case is that, feeling dissatisfied with his rewards from the joint venture, Mr Weiss rewarded himself by taking moneys belonging to Iuvus on the pretext of investing them more advantageously but instead applied them to his own use or that of his family; and that he sought further to improve his own position by competing with Iuvus, while retaining his directorship of Iuvus for the purpose of preventing Ms Hughes from gaining control of the company and thereby making it more difficult for her to seek redress from him.
Removal of, and failure to account for, £100,000
The first head of claim is set out in paragraphs 11 to 29 of the particulars of claim, where the matter is put as follows. When Ms Hughes was on holiday in September 2006, Mr Weiss withdrew £100,000 from Iuvus's bank account. Although they had previously spoken about possible ways of investing the company's moneys to greater advantage, they had never reached any decision or agreement on the matter, and the withdrawal was made without her knowledge or consent. When she learned what had happened, Ms Hughes asked Mr Weiss to tell her what had become of the money. On 29 September 2006 he told her that he had paid the money into his own interest-bearing personal bank account pending transfer to an account that paid a higher rate of interest or, possibly, into premium bonds. In November 2006 he informed her that he had used £30,000 of the moneys to buy premium bonds and that he proposed to transfer the rest into an account with an advantageous rate of interest. However, no documentary evidence has ever been produced to show what became of the money, and Mr Weiss has resisted all requests to repay it. Further, when in January 2008 Mr Weiss made a witness statement in response to an application that Ms Hughes brought for pre-claim disclosure, he stated that he had retained the money only until August 2007, when "it became clear that it was in the best interests of the Company to discharge genuine Company expenses rather than allow [Ms Hughes] to make claims against it for unauthorised expenditure." In fact, the "genuine Company expenses" turn out to be payments of £10,000 p.a. to Mr Weiss's wife, £5,000 p.a. to his son and the remaining balance to himself by way of (a) quantum meruit for his additional efforts for Iuvus, (b) relocation expenses resulting from the necessity of moving to a smaller house because of the reduction in his income, and (c) payment of a £30,000 dividend that had been declared in March 2006. As for the dividend, Ms Hughes says it had been agreed that it would not be taken until such time as it should be convenient to withdraw the moneys from the company. As for the other bases of payment, none of them (says Ms Hughes) were agreed or legitimate; they are "pure invention which Mr Weiss has engineered to justify keeping the monies he seized" (Mr Jory's skeleton argument, paragraph 15). If indeed he made the payments as claimed, he did so in breach of trust or fiduciary duty.
Mr Weiss states that the initial transfer of the £100,000 from Iuvus's bank account was within his authority on the bank mandate and was pursuant to discussions—he stops short of saying agreement—with Ms Hughes concerning the more advantageous investment of the company's funds. The placing of the funds in Mr Weiss's own account was "the quickest solution to avoiding the problems we had discussed and was a temporary measure until a better account could be found (with no charges and a higher interest rate)": statement, paragraph 18. When Ms Hughes learned of the transfer of the funds, she initially made no request for their return to Iuvus, other than saying in November 2006 that sufficient funds would have to be returned for the payment of certain outgoings. In May 2007 Ms Hughes suggested that he retain the £30,000-worth of premium bonds as payment of a dividend in that amount that had been declared for each of the two shares in March 2006. In fact, she also then demanded the return of the balance of £70,000, from which she would take her own dividend.
As for the payments to himself, Mr Weiss relies first on the declaration of the dividend in March 2006 and on the terms of the resolution dated 31 March 2006, which appears to contemplate immediate payment; his case is that there was an immediate entitlement to take the dividend. Ms Hughes, however, says that it was agreed to defer receipt of the dividend until a time to be agreed between the parties. In this respect, it is notable that neither shareholder had taken the dividend by September 2006, when Mr Weiss withdrew the money from the company bank account, and that he did not initially justify any part of the withdrawal as being in respect of his own entitlement. In his witness statement, Mr Weiss says that he does not understand...
To continue reading
Request your trial
-
Re Singh Brothers Contractors (North West) Ltd
...QC, sitting in the Leeds District Registry of the Chancery Division as a judge of the High Court, in the case of Hughes v Weiss [2012] EWHC 2363 (Ch). I have looked at that authority, which I agree provides the most up to date and helpful guidance on the grant of permission to bring a deriv......
-
Richard Terence Percy v Merriman White
...Lapper [2005] EWHC 1152, [2005] B.C.C. 990; Barrett v Duckett [1995] B.C.C. 362. The submission to wind up the company in Hughes v Weiss [2012] EWHC 2363 was rejected Judge for reasons that were not present in this matter. Similarly, Saatchi v Gajjar [2019] EWHC 3472 was factually a differe......
-
Inderjit Singh Bhullar v Jatinderjit Singh Bhullar and Others
...Halle v Trax BW Ltd was not referred to in the judgment and it seems likely that it was not cited to the court. 66 Hughes v Weiss [2012] EWHC 2363 (Ch) was another case of a company with two equal shareholders who were both directors. The court permitted one shareholder to bring a derivati......
-
Certain Ltd Partners in Henderson PFI Secondary Fund II LLP (A Firm) v Henderson PFI Secondary Fund II LP (A Firm)and Others
...of such a remedy is not however conclusive of the matter. HH Judge Keyser QC sitting as a Deputy Judge so held in Hughes v Weiss [2012] EWHC 2363 (Ch) at paragraphs 58–62, by reference to earlier first instance decisions under the law preceding the 2006 Act, contrary to a dictum of Gibson L......
-
Table of Cases
...451, [1978] 2 WLR 661, [1978] 2 All ER 363, CA 146 Hughes & Co, Re [1911] 1 Ch 342, 80 LJ Ch 262, 104 LT 410, ChD 153 Hughes v Weiss [2012] EWHC 2363 (Ch), [2012] All ER (D) 197 (Oct) 140 Hunter v Belcher (1864) 2 De GJ & S 194, 46 ER 349 137 Hurst v Bryk [2000] UKHL 19, [2002] 1 AC 185, [2......
-
Litigation
...can therefore be treated for most purposes just 42 Watson v Imperial Financial Services (1994) 111 DLR (4th) 643. 43 Hughes v Weiss [2012] EWHC 2363 (Ch), [2012] All ER (D) 197 (Oct). 44 Kleanthous v Pafitis and others [2011] EWHC 2287 (Ch), [2012] BCC 676. Litigation 141 as any other litig......