Taylor v Van Dutch Marine Holding Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Miss Julia Dias |
| Judgment Date | 22 July 2019 |
| Neutral Citation | [2019] EWHC 1951 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2016-001519 |
| Date | 22 July 2019 |
[2019] EWHC 1951 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Miss Julia Dias QC SITTING AS A DEPUTY JUDGE OF THE HIGH COURT
Case No: HC-2016-001519
James Ramsden QC and Daniel Benedyk (instructed by Keystone Law) for the Claimant
Lance Ashworth QC and Dan McCourt Fritz (instructed by Messrs Archerfield Partners LLP) for the Additional Defendants
The Original Defendants did not appear and were not represented
Hearing dates: 4–5, 8–12 April, 21 June 2019
Miss Julia Dias QC sitting as a Deputy Judge of the High Court:
A. INTRODUCTION
This judgment is divided into the following sections:
A. Introduction
B. The issues in outline
C. The evidence
E. Agency
F. Contractual claims
G. Misrepresentation H. Conspiracy
I. Unjust enrichment
J. Proprietary claims and constructive trust
K. Quantum and interest
The Claimant, Mr Kevin Taylor, is a businessman of some prominence. He is the chairman and founder of the McClaren group of construction companies. However, for all his undoubted business acumen, he now finds himself in the unfortunate position of having made a short-term loan on the strength of apparently credible assurances that it would be repaid in short order, only to be left grievously disappointed when the time for payment arrived.
When no payment was forthcoming, Mr Taylor obtained a default judgment against the four Original Defendants, who were the persons and entities with whom he had dealt. That judgment remains unsatisfied and the question for determination at this trial has been whether Mr Taylor is additionally entitled to seek relief (a) in respect of the same causes of action against the Fifth to Seventh Defendants (the “Additional Defendants”), one or more of whom he alleges to have acted as undisclosed principals of one or more of the Original Defendants, and/or (b) on the basis of an alleged conspiracy between the Additional and Original Defendants. This raises an interesting and difficult question concerning the extent to which a default judgment obtained against an agent bars a subsequent claim against an undisclosed principal – the so-called rule in Kendall v Hamilton (1879), 4 App. Cas. 504.
The procedural history of this action has been both tortuous and torturous, particularly in relation to disclosure, spawning no fewer than 25 witness statements and 16 affidavits on behalf of the Claimant, 11 affidavits on behalf of the Original Defendants, 9 witness statements on behalf of the Additional Defendants, and two separate sets of contempt proceedings against the Third and Fourth Defendants resulting in two separate sentences of imprisonment imposed on them.
Nonetheless, for present purposes the background can be stated relatively shortly as follows.
The Parties
The Claimant is a UK national with a passion for boats. Between about 2008 and 2016, he was resident in Monaco having moved there in part, but not exclusively, for tax reasons. He still retains business interests there, although he has now moved back to the UK. His representative in Monaco is Mr Damian Crean.
The First Defendant (“VDMH”) is a Maltese registered company which was incorporated at the end of April 2015. It is the 100% owner of the Second Defendant (“VDML”), a UK domiciled company. The Third Defendant, Mr Henk Erenstein, and the Fourth Defendant, Mr Ruud Koekkoek, are Dutch nationals, both resident in Monaco. They are the ultimate beneficial owners of the Van Dutch group, each owning 50% of the shares in VDMH.
The Fifth Defendant, Mr Mohammed Khodabakhsh, is a US citizen of Iranian extraction, residing in California. He is the legal and beneficial owner of the Sixth Defendant (“NBT”), a Limited Liability Corporation incorporated in Delaware on 19 June 2015. He is a physicist and engineer by profession and an inventor with several patents to his name. His particular expertise, and NBT's business, relates to the development of advanced green technologies. In 2009, he opened a private laboratory in California to research and develop these technologies. At the same time he recruited Mr Terry Vechik, a businessman with an MBA in marketing whom he had known for about 15 years, to handle his business affairs. In February 2018, Mr Khodabakhsh transferred his operations to an on-campus facility at Aachen University in Germany and the Californian laboratory was closed.
Mr Khodabakhsh has been the Chief Technology Officer of NBT since its incorporation. Mr Vechik was the Chief Operating Officer of NBT from its incorporation until January 2017, when he became the Chief Operating Officer of the Seventh Defendant.
The Seventh Defendant (“Rhino”) is a Panamanian company which was, at least until 30 May 2015, a 100% subsidiary of VDMH. It is the Additional Defendants' case that by a written agreement of that date, VDMH undertook to transfer 100% of the shares in Rhino to Mr Khodabakhsh as nominee for NBT as part of a joint venture between “Van Dutch” (putting it neutrally) and Mr Khodabakhsh/NBT to develop a green technology motor for marine use (referred to in these proceedings as the “E-Force Generator” or “E-Generator”). The entire shareholding in Rhino was formally registered in the name of NBT on 25 January 2017. However, the beneficial ownership of Rhino after 30 May 2015 was a matter of dispute before me.
At all material times, which for present purposes is 2014 onwards, Mr Erenstein and Mr Koekkoek carried on business designing, manufacturing and selling luxury leisure yachts under the “Van Dutch” brand. VDML was the active trading company, acting on behalf of Rhino, by whom all the relevant IP rights and valuable assets (principally moulds and tools) were owned. The actual manufacture of the yachts was outsourced partly to Marquis Yachts LLC (“Marquis”) in the USA and partly to Couach CNC in France. By virtue of a licensing agreement dated 11 March 2015 between VDML, Rhino and an unrelated Panamanian company called Van Dutch Latam SA (“Latam”), Latam was granted exclusive rights to produce, distribute, promote, market and sell Van Dutch boats and products in a widely defined territory including the USA and Latin America. In return Latam undertook to pay VDML licence fees and substantial revenues linked to the number of boats sold by Latam, based on a minimum of 20 boats per year.
In 2015, the business was restructured. VDMH was incorporated in April 2015 as the holding company of both VDML and Rhino as 100% subsidiaries.
The first approach to Mr Taylor
In August 2014, while Mr Taylor was still living in Monaco, he was contacted by a friend, Mr Mark Thomas. Mr Thomas also lived in Monaco and was very well-connected there, having close links to Prince Albert. Mr Thomas had become involved in the Van Dutch business and worked closely with Mr Erenstein and Mr Koekkoek. He explained to Mr Taylor that Mr Erenstein and Mr Koekkoek needed a bridging loan of US$1.2 million to tide them over a working capital crisis. In particular, money was needed to buy out a 10% shareholder. Mr Taylor was sufficiently interested to ask for some financial information and forecasts which he asked McLaren's Group Finance Director, Mr Craig Young, to assess. Mr Young advised that the return Mr Taylor could expect was reasonable but not such as to justify the trouble of entering into and documenting the transaction. In the event, the proposal was not taken further. In fact, although Mr Taylor was not aware of this until much later, a loan was made in November 2014 by TCA Global Credit Master Fund LP (“ TCA”).
The loan
In July 2015, Mr Thomas asked Mr Taylor again whether he would be prepared to make a bridging loan to the Van Dutch business. Negotiations took place, principally between Mr Young and Mr Crean on behalf of Mr Taylor, and Mr Erenstein and Mr Hans Klaver on behalf of Van Dutch. Mr Klaver was the Van Dutch group's Dutch lawyer. I will have to deal in more detail below with the information provided to Mr Taylor and his advisers and the representations made to them during the course of those negotiations.
In general terms, however, they were given to understand that business was booming, that the group wished to expand and that it was currently in the process of preparing a bond issue in order to raise up to €20 million for this purpose. Meanwhile, however, a short-term cash injection of US$1,591,040 was urgently needed in order to settle outstanding payments due to Marquis. Mr Taylor was assured that yachts had been pre-ordered and that significant payments could be expected imminently from customers, and that in any event the licence fees from Latam alone would be sufficient to repay the loan within six months irrespective of the forthcoming bond issue. Further security was also offered to him in the form of options to acquire equity in the business and to purchase any two Van Dutch yachts at cost price, as well as pledges of 30% of the equity in VDMH and a charge over three stock boats owned by VDMH.
Heads of Terms between Mr Taylor and VDMH were drafted by Mr Crean to reflect these discussions and were signed by Mr Erenstein on behalf of VDMH on 24 July 2015. They included terms requiring full transparency in all the group's financial dealings and express authorisation by Mr Taylor for all payments by any group company. They also entitled Mr Taylor to direct that any receipts by a group company should be applied to repayment of the loan.
The Heads of Terms were expressly subject to the agreement and signature of a formal loan agreement....
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