BUSINESS AND PROPERTY COURT
IN THE MATTER OF BANKSIDE HOTELS LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
IN THE MATTER OF PEDERSEN (THAMESIDE) LIMITED CR-2013-003500 (no.1806/2013)
AND IN THE MATTER OF THE COMPANIES ACT 2006
IN THE MATTER OF G & G PROPERTIES LIMITED CR-2013-003502 (No. 1807/2013)
AND IN THE MATTER OF THE COMPANIES ACT 2006
7 Rolls Building,
Fetter Lane, London, EC4A 1NL
B e f o r e :
| NICHOLAS JOHN CLWYD GRIFFITH
|- and -
|(1) MAURICE SALEH GOURGEY
(2) TRUCHOT TRUSTEES LIMITED
(3) ROBERT LEWIS and NICHOLAS EDWARD REED (as Joint Trustees of the estate of Robert John Hodge)
(4) BANKSIDE HOTELS LIMITED
AND B E T W E E N
|MEWSLADE HOLDINGS LIMITED
|- and -
|(1) MAURICE SALEH GOURGEY
(2) FRANCOIS NAIRAC
(3) PEDERSEN (THAMESIDE) LIMITED
(4) BRENTFORD HOTELS LIMITED
AND B E T W E E N
|NICHOLAS JOHN CLWYD GRIFFITH
|- and -
|(1) NEIL JOSEPH GOURGEY
(2) CHARLES DUNCAN GOURGEY
(3) ROBERT LEWIS and NICHOLAS EDWARD REED
(4) G & G PROPERTIES LIMITED (as Joint Trustees of the estate of Robert Hodge)
Andrew Thompson QC (instructed by Simmons & Simmons) for the Second Respondant
Daniel Lightman QC and Adil Mohamedbhai (Instructed by Olephant Solicitors) for Maurice Salek Gourgey, Neil Gourgey, Charles Gourgey, Brentford Hotels Limited and Jane Nairac
Crown Copyright ©
Sir Nicholas Warren:
a. The judgment of Simon Monty QC sitting as a deputy High Court Judge dated 13 November 2014;
b. The judgment of Simon J dated 23 April 2015 ("the Simon judgment");
c. The judgment of Mark Anderson QC sitting as a deputy High Court Judge dated 10 November 2017 ("the Anderson judgment");
d. The judgment of HHJ Judge Pelling QC (sitting as a High Court Judge) dated 12 December 2017 ("the Pelling judgment) reported at Re Pedersen (Thameside) Ltd  EWHC (Ch) 3406,  BCC 58.
"There be a further hearing to consider the further steps necessary to dispose of the Petitions in the light of this order, to be listed before a Judge of the High Court with a time estimate of two days. 28 days prior to that hearing the parties shall file a list of issues to be determined at that hearing."
An appeal from Simon J's decision was unsuccessful.
a. An application by Truchot to strike out certain references to it in the Bankside petition and the current version of the Points of Claim ("the PoC") on the grounds that neither of them discloses any reasonable grounds for bringing the claim to the relief sought (or any relief) against it. That application has been met by a draft of amendments ("the Bankside draft amendments") to the Bankside petition and the PoC for which permission is likely to be sought if I rule against Mr Griffith in relation to them.
b. An application by Neil and Charles in the G&G petition and the PoC to strike out certain references to them on the grounds that neither of them discloses any reasonable grounds for bringing the claim to the relief sought (or any relief) against either of them, alternatively an order that Mr Griffith apply within 28 days of the hearing for permission to amend them. Proposed amendments to the G&G petition have been produced since the hearing, which I will consider when this judgment is handed down.
c. The issue of the extent to which the petitioners need to adduce any evidence to establish unfair prejudice sufficient to found relief under section 994 against the respondents whose Points of Defence have been struck out.
d. An application by Mewslade to amend the Pedersen petition. At the hearing, it became apparent that Mr Griffith wished to make amendments going beyond those specified in the application. I will deal with this application too when this judgment is handed down.
e. An application by Mr Griffith that the Bankside petition should be stood over as against Truchot pending the outcome of that petition as against Mr Gourgey and, assuming that Mr Gourgey is ordered to purchase Mr Griffith's shares, pending satisfaction of such an order, the purpose being to allow Mr Griffith to proceed with the Bankside petition against Truchot if Mr Gourgey proves unable to meet the purchase price.
The strike-out applications
"This is of particular importance to proceedings under [section 994]. The breadth of the jurisdiction means that the petition plays, in my judgment, a vital role in defining the basis of the petitioner's case...... the grounds on which the petitioner says the affairs of the company have been conducted in an unfairly prejudicial manner should be fairly set out in the petition. Only in this way will the respondents be able properly to meet the case and the court be able to keep the proceedings within manageable bounds."
"where a claim under s.994 is brought it is necessary for the petitioner both to plead and prove that the respondent was concerned either directly or indirectly in conducting the affairs of the company in an unfairly prejudicial manner. In considering a strike-out application, as when trying a s.994 petition, it is necessary to focus on the allegations that have been pleaded see Re Fildes Brothers Ltd  1 WLR 592"
" .. The petitioner is confined to the heads of complaint set forth in his petition. His evidence may no doubt amplify and explain these complaints, but I do not think he can rely upon any new head not fairly covered by his petition
...In cases where there are no normal pleadings, it seems to me important that those who oppose winding up should know, in time to prepare their case, what are the allegations that they have to meet. If after a petition has been presented the petitioner wished to broaden his attack let him first amend his petition."
"It was suggested in the course of argument that it was really the evidence and not the allegations contained in the petition which was of importance in this matter. I entirely dissent from that proposition. It seems to me that it would be wrong for the court to travel outside the allegations in the petition, particularly in a case of this sort where the petition is based on the proposition that the respondents to it have been guilty of some oppression or some lack of probity."
"relevant conduct is carried out by a person himself or by his agent, there is no difficulty of attribution of responsibility for that conduct for the purposes of section 994 since the ordinary and strict standards of attribution or responsibility applicable under the general law will have been satisfied".
"is so connected to the unfairly prejudicial conduct in question that it would be just, in the context of the statutory regime contained in sections 994 to 996, to grant a remedy against that [respondent] in relation to that conduct. The standard of justice to be applied reflects the requirement of fair commercial dealing inherent in the statutory regime. This is to state the test at a high level of abstraction. In practice, everything will depend upon the facts of a particular case and the court's assessment whether what was done involved unfairness in which the relevant [respondent] was sufficiently implicated to warrant relief being granted against him."
"However, the relief sought must be proportionate to the unfairly prejudicial conduct of which the petitioner complains It is for the petitioner to specify the relief that he, she or it seeks and in my judgment in an appropriate case a respondent is entitled to seek to strike out the relief claimed as being excessive, providing that the respondent can show that the likelihood of a trial judge exercising his discretion to grant the relief claimed is so remote that the case can be described as perfectly hopeless."
" the fact that a petitioner advocates one course, does not make it fair or appropriate. One aspect of fairness that must be borne in mind is that the remedy must be proportionate to the unfair prejudice found. In the case of relatively modest unfair prejudice, a buyout order may be disproportionate " .
" In my judgment it is the invariable practice of the court to require late amendments to be completely and fully particularised in every respect when made, leaving no lacuna and no uncertainty of allegation."
This is of particular importance in unfair prejudice proceedings in relation to which the observations of David Richards J in Re Coroin referred to at paragraphs 15 and 16 above are equally applicable to amendments as to original pleadings.
The Truchot strike-out application
a. In paragraph 3, the ownership of shares in Bankside is set out ("At all times the shares have been held as follows:") with 50 shares being held by Truchot. Truchot is described as the trustee of "the M.S Gourgey Settlement, a trust benefiting the family of" Mr Gourgey; and
b. In paragraph (1) of the prayer for relief an order is sought that "the First and/or Second Respondents [ie Mr Gourgey and Truchot] be ordered to purchase [Mr Griffith's] shares in Bankside at a price to be determined by the Court" on a number of bases set out.
"The Company represents a collaboration in 1996 between [Mr Griffith], Mr Hodge and Mr Gourgey. The Company was formed on the basis of relationships of mutual trust and confidence between Mr Hodge and Mr Gourgey and between Mr Hodge and [Mr Griffith] on the understanding ("the Understanding") that all profits, however, taken should, be taken, and all risks were, subject to contrary agreement, to be taken in proportion to the parties' shareholding, i.e. [Mr Griffith] 25%, Mr Hodge 25% and Mr Gourgey 50%."
a. No allegation is made that Truchot has been in any way party to or had any connection with, or had any responsibility for, any allegedly unfairly prejudicial conduct.
b. If the unfairly prejudicial conduct is made out, then Truchot as a 50% shareholder was as much a victim of that conduct as Mr Griffith and yet the relief sought if granted would in effect require Truchot to compensate Mr Griffith.
c. Mr Griffith could not pursue a derivative claim against Truchot on behalf of Bankside and yet, if granted, the relief sought would make Truchot indirectly liable for the wrongdoing of others.
"5. Mr Gourgey, Mr Griffith and Mr Hodge ("the Three Shareholders") (or in some cases their families and/or family trusts associated with them) were members of or beneficially interested in large numbers of companies, including various companies referred to in the Petitions. In the majority of cases, the interest of Mr Gourgey was equal to that of the combined interests of Mr Hodge and Mr Griffith. This was the case in relation to the following companies:
5.1 Bankside, ........"
"To the extent that any conduct falling within that course of action would otherwise have constituted a breach of Mr Gourgey's fiduciary duties, it was authorised and/or ratified by the Three Shareholders, who between them were or represented all the members of the relevant companies...."
a. As to paragraph 5, I do not agree for a moment that it accepts, even implicitly, Mr Griffith's case. "The Three Shareholders" is a perfectly apposite description of the three men concerned even if they chose to put their interests (that is to say the percentage shareholdings in Bankside allocated to them) into a family trust. I do not regard the definition as in the least telling about the relationship between Mr Gourgey and Truchot. Nor is the description of a "family trust associated with [him]" in the least telling. To say that it constituted an admission by Mr Gourgey of a relationship between him and Truchot is no more than a trite statement true of any settlor and the trustees of the settlement which he creates.
b. As to paragraph 11, the pleading makes perfectly good sense. The Understanding was that each individual would take the agreed percentage of the shares and, as I have said, it is inconceivable that the Understanding was breached by Mr Gourgey placing the shares in Bankside in a family settlement. That does not entail that for any purpose, even for the purpose of the Understanding, that the shares are to be treated as Mr Gourgey's. Quite the reverse: the shares are indeed those of Truchot and not Mr Gourgey, but the Understanding is to be understood as permitting the shares to be placed in settlement. Surely the concern of each man was that he would be entitled to his share, not that others should be restricted in how they dealt with their entitlement.
c. As to paragraphs 13 to 31 (other than 31.2), I find it difficult to understand the point being made. From Mr Gourgey's perspective, what is important in a claim by Mr Griffith is that Mr Griffith himself consented and cannot therefore be heard to complain. The pleading does not address a complaint by Truchot were one to be made, but that is beside the point.
d. As to paragraph 31.2, it may or may not be that Mr Gourgey did consider that he represented Truchot. In relation to instructing lawyers purportedly on behalf of Truchot in the litigation the Court has held that he had no such authority.
The proposed amendments
a. Truchot is a Guernsey-registered professional "trustees" company;
b. Mr Gourgey settled certain assets in 1988, the beneficiaries being himself, his wife and his family;
c. The settlement contains a provision (fairly standard in my experience) absolving the trustees from interference in the management or conduct of the business of any company, and giving them liberty to leave the conduct of the business to the directors provided they have no notice of any act of dishonesty or misappropriation of monies. I note that it is not pleaded in the current PoC or by the suggested amendments that Truchot had actual notice of any of the alleged unfairly prejudicial conduct and Mr Parker has not suggested that it did;
d. Truchot was appointed trustee in May 1990; and
e. Mr Gourgey and his wife were excluded as beneficiaries on 22 December 2004 and new trusts were appointed for the benefit of other family members.
"permitted Mr Gourgey to conduct the affairs of [Bankside] entirely as he saw fit, including in a manner which is unfairly prejudicial to the interests of [Mr Griffith] as pleaded above."
" Truchot has permitted Mr Gourgey to act as its agent in connection with the exercise of its rights as shareholder in [Bankside] including by (a) granting him and/or his wife retrospective authority to act as its agent on its behalf at [Banksides] annual general meetings on [certain specified dates] (b) granting him prospective authority to do so at [Bankside's] annual general meeting held on 23 August 2006, and (c) failing to take any steps to procure the holding of annual general meeting in subsequent years."
a. Truchot has permitted (and continues to permit) Mr Gourgey to conduct the affairs of Bankside in a manner unfairly prejudicial to the interests of Mr Gourgey;
b. Truchot has permitted (and continues to permit) the affairs of Bankside to be conducted by a man, Mr Gourgey, who is unfit to be a director of it;
c. Truchot has permitted (and continues to permit) Mr Gourgey to act as its agent in connection with the exercise of its rights as a shareholder in Bankside;
d. Truchot has not at any time sought to interfere with Mr Gourgey's management of the affairs of Bankside notwithstanding that it has been on notice since March 2016 of Mr Griffith's allegation;
e. Truchot has failed to prevent Mr Gourgey from purporting to act as its agent in circumstances where he lacked authority to do so; and
f. Mr Griffith's interest in the proper operation of article 7 of Bankside's articles has been unfairly prejudiced.
a. Other than having an ability to block an ordinary resolution, Truchot was not really in any different position from Mr Griffith himself. It would be obviously unjust for one minority shareholder to claim compensation for wrongdoing by directors against another minority shareholder who was in no better position to take steps to prevent that wrongdoing. Truchot is no more culpable in relation to the alleged wrongdoing than Mr Griffith himself. On the basis of the proposed allegations, whatever criticism Mr Griffith might make against Truchot could just as well be made against Mr Griffith himself. I agree with that once it is recognised that the general non-involvement allegation does not extend to an allegation of knowledge or constructive knowledge of the unfairly prejudicial conduct complained of. I am not saying that Mr Griffith actually has no case against Truchot to establish that it had the knowledge or constructive knowledge necessary. His problem is that the proposed amendments do not plead such knowledge or the facts relied on in support of such an allegation.
b. Mr Thompson points out, entirely correctly, that it is not alleged that Mr Griffith ever demanded any action by Truchot or even raised with Truchot any concern about the affairs of Bankside. And so it is not alleged that Truchot failed to take steps (insofar as it had any power to do so) to control the affairs of Bankside to prevent the alleged wrongdoing in response to such a request. This is not, therefore, a case where, for example, a petitioning minority shareholder has demanded action from a majority shareholder with the power to control the affairs of the company to prevent wrongdoing by directors and the majority shareholder has refused to take any action, thus facilitating the wrongdoing.
The G&G strike-out application
"83. The affairs of [G&G] are being conducted by a man, Mr Gourgey, who is unfit to be a director thereof as evidenced by his conduct of [companies referred to earlier] as set out above.
84. Whilst unlawfully appropriating to himself or his companies the assets of [G&G] [and other companies], Mr Gourgey is withholding any benefit from [Mr Griffith] and seeking repayment of such benefit as he [presumably a reference to Mr Griffith] has previously derived as a result of his shareholding."
a. The basis under (a) is the Court "has determined the amount that [Neil] and/or [Charles] should pay to G&G as compensation for his/their breaches of duty to [G&G] pleaded above".
b. The basis under (d) is after "taking account of and making due allowance for the unfairly prejudicial conduct of [G&G's] affairs about which complaint is made herein, and in particular the same in (a) above".
a. The first is found at paragraph 19 where it is alleged that Neil and Charles as well as Mr Gourgey owed fiduciary duties to each company of which he was a director. It may be that in some cases in other petitions, such duties on the part of Neil and Charles were alleged; but none was alleged in the G&G petition and an allegation that duties were owed should not have been pleaded in relation to G&G without amendment of the G&G petition.
b. The second is found at paragraph 36 which provides as follows:
"In breach of their fiduciary duties as directors and contrary to the Understanding, Mr Gourgey has, without the approval of Mr Griffith, and with the support of his sons, caused the following monies to paid over or lent by G&G"
and there follows the same list of payments as is found in paragraph 32 of the G&G petition.
a. fail to explain what is meant by the expression "with the support of his sons";
b. fails to specify how, with respect to any of the payments relied on by Mr Griffith either (i) Neil or (ii) Charles is alleged to have given "support" to Mr Gourgey;
c. fail to identify which fiduciary duties either (i) Neil or (ii) Charles is alleged to have breached in relation to any of those payments; and
d. fail to explain the relevance of the alleged Understanding to the relief sought against Neil and Charles in the G&G Petition or the allegation that the payments are alleged to have been contrary to its terms, in circumstances where:
i. neither Neil nor Charles is alleged to have been a party to the alleged Understanding or to be or at any time to have been bound by it; and
ii. Mr Gourgey is not, and has never been, a shareholder in G&G, and is not a respondent to the G&G Petition.
The extent of evidence required
a. Section 994 provides that a member of a company may apply to the court for an order on the ground that the company's affairs are being or have been conducted in an unfairly prejudicial manner.
b. Section 996 provides for the remedies available: if the Court is satisfied that a petition is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
116. There are therefore two aspects of the process. First, the court has to be satisfied that there has been unfair prejudice. If it is, then it has wide powers to grant relief in respect of the unfair prejudice established. Procedurally, a petitioner will set out in his petition and Points of Claim the facts and matters alleged to amount to unfairly prejudicial conduct and will also set out the relief he seeks. The Court, even if it is satisfied that there is such conduct, is not circumscribed in the relief, if any, which it decides to grant by the petitioner's claimed relief. There is, as Mr Lightman correctly submits, no entitlement to relief, even if unfairly prejudicial conduct is established. The appropriate relief will depend on all the circumstances of the case. As Patten J said, giving the judgment of the Court of Appeal in Grace v Biagioli  EWCA Civ 1222,  2 BCLC 70 at :
"Once unfair prejudice is established, the court is given a wide discretion as to the relief which should be granted. Although [section 994] speaks in terms of relief being granted 'in respect of the matters complained of', the court has to look at all the relevant circumstances in deciding what kind of order it is fair to make. . the court must assess the appropriateness of any particular remedy as at the date of the hearing and not at the date of presentation of the petition; and may even take into account conduct which has occurred between those two dates. The court is entitled to look at the reality and practicalities of the overall situation, past, present and future."
The parties' submissions
a. The defence having been struck out, all of the allegations contained in the PoC are to be treated as admitted. There is no need, therefore, for evidence to support those allegations.
b. Subject to the Court being satisfied that the facts pleaded in the PoC amount to unfairly prejudicial conduct (as to which Mr Parker submits the answer are is obviously that they do), the Court can move on to consider the appropriate relief under section 996. There is no need for a trial to establish the facts pleaded in the PoC. Whether those facts amount to unfairly prejudicial conduct is a matter of argument which can be dealt with as easily on a Part 23 application as at a trial.
c. The case falls within Rule 3.5(5) since it is clear that there is unfairly prejudicial conduct and all that is necessary now is to determine the relief. I would add that, even if the case does not fall strictly within Rule 3.5(5), the applications which the petitioners have made could nonetheless be seen as falling within Part 23. He points out that whether a claimant can simply make a request for judgment (where judgment is obtained automatically under paragraphs (2) to (4)) or has to apply for judgment (where judgment is obtained pursuant to paragraph (5) and requires an application under Part 23) turns on the remedy that is sought. It would, he submits, be irrational if the Court's involvement under a Part 23 application went to anything other than a consideration of the remedy. There can be no rational basis for requiring a claimant who wants money from the defendant by way of a buy-out order to have to prove his case whilst a claimant who simply wants money (quite possibly in a far larger amount) does not have to do so.
d. Mr Parker accepts that the respondents are entitled to appear on any relief hearing and to make submissions about (i) whether the pleaded facts establish unfairly prejudicial conduct and (ii) the relief which should be granted. He does not accept, as I understand his case, that the respondents whose defences have been struck out would be entitled to adduce any evidence which might be relevant to the appropriate relief.
a. Rule 3.5(5) is inconsistent with the statutory scheme. The Court cannot be satisfied that there are unfair prejudice without either an express admission of the facts relied on by a petitioner or evidence on which the Court can decide the facts.
b. Rule 16.5 does not lead to a different conclusion. Rules of Court which merely treat a person as admitting an allegation are insufficient, for the purposes of the statutory scheme, of being capable of satisfying the Court that the affairs of the company have been conducted in an unfairly prejudicial manner.
c. A trial is necessary. At a trial, evidence must be adduced. The PoC, even if supported by an appropriate statement of truth, cannot be relied on since Rule 32.6 only applies at hearings other than a trial.
d. The issue of unfair prejudice cannot be hived off from the issue of the relief sought. There is a single set of proceedings with a single outcome, namely, if a petitioner is successful, the grant of such relief as the Court sees fit. The relief is discretionary: a petitioner has no right or entitlement to particular relief or indeed to any relief at all. Rules 3.5(2) for proceeds on the basis that there is an entitlement to relief . The same should apply to Rule 3.5(5)
" .. Default judgment is not, in any circumstances, a judgment on the merits"
" the purpose of the requirement for an application is either to enable the court to tailor the precise relief so that it is appropriate to the cause of action asserted, or otherwise to scrutinise the application in circumstances calling for more than a purely administrative response. It is in those respects that it must appear to the court either that the applicant is entitled to the default judgment sought, or to some lesser or different default judgment."
" ..This relief, or at any rate most of it, is not obtainable by simply filing a request for judgment. It is relief which requires the court to be satisfied, exercising its judicial function, that it is appropriate to grant it.."
" .What was required in order to determine whether Mr Thevarajah was entitled to the relief claimed was a trial. Although we have no transcript of the hearing before Hildyard J, it appears that that was also his view. According to a note cited by the Respondents' counsel in their skeleton argument placed before the Deputy Judge, Hildyard J observed on that occasion that:
"You need to prove your right with regards to anything that goes to the substance of the claim, you cannot seek judgment in default. That would not work.""
" ..Save that CPR Pt 23 is concerned with the making of applications, it contains nothing which would justify the court directing specific performance of an agreement without enquiring into the question whether the claimant thereto is entitled to such relief. Mr Thevarajah was not "entitled" to any of this relief simply because the Defendants had had their defences struck out and been debarred from defending the claims brought against them."
" ..It is true that rule 3.5(5) mandates an application under Part 23 if a party wishes to "obtain" judgment under this rule in a case to which paragraph (2) does not apply. But a judgment "under this rule" is a judgment without trial. Rightly, it was here recognised albeit it not perhaps consistently that the Claimant had to prove his case and his entitlement to the relief sought." [this was said in a case, it should be remembered, where the defence had been struck out.]
"In the context of s.994 petitions the court has to be satisfied that the case is established, there is, for example, no room for judgments by consent or judgments in default of defence, but that does not prevent the court from debarring a respondent from defending so that, in that event, the position is that it is for the petitioner to make out his or her case, but without opposition."
" it follows from section 7 of the 1988 Act that the jurisdiction of the court to make an order for possession is limited. If the court is not satisfied that the relevant grounds are established, it has no jurisdiction to make the order. The court is under a duty to investigate whether the grounds are in fact established independently of whether either party puts that question in issue."
" . The crucial point is that, in order for the court to have jurisdiction in a case where there is a consent order, the relevant admission, whether express or implied, must be clearly shown. If the true explanation for the consent order may simply be that there was a compromise between the parties, it may well be that it will not be possible to imply the relevant admission...."
And so in the case of a section 994 petition, I do not doubt that a respondent is able expressly to admit a fact so that the Court may not need to require that fact to be proved by evidence but can take the fact as established when considering whether it is satisfied that there is unfairly prejudicial conduct. I say "may" rather than "will" since there may be circumstances where another person against whom relief is sought may not agree with the admission and requires the fact to be proved. In my view, the Court can only reach one answer on the question whether it is satisfied that there had been unfairly prejudicial conduct. It cannot reach one answer vis a vis one respondent and a different answer vis a vis another respondent. Accordingly, if the admission is shown, at trial, to be incorrect, the Court must act on the facts as it has found them, not as they have been admitted by one respondent. But if all the respondents admit a particular fact, then there is no reason for the Court to receive evidence about that fact: the admission should prima facie be enough to satisfy the Court of the fact and if there is nothing to raise a doubt the Court need go no further.
Discussion and conclusions
The application to stay the Bankside petition as against Truchot