Tarn Insurance Services Ltd ((in Administration)) v Kirby & Others
| Jurisdiction | England & Wales |
| Judge | Sir John Chadwick,Lord Justice Thomas,Lord Justice Waller |
| Judgment Date | 27 January 2009 |
| Neutral Citation | [2009] EWCA Civ 19 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2008/1781 HC08C00984 |
| Date | 27 January 2009 |
[2009] EWCA Civ 19
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(Mr Justice Norris)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Waller
Vice-president of the Court of Appeal (Civil Division)
Lord Justice Thomas and
Sir John Chadwick
Case No: A2/2008/1781
A2/2008/1781A
HC08C00984
Mr Philip Marshall QC (instructed by DLA Piper UK LLP, 3 Noble Street, London EC2V 7EE) for the Appellant
Mr Francisco Xavier Rodriguez-Purcet, the fourth Respondent (and eighth Defendant) appeared in person on his own behalf and as the authorised representative of the fifth Respondent (and ninth Defendant), Outtake Limited
Hearing dates: 8 and 9 December 2008
This is an appeal from an order made on 2 July 2008 by Mr Justice Norris on applications made by the claimant, Tarn Insurance Services Limited (in administration) (“Tarn”), in proceedings brought against Mr Stephen Kirby and eight other defendants.
Tarn (formerly known as Tarn Insurance Management Limited) was incorporated on 25 October 2005. In the course of its business it acted as intermediary in connection with loans made by Euro Holdings Limited Partnership (“Euro”) to assist persons who were entitled, as local authority tenants, to purchase the properties which they occupied under the “right-to-buy” provisions in Part V of the Housing Act 1985 in meeting the incidental legal or other costs associated with the exercise of those rights. In consideration of its services as intermediary, Tarn received a fee, part of which was paid in advance of the purchase of property by the tenant. In the event that the purchase did not proceed to completion, Tarn was obliged to repay that advance. It secured that liability by a fixed and floating charge over its undertaking and assets. In the events which happened a substantial proportion of those tenants who had received loans from Euro did not complete their purchases and advance fees received by Tarn – amounting to some £3.4 million or thereabouts – became repayable. On 13 November 2007 Euro made demand for that sum. Tarn failed to make repayment. On 30 November 2007 joint administrators were appointed.
The claims in these proceedings
These proceedings were commenced on 8 April 2008. The first, second and third-named defendants are Mr Kirby, Mr Tony Bennett and Mr Stephen Hirst. It is said that, although never formally appointed directors of Tarn, they were the persons who,
at all material times, controlled and directed its affairs: and, as such, were to be treated as de facto directors. The fourth-named defendant, Mr David Holden, had been appointed a director of Tarn from incorporation. It is said that he acted under the directions of Mr Kirby, Mr Bennett and Mr Hirst. Mr Holden was an employee of the fifth-named defendant, STS Insurance Services Limited (“STS”), a company which, at all material times, was owned and controlled by Mr Kirby, Mr Bennett and Mr Hirst. Those three individuals also controlled the sixth and seventh-named defendants, Luxury Bathe Limited and Get With It Limited. The eighth-named defendant, Mr Francisco Xavier Rodriguez-Purcet (“Mr Rodriguez”) was, at all material times, the owner and controller of Legal 4 Life Limited (“Legal 4 Life”), a company which acted as a sub-agent for Tarn, and of Outtake Limited (“Outtake”), the ninth-named defendant.
It is alleged in the proceedings that, during the period from September 2006 to November 2007, substantial payments were made by Tarn to each of the defendants (other than Mr Holden and Mr Rodriguez) and to Legal 4 Life. It is sufficient, in the present context, to note that £632,732 is said to have been paid to Mr Kirby, that sums amounting together to £2,687,240 are said to have been paid to Mr Hirst, Mr Bennett, STS, Luxury Bathe Limited and Get With It Limited (of which £1,566,440 is said to have been paid to STS), that £1,876,965 is said to have been paid to Legal 4 Life and that £379,350 is said to have been paid to Outtake. It is said that those payments were made without any, or any proper, regard to the interests of Tarn; and that they must be repaid: alternatively, that they were received by the payees with knowledge of the breach of fiduciary duty by the directors (or de facto directors) of Tarn and so were subject to constructive trusts in the hands of the recipients.
In response to an application for documents and information made by the joint administrators under section 236 of the Insolvency Act 1986, Mr Kirby, Mr Bennett and Mr Hirst deposed in affidavits sworn on 29 February 2008 that – save as to £185,850 out of the £632,732 paid to Mr Kirby by Tarn—the monies paid to them and to the companies which they controlled (STS, Luxury Bathe Limited and Get With It Limited) by Tarn, amounting in aggregate £3,134,122, had been paid in respect of services provided by STS under an agreement (“the STS Agreement”) dated 1 September 2006 and made between Tarn and STS. Mr Kirby deposed that the balance of the monies paid to him (£185,850) had been paid by Tarn on behalf (and for the account) of Legal 4 Life in respect of his entitlement to receive consultancy fees from Legal 4 Life under an arrangement made in or about December 2006. That arrangement was confirmed by Mr Rodriguez in an affidavit sworn on 3 March 2008. Mr Rodriguez deposed, also, to the receipt by Legal 4 Life of £1,876,965 from Tarn in respect of introduction fees invoiced under agreements (“the Legal 4 Life agreements”) dated July 2006 and 22 February 2007; and to the receipt by Outtake of monies amounting to £375,000 said to be due to Outtake in respect of consultancy services provided to Legal 4 Life.
Tarn challenges the authenticity of the document said to be the STS agreement of 1 September 2006. But without prejudice to that challenge, Tarn contends that Mr Kirby, Mr Bennett, Mr Hirst and Mr Holden caused Tarn to enter into the STS agreement (if authentic) in breach of their fiduciary duties as directors (or de facto directors) and that the STS agreement should be set aside. Further, it is said, in causing Tarn to enter into the STS agreement, Mr Kirby, Mr Bennett, Mr Hirst and Mr Holden acted in breach of the duties of care which they owed to Tarn as directors (or de facto directors). Those allegations are reflected in the first group of claims in the proceedings: that is to say, in claims against Mr Kirby, Mr Bennett, Mr Hirst and Mr Holden for damages and/or equitable compensation in the sum of £3,124,122 (the amount said to have been paid by Tarn under the STS agreement).
The second group of claims in the proceedings are founded on the allegation that the payments to Mr Kirby, amounting to £185,850, in respect of consultancy services provided to Legal 4 Life were in the nature of a secret commission or bribe. It is said that Mr Rodriguez and Mr Kirby agreed that, in consideration of a commission or fee of £50 on each introduction by Legal 4 Life under the Legal 4 Life agreements, Mr Kirby would ensure that a proposed reduction in the number of introductions which Tarn would accept from Legal 4 Life would not be carried into effect. It is said, further, that Mr Rodriguez knew that Mr Kirby was a de facto director of Tarn; and knew that the arrangement for the payment of commission to Mr Kirby was not, and was not intended to be, disclosed by Mr Kirby to Tarn. The effect of the arrangement (it is said) is that Tarn continued to accept introductions from Legal 4 Life when it would not otherwise have done so; and that – in the circumstances that none of those introductions led to completed purchases – Tarn became liable to repay to Euro advances amounting in aggregate to £1,662,316 which (but for the acceptance of introductions pursuant to the arrangement) would not have been made. Tarn claims against Mr Kirby and Mr Rodriguez damages in the amount of £1,848,166 (being the sum of £1,662,316 and £185,850); and, further, claims repayment of the £379,350 said to have been paid to Outtake at the direction of Mr Rodriguez.
The orders for provision of information and delivery of documents
As I have said, the joint administrators had made application for information and documents under section 236 of the Insolvency Act 1986. That application came before His Honour Judge Pelling QC, sitting as a Judge of the High Court in the Manchester District Registry of the Chancery Division, on 8 February 2008. Upon undertakings given by (amongst others) Mr Kirby and STS, he adjourned the application generally with liberty to restore. The undertakings included an undertaking to make and serve upon the solicitors for the joint administrators an affidavit giving an account of his (or its) respective financial dealings with Tarn: specifying all funds, property or assets of any kind received by them or by any of the other respondents from Tarn which individually exceeded £500 in value (“transferred assets”), stating in respect of each of the transferred assets (amongst other matters) the then present whereabouts of the transferred assets and details of any assets acquired with the transferred assets, identifying all relevant transactions and providing all relevant documents in their possession custody or control.
The joint administrators took the view that the information provided by Mr Kirby – and by STS – in purported compliance with the undertakings given on 8 February 2008 was seriously deficient. These proceedings were commenced on 8 April 2008. On...
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