Neutral Citation Number:  EWHC 1496 (Comm)
Case No: CC-2019-CDF-000006
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN WALES
CIRCUIT COMMERCIAL COURT (QBD)
Cardiff Civil Justice Centre
2 Park Street, Cardiff, CF10 1ET
Date: 17 June 2022
HIS HONOUR JUDGE KEYSER QC
sitting as a Judge of the High Court
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(1) ZENITH LOGISTICS SERVICES (UK) LIMITED
(2) UNISERVE (UK) LIMITED
(3) JAMES KEMBALL LIMITED
- and –
(1) PETER JAMES KEATES
(2) CHRISTOPHER JAMES READ
(3) NICOLA HORSLEY
(4) HALENA LOUISE COURY
(5) MICHAEL ROGER DAVIES
(6) DEREK CLARIDGE
(7) LEONARD NEIL BUNDOCK
(8) BIOSOL RENEWABLES UK LIMITED
(9) SPRING LOGISTICS (UK) LIMITED
(10) SPRING RENEWABLES LIMITED
(11) SPRING FARM CONTRACTORS LIMITED
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Michael Duggan QC and Nicholas Goodfellow (instructed by Holman Fenwick Willan LLP) for the Claimants
Patrick Clarke (instructed by W. Parry & Co) for the Seventh and Eighth Defendants
The First, Second, Third and Sixth Defendants in person
The First Defendant on behalf of the Ninth and Tenth Defendants
Hearing dates: 9, 10, 11, 14, 15, 16, 23 March 2022
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This judgment was handed down remotely by circulation to the parties or their representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10.30 am on Friday 17 June 2022.
JUDGE KEYSER QC:
Introduction and Overview
The parties and their relationships
· The second claimant (“Uniserve UK”) was incorporated in 1985. It is in the business of supplying a range of distribution, logistics and trade management services.
· The first claimant (“Zenith”) was incorporated in April 2010 by the first defendant (“Mr Keates”), who was its sole member. On 9 October 2015, when Zenith was in financial difficulties, Mr Keates sold his entire shareholding in Zenith to Uniserve UK for a nominal consideration. Zenith is in the business of providing distribution, logistics and trade management services; its business complements that of Uniserve UK.
· The third claimant (“Kemball”) was incorporated in 1973 but became part of the Uniserve Group only in April 2016. It supplies shipping containers to the freight transport industry. Kemball has featured very little in these proceedings; it is concerned only with one or two discrete parts of the Main Claim.
From time to time I shall simply refer to “Uniserve”. This deliberately vague reference will indicate that the matter in question falls somewhere within the scope or interest of one or more of the companies in the Uniserve Group and that further precision is either impossible or unnecessary.
· The ninth defendant (“Spring Logistics”) was incorporated on 2 August 2017. Mr Keates was the sole shareholder and he and Ms Coury were the directors. Miss Horsley was the company secretary. The company was dissolved via compulsory strike-off in September 2019 but has been restored to the register.
· The tenth defendant (“Spring Renewables”) was incorporated on 16 June 2017 under the name N & R Commercial Limited (N for Neil (Bundock) and R for Roger (Davies)). Mr Davies and Mr Bundock were the first directors and each held 50% of the issued shares. On 9 October 2017 the company changed its name to Spring Renewables Limited, and shortly afterwards Mr Keates was appointed as a director and shares were issued to him so that he, Mr Davies and Mr Bundock each held one third of the issued shares. Mr Davies and Mr Bundock resigned as directors in April 2018 but have remained as shareholders.
· The eleventh defendant (“Spring Farm”) was incorporated on 12 September 2017. Mr Keates was the sole director and shareholder. The company was dissolved via compulsory strike-off on 19 February 2019 and has not been restored to the register.
Some other people
· Mr Colin Newnes was employed as the Finance Director of Zenith from November 2011 until his death on 11 March 2018, and from November 2015 he held the office of a director of Zenith. At all times prior to Mr Newnes’ death, the accounts of Zenith were separate from those of the rest of the Uniserve Group and were managed by him. His responsibilities included monitoring accounts, cash-flow and financial transactions, and supervising the day-to-day operations of the finance department. It is the claimants’ case that while Mr Newnes was in post Mr Keates was able to act with impunity, but that when Mr Newnes died his illicit schemes began to unravel.
· The Accounts Department for which Mr Newnes had responsibility included Miss Horsley, Ms Catherine Watkins, who was employed as an Accounts Manager and is now the Finance Manager, and Ms Julie Makos, who like Mis Horsley was an Accounts Administrator.
· Mr Paul Stone has been employed since 2008 as the Group Human Resources Director for the Uniserve Group. It was Mr Stone who, together with Mr Barry Tuck, the Uniserve Group Accountant, carried out the initial investigation that led to the discovery of what is said to be serious wrongdoing on the part of Mr Keates and others.
· Mr Paul Southern is Zenith’s Operations Director, based at its Chepstow premises. He has worked for Zenith since its incorporation in 2008, having been approached by Mr Keates, whom he knew from his prior employment in the logistics industry.
· Mr Michael Boardman is the General Manager South for Zenith, based at its Chepstow premises. He reports directly to Mr Southern. His duties include the management of Zenith’s fleet of vehicles, so as to ensure that they are operating efficiently and that sufficient drivers and vehicles are available for necessary jobs. He was thus concerned with the provision of vehicles for Biosol’s use from April 2017 in circumstances explained below.
· Mr Nigel Short is a director of Short Bros Homes Limited (“Short Bros”) and the person with significant control of that company. At the time to which these proceedings relate, Short Bros owned premises at Resolven, near Port Talbot, which contained four biomass boilers and a woodchip drying facility. Pursuant to a written agreement, undated but taking effect on 1 April 2017, made between Short Bros and Mr Nigel Short and Biosol and Mr Bundock (“the Resolven Contract”), Biosol had the exclusive use of that facility for converting virgin timber into woodchip. Biosol has since purchased the Resolven site.
· DT & CI Burrows is the name of the farming partnership carried on at, and by the owners of, Sandridgebury Farm, St Albans (“the Farm”). (The same partnership is also referred to as CI & DT Burrows; nothing turns on this variation. References in some of the documents to DT & CI Burrows Ltd are, however, in error.) Mr Jamie Burrows was a member of the partnership and was involved in running operations at the Farm. Mr Keates lived near the Farm and made the initial suggestion that a biomass energy development, involving Mr Davies, Mr Bundock and Biosol, might take place there.
· Mr Grahame Bundock is Mr (Neil) Bundock’s brother. At the times material to this case he was employed by Biosol, though he is not so employed any longer and did not give evidence at trial.
· I regarded the claimants’ witnesses as basically truthful. This is true also of Mr Liddell. However, he made no attempt to conceal his animus against those who he believed had cheated his companies. Mr Read submitted that, feeling aggrieved at Mr Keates, Mr Liddell had “come down with as much force as possible on anyone involved” and had “cast the net to financially cripple and torment individuals associated with Mr Keates”. This was borne out by the manner in which he gave evidence and is in my view reflected in some of the more petty, as well as in some of the more outlandish, claims that have been advanced—claims that he has advanced without positive dishonesty but also without much regard to the adequacy of their evidential basis. This also led him on occasion to make bolder assertions in evidence than he ought to have done: for example, in respect of a written agreement relating to the Biosol Contract, and in respect of the causes of errors allegedly made by Mr Keates.
· Unhappily, I am unable to conclude that the defendants who gave evidence and their witnesses were truthful witnesses. My adverse conclusion as to their credibility is based on objective considerations relating in particular to the documents and the inherent plausibility of their evidence.
· Mr Read presented at trial as pleasant and likeable, which no doubt he is. But I did not regard him as a frank and honest witness. His evidence, regrettably, was an exercise in seeking to get out of a tight spot. When cross-examined by Mr Duggan, he gave on a number of matters what I regarded as evasive and untruthful answers, which were both implausible and in marked contrast to answers that he gave in the course of the disciplinary proceedings that led to his dismissal. For example: he accepted that he had been actively involved in the project concerning the Farm, but he strongly denied any wrongdoing; he asserted that he had not realised that there was anything untoward in the Spring Logistics venture until he had been confronted by evidence in the course of Uniserve’s investigations in April 2018, and he remarked, “I didn’t believe I was doing anything that was outside the interests of the [Uniserve] business”, although that was contrary to the responses that he gave in the disciplinary hearing; he denied having had any intention to leave the Uniserve Group to go to work in the Spring venture, though again that sits ill with his responses in the disciplinary proceedings. When Mr Duggan put to him the record that he said in the disciplinary proceedings, “I knew the business was going on and I should have held my hands up”, Mr Read replied, “I think at the time, once this had come out, if I had known there was wrongdoing I should absolutely have held my hands up, but I didn’t genuinely believe there was any wrongdoing.” This conflicts with any reasonable reading of what was said at the disciplinary meeting, and I do not accept it. Again, when Mr Read was asked why he had not mentioned the Spring venture to Mr Liddell he replied, “I didn’t see Mr Liddell very often and certainly not in the capacity of sitting down and having a discussion. … I didn’t see any need to mention it.” But this is clearly contrary to what Mr Read acknowledged to Mr Liddell in the disciplinary meeting.
· As for Mr Bundock, he displayed a frustrating inability to answer questions succinctly and pertinently. I do not assume that this was tactical: in large measure it is a sign of nothing more than the way he talks. However, his evidence was notable for the repeated excuse, in the face of adverse documents, that he had raised objections by telephone. I regarded this as tactical and Mr Bundock as a generally untruthful witness. Unfortunately, both of his children employed the same tactic, just as dishonestly.
“Hi Peter[,] Neil here from biosol[;] had your number from Roger Davies. Thanks for meeting Friday re biomass. Just come from meeting and we’re looking at supplying 3 trailer loads of chip daily just wondering if you can assist?? This is long term.”
Mr Keates responded, “Love to help”, and asked for the times and places for collection and delivery. The collection point was in Isfield, East Sussex; the delivery point was Resolven.
“Many thanks for your time on Saturday and we look forward to forming a strong partnership with you and your team.
As discussed I will draw up a service level agreement over the next few days but in the interim please see bullet points below to what we have agreed and please feel free to add/comment. I hope to have a working document ready for discussion when I return to the UK on the 11th April. However in the meantime we will start with the hired equipment and place orders for new fleet.
· Biosol Renewables UK limited (BS) & Zenith Logistics Services (UK) Limited (ZLS) will enter into an open book transport partnership for the transport of wood product to variation [sic] locations across the UK.
· ZLS will provide all transport related services as and when required by BS and work with BS to find the optimal commercial solution.
· The agreement between BS and ZLS will be for a minimum period of 5 years.
· ZLS will manage all inbound transport operations for BS and use all reasonable endeavours to meet the demands of the BS business.
· The initial requirement is to collect and deliver 18000 tons per annum from various points across the UK, with the first loads being sourced from Uckfield Sussex & ZLS will ensure that the correct amount of assets and resource is in place to deal with this initial volume.
· ZLS will start operating from the 3rd April 2017 with rental equipment and look to acquire 4 walking floor trailers and 4 tractor units. The fleet size going forward will be adjusted in accordance with the contractual demands of BS. For the sake of clarity ZLS will increase the fleet when contractual supply of materials is agreed with BS and their customers.
· The operation will operate across 7 days per week or to the optimum amount of working days that can be achieved due to delivery and collection restrictions.
I appreciate that the above is not an exhaustive list but it gives us a starting point. As you know Myself and Paul Southern are away for a week but we will be in regular contact and Mike Boardman will ensure that we get this operation up and running as soon as possible. This morning we are collecting a walking floor trailer and a tractor unit so we can start collections early this week. I will ask Mike to call you later once we have confirmation that the equipment is ready to go into service.”
“I had a meeting today with Biosol Renewables …
WGD recently invested 850k in Solar power generation, Biomass heat generation across our depots. This has led to a partnership being created between myself & Neil Bundock to acquire some commercial real estate to let and install a Biomass boiler to generate an investment return of circa 20% per annum!
WGD/MAN are keen to develop our relationship with Zenith logistics, Peter Keates - group Company of Uniserve. I met Iain Liddell MD at Uniserve recently in Hong Kong whilst on a trip to the Sevens Rugby with Peter Keates, hence the opportunity to present to Iain the Biosol Business solutions of Renewables for the Uniserve Warehouse operations across the UK. Uniserve are currently building a 125million warehouse facility in Upminster.
In addition to this MAN/WGD are aware that these potential biomass boilers will require wood fuel on a regular basis so that’s where we come in with the transport solution, Biosol have already been using Zenith to collect & deliver Biomass fuel for existing customers across South Wales.
We have 4 trucks on order for Zenith that will be dedicated to this business.
Hope the above is sufficient to start you off … the Biomass solution for Upminster alone Neil estimates would be a 30million investment, I'm also looking to supply circa 90 vehicles within 12mths!!”
“At no point during the 23 May Meeting, or indeed afterwards, was it suggested to me that Mr Keates would be involved in his personal capacity in the pursuit of such opportunities. As far as I was aware, the sole business opportunity that was being presented to me was that which related to the use of sites under the ownership of Uniserve UK.”
I accept that evidence.
“The business plan would be something like, we get 5 investors each put in a £1 million and a build a 1 x plant and 4 biomass boilers and use this as the flag ship to expand more plants, sell the fuel and boilers going forward, I have the perfect site in Scotland for this which is available now.”
“Following our discussions reference the Midlands and the potential for a tri party agreement to develop a further plant I am keen to get together to discuss in detail, I know that if we are to do this we need to act fast and therefore time is of the essence, we are gathering together finalised property details and I will have them for early next week and then it is a case of establishing what further investment is required and agreeing a way forward between us all to make it happen.”
“I met with a farmer yesterday near St Albans who is seriously interested in putting to [scil. two] boilers on his farm and fuelling them using horse manure. There is an opportunity here for us to be part of this and enjoy the rewards but we have to move quickly …”
This is the first express mention of the proposal concerning the Farm, although its genesis can be seen in Mr Keates’ email of 15 July and it is, in my view, alluded to in Mr Read’s email of 21 July.
“This document outlines the basis of a proposed partnership agreement between the four parties, Spring Logistics (3 parties) and DT & CI Burrows Ltd (1 party) to install 1 Biomass boiler, 1 CHP unit and 1 woodchip drying floor at Sandridge Bury Farm, St Albans.”
The document set out anticipated investment and costs, including £303,000 for the purchase of equipment and £75,000 for the cost of installation, and under the heading “Commercial Agreement” stated:
“The commercial agreement is based on the following logic:
1. Will fund all capital outlay for the required equipment to be purchased and installed within the facility at St Albans to the tune of £378k as detailed above.
2. Will pay DT & CI Burrows Ltd £20k per annum to manage the facility including all woodchip handling within and in and out of the facility.
3. DT & CI Burrows Ltd will provide the space, Telehandler and any tractor usage at their cost.
4. DT & CI Burrows Ltd on the agreement on contractual deal will provide a property lease deal to Spring Logistics for the term of 20 years under the terms sin point 3.
5. All revenue generated will be retained 100% by Spring Logistics until the initial £378k of cost in [scil. is] recovered. (Final costs to be determined at point of order and installation.)
6. Post recovery of all costs in point 4 all net profit will be shared 50/50 between Spring Logistics and DT & CI Burrows Ltd.”
1) The ninth defendant had not yet been incorporated; Mr Keates incorporated it on 2 August 2017. In the email, Mr Read was using “Spring Logistics” as the name used for a prospective business venture or for those engaged in it. The three parties involved in the venture were (i) Mr Davies / WG Davies, (ii) Mr Bundock / Biosol, and (iii) Mr Keates.
2) For several reasons, I reject Mr Read’s evidence that he believed that the third party in the venture was to be a company within the Uniserve Group.
3) The documents relating to the Farm and to Spring Logistics make no mention of Uniserve. (I note, of course, that at this stage all emails were sent from Zenith email accounts, and that even when a Spring Logistics email account was set up Mr Read never had an address on that account but always used his Zenith address.)
4) Mr Read did not mention the Farm or Spring Logistics to Mr Liddell. The tenor of his evidence was that he had no opportunity or cause to do so. That is inherently implausible and is contradicted by what he later said in his disciplinary proceedings.
5) Neither Mr Bundock nor anyone else mentioned Spring Logistics to Mr Liddell until in April 2018 Mr Bundock claimed that the invoices sent by Zenith to Biosol for transport services ought instead to have been sent to Spring Logistics. Further, no one had mentioned the Farm to Mr Liddell. (It is true that, at a later date, Mr Bundock alluded to the Farm as one of Biosol’s ventures, but not in any way that could have been meaningful to Mr Liddell or alerted him to Mr Keates’ involvement.)
6) There is a serious tension between the evidence of Mr Read and that of Mr Bundock. Mr Read’s evidence was that he thought Spring Logistics and the project at the Farm involved Uniserve and therefore were within Mr Liddell’s purview; he just lacked opportunity, and saw no necessity, to mention them to Mr Liddell. But Mr Bundock said that he thought that Spring Logistics and the Farm project were a private venture of Mr Keates and nothing to do with Uniserve or Mr Liddell; that was why he said nothing to Mr Liddell. Although it is logically possible that both pieces of evidence are true, it very unlikely that they both are: it is implausible that over a period of several months Mr Read believed that he and Mr Keates were acting for the Uniserve Group while Mr Bundock believed the contrary.
7) When he was questioned about this in his disciplinary proceedings (see below), Mr Read acknowledged that he understood Spring Logistics to be a business opportunity separate and distinct from Uniserve. He did indeed say that he did not realise this at first, but I think it more probable that he knew the truth in July 2017 and was trying to minimise his guilt when facing possible dismissal from his employment.
“I spent a lot of time with Jamie at sandridgebury farm St Albans yesterday to look at all options and what could be achieved. We also met with a local estate owner reference wood supply. Basically the up shot of my meeting is we believe that we can go with two wood chip boilers with CHP units and drying floors and one horse manure boiler with a CHP unit.
We need to move quickly on this and produce a plan for the funding. I require confirmation that everyone is up for it.”
“Peter Keates currently employed as managing director of a number of business for the Uniserve Group and paid a salary plus car allowance and additional benefits.
Spring Logistics primary trade activity is the supply of wood chippings and feed in tariff to the National Grid.”
The relationship of this application to the meeting with Mr Mulholland on the same day is not clear, though both plainly had to do with financing the venture that had been discussed in the emails during the previous fortnight.
“This letter is to conﬁrm the intention of Biosol Renewables UK Ltd to award Spring Logistics a three year contract with a 12 month notice period for the provision of supply 8000 tonne of wood chip in line with your quotation date 02nd July 2017.
This agreement is subject to the following:
• Procurement of & supply a Tractor, Low loader
• Access to a log/wood chipper”.
The documents do not show whether this letter of intent was signed and returned, but I understood Mr Bundock’s evidence to be that it was. I understood him also to say that transportation, as distinct from supply, would be dealt with only by Zenith or Uniserve UK, but that he understood that Mr Keates was the owner of both Zenith and Spring Logistics.
“[T]here are still a couple of bits for us to work through to ﬁnalise the plans and I think that the best way to do this is to walk through the end to end collectively, in summary we are as follows:
Wood chip & CHP set up - We are clear on location for this and I will now start having dialogue with Lucie to ensure that we get a building ﬁt for purpose sent in for planning approval, Neil would be useful to discuss with you when you return.
Manure & CHP set up - Given the space requirements this is proving a little more difﬁcult, by no means impossible to overcome we just need to be a bit more creative. The location of this needs to be near the stables and livery yard to beneﬁt all round. We have some ideas on this but need ﬁnal clariﬁcation of size requirements.
In [scil. I] would like us to be in a position by the end of next week to have a very clear strategy for the end to end project and to support this I really feel it would be beneﬁcial to see example set ups of both wood chip and manure, enable us all to visualise space and layout requirements and then ﬁnally translate that into solution design for Sandridge Bury Farm.
With the above in mind I have spoken to Neil and we propose the following:
Thursday 31st - Peter Jamie and I will drive across from St Albans to visit Resolven, following this Neil can you arrange for us to visit the Horse manure set up, I think the equivalent to what we are trying to achieve is Southampton.
Thursday PM / Friday AM - We collectively view the facilities at St Albans and agree a strategy for locations and ﬁnal set up.
I appreciate that this is a couple of days out of everyone’s diaries but we need to get cracking on with this, I am more than happy to push on with the work post this but I want us all in the same place and aligned with our plans.”
For present purposes, the relevance of this email is the insight it gives into Mr Read’s involvement in the Farm project.
“I'm back in the country tomorrow and could do with a catch up if you are around. I’ve bought a tractor and part way through financing a chipper as we really need to get this moving. Hence the reason for trying to get to see Neil next week to understand where’s [sic] he is. We need to buy timber as Neil tells me he doesn’t have the cash. I’m shelling out huge amounts of cash (£150k) which I can’t put through group and just need to know we are all pulling in the right direction.”
“I have agreed in principle that we run Resolven so we can get the maximum use out of the Zenith fleet and push more volume through the site.
This includes operating the telehandler on site, however I am looking into buying one that is fit for purpose as the Merlow that they have is not fit for purpose. I think that we need multi skilled drivers who can drive the telehandler and would like to explore the possibility of training some of our guys before we go and recruit.
Your thoughts would be appreciated and suggest we have a call on Monday when I am in Chepstow.”
It is probable that Mr Keates meant that Spring Logistics would run Resolven, not that Zenith would do so: Zenith was a transportation company and would have no apparent interest in running the site or capacity to do so; if the “we” in the first line had been Zenith, the reference would probably have been to “our fleet” rather than “the Zenith fleet”; and the email was sent from Mr Keates’ Spring Logistics account, not from his Zenith account. I do not think that the paragraph concerning the telehandler tells strongly against this conclusion, because the idea was apparently that drivers in the Zenith fleet, who were dedicated to the Biosol Contract, would operate the telehandler as well as driving other vehicles.
“I have reworked all of the numbers that we discussed in the meeting and put them into a format that we can play around as we wish, there is a lot of useful discussions points contained within but headline summary for me is:
1. Resolven as it stands at the minute under current contractual arrangements returns a loss of c £170K even with 40000 woodchip sales, we need to sell 56000 to break even.
2. Resolven appears to be a nonstarter even with a buyout at £3mn we need to turn 40000 tonnes of sales and receive 90% of the RHI at £900K per annum purely to break even.
3. Running Resolven would detract from woodchip sales we could make elsewhere for real proﬁt.
4. There is healthy return from the 3 other sites and this is where we should be focusing our efforts - £20mn over the 20 year term allowing for 5 year finance payback at 5%.
5. Woodchip profit from the 3 sites would deliver further beneﬁt over and above point 4.”
The reference to “the 3 other sites” is to WG Davies’ premises at Tenby, the Farm, and either premises in Hereford or Biosol’s premises in Ammanford.
“[P]lease could you update me on where you are at with the technical drawings for St Albans as I was expecting to receive something by now. I am waiting to get some detailed building plans drawn up and start the planning process.”
“Hopefully Colin [Newnes] has everything to submit a detailed application for funding to NatWest - Neil will arrange a meeting with Nick & Natasha ASAP at Chepstow (hopefully we can all attend) Colin if you need me to do something please don’t hesitate to call me.
How did you get on with Iain, is Paisley a goer?”
“1. NS will cover all operating costs for the plant which includes utilities rates and labour.
2. The plant will only operate when wood chip sales dictate. The plant will not operate just to generate RHI. So currently switched off.
3. Biosol will procure timber, chip and pay for deliveries.
4. An open book approach will exist between both parties. RHI will be separate until the capital for the plant is repaid and then RHI will become part of the agreement.
5. All profits on wood chip sales will split equally between Biosol and NS.
6. Biosol will pay Spring Logistics for the telehandler chipping and all associated transport.
7. Halena [Coury] and Chris Read will develop a sales strategy for Spring Renewables to sale (sic) wood chip.
There was a conversation around Spring taking 50% of Biosol’s profit from woodchip but I think we need to discuss this in more detail as currently we are all just incurring costs.”
“1. Spring Renewables agreement with Biosol / Nigel Short
2. Operating of Resolven
3. Wood chipping service from Spring Logistics (start date)
4. Bank meeting -1430 Natasha and Nick
5. Sales and Marketing Strategy (a) Current sales pipeline (b) Sales Agreements (c) Alun Conduit
6. Timber supplies and transport”.
“Obviously aware that you guys want to get on with this process however, I believe that we need to grab the ‘bull by the horns’ and start running the sales and logistics streams for Resolven. There is no doubt that the Biosol are struggling and no one has an handle on exactly what we have in stock dry or wet and therefore what timber requires purchasing.”
1) On 27 August 2017 Tilhill Forestry Ltd sent a pro forma invoice by email to Mr Newnes (on his Spring Logistics email account). It appears that the invoice was addressed to Spring Logistics. Mr Newnes forwarded the email to Mr Davies, who asked him, “Is the invoice correct? Spring Logistics?” Mr Newnes replied, “Yes as we can’t access spring renewables I’ll process through spring logistics & we can sort out recharged etc later.” Mr Davies replied, “Ok - money on its way”.
2) Mr Grahame Bundock’s email of 14 November 2017, mentioned below.
3) The Spring Renewables website, which was operational from December 2017, advertised that the company supplied “top quality virgin wood chip”.
4) On 31 January 2018 Mr Lee Dowson of Amethyst Systems Limited sent an email to Mr Newnes, with the subject line “Woodchip system”, containing “Site Visit notes for Spring Renewables in Resolven, Wales”, which made clear that the supply of woodchip was an activity of Spring Renewables.
5) In February 2018 Mr Davies and Mr Bundock engaged Mr Ben Jenkins as a sales representative with a view to identifying and approaching new customers for woodchip. Mr Bundock’s contention is that he did this on behalf of Spring Logistics, by way of assistance to Mr Keates and Mr Newnes. I find, however, that Mr Jenkins was engaged on behalf of Spring Renewables and that Mr Bundock’s self-serving account is false.
“I am emailing to inform you we have amalgamated the supply of woodchip with our new partnership company Spring Renewables.
As of now all invoicing for wood chip products will come from Spring Logistics, all other services remain the same i.e.: wood preparation, deliveries and quality control.
I remain the point of contact and I will be arranging deliveries and quality control.”
(This appears to be the only such email to have been disclosed, but it seems very probable that this is an instance of a standard email sent to all of Biosol’s woodchip customers.) The claimants rely on this email as evidence that Biosol’s claim to have dropped out of the picture by reason of novation of the contracts with individual customers is false. When Mr Neil Bundock was asked about the email in cross-examination, he accepted that customers would not have understood from it that Biosol was no longer the contracting party and said that his brother had not expressed himself well. In my view, for reasons already indicated, he had expressed himself well enough. The position was simply that the contracts remained between the customers and Biosol, Spring Renewables was acting in something akin to a partnership with Biosol, and Spring Logistics was administering the operation of the contracts.
· On 19 December 2017 Mr Newnes sent to Amber Bundock by email a statement of account, showing that Biosol then owed Zenith £161,638.99 and informing her, “I need to arrange payment of the oldest invoices of ours to keep HQ happy”. Two points may be noted. First, such an email, containing as it did no recognition of any challenge to the invoices, would be practically inexplicable if the Bundocks had been challenging the invoices. Second, instead of stating and reiterating a challenge to the invoices, Amber Bundock replied by asking which invoices Mr Newnes wanted her to pay.
· When Mr Newnes replied by asking for payment of £32,670.05 in respect of invoices outstanding for more than 120 days, there was no response querying the invoices.
· On 3 January 2018 Mr Newnes sent a further statement of account. On this occasion, Amber Bundock asked for information as to which invoices the payment made by Biosol in November had been attributed to. Mr Newnes provided that information and said, “we’ll need to sort out a payment to keep group off my back & ensure we get the order for boiler installs across the group sites.” Again, there is no documentary evidence that any challenge was made to the claim for payment.
“I need to specifications and drawings for St Albans 1 and 2 as I’m going to try and fund it through a guy I met over the weekend.
I can [presumably, can’t] do anything with prep landing for phase 2 until I have the drawings . If your workload is too great then let me know as maybe we have to look outside our group.”
“With regards our conversation Saturday I can confirm the weekly repayments and I have several installations coming to a close imminently and I will endeavour to clear the debt owing as soon as possible.”
Again, there was no suggestion in the written communications that the debt was disputed, and I find as a fact that no oral dispute had been raised at this time.
“Peter and Helena [sic] and Colin took over the distribution from Resolven in October and all monies went direct from Nigel Short to Peter via spring logistics and spring logistics invoices all customers hence Peter Colin and … Helena took over the running and responsibility for the transport and I have been waiting for credit notes!!
As such I have had no responsibility in the transport since then and I'm sorry to have been dragged into this.
Peter roger and I were to do work together on various sites of ours but nothing has transpired.
I hope this clarifies a few things but all of what I have said can be corroborated via roger and Nigel and Nathan Short as they dealt directly with peter and spring logistics in the wood chip distribution from Resolven.”
This appears to be the first written challenge from Biosol to the debt alleged by Zenith and the first written mention of credit notes. It sits uncomfortably with Mr Bundock’s earlier assurance that the debt would be paid, as well as with the fact that Mr Newnes had sent a statement of account showing the full extent of the debt on 3 January 2018 and continued to send further invoices thereafter.
“PS You have a car through Zenith. Do you pay for that yourself?
CR No. When I joined the business I got offered a deal. I said I wasn’t going to join but then got offered a car as well as a car allowance.
PS Who gave you that?
PS You know that’s wrong?
CR Yes, but it was agreed by Peter.”
“PS In the suspension meeting you said Peter Keates had given you the car to convince you to join but you also had an allowance knowing it was wrong.
CR Yes, and there is no further explanation.”
Most of the meeting concerned Mr Read’s involvement in the Spring venture. I note the following passages.
“PS Give us your explanation of your involvement [in Spring Logistics], particularly what you thought when establishing email addresses.
CR My first introduction was when I went to Resolven with Iain. I knew we did some work for Biosol and thought the concept quite good. After a while there was talk around Paisley. Further down the line it became obvious that Peter Keates had some conversation before my involvement, and it wasn’t clear initially that it was nothing to do with the (Uniserve) business but another business. My first involvement I was asked to go to a meeting to discuss boilers in three locations.
PS What did you think was happening?
CR After that initial meeting? After the initial meeting I was thinking, ‘Is there a business opportunity?’
PS What did you think Spring Logistics was about then?
CR Putting the three boilers into the three locations.
PS The email addresses?
CR I thought, ‘There is a work opportunity here - a change maybe further down the line.’ I asked if I could become involved in the Paisley project prior to that. Never been into any Spring Logistic inbox.
PS But you have had correspondence from Spring Logistic email addresses?
CR I wrote an email asking for email addresses.
PS Did you ever think, ‘This is not right?’
CR At the time I thought it’s a business venture. … Peter has made comments in the past that he’s mentioned to Iain he wants to do a business venture. Obviously I now know that he hadn’t had this discussion.
PS There’s an email in your Outbox re Opportunity outside Uniserve. Was the intent to sever all ties?
CR Yes, I thought at the time a good opportunity. Peter Keates is very good at telling you the little bits he wanted to tell you. I’ve been a fool and am suffering for it now. An opportunity to do something different down the line. …
PS When was it your intention to exit from Uniserve?
CR In the early days I didn’t know - how long to set it up, what it would look like etc. And then towards back end of the year nothing happening. …
PS You had no suspicion [Mr Keates] was taking money from Zenith to use for his own personal gain?
PS … Put yourself in our position. In April you were still getting emails from Peter Keates asking you to discuss such a matter with him. We can only assume you were going to do this with him. Otherwise, why not raise the flag to us?
CR My explanation is I thought there may be an opportunity further down the line from a career perspective. I thought it was a good business - thought the biomass idea was a good one.
PS Setting up email addresses means it’s a separate business venture.
CR I know, and I’ve naively done stuff.
IL You know it was wrong to conceal this from us?
CR Yes. I’ve done what I was instructed to do, but you should have known about it.
IL You see me enough to have mentioned it.
CR I know.
IL You know it was wrong to be paid by Zenith or Uniserve and be doing work for Spring?
CR Yes, at a point, yes I did. At very initial meetings it wasn’t clear, but it did at a point become clear. … I knew the business was going on and I should have held my hands up.
PS You understand the allegations and the evidence, you agree to the allegations and can give no explanation other than looking elsewhere for an opportunity - saying you were doing what Peter asked you to, but you are aware of your contractual obligations. We’ll adjourn the meeting. is there anything else you want to add?
CR I know, and I apologise for what I’ve done.
PS There will be a cost involved regarding the car.
CR Yes, I know about that. the other money going out of the business, I want to apologise for my part in that.”
“PK UK Limited was me and my partner looking at where she could do something different. There was an opportunity with Nigel Short to buy and sell woodchip. Biosol was with Zenith. I believe no direct competition to Uniserve as Uniserve do not buy or sell woodchip. Never intended to run transport. SR [Spring Renewables] was basically RD [Roger Davies], NB [Neil Bundock] and myself going to buy three boilers, one in Wales and one in St Albans on a friend’s farm.
IL Lets go back to Spring Logistics. How can you say nothing to do with what we’re doing?
PK We booked transport through Zenith and Zenith would do Biosol.
IL You knew it was in direct competition - it was a Zenith customer and transport. Your business case was selling woodchip including transport.
PK We weren’t supplying the transport. Trying to help as Biosol getting in a muddle with Resolven. Biosol were still to buy the transport from Zenith.
IL Why did you put Chris Read in and when?
PS Why establish email addresses for Zenith employees?
PK Mike Boardman never used his. I don’t know why; I did not ask. I set one up for Chris and Colin. The idea was we could sell a lot of woodchip. CR [Mr Read] was looking to get out. It was my future, my retirement plan and nothing to do with transport.”
“PJ Derek Claridge lent Zenith 1 [i.e. ZLL] £140K in 2002 and was carried into Zenith 2 [i.e. Zenith, the first claimant].
IL We found out at the same time as found you were bankrupt.
PK My bankruptcy got annulled. What you on about now? I went to court and got it annulled.
PS Going back to Claridge …
PK That was before Uniserve came along and part of the deal was that he could have a phone.
IL Where does it go into in Zenith 2?
PK I don’t know. Colin did that, but it's in the balance sheet. But you never basically looked at anything before you took over Zenith.
IL A little bit of due diligence with Colin, but that was not mentioned.”
“PS There’s the whole issue around purchasing a container for Claridge and shipping through us.
PK He came to me, said I could arrange it, got Steve involved, charge to Uniserve, charge Zenith, Zenith charge Claridge. Spoken to him since I’ve been on suspension and he told me he had paid it back to Colin in cash.
PS Where would that be paid?
PK Don’t know.
IL Did he pay his HK [Hong Kong] 7’s trip in cash also?
IL The trip he’d been saving up all year to go on?
PK Let’s address that now. You paid me a bonus in 2016. I never took that money.
IL It was all paid for through Belgravia Travel; the invoice is there.
PK But then I paid it back. I never took my bonus and I know Paul Southern didn’t take his bonus either.
PS Who paid?
PK RD [Roger Davies], Edward McDonald, Darren (can’t remember surname), I did mine out of my bonus payment.
PS So everything was paid back regarding the container to Colin—so it should be traceable somewhere?
PK An invoice was raised on a monthly basis to be put through this system and it was put down to driving services.
PS Put [your]self in our positon. What would you think?
PK You can see what it is.
PS It’s a fraudulent invoice?
PK I’m not taking the blame for that one. I’m not going to sit here and blame a deceased friend though.
PS Colin’s getting a lot of blame. And you’re saying you would never know about any of this?
PK No, I knew that was there.”
“PS Not diverting business from Uniserve in any way?
PS Just diverting employees away from Uniserve work?
PK CR [Mr Read] worked quite a lot on it. PS [Paul Southern] did nothing in it. All MB [Mike Boardman] did was sort out a few vehicles. Nothing to do with it whatsoever. [The note of the meeting attributes this comment to CR, but that is clearly a mistake.]
PS So none of our trucks used for SL [Spring Logistics]?
PK Once I used it and I drove it myself.
PS Drivers didn’t come back with cheques made out to SL?
IL You know it wrong to be paid by Uniserve and doing all work for yourself and diverting CR’s time?
PK I didn’t put CR’s arm up his back—he wanted to do it. … He wanted to get away and get closer to home. I know that doesn’t excuse his working with me. He wasn’t working on it days and days. There were two and three emails a and night times weekend [sic]. Not saying he did it every week. Yes, I do know it was wrong. I know that now, but CR was doing it voluntarily.
IL His justification is you were his boss and he was doing as asked. You knew as Director of the business. Why?
PK My view trying do something for my future. Lost £750k in Zenith. Trying to do something for me and my kids. At no time did I look to take anything away from Uniserve for SL.
IL Did you know it would be damaging?
PK Of course I cared.”
“PK [I] told him [i.e. Mr Newnes] to just get on and get the money back from Claridge.
IL We didn’t know that CN was corrupt and you’ve just said you didn’t know?
PK I had no access to the bank account, I didn’t touch it. Yes, I had the loan account. You’ve met Derek Claridge, you know what he’s like: second-hand car dealer. But [I] told him mates rates but have to pay for it; and he did.
IL But you know it [was] wrong.
PK I honestly didn’t think [so] in the early stages.
PS When did you begin to think it, then?
PK When you told me to get out of the business.”
There is a great deal more in the notes, in particular regarding specific payments, but these already over-long extracts must suffice for the present.
The Biosol Claim
1) What were the terms of the Biosol Contract?
2) Did the Biosol Contract come to an end in October 2017?
3) What is the state of the account between the parties?
(1) The terms of the Biosol Contract
1) Although Mr Keates’ email shows that it was envisaged that a formal written contract would be prepared, it is carefully if informally written, records matters in some detail and makes clear that the matters it records were to be put into immediate operation. The tenor of Mr Bundock’s evidence is that the email mis-states the terms of the agreement in material respects; he says, accordingly, that he challenged it. However, it is inherently improbable that Mr Keates would have included so many mistakes or falsehoods within the email. If Mr Bundock were right, Mr Keates would either badly have misunderstood his conversation with Mr Bundock—which is unlikely, as whatever else may be said of him he is obviously astute and able—or deliberately produced a false record of the agreement for no apparent reason and in circumstances that invited an immediate riposte and contradiction.
2) Mr Keates’ email expressly invited Mr Bundock to add to or comment on the summary of what had been agreed. It is strongly probable that, if Mr Bundock had considered that the record of “what we have agreed” was materially inaccurate or that Zenith was wrong to “look to acquire 4 walking floor trailers and 4 tractor units” or was looking to acquire them on a mistaken basis, he would have made his position clear by an email, copying in all the recipients of Mr Keates’ email. In fact, there are no emails or other documents that put the terms of the email in question until after the business relationship between the parties had ended. Mr Bundock’s evidence was characterized by a repeated assertion that he had queried or challenged the contents of documents but had always done so orally and never in writing. In my view the assertion is a deliberate falsehood and was used by Mr Bundock as a tactic for getting around the fact that the documents are against him.
3) In his oral evidence Mr Bundock maintained that Biosol’s single vehicle was sufficient for its daily needs at the time. Mr Clarke in his closing submissions tried to maintain that Biosol could have coped with the daily transportation of three trailer loads with its single vehicle by making repeat journeys in a day. None of this has any credibility. Biosol’s request for assistance from Mr Keates shows that it lacked in-house capacity to meet its needs. As for multiple daily journeys with a single vehicle, the round trip between the two sites (in South Wales and the south of England) would be at least eight hours, probably more; and there remained the necessary deliveries of woodchip to Biosol’s customers. Further, it is in my view clear that the orders placed by Zenith for new vehicles were specifically on the agreed basis that they would give Biosol increased capacity to deliver woodchip and would thereby facilitate the anticipated growth of Biosol’s business.
4) Mr Bundock accepted that he knew that Zenith had acquired four tractors and trailers and had done so to service Biosol’s business; he said that he had told Mr Keates that these were not required but that Mr Keates had nevertheless decided to go ahead with the purchase on the basis of planning for the future (transcript, day 4, pages 133-134). While this is not impossible, it is inherently unlikely that Mr Keates would commit to such expenditure for vehicles that were not currently required and in respect of a business with which Zenith had no prior business relationship. This is apart from the point, already made, that the evidence does not support Mr Bundock’s claim to have challenged Mr Keates on this point.
5) The relevant text of the email sent by Mr Davies on 17 May 2017 has been set out above. In my view the reference to having “4 trucks on order for Zenith that will be dedicated to this business” is clearly to the vehicles mentioned by Mr Keates in his email of 3 April 2017 for use on the Biosol Contract. Mr Davies was present at the meeting on 1 April 2017, when the Biosol Contract was made, and was one of the recipients of the email of 3 April 2017. He clearly knew nothing of Mr Bundock’s alleged correction of this point in subsequent conversation with Mr Keates. He also clearly understood that the vehicles in question were obtained so as to be “dedicated” to the Biosol Contract. Further, Mr Davies’ email of 17 May 2017 was copied to Mr Bundock, yet there is no evidence in the emails or other documents to show that Mr Bundock challenged Mr Davies’s assertion. When Mr Bundock was asked about this email (transcript, day 4, pages 135-138) he suggested two reasons why he might not have taken notice of, or even seen, Mr Davies’s email, namely that it was not addressed to him and that the particular email address on which he was copied in on the email meant that it might have come to the attention of one or other of his children, who might not have referred it to him. I regard those explanations as implausible and as typical of Mr Bundock’s efforts to get around the evidence of the documents.
6) The newly acquired trailers were not merely dedicated to the Biosol Contract but were specifically purpose-built for that use, rendering them unsuitable for much other use. Although it is not impossible that Zenith made the decision to acquire such dedicated trailers without an understanding that Biosol would meet the cost, I do not regard this as at all likely. This tends to confirm that Mr Bundock’s account of what was agreed is false. Once it is acknowledged that Zenith was to acquire bespoke vehicles that were dedicated to the performance of the Biosol Contract, the contention that Biosol would bear only such costs of the vehicles as were strictly referable to the days when Biosol actually used them makes no commercial sense. Of course, it is not impossible that Mr Keates orally made such an agreement: parties can make agreements that lack commercial sense. However, it is implausible that he did so and I see no good reason to suppose that he did so. Against this, the point is made that the actual use made by Biosol of the vehicles under the Biosol Contract did not come close to full use of the allegedly dedicated fleet; this, it is said, shows that the agreement alleged by Zenith made no commercial sense for Biosol. There is some truth in this, but I am not greatly impressed. First, Biosol had only very recently entered into the Resolven Contract with Short Bros and was ambitious to expand its woodchip business quickly. Second, Biosol was a new customer for Zenith. Third, for both of those reasons, it is to be expected that the risks of investment associated with the development of Biosol’s business would be borne by Biosol rather than by Zenith. Fourth, with due respect to Mr Bundock, I have no doubt that he is a less intelligent and astute businessman than is Mr Keates. The fact that the Resolven Contract was quickly seen to be potentially ruinous of Biosol is some illustration of this.
7) The lack of challenge to the invoices until after the relationship between the parties had broken down is good evidence that Biosol’s own understanding of what had been agreed in the Biosol Contract was the same as that now advanced by Zenith. The invoices were first sent by Zenith to Biosol on 4 July 2017 and were sent, by post, regularly thereafter. As the Biosol Contract was an “open book” contract, the invoices were supported by a billing spreadsheet in Excel format, which was first created by Mr Boardman on 4 April 2017 (i.e. the day after Mr Keates’ email setting out the agreed terms) and had a separate tab for each week. Mr Bundock, Ben Bundock and Amber Bundock all gave evidence to the effect that the invoices were repeatedly challenged and that credit notes were promised. I unhesitatingly reject their evidence and find that no challenge was made until after Mr Newnes’ death and Mr Gambold’s involvement. Many of the relevant points in the chronology have been identified above.
(2) Termination of the Biosol Contract?
“Biosol avers that Zenith provided transport services to Biosol from April 2017 to October 2017, at which point the arrangement between Zenith and Biosol came to an end by mutual agreement. In October 2017 Mr Bundock of Biosol contacted Mr Keates of Zenith and advised him that the defendant had lost a wood fuel supply contract with its major customer (R&A Properties) and therefore would no longer require transport services for that customer. Shortly thereafter a meeting took place between Mr Bundock, Mr Keates, Mr Colin Newnes … and Mr Nigel Short, at which an agreement was reached that Mr Short’s company (Short Brothers Limited) would assume the role of Biosol in supplying the wood fuel products to Biosol’s customers (including R&A Properties) and a company named Spring Logistics Limited would assume the role of Zenith in providing the transportation services. Spring Logistics Limited was a company owned by Mr Keates and a Halena Coury. By agreement the arrangement between Zenith and Biosol was terminated from that point.”
In further information pursuant to Part 18, provided on 29 October 2018, Biosol gave these responses (where “Spring” means Spring Logistics):
“2. The contracts between Biosol and Short Brothers for the supply of wood products were novated. It was agreed between Biosol and Short Brothers that Short Brothers would assume the obligation to supply the customers with wood products and Biosol would be released from its obligation to supply the customers with wood products.
3. Such was verbally agreed between Mr Nigel Short of Short Brothers and Mr Neil Bundock of Biosol. It was not recorded or referred to in any document.
4. No contractual arrangement was agreed between Biosol and Spring for Spring to assume the role of Zenith in providing the transportation services; such contractual arrangement was agreed between Mr Peter Keates and Mr Nigel Short. Mr Peter Keates and Mr Neil Bundock agreed that the contractual arrangement between Zenith and Biosol for the provision of transportation services would be terminated with immediate effect by mutual agreement. Biosol is not aware of the precise nature or terms of the contractual arrangement entered into between Short Brothers and Spring.
8. Biosol’s understanding was that Spring was utilising the logistics equipment of Zenith to provide transportation services for Short Brothers. Biosol understood that Zenith was to invoice Spring for use of the logistics equipment and Spring was to invoice Short Brothers for the transportation services.”
In additional Part 18 further information, dated 13 November 2018, Biosol averred:
· that the “verbal agreement” between Mr Short and Mr Bundock was made at a meeting on 20 October 2017 at Biosol’s offices, which was attended in addition by Ben Bundock, Amber Bundock, Mr Keates, Ms Coury and Mr Newnes;
· that Biosol’s customers “provided their consent to the novation of their contracts” on or around 13 November 2017 and that this was dealt with by Ms Coury of Spring Logistics, who had indicated that she would do so;
· that the arrangement for invoicing for transportation (that is, from Zenith to Spring Logistics, and from Spring Logistics to Short Bros) was agreed at the meeting on 20 October and at the further meeting (mentioned above) on 23 October 2017.
“it was agreed that we hand over this responsibility [i.e. of the running of the Resolven biomass fuel plant] to Mr Keates who had discussed this proposition with Mr Short, the content of the discussions was unknown to me as I was not party to any of these meetings” (para 38).
Mr Bundock did not then relate the alleged meeting with Mr Short. Instead, in paragraph 44 of his statement he referred to the meeting on 23 October 2017; then he continued:
“45. Unbeknown to myself [I think this means something like: Without prior warning to me], Mr Keates and Ms Coury then asked when Spring Logistics could take over Biosol. This was a huge shock to me and did not understand where this was coming from or going. Yes, Spring Logistics was taking over the running of Resolven and Biosol’s responsibilities there, but Biosol still remained and was continuing to trade in the sales, supply and installation of biomass boilers. I acutely remember the reaction of Mr Davies to this, who appeared to have been taken aback by this statement. I had never intended to relinquish any part of Biosol. It appeared that Mr Keates and Ms Coury had their own agenda and were trying to acquire my company.
46. Mr Keates then made it known that upon conclusion of this meeting that he, Ms Coury and Mr Newnes had a meeting arranged with Mr Short and his representatives in Cardiff and would be leaving to attend directly after the meeting. I was totally unaware of this and rather shocked. Even though I was shocked, I did understand as I had no further involvement at Resolven and with Mr Short.
47. Further discussions continued in October 2017 surrounding the takeover of the Resolven plant by Mr Keates and Ms Coury continued to a degree that on 27 October 2017, Mr Keates and Ms Coury took over all responsibilities of Biosol at the Resolven wood chip plant. My brother Mr Grahame Bundock, being the point of contact for Biosol’s wood chip customers, assisted Spring Logistics during the transition for a short period of time. Mr Keates and Ms Coury, together with Mr Newnes, were in direct contact with Mr Short and I/Biosol took no further part or responsibility in the wood chip operation and fuel deliveries to customers. Biosol have not received any income regarding the sale of wood chip fuel from Resolven from customers since the takeover by Spring Logistics of the plant.”
· It does not narrate the pleaded agreement between Biosol and Short Bros. Rather, it portrays a situation in which Spring Logistics held discussions with Short Bros, from which Biosol was excluded.
· It does not say that Short Bros were (in whatever way) to take over Biosol’s customers. Rather, it at least implies that Spring Logistics took over the customers.
· It does not give an account of the agreement to terminate the Biosol Contract. The statement does not attribute such an agreement to the alleged meeting on 20 October 2017—it does not mention such a meeting. And it does not say anything about such an agreement being made in the meeting on 23 October 2017.
1) The contracts with the woodchip customers remained with Biosol. I can see no evidence that there was a “novation” or that the customers purported to contract with any different entity, and Grahame Bundock’s email of 14 November 2017 implies an arrangement well short of that. When Spring Logistics sent invoices for the woodchip to the customers, it did this on behalf of Biosol, not because it was the contracting party.
2) Biosol’s woodchip business was henceforth carried on as a joint venture with Spring Renewables, which it must be remembered was in the nature of a quasi-partnership between Mr Keates, Mr Bundock and Mr Davies. The division of profits had not been finally agreed, probably because the woodchip business was not yet profitable.
3) Spring Logistics would be responsible for the woodchipping operations at Resolven, including the provision and operation of the telehandler. It would also do the invoicing for woodchip, but it would not itself be the contracting party for the sale of woodchip.
4) Biosol continued to be responsible both for the costs of procuring and delivering woodchip and for the costs incurred by Spring Logistics.
(3) The state of account under the Biosol Contract
The Read Claim
· Mr Read was employed by Uniserve UK under an employment contract dated 19 January 2016 (“the Read Contract”).
· The formal offer of employment to Mr Read was made not by Mr Keates but by Mr Stone, in a letter dated 19 January 2016. The letter was accompanied by the Read Contract, which Mr Read signed in acceptance. The letter and the Read Contract made no mention of the use of a company car, but clause 12 of the Read Contract provided for a car allowance of £9,600 p.a. “for use in the performance of your duties under this agreement”.
· A “contract details form” prepared by Mr Keates on 12 January 2016, for the use of Uniserve Group’s HR department, stated that Mr Read would not receive a company car but would have a car allowance of £800 p.m.
· Despite the terms of the Read Contract and the information provided to Uniserve Group’s HR department, Mr Keates had proposed to Mr Read a package that included the use of a company car.
· During the course of his employment by Uniserve UK, and in addition to receiving his car allowance, Mr Read had the use of company cars as follows:
i. From January 2016 until February 2017, a Land Rover Discovery. This vehicle had previously been used by Mr Keates and was subject of a pre-existing lease agreement.
ii. From February 2017 until April 2017, a BMW X5. Mr Read arranged the short-term lease of this car.
iii. From April 2017 until May 2018, an Audi Q7. Mr Read arranged the lease agreement and executed it as “Ops Director” of Zenith, which was named as the hirer. Zenith cancelled the lease on or about 1 May 2018.
· Mr Read was not, despite his job title, a director of either Zenith or Uniserve UK, but Mr Keates was a director of both companies.
· Mr Keates knew of and purported to authorise Mr Read’s use of the cars and his entry into the leasing agreements.
· The total amount paid by Zenith in respect of the provision of the cars (including not only the hire charges but the IPT in respect of insurance and a sum of £4,400 to obtain early cancellation of the leasing agreement relating to the Audi Q7) was £39,312.42.
“3.2. It is denied that [Zenith] and Uniserve (UK) were at all material times aware that [Mr Read] had the use of a company car as well as receiving a car allowance:
3.2.1. It is admitted that an arrangement was offered to [Mr Read] by Mr Keates, whereby [Mr Read] was to receive a company car in addition to a car allowance, but denied that Mr Keates was authorised to offer any such arrangement on behalf of Uniserve (UK) and/ or [Zenith], or that it was binding on either party.
3.2.2. It is denied that Mr Keates’ knowledge is to be attributed in law to Uniserve (UK) and/ or [Zenith], because he was acting outside the scope of his authority as director and in ﬂagrant breach of his ﬁduciary duties.
3.3. Further, it is denied that [Mr Read] believed Mr Keates had authority to offer any such arrangement, as [Mr Read] knew that this arrangement was irregular and wrong. Alternatively, if (which is denied) [Mr Read] relied on the existence of apparent authority on the part of Mr Keates, it is denied that any such reliance was reasonable.”
“Mr Shaw maintained that a proper ground for restitution was made out, showing that Bhimji Varsani’s enrichment at Relfo’s expense was unjust, in that the transfer of funds from Relfo by Mr Gorecia had been with a lack of proper consent by Relfo since Relfo was caused to make that transfer by Mr Gorecia acting in breach of fiduciary duty and without authority (ibid., paras. 1-22, 8-32 to 8-36 and at paras. 8-45 and 8-50 to 8-59, with reference in particular to dicta of Lord Nicholls of Birkenhead in Criterion Properties Plc v Stratford UK Properties Ltd  UKHL 28;  1 WLR 1846 at -, who observed that if it were established that a benefit had been conferred on B by company A as a result of the directors of company A acting for an improper purpose and without authority, then ‘irrespective of whether B still has the assets in question, A will have a personal claim against B for unjust enrichment, subject always to a defence of change of position. B’s personal accountability will not be dependent upon proof of fraud or “unconscionable” conduct on his part. B’s accountability in this regard will be “strict”’). Mr Shaw referred to Hopkins v TL Dallas Group Ltd  1 BCLC 543 at - in support of the proposition that grant of actual authority to an agent will not include authority to act for the agent’s benefit rather than that of his principal.”
After mentioning a different point that does not call for discussion here (it was considered in the Court of Appeal), Sales J continued:
“88. I accept Mr Shaw’s submissions, set out above. In my view Bhimji Varsani was clearly enriched by the Intertrade payment at the expense of Relfo. That is so even if the Intertrade payment cannot be identified with the Relfo/Mirren payment according to the rules of tracing. Relfo had its funds diverted by Mr Gorecia in breach of his fiduciary duty as a director of Relfo and acting outside the scope of his authority from Relfo. In my judgment, that establishes a proper ground for an in personam claim by Relfo under the law of unjust enrichment against Bhimji Varsani for repayment of a sum equivalent to the extent of his enrichment, namely the amount of the Intertrade payment. If Relfo had paid those monies to Bhimji Varsani by mistake it would have had a right to restitution of them. The position can in my view be no different where the matters which have affected Relfo’s consent to the transfer of value from itself to Bhimji Varsani involve instead a breach of fiduciary duty and of authority by its director and controller, Mr Gorecia, acting to perpetrate a fraud on the company.
89. Liability in unjust enrichment is ‘strict’, in the sense that Lord Nicholls uses that term. It does not depend upon knowledge of the recipient that the receipt is improper in some way, so as to affect his conscience, unlike liability in equity for knowing receipt (and, accordingly, liability under the law of unjust enrichment may not carry the full range of obligations which might arise in relation to a person found liable in equity to account for the property on the grounds of knowing receipt, including perhaps an obligation to keep funds separate and unmixed and to account for their use as referred to in Sinclair Investments). The law of unjust enrichment also carries with it its own framework of legal defences.”
“the vehicle … element of the structured deal was regularly visible through budgeting and business profitability work I was involve[d] in[,] for example the monthly reconciliation against the Homebase account where the car was accounted for.”
The Main Claim
1) That Mr Keates acted to exploit biomass business opportunities, using Zenith’s staff and its assets, as part of a conspiracy involving Mr Read, Mr Bundock, Biosol and the Spring Companies. This strand has a factual connection to the Biosol Claim, though it raises different issues.
2) That Mr Keates misused and misappropriated Zenith’s assets for the mutual benefit of himself and others, when acting in concert with other defendants. This strand involves:
a) In respect of Mr Read, his use of company cars (which overlaps with the Read Claim) and his attendance at a trip to Hong Kong;
b) In respect of Ms Horsley, her receipt of illegitimate expenses, her issue of illegitimate fuel cards to herself and third parties, and her making of illegitimate payments, in particular to Mr Claridge;
c) In respect of Mr Claridge, his receipt of illegitimate payments and various benefits that were funded by the claimants.
3) That Mr Keates misused and misappropriated the claimants’ assets for his own personal gain.
1A) Loss of profits said to have been caused to the claimants by reason of Mr Keates deliberately disregarding his duties to them or being diverted from performance of his duties by “frolics of his own”.
Section 281 of the Insolvency Act 1986
“(1) Subject as follows, where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts …
(3) Discharge does not release the bankrupt from any bankruptcy debt which he incurred in respect of, or forbearance in respect of which was secured by means of, any fraud or fraudulent breach of trust to which he was a party.”
“I consider that the exception extends to any debts of the bankrupt resulting from his actual dishonesty. In this regard I agree with the analysis of HHJ Simon Barker QC in Templeton Insurance Ltd v Brunswick  EWHC 1522(Ch), and what was stated by him at paragraph :
‘In my judgment, a “fraudulent breach of contract” or a “fraudulent breach of fiduciary duty” is as capable of coming within the meaning of the word “fraud” at s. 281(3) as is the tort of deceit. The purpose of s.281(3) as a qualification to s. 281(1) is to prevent a person from using the process of bankruptcy or invoking his bankruptcy and discharge therefrom as a medium for becoming free from debts and liabilities resulting from his actual dishonesty. In other words, s. 281(3) is an anti-avoidance and preservative provision aimed at continuing the rights of a creditor who has been defrauded by the bankrupt. Thus, “fraud” as the gateway to the application of s. 281(3) and a route through the barrier imposed by s. 281(1) is not satisfied by establishing “fraud” in the equity sense (“against conscience” or “unconscionable”). To pass through the gateway and remain on the road to recourse against the discharged bankrupt, a creditor must prove “fraud” in the common law sense; this is not to be understood as restricting access only to bankruptcy debts founded in the tort of deceit, but rather as a reference to debts tainted by actual dishonesty.’”
Unlawful means conspiracy
“111. A further feature of the tort of conspiracy, which is also found in criminal conspiracies, is that, as the judge pointed out (at p 124), it is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end. Although civil and criminal conspiracies have important differences, we agree with the judge that the following passage from the judgment of the Court of Appeal Criminal Division delivered by O’Connor LJ in R v Siracusa (1990) 90 Cr App R 340 at 349 is of assistance in this context:
‘Secondly, the origins of all conspiracies are concealed and it is usually quite impossible to establish when or where the initial agreement was made, or when or where other conspirators were recruited. The very existence of the agreement can only be inferred from overt acts. Participation in a conspiracy is infinitely variable: it can be active or passive. If the majority shareholder and director of a company consents to the company being used for drug smuggling carried out in the company’s name by a fellow director and minority shareholder, he is guilty of conspiracy. Consent, that is agreement or adherence to the agreement, can be inferred if it is proved that he knew what was going on and the intention to participate in the furtherance of the criminal purpose is also established by his failure to stop the unlawful activity.’
Thus it is not necessary for the conspirators all to join the conspiracy at the same time, but we agree with the judge that the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of. In a criminal case juries are often asked to decide whether the alleged conspirators were ‘in it together’. That may be a helpful question to ask, but we agree with Mr Brodie that it should not be used as a method of avoiding detailed consideration of the acts which are said to have been done in pursuance of the conspiracy.
112. In most cases it will be necessary to scrutinise the acts relied upon in order to see what inferences can be drawn as to the existence or otherwise of the alleged conspiracy or combination. It will be the rare case in which there will be evidence of the agreement itself. …”
“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”
“45. So the distinguishing obligation of a fiduciary is that he must act only for the benefit of another in matters covered by his fiduciary duty. That means that he cannot at the same time act for himself.”
“172 Duty to promote the success of the company
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole …”
“175 Duty to avoid conflicts of interest
(1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
(2) This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity).”
“176 Duty not to accept benefits from third parties
(1) A director of a company must not accept a benefit from a third party conferred by reason of—
(a) his being a director, or
(b) his doing (or not doing) anything as director.
(2) A ‘third party’ means a person other than the company, an associated body corporate or a person acting on behalf of the company or an associated body corporate.
(3) Benefits received by a director from a person by whom his services (as a director or otherwise) are provided to the company are not regarded as conferred by a third party.
(4) This duty is not infringed if the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.
(5) Any reference in this section to a conflict of interest includes a conflict of interest and duty and a conflict of duties.”
These provisions are to be understood and interpreted in accordance with section 170:
“170 Scope and nature of general duties
(1) The general duties specified in sections 171 to 177 are owed by a director of a company to the company.
(3) The general duties are based on certain common law rules and equitable principles as they apply in relation to directors and have effect in place of those rules and principles as regards the duties owed to a company by a director.
(4) The general duties shall be interpreted and applied in the same way as common law rules or equitable principles, and regard shall be had to the corresponding common law rules and equitable principles in interpreting and applying the general duties.”
“7. What are the equitable principles and duties that apply to the facts of this case and are available for the interpretation and application of the general statutory duties?
8. Lord Cranworth LC in Aberdeen Railway Co v. Blaikie 1 Macq 461 at 471 explained how potential conflicts of interest are to be avoided by those who are committed as directors to be loyal to the company:
‘And it is a rule of universal application, that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interest of those whom he is bound to protect. So strictly is this principle adhered to, that no question is allowed to be raised as to the fairness or unfairness of a contract so entered into.’
9. In Boulting v Association of Cinematograph, Television and Allied Technicians  2 QB 606 at 636 Upjohn LJ said that the principle has nothing to do with establishing that the director is guilty of fraud or corruption. In the case of a company director the principle recognises the primacy of the interests of the company which he is trusted not to betray. Thus a company is entitled, in the words of Upjohn LJ, ‘to the undivided loyalty of its directors.’ We have been reminded by counsel for the appellant that Upjohn LJ referred to the rule as being a broad and flexible one to be fashioned according to changing circumstances and to be applied with common sense and realistically: see pp 636 and 638. That approach to the formulation and the application of the principle does not, however, undermine the strict nature of the liability enshrined in the principle where it applies. The rationale and the justice of the principle lie in its strict regard for the protection for those interests potentially at risk from a director who does not give his undivided loyalty to the company.
10. Thus a director’s liability for disloyalty in office does not depend on proof of fault or proof that a conflict of interest has in fact caused the company loss: Foster Bryant Surveying Ltd v Bryant  EWCA Civ 200. A director’s potential conflict of interest may arise, for example, in connection with a business opportunity. If a director obtains the opportunity for himself, he will be liable to the company for breach of duty regardless of the fact that he acted in good faith or that the company could not, or would not, take advantage of the opportunity.
11. As explained by Lord Russell of Killowen in Regal (Hastings) Ltd v Gulliver  AC 134 at 144 the liability of a fiduciary to account for the profit made by use of his position
‘…in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged of benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well intentioned, cannot escape the risk of being called upon to account.’
12. Equity’s response of strict liability to account for breach of a fiduciary duty is similar whether the liability is triggered by an event which breaches the loyalty duty, or the ‘no conflict principle’, or the ‘no profit principle.’”
“The phrase ‘possibly may conflict’ requires consideration. In my view it means that the reasonable man looking at the relevant facts and circumstances of the particular case would think that there was a real sensible possibility of conflict; not that you could imagine some situation arising which might, in some conceivable possibility in events not contemplated as real sensible possibilities by any reasonable person, result in conflict.”
“The third duty [that is, the duty of the first defendant to disclose his own wrongdoing] is supported by paragraph 65 of the decision of Peter Smith J in Hanco ATM Systems Limited v. Cashbox ATM Systems Limited  EWHC 1599 (Ch), where he held that it was clear law that an employee who owes fiduciary duties (whether a director or not) owes a duty, as part of those fiduciary duties, to disclose his own wrongdoing to his employer. The scope and extent of this duty could depend on the precise circumstances, but in the case of a clear commercial conflict of interests, it seems to me to be right to say that such a conflict must be disclosed.”
“40. Fiduciary duties normally arise in certain settled categories of relationship, such as between a trustee and a beneficiary, or a solicitor and his client or the agent and his principal. It is exceptional for fiduciary duties to arise other than in those settled categories: see Leggatt LJ in Sheikh Al Nehayan v Kent  EWHC 333 (Comm) at . Whilst fiduciary duties may exist outside such established categories, the task of determining when they do is not straightforward because there is no generally accepted definition of a fiduciary. In the same case at , Leggatt LJ said:
‘159. Thus, fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person. (Such duties may also arise where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party's decision-making: see Lionel Smith, “Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another” (2014) 130 LQR 608.) The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal. This is the core of the obligation of loyalty which Millett LJ in the Mothew case  Ch 1 at 18, described as the “distinguishing obligation of a fiduciary”. Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary’s own interests. To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal) place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal. They are also liable to account for any profit obtained for themselves as a result of their position.’
41. An argument that has arisen in some of the authorities is whether there is a fiduciary relationship because there is a high degree of mutual trust and confidence between the parties. However, Leggatt LJ was at pains to point out at  that the existence of trust and confidence is not sufficient by itself to give rise to fiduciary obligations. He went on at  to emphasise the particular kind of trust and confidence that was characteristic of a fiduciary relationship. He said it was ‘founded on the acceptance by one party of a role which requires exercising judgment and making discretionary decisions on behalf of another and constitutes trust and confidence in the loyalty of the decision-maker to put aside his or her own interests and act solely in the interests of the principal.’
42. Although we were referred to a number of other authorities on the question of fiduciary relationships, such as Glenn v Watson  EWHC 2016 (Ch) and Ranson v Customer Systems  EWCA Civ 841, they did not seem to me to add anything material. I note that this court in Ranson at  -  also stressed the importance of the terms of the contract in identifying whether there is a fiduciary relationship, a point picked up by the learned editors of Jackson and Powell on Professional Liability, 8th Edition, at paragraph 2-146.”
“45. In Sybron Corp v Rochem Ltd  Ch 112 Stephenson LJ said:
‘…there is no general duty to report a fellow-servant’s misconduct or breach of contract; whether there is such a duty depends on the contract and on the terms of employment of the particular servant. He may be so placed in the hierarchy as to have a duty to report either the misconduct of his superior, … or the misconduct of his inferiors, as in this case.’ (Emphasis added)
46. What goes for the reporting of misconduct of fellow employees must apply with at least equal force to reporting one's own misconduct.
47. In University of Nottingham v Fishel  ICR 1462 the University argued that: ‘… the employee’s duty of loyalty and good faith obliged Dr Fishel to inform the university that he was being paid for his outside work. The argument then is that, had the university been aware of the opportunity to do outside work, it would have sought to do it itself.’
48. Elias J rejected that argument. He said: ‘In my view the premise is wrong. I do not think that as a general principle an employee is bound to inform his employer if and when he is doing outside work in breach of his contract.’
49. In amplifying his reasons he referred to: ‘… the well established rule in Bell v Lever Brothers Ltd  AC 161 that employees are not obliged to disclose their own past misconduct or breaches of contract.’
54. I would endorse the general principle as stated by Elias J in Fishel.
55. That is not to say that an employee can never have an obligation to disclose his own wrongdoing; but any such obligation must arise out of the terms of his contract of employment. …”
Main Claim: Strand 1: Biomass Business Opportunities
“You undertake to work to the best of your ability and to use your best endeavours to promote, develop and extend the Employer’s business and interests and that of any other company in the Group.
The Employer requires the highest standards from you in your performance at work and your general conduct and in particular you must:
• be diligent, honest and ethical in the performance of your duties and during working hours devote the whole of your time, attention and abilities to them;
• do your best to promote the interests of the Employer and any other company in the Group;
• render your services in a professional and competent manner in willing co-operation with others and at all times conform to the reasonable directions of your supervisor;
You must not, without first obtaining the prior written consent of your line manager, take up any other employment or hold any office or directly or indirectly be interested or involved in any capacity in any other business, organisation, entity or occupation whilst working for the Employer.
You must notify your line manager immediately of:
• any plan you have which could reasonably be considered to relate to activity which is in breach of a duty or lawful obligation to the Employer; or
• any circumstances where there is a reasonable suspicion that a colleague is materially breaching a duty or lawful obligation owed to the Employer or any other company in the Group including any of the obligations which you have which are referred to in this agreement), or is not observing rules and/or procedures for the proper conduct of the Employer’s business; or
• any competitor (or its employees, directors or officers) approaching you or any colleague where there is any influence to breach employment obligations owed to the Employer.”
Breaches of duty by Mr Keates and Mr Read
Misuse of claimants’ assets in connection with the pursuit of biomass opportunities
1) In August 2017 Mr Keates obtained finance for Spring Logistics from Agco Finance to fund the acquisition of a farm tractor. It appears that the tractor was used at the Farm.
2) On 25 August 2017 Mr Newnes caused Zenith to make to Agco Finance a payment of £87,840, with payment reference “Spring”, in respect of this finance. Further payments were made by Zenith to Agco Finance thereafter. Spring Logistics has reimbursed Zenith for one of its payments. However, it has not reimbursed it for the initial payment of £87,840 or a subsequent payment of £12,605.96.
3) Mr Keates’ defence confirms that the tractor was acquired for Spring Logistics on hire purchase. It says that it was intended that Spring Logistics would make the payments to Agco Finance (or reimburse Zenith if, as happened, Zenith made the payments) and that matters were left unresolved after Mr Newnes died and Mr Keates was suspended. “The tractor was sold in 2018 and all outstanding finance was repaid by the ninth defendant, Spring Logistics (UK) Ltd.”
4) Accordingly Spring Logistics is liable to pay to Zenith the full amount of the payments not so far reimbursed, namely £100,445.96.
5) The reamended particulars of claim aver: “It is to be inferred that these payments were made with the knowledge of Mr Keates … for the benefit of Spring Logistics and/or the Spring Companies. The payments did not relate to the business of Zenith and were a misapplication of the assets of the company and a dishonest and fraudulent breach of Mr Keates’ contractual and/or fiduciary duties.” There is no direct evidence that Mr Keates knew of and approved the payments from Zenith to Agco, but it is overwhelmingly probable that he did so, as (a) he was managing director of Zenith, (b) he was sole shareholder in and a director of Spring Logistics, (c) he was the person who initiated the involvement with the Farm, (d) he made the application to Agco Finance for finance for the tractor, and (e) he worked closely with Mr Newnes and had involved him in the affairs of Spring Logistics. Even if Mr Keates intended that Spring Logistics would reimburse Zenith for the payments it made, it was plainly dishonest of him and Mr Newnes to procure payments from Zenith for a venture in which it was not involved. Accordingly I consider that Mr Keates has personal liability for the sum of £100,445.96 on the basis that it was a payment made by Zenith by reason of his breach of contract and breach of fiduciary duty; and I find that this is a liability resulting from his actual dishonesty and is accordingly preserved by section 281(3) of the Insolvency Act 1986.
1) On 13 March 2018 Mr Keates instructed Ms Catherine Watkins of Zenith’s Accounts Department to make a payment of £20,000 to DT & CI Burrows and to classify it as a payment on account. This she did.
2) Mr Keates’ defence admits the payment. It continues:
“It was not in connection with any personal interest of the First Defendant but because the First Defendant had been made aware that Mr Newnes had. for a period prior to his death been assisting DT and Cl Burrows with their accounts. During the course of such assistance it appeared that he had arranged for a payment to be made to Zenith by DT and Cl Burrows in the sum of £20,000 which the First Defendant could not reconcile and which appeared to have been paid in error or wrongly. It seemed that the sum was due to be repaid to DT and Cl Burrows and accordingly the First Defendant instructed such repayment to be made on the basis that it Zenith should not have received the sum of £20,000.”
3) There is no evidence to support Mr Keates’ contention. Further, as Mr Duggan and Mr Goodfellow point out, the figure of £20,000 is the same as the figure mentioned in Mr Read’s email of 31 July 2017 as being the annual payment to be made by Spring Logistics to DT & CI Burrows for the management of the facility at the Farm.
4) In the circumstances, I find that the payment was a dishonest misapplication of Zenith’s moneys in breach of Mr Keates’ contractual and fiduciary duties.
1) On 7 September 2017 Zenith entered into a 5-year lease of a low loader trailer at a rental of £798.10 per month. The lease was signed by Mr Southern, but I find that he was instructed to sign it by Mr Keates, who told him that it was required to move “combines” (combine harvesters), and that Mr Keates had arranged the lease with the finance company (the owner) before Mr Southern signed it. The low loader was at the Farm when it was collected from there by Kemball on 15 March 2018. Mr Southern’s evidence was that Zenith and Kemball used the low loader on only about a dozen occasions, for the purpose of moving tractors. In his witness statement, he asserted that Mr Keates caused Zenith to procure the low loader trailer so that it could be used to transport a wood chipping machine to any location where Biosol would be cutting down trees. In his oral evidence Mr Southern confirmed that he knew nothing about the purpose for which the low loader was required, save what he was told by Mr Keates. Although the low loader trailer was returned to the owner in September 2018, the evidence is that early termination of the lease is not permitted and that Zenith has continued to incur the charges under the lease, which will amount to a total of £9,577.20.
2) Mr Keates’ defence averred that the low loader trailer was ordered by another director of Zenith (presumably, Mr Southern) for the purposes of the claimants’ business and was used by all of the claimants. It was used once by Spring Logistics. It was not based at the Farm; it was merely taken there to be collected by the claimants.
3) I have already found, on the balance of probabilities, that this trailer was not acquired for or used in connection with the Biosol Contract. It seems to me to be likely, also, that Mr Keates wrongly led both Mr Southern and Mr Boardman (witness statement, paragraph 11(vi)) to believe that the low loader was being used for the Biosol Contract and that he did so in order to conceal the true nature of its use. I am not clear what that use was: it was probably mainly at the Farm and was for the direct or indirect benefit of Mr Keates. I find that the acquisition and subsequent use of the low loader trailer was a deliberate and dishonest misuse of Zenith’s money and assets and breach of his fiduciary duties.
4) Some allowance ought to be given for the use that was made of the trailer by the claimants. On the basis of the very limited evidence to assist, I consider that the appropriate credit is the equivalent of twelve days of the charge-out fee as invoiced by Zenith to Biosol.
1) The complaint is that on 10 October 2017 Mr Keates instructed Kemball to deliver 5,000 litres of red diesel to the Farm, ostensibly for Zenith, although the delivery did not relate to the business of Zenith. The cost of the diesel, £2,492 exclusive of VAT, was reimbursed to Kemball by Zenith.
2) Mr Keates’ defence stated that Spring Logistics intended to reimburse the claimants for the cost of the diesel and that indeed £2,150.73 was paid by Spring Logistics to Zenith on 16 November 2017, “which was believed to be in relation to the repayment of this item.” No documentary evidence has been provided in support of this assertion. The payment and receipt do not appear on the disclosed bank statements of Spring Logistics and Zenith. Mr Stone’s evidence was that Zenith has no record of such a payment. I find that the payment by the claimants for the diesel was a dishonest appropriation of their moneys by Mr Keates, in breach of his contractual and fiduciary duties to Zenith and Kemball. Mr Keates is liable to Zenith for the cost of the diesel. As the misappropriation was dishonest, the liability survives his discharge from bankruptcy.
3) The defence of the Spring Companies adopts the contents of Mr Keates’ defence on this matter. Accordingly Spring Logistics accepts that the diesel was obtained for it and ought to be reimbursed by it. Therefore it is liable to pay Zenith £2,492.
1) Zenith complains that from 11 December 2016 until 4 April 2018 Mr Keates used his corporate credit card to pay for taxi fares “to and from Sandridgebury Farm (or locations within the nearby vicinity)” at a cost of £853.51. Zenith says that these journeys were unrelated to Uniserve business and that it is to be inferred that they were connected with the biomass business opportunities he was exploring with Mr Davies and Mr Bundock. There is a detailed breakdown of the journeys in Annex 4 to the re-amended particulars of claim; that is useful, in showing the addresses where the journeys commenced and ended, but I shall not mention its detail here.
2) I do not find that this allegation has been proved. Mr Keates’ defence provided an explanation of the expenses in terms of the use of his home, near the Farm, and a nearby public house by directors, employees and associates of the claimants, who would also use his Uber account. The claimants dispute this and observe that it is unsupported by evidence. However, the claimants’ own case on this point seems to me to rest on simple assertion that the journeys were illegitimate and has something of the air of trawling for additional complaints to lay at Mr Keates’ door. The schedule of journeys in Annex 4 contains 29 entries. Of these, ten pre-date the meeting between Mr Keates and Mr Bundock (1 April 2017) and a further eight pre-date Mr Keates’ meeting with Mr Jamie Burrows at the Farm on 23 July 2017. This undermines the credibility of the schedule as a record of journeys made in furtherance of a conspiracy in respect of the biomass projects. Although it remains possible that Mr Keates was making improper use of taxis for his own purposes, I do not find this to have been proved.
1) On 6 March 2018 Zenith paid £3,376 to Qwerk Digital Limited (“Qwerk”). It says that this payment was for work done by Qwerk on the new website of Spring Renewables (though Qwerk’s invoice was addressed to Spring Logistics) and that it was arranged and authorised by Mr Keates and Mr Newnes. It points to email exchanges between those two men in February 2018, after which on 5 March 2018 Mr Newnes wrote to Mr Keates, “I was going to suggest paying from zenith & sorting once spring cashflow sorted”.
2) Mr Keates’ defence to this allegation adopts the contents of the defence of Spring Logistics and Spring Renewables, which states:
“It appears that on the 6.3.18 Zenith made a payment to Qwerk of £3376 which appears to be in relation to services provided to the tenth defendant. Because of Mr Newnes’ untimely death some 4 days after such payment, the ninth and tenth defendants have received no information from Zenith in relation to such payment. The ninth and tenth defendants seek evidence of such payment in order to verify the position and will take action accordingly once the information is provided.”
3) No payment has been received from Mr Keates, Spring Logistics or Spring Renewables, although disclosure has been given in respect of the payment made by Zenith.
4) As Zenith’s payment was for services provided by Qwerk to Spring Renewables, that company is liable to reimburse Zenith in the sum of £3,376. I am not satisfied that the primary liability for the debt lay with Spring Logistics.
5) I find that the payment by Zenith was made with the knowledge and approval of Mr Keates and constituted a breach of his contractual and fiduciary duties to Zenith. Further, it was plainly dishonest to use Zenith to make payment for liabilities of Mr Keates’ personal business ventures, even if (as may perhaps have been the case) it was intended to make repayment in due course. Therefore Mr Keates is also liable for the sum of £3,376 and his liability survives his discharge from bankruptcy.
“the requirement of dishonest assistance relates not to any loss or damage which may be suffered but to the breach of trust or fiduciary duty. The relevant enquiry is . . . what loss or damage resulted from the breach of trust or fiduciary duty which has been dishonestly assisted. In this context, as in conspiracy, it is inappropriate to become involved in attempts to assess the precise causative significance of the dishonest assistance in respect of either the breach of trust or fiduciary duty or the resulting loss.’”
These principles and that dictum are undoubted, but in my judgment they are not in point. The effect of the claimants’ case is that, if A and B conspire with C to harm D by the use of unlawful means (namely, C’s breach of fiduciary duty to D by joining with them in a business competing with D’s business), A and B are liable for damages in conspiracy and for equitable compensation for dishonest assistance for any further breach of fiduciary duty committed by C to enable him to join with them in the business, even if they knew nothing of it and did nothing to assist it. So, for example, if A, B and C are each to contribute capital to their new venture, A and B will be liable in conspiracy and in dishonest assistance if C makes his contribution by stealing from D, even though they knew nothing about such theft and never contemplated it. The claimants produced no authority in support of such a startling contention, nor do I know of any. In the present case the misappropriations were not the unlawful means agreed on in the combination, and Mr Read, Mr Bundock and Biosol did not assist in the misappropriations, far less do so dishonestly.
Main Claim: Strand 1A: Loss of profits
“As a result of the defendants’ wrongdoing described above [that is, all the wrongdoing complained of in the consolidated proceedings], the claimants have suffered loss and damage. Full particulars of loss and damage will be provided by way of a schedule following disclosure and updated before trial, but will be claimed under the following heads:
102.2 Loss of profit to date and continuing hereafter, which would have been generated by each of the claimants, but for the defendants’ wrongful conduct, currently estimated in the sum of £1,913,988 in respect of all the claimants. The claimants aver that Mr Keates and Mr Newnes deliberately disregarded their duties to further the interests of the claimants and that this has very substantially impacted the profits/losses of the claimants that would otherwise have been achieved.”
“I have sought to identify from the claimants’ management specific instances where Mr Keates’s failure to devote the appropriate time and attention to the claimants’ businesses caused disruption and/or loss and to quantify those as best I can based on the information available to me” (report, paragraph 4.5).
Accordingly, he set out the seven instances of misconduct that are discussed below. It is to be noted that he did so because “the claimants’ management” had identified these as instances where Mr Keates’ lack of attention to the claimants’ business caused loss.
1) This is dealt with in paragraph 93(i) of Mr Liddell’s statement and in paragraphs 4.10 to 4.19 of Mr Conti’s report. In brief summary, Zenith contracted with Homebase to provide warehouse management services under an “open book” contract. In April 2019 Homebase (so it is said) repudiated the contract. An “open book” contract ought not to have left Zenith with any losses. However, the complaint (unpleaded, as are all these matters) is that Mr Keates failed to finalise a written contract with Homebase and permitted Zenith to take occupation of the warehouse premises before formal leases were executed. This is said to have resulted in loss to Zenith, because it was left with liabilities under the leases after Homebase repudiated the contract. The losses are said to amount to £1,298,050; though this is subject to recovery under an as yet undisclosed settlement agreement reached between Zenith and Homebase.
2) On the basis of the evidence in these proceedings, especially in the absence of pleadings, it is hard to make much sense of this allegation. There is no reason for thinking that the leases were taken on unreasonable terms. The complaint appears to be that, when the leases were taken, the formal contract with Homebase had not been executed. But it is Mr Liddell’s own case that Homebase was in repudiatory breach of contract when it walked away in 2019, and a claim (on an unknown basis and for an unknown amount) was compromised in a settlement agreement (on unknown terms).
3) Anyway, the allegation is manifestly contrived. The agreement with Homebase was in late January 2017. The two warehouses were occupied in January and February 2017. The leases were executed in March 2017. The first meeting between Mr Keates and Mr Bundock was on 1 April 2017. The conspiracy did not commence until the summer of 2017. Even as a simple matter of fact, the claimants’ case that there was a causal connection between the conspiracy and the Homebase losses is obviously wrong. Mr Liddell’s suggestion that, but for the conspiracy, Mr Keates might have remedied the position was both feeble and devoid of meaning, because (a) it rests on saying that, though Mr Keates’ original failure had nothing to do with the conspiracy, his subsequent failure can be inferred on the balance of probabilities to have done so and (b) it has not been revealed in these proceedings what the problem to be remedied might have been.
1) This is dealt with in paragraph 93(ii) of Mr Liddell’s statement and paragraphs 4.20 to 4.28 of Mr Conti’s report. The complaint relates to another “open book” warehousing agreement. Mr Liddell asserts that, “Mr Keates in negotiating the contract failed to account for the stamp duty on the lease resulting in a loss to Uniserve UK of £136,100 as Uniserve UK provided the services to GTech.”
2) Among the problems faced by this head of claim are the following. (a) The letter of intent, signed by GTech in November 2017, was issued by Mr Read. (b) The party to the “open book” contract dated 4 May 2017 was Uniserve Limited, and the party to the lease was Uniserve Holdings Limited, neither of which is a claimant. (c) The contract was signed by Mr Liddell, not by Mr Keates. (d) The only reason for linking this matter to Mr Keates is Mr Liddell’s evidence that Mr Keates was responsible for all negotiations in respect of warehousing; so now it appears that any sub-optimal outcome is to be attributed to deliberate misfeasance by Mr Keates. (e) The contract appears to be sufficient to impose a liability for the stamp duty on GTech: it is unclear why it should have avoided such a liability. (f) Because this matter, like the others, is not a pleaded allegation of wrongdoing, there is no evidence of how negotiations were conducted or of what advice was received from lawyers or others. (g) There is no sufficient reason to infer that any shortcoming of the negotiations and the agreement with GTech had anything to do with the conspiracy.
1) This is dealt with in paragraph 93(iii) of Mr Liddell’s statement and paragraphs 4.29 to 4.38 of Mr Conti’s report. This again concerns a contract for the provision of warehouse management services. The contracting party is named as Uniserve Group Limited, but it is said that the correct party was in fact Uniserve UK. (As no dispute concerning identity is said to have arisen, this does not seem to be important.) The contract is dated 16 May 2018, but it is referred to as being dated 16 May 2017 and I do not know the true date (the contractual commencement date was 16 October 2017). Mr Liddell states that the services have been provided for a number of years. Mr Liddell complains that Mr Keates failed to ensure that the contract fees were at market rate and failed thereafter to renegotiate the rates or terminate the agreement with a view to finding a customer who would pay market rates. The losses are said to be £307,529.
2) Again, this head of claim does not get off the ground. The contract was made either before any conspiracy between Mr Keates and the other defendants or five weeks after he had been suspended for gross misconduct. There are no details whatsoever to show what part he played in the negotiations for the contract, or how the prices were arrived at, or what advice was received. There is no evidence to show any connection between this this head of claim and the pleaded allegations in the case. This is simply another instance of attempting to recover moneys on no good grounds.
1) The allegation is that Mr Keates was responsible for overseeing the design and installation of the main gates at Uniserve’s Tilbury site, that these were deficient and unsafe, and that as a result the claimants have suffered loss, which was shown in the schedule of loss as £25,796.
2) The claimants abandoned this head of claim in closing submissions, on the basis that it “engages the question of responsibility for design and installation work” and is thus of a different character from the other heads. In fact, the claim in respect of the gates suffers from the same defects as the other heads of claim. When Mr Stone was cross-examined on this matter, he suggested that Mr Keates may have engaged an unsuitable contractor for the design and installation of the gates. There are, of course, no pleaded allegations or evidential bases for that suggestion. And there is no basis for connecting that matter with this case.
1) This is dealt with by Mr Liddell (statement, paragraph 93(iv)) and Mr Conti (report, paragraphs 4.43 to 4.46). The allegation is that in January 2018 Mr Keates placed an order for 316 trackers for Kemball’s fleet, even though there were only 277 vehicles in the fleet. This is said to have resulted in a loss to Kemball of £18,291.
2) All the usual objections apply equally to this head of claim. In addition I note the following. (a) The order was actually placed by Mr Southern. (b) The reasons for the order for the precise number of 316 trackers have not been identified. It is unconvincing to say that Mr Keates again took his eye off the ball (closing submissions, paragraph 357), because some arithmetic clearly lay behind the order and Mr Southern’s evidence was that he had already attended to trackers on the Zenith fleet, so he clearly applied his mind to these matters and must (if the claimants’ case is right) be supposed to have taken his eye off the ball just as much as did Mr Keates. (c) There is no evidence of what became of the 39 trackers that are said to have been surplus to requirements.
1) In paragraphs 4.47 to 4.51 of his report, Mr Conti says that an undercover operative was engaged to work at the Tilbury site for eight weeks at a total cost of £24,094, which included £3,786 for hotel costs for the operative, who did not live locally. In distinction from the foregoing heads of claim, there is here an implication that the cost was incurred not merely unnecessarily or carelessly but deliberately inappropriately, because Mr Conti records that he was instructed that the company that employed the undercover operative was run by a friend of Mr Keates.
2) The claimants no longer pursue this head of claim.
1) This is dealt with in paragraph 93(v) of Mr Liddell’s statement and in paragraphs 4.52 to 4.58 of Mr Conti’s report. The allegation is that in February 2017 Mr Keates placed an order for trucks from a leasing company, Gullivers, at unnecessary cost, despite having a more cost-effective alternative to hand. The loss to Kemball is said to be £127,422.
2) Apart from the other objections to this head of claim, it relates to an order placed well before Mr Keates and Mr Bundock met or any conspiracy was formed.
Main Claim: Strand 2: Misappropriation of assets involving other defendants
Payments to “DC Driving Services”
“l8. … The First Defendant’s position is that payments were lawfully made to DC Driving Services in the period from 2011 to 2018. DC Driving Services is the trading name of a business run by Mr Derek Claridge. Mr Claridge had lent sums in the order of £130,000 to Zenith (not the First Defendant), in or around 2009 and at a time when the First Defendant was the sole shareholder of Zenith. From around 2011 DC Driving Services were repaid monthly in respect of the loan from 2011. For accounting purposes the repayments were recorded by the method of DC Driving Services raising invoices to Zenith. The First Defendant cannot provide any more specific information without access to management accounts for the relevant period. Further, as Mr Newnes dealt with making and recording the relevant repayments the First Defendant does not know how he recorded them in the accounts of Zenith.”
· The total sum of the payments made by ZLL, Zenith and potentially related parties to Alfred Properties Limited from 29 September 2008 was £272,872.09.
· The total amount paid by ZLL and Zenith up to the date of Zenith’s acquisition by Uniserve UK (September 2015) was £136,280.95, which was already in excess of the amount of the loan as documented (£115,000) or as alleged (£130,000).
· A further sum of £53,125 was paid to Alfred Properties Limited by companies said to be connected to ZLL or Zenith before 2013. I am inclined to ignore this, as the basis for considering these payments to be relevant is unclear to me.
· The total amount paid by Zenith after its acquisition by Uniserve was £85,866.14 (i.e. the amount now claimed).
· Therefore the total amount paid by ZLL and Zenith to Alfred Properties Limited is some £222,000.
· The last payment made by Zenith to Alfred Properties Limited was on 9 March 2018. The payments ceased when Mr Newnes died. Not only were no further payments made: there is no evidence that any further payments were requested or that any enquiry was made as to why the payments had stopped.
1) Mr Claridge made a loan in 2008 to Mr Keates.
2) The loan was not Zenith’s liability.
3) Further, the amount of the loan had been repaid before Uniserve UK acquired Zenith. In the absence of any evidence to the contrary, there is no basis for finding that there was interest on the loan.
4) The payments made by Zenith to Alfred Properties Limited were made without any proper reason (which is why they were falsely shown in Zenith’s books) and were made at the instigation of Mr Keates.
5) Mr Keates’ actions in causing the payments to be made were dishonest and in breach of his contractual and fiduciary duties to Zenith. Accordingly he is and remains liable for the amounts of the payments.
1) There is no positive evidence of reimbursement.
2) My conclusions generally as to Mr Keates’ dishonesty and specifically as to the “DC Driving Services” issue lead me to view the claim that reimbursement was made with circumspection. Nevertheless, I bear in mind that an adverse conclusion in one respect does not mandate a similar conclusion on a different point, and that there is always a possibility that the claimants, having seen what they regard as dishonesty in one matter, have been too quick to see it elsewhere.
3) There is no good explanation why Mr Claridge could not simply pay for the container himself, directly. I do not know why Uniserve should be introduced into the matter.
4) The claim to have made a cash repayment is unconvincing on its own terms. First, if the charge were to be passed on to Mr Claridge, one would expect that an invoice would have been issued. There is no such invoice. Second, a payment of several thousand pounds would more usually be expected to be by transfer or, possibly, by cheque. Third, there is a tension with the case that Mr Keates and Mr Claridge advanced in respect of the “DC Driving Services” issue: if Zenith had a liability to pay Mr Claridge £3,000 each month (which is what was being paid until Mr Newnes died), it is implausible that Mr Claridge should have repaid several thousand pounds for the container—the obvious thing to do would be to set the money against Zenith’s liability.
5) On 13 March 2018 someone from Uniserve UK’s accounts department asked Mr Keates by email, “There is a entry on your August Barclaycard for 1st Containers for £1380.00, can you let me know what this is as I have no idea where to put it?” He replied, “We purchased a container to store fleet oils and ludes etc in Tilbury.” If the transaction were legitimate and reimbursement had been obtained, there would have been no need for a false explanation.
Miss Horsley’s expenses
“[P]rior to the acquisition of Zenith by Uniserve UK, fuel cards had been supplied to staff who were not in full time employment but who contributed to Zenith’s business as a reward for some staff and their families. Cards were also provided as part payments for consultancy services supplied to Zenith. It is denied that this was a wrongful practice and it is averred that it was a legitimate way of rewarding staff and business associates either by way of enhanced salary and beneﬁts packages and/or as a marketing expense. The cards were managed by Mr Newnes and Paul Southern and the First Defendant was not kept fully informed as to their actions and decisions in relation to cards.”
“The fuel card / telephone account was given by Mr Keates and/or Mr Newnes for continued financial support given by me to the company.”
1) The fuel cards for Mr Claridge were in the sum of £3,295.19. There was no legitimate reason for him to be given or to receive this benefit from Zenith. This was, as Mr Duggan and Mr Goodfellow suggest, a case of giving a “freebie” to a friend of Mr Keates.
2) The fuel cards for Miss Horsley were in the sum of £848.53. On the current, meagre state of the evidence relating to the cards, their use and her employment, I do not consider it proved that this was an illicit benefit, though it may have been.
3) The fuel cards for Miss Horsley’s sister were in the sum of £927.35. She was not employed by Zenith and this was an improper use of its assets. (The claimants have been unable to identify the amount of the benefit conferred on Miss Horsley’s mother.)
4) Fuel cards for Mr Keates (one of them also for Ms Coury) were in the sum of £10,556.71. Mr Keates’ defence does not set out a justification for his receipt of fuel cards, and it is clear from the terms of his contract of employment that he had no entitlement to that additional benefit.
5) The fuel card for Mr David Flatman was in the sum of £12,255.54. The evidence establishes almost nothing concerning this man. In his disciplinary hearing Mr Keates said that he had approved a fuel card for Mr Flatman because he was “doing introductions for us”. Zenith contends that there are no documents to support this benefit or to establish any link between the costs incurred on the fuel cards and the value of any services provided. However, Zenith’s complete failure to provide meaningful evidence regarding this part of the case leaves me doubtful as to what to make of it. I do not find this allegation proved.
6) The total sum of what I find to be illegitimate expenditure on fuel cards is £14,779.25. I find that Mr Keates knew and approved this illegitimate expenditure, even if the details were dealt with by Mr Newnes, and that it constituted a dishonest breach of his contractual and fiduciary duties to Zenith. Therefore he is and remains liable for this amount.
7) Zenith claims to recover from Mr Claridge £3,295.19, being the benefit he received. The claim appears in a somewhat muted form in paragraphs 88 and 89 of the (very convoluted) re-amended particulars of claim, though it is not carried over into paragraph 98 where it might have been expected. It also appears in the schedule of loss and damage dated 12 March 2021, though without specification of its legal basis. In my judgment, the facts set out in paragraphs 88 and 89 of the re-amended particulars of claim (namely, receipt of benefits to which there was no entitlement) and the averment that Mr Claridge is liable to account for and to repay sums received is sufficient to ground a claim in unjust enrichment. I hold Mr Claridge liable to pay £3,295.19 on that basis.
8) Grounds of liability are established against Miss Horsley in respect of her sister’s fuel card. I am not persuaded that any proper basis of liability has been established in respect of the fuel cards of Mr Keates and Mr Claridge. Miss Horsley’s liability falls within the judgment that has already been entered against her. (I remark at this point that I am doubtful how causes of action in respect of which a judgment has been entered can be pursued against the judgment debtor in any event. However, on the facts of this case it is unnecessary to explore questions concerning the merger of a cause of action in the judgment.)
Mobile telephone for Mr Claridge
Company cars used by Mr Read
Company cars used by Mr Keates and others
1) He and, especially, Ms Coury used a Range Rover HSE that was leased by Zenith from July 2015 for 36 months at a cost of £36,788.
2) He or his former girlfriend, Miss Ross, used a BMW motor car that was leased by Zenith from 22 March 2017 to 6 June 2018 at a total cost of £12,693.60 plus a further £2,092.90 for repairs.
3) He used his company credit cards to make two payments, each of £3,000, on 20 January 2018 in respect of a Range Rover HSE that was leased personally by him. One of these payments was on a Uniserve UK credit card; the other was on a Kemball credit card.
1) This was a trip to a Six Nations rugby match. The cost to Zenith was £7,430, which covered tickets for the match, travel on Eurostar, and accommodation and hospitality in Paris. Mr Stone’s evidence is that this was not a legitimate business expense and would have required Mr Liddell’s authorisation.
2) Mr Keates’ defence (paragraph 57) does not specifically aver that this was a business expense. The case there set out is, rather, that the cost of the trip was charged to his loan account pursuant to Mr Newnes’ advice. This is not supported by the documents that have been produced in evidence. However, in his Part 18 further information Mr Keates maintained that this trip (like all other trips save for the next one to be mentioned) was known of and approved by “the board”.
3) Despite Mr Keates’ unsatisfactory explanation, I am not satisfied that the charge of the trip to Zenith was a dishonest action on Mr Keates’ account. Zenith gives the impression of having hunted assiduously for things to lay at Mr Keates’ door. This is understandable. However, as a result of Mr Keates’ intervening bankruptcy Zenith has simply stuck an allegation of dishonesty onto every single allegation made against him. In many cases I think that this is reasonable. But when it comes to hospitality some further particulars should properly have been provided to show that this was not, after all, an honest but inappropriate use of corporate hospitality.
1) The case is different in respect of this trip, which was taken by Miss Ross (Mr Keates’ former girlfriend) and her son and was paid for by Zenith at a cost of £2,850.
2) Mr Keates’ pleaded case (defence, paragraph 57) is that “the trip to LA was arranged before the acquisition by Uniserve UK and at a time when the first defendant was the sole shareholder of Zenith.” I reject that case. An email exchange on 4 March 2016 shows that Mr Keates was making the booking at that time. In his Part 18 further information Mr Keates acknowledged that the trip was a personal one but said that he had provided receipts to Mr Newnes, “who allocated them to business or personal expenses and sought repayments from the first defendant accordingly as therein set out.” In fact, as I find, the money was not repaid.
3) The matter goes further, however. The email sent by Mr Keates to his contact at the travel company reads, so far as material:
“It would be good if you could act for me on booking hotels in LA as I can then loose this through the company as marketing. (Not worried about VAT).
Hayley will be travelling with her son to LA so hence the need for twin rooms. Would it possible for you to give her a call today and discuss hotels. She has been looking and has some options. You can then invoice me!! x.”
(The response informed Mr Keates that the cost would be £2,850.)
4) I find that this was a deliberate and dishonest misuse of company moneys to pay for a trip for a personal acquaintance. Mr Keates was thus in dishonest breach of contract and of his fiduciary duties to Zenith and is liable to pay £2,850.
1) This is the trip to the Hong Kong Rugby Sevens, previously mentioned. The total cost paid by Zenith was £49,320. Zenith says that the only person who reimbursed it for the cost of his attendance on the trip was Mr Davies. It seeks to recover the full amount of its expenditure from Mr Keates. It also seeks to recover from Mr Read and Mr Claridge the costs of their respective attendances (£5,740 each).
2) Mr Keates’ defence (paragraph 58) states that the trip was attended by other directors, including Mr Newnes, Mr Southern and Mr Read, and that Mr Newnes collected payments from those who attended; these payments were either by bank transfer or by cash.
3) Mr Read’s defence (paragraph 4.2) states: that he went on the Hong Kong trip on the understanding that this was by way of a reward to employees within the business; that he had no reason to doubt that Mr Keates had the authority to organise the trip and invite him; that while in Hong Kong he and others met Mr Liddell and discussed business with him; and that his own time in Hong Kong was interrupted by work commitments and was cut short by a need to return home early to attend to business matters. Mr Read gave written and oral evidence to the same effect.
4) Mr Claridge’s defence asserts that he paid for his attendance on the trip.
5) I think it probable that employees of Zenith, including Mr Southern (against whom no claim is made) and Mr Read, were led to believe that the trip was a legitimate benefit being given by way of a “thank you”. There is no particular reason why they ought to have thought this suspicious or improper. I reject the claim against Mr Read for reimbursement on the ground of knowing receipt. Similarly I reject the claim in conspiracy.
6) I do not accept the claim by Mr Claridge and Mr Keates that the former paid for his attendance on the trip. Mr Keates has said that the payment was in cash. Mr Claridge says that it was by cheque; however, the cheque he relies does not seem plausibly to be related to payment for the trip. As I have observed in a different connection, if (as he claims) Mr Claridge was entitled to regular payments from Zenith for financial assistance, it is unlikely that he would have paid further money over to cover the cost of the trip. In the circumstances, I consider that the trip was an improper benefit conferred by Mr Keates on his friend at the expense of Zenith. I also consider that Mr Claridge is liable to pay for his attendance on the trip on the basis of knowing receipt: as he claims to have known that payment was required, he is not in a position to deny that it was improper of him not to pay or that he did not know that Mr Keates was not entitled to confer this benefit on him.
7) I accept the evidence of Mr Liddell that Mr Keates told him that those attending the trip had paid their own way. I therefore find that he knew that he was not entitled to confer this benefit and that he acted dishonestly in doing so, in breach of his fiduciary duties. Zenith accepts that Mr Davies paid for his share of the cost, but it appears that no one else did. Mr Southern confirmed that he had not paid personally. I hold, therefore, that Mr Keates is personally liable to reimburse Zenith for the costs of the trip, save for the costs attributable to Mr Davies.
1) This head of claim relates to Mr Keates’ attendance, along with several other people, at a rugby match at Twickenham on 7 April 2018. The cost of this event to Zenith was £2,700. Zenith alleges that Mr Claridge was one of those who attended at its expense.
2) In his defence, Mr Keates states (paragraph 59) that attendance at the event was to have been a marketing/network event for Zenith staff and suppliers, but that this did not go ahead because of Mr Newnes’ death; instead, the tickets that had already been purchased were used by others, from whom he would have obtained payment if he had not been suspended three days later. Mr Claridge, for this part, denies that he attended.
3) I do not find it proved that Mr Claridge attended this event. Mr Liddell’s evidence that he did so (“I believe”) is vague and the source of his belief is not stated.
4) However, I do not accept Mr Keates’ defence. Mr Liddell’s evidence was that the Uniserve Group had a box at Twickenham for the event, by reason of its sponsorship of Bath Rugby Football Club, but that Mr Keates turned down an offer to attend in the company box but instead arranged a box for himself and friends at Zenith’s expense and told Mr Liddell that he would be attending in his personal capacity and at his own expense. I accept Mr Liddell’s evidence. I find that Mr Keates was entertaining himself and others at Zenith’s expense, without any legitimate ground for doing so, and that he is liable to reimburse Zenith for his dishonest breach of fiduciary duty in respect of the misapplication of Zenith’s assets.
Main Claim: Strand 3: Misappropriation of assets by Mr Keates alone
Mr Keates’ expenses
Staff advances account
Damages for wasted management time
· Mr Liddell: £250,000 (1,000 hours at £250 per hour)
· Mr Stone: £24,000 (200 hours at £120 per hour)
· Mr Southern: £3,600 (80 hours at £45 per hour)
· Mr Boardman: £1,500 (30 hours at £50 per hour)
· Ms Watkins: £1,500 (60 hours at £25 per hour)
· Ms Makos: £900 (60 hours at £15 per hour).
‘I consider that the authorities establish the following propositions. (a) The fact and, if so, the extent of the diversion of staff time have to be properly established and, if in that regard evidence which it would have been reasonable for the claimant to adduce is not adduced, he is at risk of a finding that they have not been established. (b) The claimant also has to establish that the diversion caused significant disruption to its business. (c) Even though it may well be that strictly the claim should be cast in terms of a loss of revenue attributable to the diversion of staff time, nevertheless in the ordinary case, and unless the defendant can establish the contrary, it is reasonable for the court to infer from the disruption that, had their time not been thus diverted, staff would have applied to activities which would, directly or indirectly, have generated revenue for the claimant in an amount at least equal to the costs of employing them during that time.’
1) In respect of each employee or director, the hourly rates claimed are estimates without any documentary support. I do not doubt Mr Stone’s honesty and would not disregard his estimates. But I have to treat them with caution.
2) The figures for the total time spent by each employee or director are not supported by any time-sheets, diaries or other documentation. They are by their nature likely to be impressionistic estimates.
3) There is no breakdown of the time spent by the named individuals. This results in at least two problems. First, there is no way of telling how much of the time spent, or what proportion of the time spent, related to particular claims: for example, how much of it related to the Biosol Claim, how much to the conspiracy part of the Main Claim, and how much to Mr Keates’ personal misconduct. (Mr Boardman is a partial exception to this problem, as he appears to have been solely concerned with the Biosol Claim.) Second, there is no way of telling how much of the time spent by a given individual, or what proportion of that time, related to the pursuit of the litigation itself. As to this latter point, the evidence mentioned above shows that at least a large part of the time relied on by Mr Liddell, Mr Stone, Mr Southern and Mr Boardman related specifically to the pursuit of the litigation rather than to addressing business issues resulting from the matters complained of.
4) The only direct evidence of significant disruption to the Uniserve business relates to Mr Liddell’s time. It may perhaps be inferred that substantial diversion of the activities of senior managers and directors would also be disruptive to the business; the inference is less compelling in the case of more junior staff.
5) The Uniserve Group is a very large and diverse business. Zenith, to which most of these proceedings relate, is only one part of it. Mr Liddell himself refers to the fact that diversion of his time is liable to affect the Group generally, not just the claimants.
An order for account
1) On the Biosol Claim, there will be judgment for Zenith for the full amount claimed, subject only to the deduction of the charges in respect of the low loader trailer.
2) On the Read Claim, there will be judgment for Zenith against Mr Read for £34,912.42.
3) On the Main Claim:
· There will be money judgments against Mr Keates for his dishonest breaches of contract and of fiduciary duty in respect of the various instances of the misuse and misappropriation of the claimants’ moneys and assets as detailed above.
· There will be money judgments against Mr Claridge in respect of his receipt of money payments (the DC Driving Services matter) and his receipt of benefits in respect of the shipping container, fuel cards and a mobile telephone.
· There will be no award of common law damages for conspiracy or equitable compensation for dishonest assistance against Mr Read, Mr Bundock, Biosol, Spring Logistics or Spring Renewables. If the request for an order for an account in respect of breach of fiduciary duty or dishonest assistance is pursued, I shall consider what is said.
· There will be a nominal but no substantial award of damages against Mr Read for breach of his contract with Uniserve UK.
· There will be an award of equitable compensation in favour of Zenith against Spring Renewables for the knowing receipt of diesel and IT services.
· There will be no further judgment against Miss Horsley.