Tarlochan Singh Badyal v 1) Malkiat Singh Badyal
| Jurisdiction | England & Wales |
| Judge | Mr Justice Henry Carr |
| Judgment Date | 19 January 2018 |
| Neutral Citation | [2018] EWHC 68 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2016-00763 |
| Date | 19 January 2018 |
[2018] EWHC 68 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice
7 Rolls Buildings, Fetter Lane,
London, EC4A 1NL
The Hon Mr Justice Henry Carr
Case No: HC-2016-00763
In the matter of Paramount Powders (UK) Limited (02047961)
And in the matter of the Companies Act 2006
Martin Mann QC and Richard Ritchie (instructed by Gannons Commercial Law Limited) for the Claimant/Petitioner
Jeffrey Terry (instructed by Allan Janes LLP) for the First Defendant/First Respondent
Stuart Hornett and Sarah Walker (instructed by Gordon Dadds LLP) for the Second Defendant/Second Respondent
Hearing dates: 6, 7, 8, 9, 10, 13, 14, 15, 16, 22, 23 November
Introduction
These proceedings concern a bitter dispute between three brothers who have built up a very successful business. In order to distinguish between members of the Badyal family, I shall refer to the main protagonists in the way that they were referred to during the trial, either by initials or first names. The Claimant (“TSB”) is the eldest brother, the First Defendant (“MSB”) is the middle brother and the Second Defendant (“SSB”) is the youngest. The brothers came to the United Kingdom to join their father, Sohan Singh Badyal (“the Father”) in 1976. In 1981 the brothers began working together at a business known as Slough Plastics Company (“SPC”) which was formally constituted as an equal three-way partnership between the brothers in 1983. This partnership was involved in the manufacture of powder coating. In 1986, Paramount Powder UK Limited (“PPUK”) was incorporated with TSB and MSB as directors. PPUK also manufactures powder coating. The brothers each held 25% shares in PPUK, with the remaining 25% being given to the Father. The Father did not contribute to the business, but was given a share as a mark of love and respect. The three brothers agree that PPUK was treated as a quasi-partnership between them.
In 1990 the Father moved to India, where a farmhouse was bought. TSB moved to India in 1993/4 with the intention of setting up and running a powder coating business. The Father and TSB stayed together in the farmhouse, and TSB visited the UK regularly to look into the affairs of SPC and PPUK. In his absence, MSB and SSB ran the UK businesses, with the administrative side, such as company filings, tax returns and the payroll being managed by Mr Varinder Bij, who was employed by SPC/PPUK to provide accountancy services, although he had not passed his final accountancy exams.
In 1996/1997, the Indian business, which manufactured powder coatings, was incorporated under the name Paramount Powders Private Limited (“Paramount India”). Other companies were also established in India, and assets were acquired. Several assets had been leased or purchased in the UK and others were acquired, including a hotel, a public house, and various residential houses, described more fully below.
The relationship between TSB and his brothers became increasingly sour, and in 2015, things came to a head when it was discovered that TSB's son (“Sandeep”), had set up a company, Trident Powders Limited (“Trident”) in competition with PPUK. MSB and SSB claim that TSB, whilst still a director of PPUK, was involved in, amongst other things, funding, promoting and encouraging Sandeep to set up Trident, in soliciting key employees of PPUK to join Trident, and in running Trident.
On 12 August 2016, TSB was removed as a director of PPUK. Thereafter, he commenced a claim seeking to wind up the partnership (or partnerships in the event that some assets were owned by stand-alone partnerships other than SPC) and for the taking of accounts (“the Partnership Claim”). It is agreed that the partnership(s) should be wound up and accounts should be taken. It is agreed that certain properties and businesses were partnership property, in particular the business of SPC, the Ann Boleyn Hotel, the Jolly Farmer Public House, 2&4 David Road Slough, 6 David Road Slough, and residential properties known as Snitterfield House, Stoke Poges and Greystones, Wexham. However, there are many disputes about whether other assets are partnership property, or jointly owned beneficially by the three brothers, or are owned, legally and beneficially, by TSB alone.
TSB has also filed a Petition seeking to wind up PPUK on the basis that MSB and SSB have acted in a manner unfairly prejudicial to TSB or that it is just and equitable that the company should be wound up (“the Company Claim”).
The witnesses
Primarily, this is a factual dispute. TSB, on one side, and MSB and SSB on the other, have traded allegations of misconduct which range from highly disreputable to criminal. I shall begin by setting out my impressions of the main witnesses, which will be the subject of more detailed consideration when dealing with the key issues in dispute.
TSB
TSB claimed that he required an interpreter in order to give evidence. MSB and SSB suggested that he was pretending that his English was much worse than it was. I do not accept this. Although he had spent many years in England, his language skills were poor and his speech was indistinct. The interpreter was essential for his evidence to be understood. TSB was cross-examined for three days. Counsel indicated that a short time would be required on the fourth day to finish the cross-examination. Whilst waiting outside court on the last morning of his cross-examination, TSB had a stroke. He remained in hospital and on the last day of the trial I was told that he was due to have a triple heart bypass operation.
TSB is an imposing man with a very strong will. He holds a genuine (albeit misplaced) belief that, as eldest brother, he is entitled to more of the partnership and company assets than his younger brothers. He also believes that he was primarily responsible for the success of the family business. In my judgment, TSB exaggerated his contribution and minimised that of his brothers. When assessing his evidence, I bear in mind his limited English, and the poor state of his health during his cross-examination. Unfortunately, I have concluded that both in his written evidence and his oral evidence, he did not tell the truth about key issues in dispute.
TSB was reluctant to give direct answers to direct questions, and frequently, the relevant facts emerged after much evasion on his part. In respect of certain Indian companies which are alleged to be partnership assets, he made great efforts to conceal the fact that he had reduced the shareholding of his brothers, without their knowledge. He failed to give any proper disclosure in respect of the Indian Assets (as defined below) which were clearly in issue on the pleadings, as were the shareholdings of MSB and SSB. Furthermore, I do not accept TSB's evidence about Trident. He repeatedly denied any involvement in Trident in his witness statements and in his oral testimony, but he was not telling the truth.
Sandeep
Sandeep was very defensive during his cross-examination, preferring to respond to questions with a question rather than an answer. Whilst claiming that he had set up, financed and run Trident without any assistance from his father, he did not provide documents to show that this was the case. After he was cross-examined, I was concerned that he had chosen not to reveal evidence which might assist him, in order to avoid disclosing matters about Trident to MSB and SSB. I gave him the opportunity to corroborate his evidence with documents, including bank statements from his personal account and Trident's account, to establish that he had provided the considerable sums required to finance Trident's business. He provided two sets of documents (not including any bank statements) and was twice recalled for cross-examination. He did not provide a complete or credible account and I did not consider that I could rely upon his evidence about Trident.
Mr Bij
Mr Bij worked for SPC/PPUK for many years, and was a highly trusted employee. He had a very close relationship with TSB and was acting primarily in his interests during his employment. By the time he left, he had developed a strong antipathy against SSB, which emerged clearly during his cross-examination. He claimed that he had been assaulted by SSB shortly before leaving his employment. This is strongly denied by SSB, who nonetheless accepts that there was a heated argument between them shortly before Mr Bij left SPC/PPUK.
Upon leaving his employment Mr Bij tried to change the password of an email account that he had set up in the name of PPUK, whilst employed by the company, and to transfer it to his own name. He claimed that this was his email account. I accept that he may have had some personal emails on this account, but he set it up for the company, and it did not belong to him. He wished to continue to have access to company emails, and to prevent PPUK from having access to its own emails on that account, after he left his employment.
Mr Bij was in charge of the payroll for PPUK. For several years, wives and children of the brothers had been included on the payroll, although they did not work for the company. This was characterised by Counsel during the trial as “a tax dodge”. Mr Bij added his own son to the payroll, who did not work for PPUK. During his cross-examination he offered two explanations for this, neither of which I believed. First, he suggested that this was done as a salary sacrifice by him. The suggestion that this justified a false claim that his son was employed by PPUK was wholly implausible. Secondly, he claimed that as the...
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