Thane Imvestments v Tomlinson
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE PETER GIBSON,SIR ANTHONY EVANS |
| Judgment Date | 29 July 2003 |
| Neutral Citation | [2003] EWCA Civ 1272 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | A3/2003/0013 |
| Date | 29 July 2003 |
[2003] EWCA Civ 1272
Lord Justice Peter Gibson
Sir Anthony Evans
A3/2003/0013
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr Justice Neuberger)
Royal Courts of Justice
Strand
London, WC2
MR TOMLINSON appeared in person on behalf of the Appellants.
MR MARK BLACKETT-ORD (instructed by Black Norman, Liverpool, L23 5RH) appeared on behalf of the Respondents.
Tuesday, 29 th July 2003
This is an appeal by the first defendant, Brian Tomlinson, and the second defendant, Reyall Business Consultants Ltd ("Reyall"), from part of the order made by Neuberger J on 6th December 2002 whereby the judge dismissed with costs Mr Tomlinson's and Reyall's application to discharge the freezing order made on 23rd May 2002 by His Honour Judge Anthony Thompson QC, sitting as a judge of the High Court. The appeal is brought with the permission of Carnwath LJ who ordered expedition of the appeal.
Mr Tomlinson is a chartered accountant of many years standing. He is resident in the Isle of Man, though his wife has a house in England. When in practice in the 1970s, his firm were the auditors of Northern Development Ltd ("ND"), a major property development company, the principal shareholder and director of which was Derek Barnes, and which then foundered, its collapse occasioning much litigation. Mr Tomlinson was one of the trustees of a settlement made by Mr Barnes for the benefit of Mr Barnes' family. The trustees held the bulk of the shares in a company which by name change became the first defendant, Thane Investments Ltd ("Thane"). Apart from holding shares in ND, which became valueless, the trustees also held a charge over land in Leeds of which it secured control and eventually sold at a substantial profit.
Thane had a number of subsidiaries, including the second defendant, Denbrae Ltd ("Denbrae"). In 1996 the directors of Thane and Denbrae were Mr Tomlinson and another trustee of the settlement, the former in-house solicitor for ND, Mr Bretherton. Mr Bretherton wished to retire as a director. Mr Tomlinson brought in a former colleague of his, Giles Knopp, who had been a director with him of a property company. On 4th February 1997 Mr Bretherton resigned. Mr Knopp was appointed in his place as a director of Thane and Denbrae. The next day Thane and Denbrae entered into service agreements with Mr Tomlinson and Mr Knopp, each of whom abstained when his service agreement was being considered. Each agreement gave the director concerned a salary (Mr Thompson getting rather more than Mr Knopp), a pension and other benefits and required the company concerned to give 36 months notice of termination of the agreement.
Mr Barnes took no interest in the settlement for 20 years, but in the late 1990s, on becoming aware that the settlement had assets exceeding liabilities, he began to take an active interest. In 1999 he started proceedings in the Chancery Division to remove Mr Tomlinson and Mr Bretherton as trustees and to appoint new trustees in their place. Mr Tomlinson applied for directions. The litigation was settled, the old trustees resigning in favour of new trustees and Mr Tomlinson resigning his directorship. Mr Tomlinson undertook to use his best endeavours to procure Mr Knopp's resignation as director, but he was unable to procure that. The new Boards of Thane and Denbrae stopped paying Mr Knopp any salary and on 30th January 2001 dismissed him without notice.
Mr Knopp then brought proceedings against Thane and Denbrae for wrongful dismissal. Thane and Denbrae counterclaimed for misfeasance in his conduct as director. Mr Knopp joined Mr Tomlinson as a Part 20 defendant. By the time of the hearing in March 2002 before the Judge, Mr Tomlinson and Mr Knopp had compromised the Part 20 proceedings on the basis that Mr Tomlinson accepted half of Mr Knopp's liability for any damages for misfeasance. Mr Tomlinson was never made a defendant to Thane's and Denbrae's counterclaim, although the Master allowed him to take part in the proceedings. Mr Tomlinson gave evidence at the trial for Mr Knopp.
Judge Thompson, in a lengthy and detailed judgment running to 65 pages, went through various transactions in which Thane and Denbrae had been involved and considered the conduct of Mr Knopp and Mr Tomlinson. The judge found that they treated the companies as "their private fiefdom", running them for their own benefit and that of their friends. He said that there was gross misfeasance and breach of fiduciary duty on the part of Mr Knopp as director of the companies. He criticised the late production by Mr Tomlinson of the Company minutes, which were only supplied one month before the commencement of proceedings in March 2002. The judge made various comments on Mr Tomlinson which were unfavourable to him. He found Mr Tomlinson not a trustworthy witness in respect of one matter, and he did not accept an excuse which had been provided by Mr Tomlinson. The judge was satisfied that there were grave breaches of fiduciary duty and misfeasance on the part of Mr Knopp which entitled the companies to dismiss him summarily. The judge therefore held that Mr Knopp's claim failed and that Thane and Denbrae were entitled to succeed on their Part 20 counterclaim. The judge also held that the service agreements of Mr Knopp were never validly entered into as the remuneration of the directors had to be fixed by the companies in general meeting. That had never happened. The incorporators never ratified Mr Knopp's service agreement.
The judge on 23rd May 2002 formally handed down his judgment. He was then asked by counsel for Thane and Denbrae to make a freezing order against Mr Knopp. The judge made that order in the sum of £1 million after hearing counsel for Mr Knopp arguing against any such order. Counsel for Thane and Denbrae, Mr Blackett-Ord, in the course of his submissions told the judge that the companies were intending to issue proceedings immediately against Mr Tomlinson and certain other defendants. After the judge had given a further judgment making a freezing order against Mr Knopp, Mr Blackett-Ord asked for a similar order against Mr Tomlinson, although Mr Tomlinson was not present at the hearing and no notice had been given to him. Mr Blackett-Ord also asked for a freezing order against what he called "Mr Tomlinson's company", Reyall. The judge was handed a claim form and an undated witness statement from Lesley Black, the solicitor having the conduct of proceedings in which the judge had just given judgment and conduct of the proceedings which were about to be commenced against Mr Tomlinson and Reyall. A third company has since been added, Astim Ltd, a wholly owned subsidiary of Denbrae. Similarly, a fourth company, also a wholly owned subsidiary of Denbrae, has been added. By the claim form which was shown to the judge, Thane and Denbrae claimed against Mr Tomlinson and Reyall:
"… an account of the money removed from the Claimants by [Mr Tomlinson] when he was a director of the Claimant Companies and wrongfully paid (as to part) to [Reyall], and an account and equitable compensation for the diminution in assets of the Claimant."
There was also a claim for a declaration against two other defendants, Mr Wagner, an old friend of Mr Tomlinson, and The Grant Arms Hotel. They were involved in one of the transactions which the judge had criticised. Astim was formed or acquired to be a subsidiary of Denbrae and to take the freehold of The Grant Arms Hotel.
By his witness statement Mr Black said that by the judgment given by Judge Thompson the judge had found that Mr Knopp and Mr Tomlinson were guilty of massive misfeasance in their capacity as directors of Thane and Denbrae, and found them guilty of dishonesty in the manner in which they conducted the defence of the Part 20 claim that was brought against Mr Knopp by those companies. Mr Black said in paragraph 5, after exhibiting a copy of the judgment which had been handed down:
"I submit that the matters dealt with by His Lordship amply justify a suspicion on the part of my clients that neither Mr Knopp nor Mr Tomlinson will honour the judgment but they are likely to take steps to try to dissipate their assets in order to avoid execution."
Mr Black said that the value of the claim against them with costs may be as much as a million pounds. In respect of Reyall, all that is said is that in these circumstances he asked for a freezing order to be made against the assets of Mr Tomlinson and his company, Reyall, "which received money that he had wrongfully removed from my client companies".
Mr Blackett-Ord's submissions on the application for a freezing order were even briefer. Having handed up the claim form, the witness statement and the draft order, he said that the thinking behind the relief claimed in the claim form against Mr Tomlinson was:
"If Mr Tomlinson does not honour his arrangement with Mr Knopp, which I expect he will think of some good reason not to write out a cheque for half a million pounds, it will be necessary for to us claim directly against him simply on the same grounds, to try and go for summary judgment."
Mr Blackett-Ord said that the Mareva injunction only related to Mr Tomlinson and his company, and he said of Reyall that it:
"… rather oddly stepped into the shoes of Mr Tomlinson...
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...requirements to a much more elevated state than they are in other freezing order cases. 21 The next submission of Mr Trace was based on Thane v Tomlinson [2003] EWCA Civ 1272, in which it was held that it should not be thought to be absolutely automatic that freezing order applications woul......
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Table of Cases
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