Thavatheva Thevarajah v John Riordan and Others
| Jurisdiction | England & Wales |
| Judge | Mr Andrew Sutcliffe |
| Judgment Date | 10 October 2013 |
| Neutral Citation | [2013] EWHC 3179 (Ch) |
| Court | Chancery Division |
| Date | 10 October 2013 |
| Docket Number | HC13B01932. |
[2013] EWHC 3179 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building,
110 Fetter Lane,
London EC4A 1NL.
Mr Andrew Sutcliffe QC
(Sitting as a Deputy Judge of the High Court Chancery Division)
HC13B01932.
Mr James Bailey ( instructed by Olephant Solicitors, 4 Snow Hill, London EC1A 2DJ) appeared on behalf of the Claimant.
Mr Simon Davenport QC and Mr Daniel Lewis (instructed by Moon Beever Solicitors, Bedford House, 21a John Street, London WC1N 2BF) appeared on behalf of the Defendants.
Thursday, 10 th October 2013.
JUDGMENT:
THE DEPUTY JUDGE:
Introduction
This case has an unusual procedural history. It was listed for a speedy trial with a trial window opening on 1 st October this year and closing on 31 st October. After close of business on Tuesday 1 st October the First, Second and Fourth Defendants ('the Defendants')— the third defendant company not being represented, playing no part in the proceedings and only being joined so as to be bound by the result — served notice of change of solicitors and the following day those new solicitors served an application on the Defendants' behalf asking for the following relief. First and foremost, relief from the sanction in the order of Mr Justice Henderson dated 21 st June imposed by the order of Mr Justice Hildyard dated 9 th August and consequential orders providing for the Defence and Counterclaim to be restored and further Directions to trial, which will inevitably have to be adjourned if the court accedes to this application. Second, that the freezing injunction dated 17 th May 2013 be varied so that the value of assets to be the subject of the injunction are reduced from £4.1 m to £2.5 m and that the Defendants are permitted to spend a reasonable sum on legal advice and representation.
This application was listed to be heard on the first day of trial, namely, Monday 7 th October. I have had the benefit of helpful submissions over two days from James Bailey on behalf of the Claimant and Simon Davenport QC leading Daniel Lewis on behalf of the Defendants. Before dealing with the issues that arise on the application it is necessary to describe briefly what the case is about and then to set out in some detail the procedural background to the application.
The background facts and allegations
The Claimant is a businessman said to have particular expertise in the travel industry. He also invests in property. The Defendants are property developers who appear to specialise in the development of public houses. The Fourth Defendant was declared bankrupt in May 2001. In February 2002 his discharge from bankruptcy was suspended indefinitely and he remains an undischarged bankrupt. In August 2008 he was disqualified from acting as a director for 10 years. The Claimant alleges that the Fourth Defendant was a shadow director of the Third Defendant at all material times up to 28 th March 2013, which is when the Claimant became sole director of the Third Defendant.
The Claimant's case relies on three oral agreements said to be evidenced in writing or by part performance. He says he agreed to purchase a property known as The Jewel, together with a 50% interest in another property called The Devonshire Castle, both being public houses, from the Defendants for a consideration of £2m and a pizzeria valued at £250,000, making a purchase price of £2.25m in money or money's worth. He says the properties were to be free of encumbrance or the purchase price otherwise adjusted. The Jewel was not to be purchased directly but rather the Claimant was to purchase the entire issued share capital of the company that owned it, namely, the Third Defendant. The interest in the Devonshire was similarly to be acquired through a corporate vehicle but not the Third Defendant. The total purchase price was to be split £1.5 m as to The Jewel and £750,000 for the 50% interest in The Devonshire. As Mr Bailey pointed out on behalf of the Claimant, this agreement created what he described as something of a Gordian knot within the litigation. The Third Defendant owns not only The Jewel but also a public house called The Holloway Castle, referred to by the parties as The Castle, which has never been the subject of the sale agreement. The Castle was to be transferred out of the Third Defendant to the other Defendants at completion. However, the Bank of Cyprus has lent substantial sums to the Third Defendant and these sums are secured on both The Jewel and The Castle. The Bank has not to date been prepared to separate the properties, the lending and the securities.
The Claimant says that he took steps in part performance of whatever agreement was entered into in the period from October 2011 until around the middle of 2012. During that time the Claimant paid over £1.572m in cash and in tranches to the Defendants as part payment. He says he entered into what is called "the first collateral contract" in December 2011. By this agreement the First and Second Defendants provided him with 50% of the shares in the Third Defendant and agreed that he would be a director of that company. The Claimant says that in February 2012 the agreement was varied such that he would also acquire 50% of the issued share capital in a corporate vehicle that would own a further public house called The Jester. The additional purchase price was to be £500,000. The Defendants permitted the Claimant to take possession of The Jewel and the Claimant says he has spent about £600,000 renovating it. He says that he presently trades an established and profitable pub and restaurant business from The Jewel.
By the beginning of May 2012, on the Claimant's case, the agreement as varied had still only been partially completed. On 25 th July 2012 he says that he entered into what is called "the second collateral contract". This provided a scheme by which (i) the balance of the purchase monies could be paid over to the Defendants in respect of The Jewel and (ii) the Claimant would become sole shareholder and director of the Third Defendant. It is the Claimant's case that by 10 th August 2012 the Defendants had put themselves in breach of the second collateral contract by having the First and Second Defendants appear as directors of the Third Defendant at Companies House. Matters came to a head in February 2013 when the Claimant discovered that he did not appear to be the sole director of the Third Defendant and the Defendants claimed that the agreed purchase price for The Jewel alone was in fact £2.5 m and refused to complete the sale on the terms alleged by the Claimant.
The Defendants deny the contractual arrangements set out in the Particulars of Claim contending instead that the only agreement between the Claimant and the Defendants was for the indirect purchase of The Jewel. They say that the Claimant would purchase the entire share capital of the Third Defendant, which would have The Jewel as its sole asset, for £2.5 m, comprising cash of £1.7 m and the assumption of agreed borrowings of £830,000, and that on entering into the agreement the Claimant would be appointed a director of the Third Defendant and receive a 50% shareholding and on completion the Claimant would become sole director and sole shareholder of the Third Defendant. The Defendants further allege that the Claimant is in breach of this agreement having failed to pay the sum of £1.7 m in cash (having only paid £1.572 m) and having failed to accept the Bank's mortgage offer to assume responsibility for the Third Defendant's borrowing in the agreed sum of £830,000 (thereby having failed to service the Third Defendant's borrowings) and also having purported to be the sole director of the Third Defendant.
It is apparent from this summary of each side's case that whilst certain facts are not disputed (such as the Claimant's payment to the Defendants of £1.572 m), there is a substantial dispute as to what was agreed. The court's task at trial will be to work out whether any agreement was in fact reached and if so what the terms of that agreement were, and if no agreement was reached, what the consequences of such a finding should be. It is a dispute which, had it proceeded in the ordinary way, would clearly depend very substantially upon the court's conclusions as to the parties' witness evidence. However, this case has not proceeded in the ordinary way and I need to summarise the procedural background to the application now made by the Defendants.
The procedural history
On 22 nd March 2013 the Claimant issued a Part 8 claim together with an application notice by which he sought declarations that he was the proper director of the Third Defendant and injunctive relief to prevent the Defendants holding themselves out as directors. His application was heard by Mrs Justice Proudman on short notice to the Defendants and adjourned until 28 th March with interim injunctive relief ordered in the meantime. On 28 th March the matter came before Mr Justice Sales and ultimately the Defendants consented to an order that the Claimant should be sole director of the Third Defendant until trial or further order.
In April 2013 the Claimant became aware of commitments made by the Defendants to a company called Southern Territory Ltd. This company through its directors a Mr Alexandrou and Mr Leonidas had, prior to the Claimant's involvement with the Third Defendant, had dealings with the Defendants and agreed to provide a £1.1 m guarantee to secure funding from the Bank of Cyprus...
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