William Robert Owen Harris (Petitioner) v Richard Eric Graham Jones and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 14 June 2011 |
| Neutral Citation | [2011] EWHC 1518 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 943 of 2008, HC09C00454 |
| Date | 14 June 2011 |
[2011] EWHC 1518 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF ZETNET LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Morgan
Case No: 943 of 2008, HC09C00454
Mr John Dagnall (instructed by Berg Legal) on behalf of Mr Harris Mr Jones appeared in person
Hearing dates: 21 st, 22 nd, 23 rd, 24 th, 25 th, 28 th and 29 th March 2011
Introduction
In 2005, Mr Harris and Mr Jones each acquired one share in a newly formed company, Zetnet Ltd ("Zetnet"). At that time, there were two issued shares in Zetnet so that Mr Harris and Mr Jones each had a 50% interest in the company. In August 2006, Mr Harris transferred his share to Mr Jones to hold on trust for Mr Harris. From that time onwards, Mr Harris was not a registered shareholder in relation to Zetnet. In the summer of 2007, the relationship between Mr Harris and Jones broke down. In September 2007, Mr Jones participated in a transaction whereby Mr Harris' interest in Zetnet was reduced from a 50% interest to an interest of 0.1%. At the same time, Mr Jones retained a 39.9% interest in the company. Mr Harris was excluded from the management of the company. On 1 st February 2008, Mr Harris brought a petition under Part 30 of the Companies Act 2006 alleging that the affairs of Zetnet had been conducted in a way that was unfairly prejudicial to him. He asked for an order that Mr Jones be required to buy his shares at a price to be fixed. In July 2008, Mr Jones participated in a sale of all of the shares in Zetnet, without the knowledge or consent of Mr Harris. Mr Harris subsequently brought proceedings arising out of these transactions. Those proceedings and the petition under Part 30 of the 2006 Act were heard together.
At the trial, Mr Harris was represented by Mr Dagnall of counsel and Mr Jones appeared in person. Mr Jones was accompanied by a Mr Pine, a former solicitor. Mr Jones wished Mr Pine to act as a McKenzie Friend and in addition, for Mr Pine to be allowed to act as his advocate. Counsel for Mr Harris did not oppose that application and after considering it in detail, I allowed Mr Pine to address the court as advocate for Mr Jones. Mr Pine applied for an indefinite adjournment of the trial on the grounds of Mr Jones' physical and mental condition. I declined to grant such an adjournment and the trial proceeded and in due course Mr Jones gave evidence and was cross-examined.
The principal disputes at the trial related to matters of fact. For this reason, before making my findings of fact, I will first refer to the witnesses who gave evidence before me and make my assessment of the reliability of the principal witnesses. I will next set out my findings of fact in detail and then deal with the substantive claims which have been made.
The witnesses
The witnesses on behalf of the Claimant were Mr Harris himself, Mr Simon Clarke, Mr Mark Halliwell and Mr Stephen Jones. The witnesses on behalf of Mr Richard Jones ("Mr Jones") were Mr Jones himself, Mr John Hyslop and Mrs Lisa Harris. Mr Harris had also served a witness statement from a Mr Gilbert. At the trial, Mr Harris did not seek to rely on Mr Gilbert's statement but Mr Jones sought to rely on a part of it. Mr Harris did not object to such reliance provided that the court received and considered all of the statement. In that way, Mr Gilbert's statement was admitted into evidence as hearsay evidence.
As matters turned out there was a certain amount of common ground as to the actions taken by Mr Jones and Mr Hyslop in August and September 2007 and later in relation to the sale of the shares in Zetnet. However, there were disputes of fact as to the conduct of Mr Harris in August and September 2007. Essentially, what Mr Jones and Mr Hyslop said was that Mr Harris had, by his actions, provoked a cash flow crisis within Zetnet and what was done by Mr Jones and Mr Hyslop was their response to that crisis. Mr Harris did not accept what was said about his involvement at that time. The principal witnesses, whose reliability I ought to consider in detail, are Mr Harris, Mr Jones and Mr Hyslop. I will also comment on the evidence of Mr Clarke as there was a challenge to his reliability.
I find I can be reasonably confident in assessing the credibility of Mr Hyslop. Mr Hyslop had signed a witness statement which dealt only with a conversation which he said he had had with Mr Harris as to why Mr Harris transferred his share in Zetnet to Mr Jones. When Mr Hyslop was called to give his evidence in chief, he was not asked by Mr Jones about other matters, even though he was managing director of Zetnet at the relevant times and would have been aware of the detail of what was happening. However, counsel for Mr Harris cross-examined Mr Hyslop in detail about the relevant events. I found Mr Hyslop's evidence to be very revealing. He gave detailed evidence as to Mr Harris' conduct at the relevant time. My assessment of Mr Hyslop was that the evidence he gave was generally reliable. It was put to him that he was not an independent witness because he was concerned that he would be sued by Mr Harris in some future proceedings. I do not accept that Mr Hyslop was in any way concerned about that possibility or that his evidence to me was influenced by such a concern. Mr Hyslop was highly critical of Mr Harris but I do not believe that his evidence was motivated by hostility. Instead, it appeared to be reliable evidence as to the difficulties in which Zetnet was placed by Mr Harris. Mr Hyslop gave his evidence in a measured way and he fairly accepted criticisms of the behaviour of himself and Mr Jones. The fact that he had not prepared a detailed witness statement which he merely confirmed in his evidence in chief but rather he gave his evidence in response to questions put in cross-examination suggested to me that Mr Hyslop was genuinely trying to recall and to describe the relevant events rather than sticking to an account which had been spelt out in a witness statement.
A large part of Mr Jones' evidence was corroborated by Mr Hyslop and I accept that part of Mr Jones' evidence. Further, there were passages in his evidence where Mr Jones was candid about what he had done, even where it was not helpful to his case. In other respects, I am cautious about Mr Jones' evidence. He is plainly an interested party and he bitterly regrets the fact that he ever got involved with Mr Harris. That has tended to colour his recollection of events.
As to Mr Harris, some of his evidence related to matters which were not seriously in dispute. However, his evidence in relation to the events of the summer of 2007 and as to his conduct at that time conflicted with the evidence of Mr Hyslop and Mr Jones. I have already stated that I am minded to accept what Mr Hyslop told me about Mr Harris' conduct. Mr Harris was not prepared to accept any suggestion that he had contributed to the breakdown in the relationship between himself and Mr Jones or that he had caused or contributed to Zetnet's financial difficulties. On examining the detailed facts, I did not find Mr Harris's evidence reliable on these matters. Where there is a conflict between the evidence of Mr Hyslop and Mr Harris, I prefer the evidence of Mr Hyslop.
In addition to the above comments about the reliability of Mr Harris as a witness, I also need to comment on a matter which took up some time at the trial. Mr Jones contended that the reason that Mr Harris transferred the legal title to one share in Zetnet in August 2006 was to conceal his ownership of that share from his wife in divorce proceedings which were underway at that time. Counsel for Mr Harris objected to that matter being raised by Mr Jones. Counsel submitted that Mr Harris' purpose in transferring the share to Mr Jones was irrelevant. It was said that even if Mr Harris transferred the share to Mr Jones in order to conceal his ownership of it in the divorce proceedings, that did not prevent Mr Harris establishing the existence of a trust nor did it affect the extent of Mr Jones' duties as trustee. At the outset of the trial, I ruled that Mr Harris' purpose in transferring the share to Mr Jones was not relevant to any question whether Mr Jones was a trustee of the share for Mr Harris and that any such purpose was irrelevant to the extent of the duties which Mr Jones, as trustee, owed to Mr Harris. In this case, Mr Jones made an express declaration of trust of the share and the existence of the trust was admitted in Mr Jones' defence. There was no scope here for any argument that the trust should not be recognised by reason of any alleged illegality in the purpose behind the creation of the trust. However, I also ruled that Mr Harris' purpose in transferring the share to Mr Jones as a trustee could be relevant to the question of Mr Harris' credibility as a witness.
My ruling that Mr Harris' purpose in transferring the share might be relevant to an assessment of his credibility then gave rise to a further argument. Counsel for Mr Harris submitted that it was not open to Mr Jones to cross-examine Mr Harris about the disclosure he had given in the divorce proceedings nor to lead evidence about such disclosure. Counsel relied on Clibbery v Allan [2002] Fam 261, in particular, at [67] – [74] per Butler-Sloss LJ, dealing with the topic of confidentiality of documents in the Family Division.
In Clibbery v Allan it was explained that documents disclosed in family financial proceedings are to be considered as disclosed under compulsion with the result that the other party to the family proceedings is subject to...
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