TMO Renewables Ltd ((in Liquidation)) v Timothy Stephen Kenneth Yeo
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Joanna Smith |
| Judgment Date | 20 July 2021 |
| Neutral Citation | [2021] EWHC 2033 (Ch) |
| Docket Number | Case No: BL-2018-000628 |
| Court | Chancery Division |
[2021] EWHC 2033 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Joanna Smith DBE
Case No: BL-2018-000628
Mr Andrew Sutcliffe QC, Mr George McPherson and Mr Ravi Jackson (instructed by Hewlett Swanson Limited) for the Claimant
Mr Yeo, who is unrepresented and the First Defendant
Mr Weaver, who is unrepresented and the Second Defendant
Mr Matthew Collings QC and Mr Ted Loveday (instructed by Blake Morgan LLP) for the Third and Fifth Defendants
Mr Richard Morgan QC (instructed by Alius Law) for the Fourth Defendant
Hearing dates: 1–26 March 2021
Approved Judgment
JUDGMENT I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This claim is brought by the joint liquidators of TMO Renewables Limited (“ TMO”) and arises out of the circumstances in which TMO entered administration in December 2013, when the first to fourth defendants were its directors (together the “ Director Defendants”) and the fifth defendant (“ Mr Audley”) is alleged to have been its legal adviser.
At the heart of the case is an allegation that the Director Defendants gerrymandered a vote at an extraordinary general meeting of TMO held on 28 October 2013 (“ the EGM”) with a view to defeating resolutions aimed at changing control of the TMO board of directors (the “ Board”) presented by a major shareholder, Sinoside Investments Ltd (“ Sinoside”). The alleged gerrymandering consisted principally of the issue of 75 million ordinary shares to a new investor on terms which (i) permitted payment to be deferred for up to two years notwithstanding that TMO was in dire financial straits; and (ii) enabled that investor to vote in favour of the status quo and thus prevent the take-over.
TMO alleges that in issuing the new shares, the Director Defendants exercised the powers conferred on them as directors of TMO for an improper purpose, recklessly and in bad faith in pursuit of a dishonest strategy for maintaining control of the Board and that they thereby acted in breach of their statutory and fiduciary duties. TMO also alleges that the Director Defendants deliberately intended to mislead existing shareholders into thinking that a cornerstone investor had injected a substantial sum of money into TMO, thereby securing its future, and that they knowingly or recklessly made or authorised untrue representations to shareholders in order to achieve their improper purpose of defeating the EGM resolutions.
In addition, TMO alleges that Mr Audley was acting as legal adviser to the Director Defendants pursuant to an agreement dated 22 April 2013 and that he failed to use his best endeavours to promote the interests of TMO when providing his services, in breach of his contractual and fiduciary duties.
Had the Director Defendants and Mr Audley not acted in breach of their duties, it is TMO's case that control of the Board would have changed hands at the EGM and that thereafter TMO would not have entered administration on 19 December 2013 and creditors' voluntary liquidation on 8 December 2014. Instead, TMO would have pursued a business plan which would have been substantially similar to the business plan that has in fact been pursued by the company that acquired TMO's business and assets from TMO's joint administrators on 7 March 2014, Rebio Technologies Limited (“ Rebio”), a company incorporated in the United Kingdom.
TMO makes a very substantial claim for equitable compensation based on TMO's lost opportunity to develop its business and assets (as they have subsequently been successfully developed by Rebio) (the “ Business and Assets”).
Relevant Procedural Background
There were two PTRs in this case prior to trial, taking place respectively on 27 January 2021 and 22 February 2021. A number of issues arose at the PTRs which I should record in this judgment.
Confidentiality
Given TMO's case that Rebio is effectively to be regarded as a proxy for TMO, a substantial amount of evidence at trial concerned the development of the Rebio business together with details about its products, investors, business forecasts and competitors. This information was contained in disclosed documents, witness statements and expert reports and is regarded by Rebio as highly confidential and commercially sensitive. By the date of the first PTR, this information had already been provided to all the parties, but TMO (effectively acting on behalf of Rebio) was concerned that if referred to in open court that confidentiality would be damaged. Accordingly it sought directions at the first PTR for the implementation of a confidentiality regime in respect of such information (the “ Rebio Confidential Information”).
For reasons I need not go into here, I refused to put a confidentiality regime in place at the first PTR, requiring TMO instead to take further time to consider whether the information that it was seeking to protect really required such protection. The matter was raised again at the second PTR, by which point TMO had produced a confidential bundle with all matters said to be confidential highlighted in the documents contained within that bundle. Following further submissions on this material, Mr Sutcliffe QC, acting on behalf of TMO, helpfully accepted that it would not in fact be necessary to set up a formal confidentiality regime and that he was content to proceed at trial on the basis that all parties would endeavour not to refer to the Rebio Confidential Information unless absolutely necessary, in which case an application would be made to me at that point to sit in private.
In the circumstances, the trial has proceeded, for the most part, in open court, albeit that there has been a small amount of cross examination which has had to take place in private. No suggestions were made to me by the parties as to how I should deal with the Rebio Confidential Information in my judgment, but I have determined that it is not necessary to refer to any such information and I have not done so.
Applications to amend
At the first PTR and on the first day of trial, TMO sought to make numerous substantive amendments to its Particulars of Claim (including amendments to plead further allegations of dishonesty against the Director Defendants, together with a claim of dishonest assistance against Mr Audley) the vast majority of which I rejected for the reasons set out in my two judgments dated 27 January and 2 March 2021 respectively.
I made it clear that the trial would proceed on the basis of the allegations made in TMO's Re-Amended Particulars of Claim, provided in final form on 4 March 2021. However, I should note that Mr Sutcliffe cross examined the Defendants with a view to establishing the dishonest conduct pleaded in the rejected amendments (which he asserted was relevant factual background to the existing pleaded allegations) and also sought to make submissions in closing by reference to those rejected amendments.
By an order dated 11 May 2021, Newey LJ granted TMO permission to appeal against my decision to refuse permission to amend to add a claim in dishonest assistance against Mr Audley. Newey LJ also ordered that it was appropriate to stay the appeal pending my judgment on the claim. This resulted in a flurry of correspondence to the Court, with TMO's solicitors, Hewlett Swanson, inviting me specifically to address in my judgment (giving reasons) the decision I would have reached on TMO's dishonest assistance claim against Mr Audley if I had permitted that claim to be pursued at trial so that TMO can consider (if applicable) any potential grounds of appeal on a fully informed basis. The solicitors for Mr Audley, Blake Morgan, objected to this proposed course of action and invited me instead to determine the case on the basis of the parties' pleaded cases as they currently stand.
In circumstances where there is no extant claim of dishonest assistance against Mr Audley in the Re-Amended Particulars of Claim and Mr Audley prepared for trial on the basis that he did not stand accused of dishonest assistance beyond some unparticularised reference to dishonest assistance in the Reply, I intend to determine the case on the basis of the parties' pleaded cases as they actually stand. I note, however, that it was acknowledged on behalf of Mr Audley in closing submissions that allegations of fraud made in the Reply against him (including the unparticularised allegation of dishonest assistance) would need to be addressed in my judgment, not least because of TMO's case that there is a fraud exclusion to the limitation of liability in Mr Audley's retainer.
Hybrid Trial
Pursuant to my order at the first PTR on 27 January 2021, the trial proceeded as a hybrid hearing. Submissions were made remotely and, with one exception, TMO's witnesses gave evidence remotely. The experts' evidence was also given remotely. At their request (and in light of the serious nature of the allegations made against them), the Defendants and their witnesses all gave evidence in person at a socially distanced hearing subject to a strict pre-agreed protocol designed to ensure (insofar as possible) the safety of everyone in attendance. I am satisfied that these arrangements gave the Defendants every chance to be seen and...
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