Mark Glenn Hawkes v Gordon Adrian Cook

1. The Claimant was the sole director and shareholder of a company originally called Michael Green Plant Limited (“ the Company ”), which was in the business of demolition and clearance works (“ the Business ”). The Company owned assets comprising (i) machinery, which was used in the Business, and (ii) land, which was not used in the Business.

2. In 2004, the Company was in serious financial difficulties, and the Claimant was introduced to the Defendant, who had experience in helping distressed and insolvent companies.

3. The Defendant advised upon a rescue plan whereby in summary: a. the Company would be liquidated, b. the Company’s machinery and land would be sold to a finance company, which would then lease back the machinery and land to separate newcos incorporated by the Claimant, and in part to enable him to continue the Business through the newco leasing back the machinery; and c. the proceeds of sale of the machinery and land, after deduction of fees and disbursements, would then be available to the creditors of the Company.

4. Following the implementation of the rescue plan and sales of machinery/land generating proceeds of £222,693.25, the funds ultimately available to HMRC as preferential creditor of the Company was the sum of £11,223 and in part settlement of a debt of £311,609.22.

5. The Claimant, suing as the assignee of the Company, brings alternative equitable claims against the Defendant for: a. fraudulent misrepresentations, which induced the Claimant to appoint the Defendant as a fiduciary agent/trustee of the Company and which misrepresentations the Defendant failed to correct following his appointment and in breach of his fiduciary duty; or b. fraudulent breaches of trust by paying away Company funds under his control/direction for the financial benefit of him and his associates at the expense of the Company.

6. The Defendant denies that he was ever appointed as a fiduciary agent/trustee of the Company. He also strenuously denies acting dishonestly or fraudulently at any time. Any payments he directed out of Company funds were legitimate and authorised by the Company’s insolvency practitioner, who appointed him as trusted agent. The Claimant is not out of pocket since the rescue plan was a success and enabled the Claimant to continue the Business through the newco. Indeed, it was the Claimant who was in breach of his fiduciary duty as a director of the Company by not repaying his director’s loan debt and/or diverting the Company’s book debt to the newco for nil consideration. Agreed or not seriously disputed background

7. The Company owned freehold property situated at Springfield farm, Glendon Road, Rushton, Northamptonshire (“ the Land ”), which on 22 January 2004 was valued by Gerald Frank Allen FRICS on behalf of Prime Business Loans in the sum of £140,000. Mr Allen described the Land as comprising “a single enclosure of old pasture land extending to 45.34 acres.” The Claimant believed the Land had development potential.

8. On 28 September 2004, Telerate Limited (later changing its name to Michael Green Limited)(“ Newco1 ”) and Quotepool Limited (“ Newco2 “) were incorporated.

9. On 7 October 2004, HMRC petitioned to wind-up the Company in respect of unpaid debts totalling £311,609.22. The petition was listed for a hearing on 17 November 2004.

10. In early November 2004, the Claimant spoke on the telephone with Andrew Kirkpatrick, who was a director and shareholder of County Leasing Limited (“ CLL ”), which offered financing services by way of sale and leaseback arrangements.

11. On 16 November 2004, the Claimant met with Mr Kirkpatrick, who introduced the Defendant to the Claimant as an independent consultant with experience in helping distressed and insolvent companies.

12. Following the meeting, the Defendant wrote a letter dated 16 November 2004 to the Claimant (“ the Engagement Letter ”): “ Re: Michael Green Plant Limited …… Thank you for instructing us to act for you in the above matter. In order that we may proceed as quickly and smoothly as possible I am writing to explain the basis on which Chard Wallis will carry out your instructions and the work involved. It is important that you understand that neither I nor Chard Wallis are Solicitors or Insolvency Practitioners. The advice given is mine/ours unless stated otherwise in correspondence, for example if we have taken legal advice from lawyers. You have asked us to arrange the liquidation of the company and the ‘buy back’ of all of the company’s assets including plant and equipment, land and book debts which should cost no more than £350,000. County Leasing Limited will provide the necessary finance for the ‘buy back’. ……….As you are aware we have arranged for Counsel to attend the High Court in London to obtain an adjournment of the Winding up Petition. We have agreed that all of our fess will be paid from the realisations of the equipment, the money paid to the liquidator to buy the assets back, we may however need a small amount of disbursements to be paid before that takes place. Please read and sign this letter of instruction and the Minutes of the Board Meeting on the last page and fax them back to our office as soon as possible.”

13. On 17 November 2004, the winding-up petition was adjourned.

14. On 25 November 2004, the Claimant was appointed sole director of Newco1 and Newco2. He was also the sole shareholder of both companies.

15. The Company transferred ownership of a Kubota excavator and a Benford roller (“ the Additional Items ”) to an associated company, Green Plant Services Limited (“ GPSL ”), which then sold the machinery to CLL for the sum of £11,750 inclusive of VAT. On the same day, CLL leased back the machinery to GPSL.

16. On 2 December 2004, CLL purchased equipment (“ the Equipment ”) from the Company for £90,000 plus VAT (total of £105,750), which equipment was then leased back to Newco1.

17. On 22 December 2004, contracts were exchanged for the sale of the Land by the Company to CLL for the sum of £110,000.

18. On 12 January 2005, the Company applied for an administration order. In support of the application, the Claimant signed a witness statement in which he stated the following: “[3.] ……….. The Company has a staff of about 30 personnel, including the equipment operators, maintenance staff, sales and clerical staff. ……. [4.] A winding up petition dated 7 October 2004….. is due to come before the Court for hearing on 19 January 2005….. ….. [7.] I have been advised that in view of the winding up petition… the Company is no longer competent to arrange a sale of its assets on its own. However I believe such a sale (on appropriate terms) would be in the best interests of creditors. A sale of the business as a whole would enable the business of the Company to continue and is likely to achieve a substantially higher price than if the assets are sold piece-meal on a break-up basis. Much of the Company’s stock of equipment for hire is relatively old, although still serviceable, and would (so I am advised) attract little interest or value if not sold as a package which includes the business itself. If the Company goes into liquidation its business will have to cease immediately and this will effectively eliminate the possibility of achieving a sale of the business as a whole. [8.] Through my contacts in the plant hire industry and with the assistance of my advisers I have been successful in procuring an offer for the purchase of the Company’s assets as a whole from an unconnected third party. Included at page 9 of exhibit.. is the heads of terms in respect of the sale of assets…. I am told by the proposed purchaser that the current offer would not be extended if the Company goes into liquidation and its business is consequently impaired or interrupted by the liquidation process…..”

19. Exhibited to the witness statement were Heads of Terms dated 12 December 2004 made between the Company as vendor and CLL as purchaser. The stated prices agreed were £90,000 for assets as per the inventory and £110,000 for the Land. The stated completion date was as soon as possible.

20. Also exhibited to the witness statement was an estimated outcomes statement recording:

21. On 19 January 2005, the winding up petition was adjourned.

22. On 28 January 2005, the administration order was made, and Robert Valentine was appointed Administrator of the Company.

23. On 31 January 2005, completion took place of the sale of the land by the Company to CLL with a lease back of the Land by CLL to Newco2, which included an option for Newco2 to purchase the Land on 30 January 2010 for the sum of £143,000 plus VAT.

24. On 6 April 2005, there was a meeting of creditors. The minutes of the meeting recorded: a. The question of the Claimant’s overdrawn loan account of £70,000 was discussed. The Claimant adamantly maintained that he was a creditor for that amount as opposed to a debtor, and he agreed to provide an analysis to back this up. b. The Administrator’s remuneration was fixed at 5% of total realisations. c. The Company be moved from administration to a creditors’ voluntary liquidation within 4 months.

25. An unsigned statement of affairs dated 11 April 2005, recorded non factored book debts in the total sum of £69,203.

26. On 12 April 2005, an extraordinary resolution was passed that the Company be wound-up voluntarily, and that Mr Valentine and Mark Reynolds, both of Valentine & Co, be appointed Joint Liquidators of the Company.

27. On 6 December 2015, Mr Valentine signed (i) the Notice of move from administration to creditors’ voluntary liquidation, and (ii) the Administrator’s Final Progress Report. The report stated that “[d]uring the administration, the property was realised and efforts continue to realise the book debts and other assets of the company.” Attached to the report at appendix A was an account recording the receipts and payments for the period from 28 January 2005 to 6 December 2005 as follows:

28. On 15 September 2006, the Claimant wrote to The Insolvency Service as follows: "In reply to your letter dated 8 th August, I would like to present you with a brief insight into our company history. ……… Due to inadequate management and book keeping the company found itself indebted to the Inland Revenue which led to a petition being presented to wind up Michael Green Plant Limited on 7 th October 2004. Between October and November 2004 I on behalf of Michael Green Plant Limited, had a number of meetings with Gordon Cook (t/a Chard Wallis) and Andy Kirkpatrick (Managing Director of County Leasing). The result of these meetings were formalised in a letter and signed by me on behalf of Michael Green Plant Limited on 17 th November 2004. I now know that Gordon Cook was made bankrupt in Sept 2004 and was discharged in September 2005 and that he is a disqualified Director until 2007. This action was taken by the DTI. Gordon Cook introduced me to Andy Kirkpatrick and he also controlled the events from 17 th November until the company went into liquidation. The following transactions were entered into:

1. On 25 th November 2004 County Leasing Limited provided £25,000.00 against a parker crusher and Kubota.

2. On 2nd December 2004 County Leasing Limited provided £90,000.00 for a mixture of plant equipment.

3. On 2 nd December 2004 County Leasing Limited provided £11,750.00 for plant equipment which was paid directly to Beachcrofts.

4. On 16 th December 2004 County Leasing provided £110,000.00 for land. These transactions were for the benefit of Michael Green Plant Limited and amounted to £236,750.00 which stands against the amount received by the liquidator, Robert Valentine, which shows £110,000 being received for the assets of Michael Green Plant Limited. Therefore there is a considerable gap between the monies raised via the advice of Gordon Cook and Andrew Kirkpatrick and the monies received by Valentine & Co for the benefit of creditors. If I had known at the time that Gordon Cook was a disqualified director or that a bankruptcy order was made against him on the 30 th September 2004 and that Gordon Cook is a business agent of County Leasing Limited and receives commission for the work he introduces I would never have associated the company with him. I believe Michael Green Plant Limited received dishonest advice and the creditors have lost substantial funds which were due to them…..”

29. In 2006/2007, the Claimant terminated all payments due under the leaseback agreements.

30. On 23 January 2009, Mr Valentine signed the Return of Final Meeting in a Creditors’ Voluntary Winding Up, which included the following statement of account:

31. On 6 March 2008, CLL commenced proceedings against Newco1, the Claimant, Newco2 and GPSL seeking to enforce the lease back agreements (“ the Enforcement Proceedings ”). It was the defence to the Enforcement Proceedings that the agreements were not enforceable because they had been induced by material misrepresentations made by Mr Kirkpatrick. Although the Defendant was not a party to the Enforcement Proceedings, he was called as a witness by CLL.

32. On 26 April 2009, the Company was dissolved.

33. On 30 November 2010, the Claimant applied to restore the Company, appoint a new liquidator and for a direction that the period between dissolution and restoration should not be counted for the purposes of statutory limitation periods applicable to any claims vested in the Company (“ Limitation Direction ”). The Defendant was joined as one of the respondents to that application on 19 May 2011.

34. On 16 December 2010, HHJ Hampton gave judgment in the Enforcement Proceedings. In summary: it was held that: a. the lease back agreements were not enforceable; and b. Newco1 was awarded damages of £55,000 on its counterclaim. The basis of the award was that, if the leaseback agreement had had not been entered into the Company would have gone into liquidation, and Newco1 would have purchased the equipment from the liquidator for the sum of £55,000.

35. On 19 October 2010, it was ordered that (i) the Company be restored to the register, and (ii) Nicholas Williamson Nicholson of Haslers be appointed as Liquidator of the Company.

36. On 2 February 2012, the Court of Appeal dismissed the appeal against the award of damages made to Newco1 in the Enforcement Proceedings.

37. By a deed dated 5 February 2013, the Company, acting by its Liquidator, assigned to the Claimant the claims that it may have against the Defendant “in respect of certain transactions which took place during 2004 and 2005”, and in consideration of a payment by the Claimant to the Company in the sum of £2,000 (“ the Assignment ”).

38. By letter dated 6 February 2013, the Defendant was given notice of the Assignment.

39. On 11 April 2014, Andrews J granted the Limitation Direction.

40. Also, on 11 April 2014, the Claimant issued the first set of proceedings against the Defendant as assignee of the Company’s claims (“ the First Set of Proceedings ”).

41. On 4 December 2015, the Court of Appeal set aside the Limitation Direction.

42. On 31 March 2016, the Company, acting by its Liquidator, issued a claim against Mr Valentine for damages for alleged misfeasance (“ the Misfeasance Claim ”).

43. On 19 May 2016, the Supreme Court refused permission to appeal from the Court of Appeal’s decision to set aside the Limitation Direction.

44. On 11 July 2016, the Claimant applied to amend the First Set of Proceedings to allege fraud or dishonesty, which claims would not be subject to any statutory limitation period.

45. On 26 January 2017, the Defendant cross-applied to strike out the First Set of Proceedings on limitation grounds.

46. On 16 May 2017, Mr Purvis QC, sitting as a Deputy High Court Judge, dismissed the application to amend and struck out the First Set of Proceedings. In doing so, the Judge said: “[60.] Therefore, it is plain that an allegation of fraud, in particular the allegation of fraud in this case, requires the proof of extra facts concerning the state of mind of the defendant than was previously pleaded and therefore on the face of it does not arise out of the same facts as the matters already pleaded. That indeed is confirmed by an examination of the pleadings. No previous allegation of intent or state of mind was made when it was previously limited to negligence.”

47. On 13 July 2017, the Misfeasance Claim was compromised by way of a settlement deed (“ the Settlement Deed ”) under which Mr Valentine agreed to pay to the Company the sum of £335,000 “inclusive of interest, VAT, costs and any other sum”, but without any admission of liability or wrongdoing.

48. On 25 April 2018, the Claimant issued the present claim.

49. Also, on 25 April 2018, the Claimant was made bankrupt on the petition of CLL in respect of an outstanding costs order made in their favour in the Enforcement Proceedings.

50. On 29 May 2020, the Claimant annulled the bankruptcy order dated 25 April 2018.

51. On 22 February 2021, the Defendant applied to strike out the present claim as an abuse of process.

52. On 13 October 2021, Baker J dismissed the strike out application.

53. The trial bundle extended to 13 lever arch files of documents. I am unable in the course of this judgment to refer to all the evidence and argument relied upon by the parties but I have taken it all into account. The competing narratives

54. I read and heard evidence from the Claimant and the Defendant.

55. I also read and heard evidence from Julian Aubrey Payne, on behalf of the Claimant, but only in connection with a very discrete issue arising in connection with the preparation of the invoices and proof of ownership of the Additional Items (“ the Shellplant Invoices ”).

56. It was the Claimant’s written evidence that: a. Mr Kirkpatrick introduced the Defendant to the Claimant as an independent business management consultant trading as Chard Wallis. The Defendant gave the Claimant his business card, which indicated that the Defendant had offices in the UK and overseas, and therefore was a substantial organisation. b. It was made clear to the Claimant by Mr Kirkpatrick at the outset of their discussions that unless the Claimant engaged the Defendant as the Company’s independent business management consultant then he would not provide finance. The Defendant explained that he worked with distressed companies although he pointed out that he was not a solicitor nor was he an insolvency practitioner. He did say that he had offices in Monaco, USA and the UK. c. The Defendant represented his business as a professional and substantial outfit. The Claimant was not made aware at that time that the Defendant was in fact a disqualified director and an undischarged bankrupt. d. Initially it had been the Claimant’s hope that the assets of the Company could be sold and the net proceeds, which he was expecting to be around £350,000) would be used to pay off the creditors so that the Company could continue to trade. e. However, the Defendant told the Claimant that the only way forward was for the Company to go into some form of insolvency procedure (liquidation was proposed at the time) with a new company then acquiring the assets of the Company to allow the business to be carried on. Those were the Claimant’s twin priorities – paying off the creditors but at the same time preserving the business and the jobs of the Company’s employees. f. The Claimant was not happy with this advice but Mr Kirkpatrick told the Claimant that the Defendant knew his business and he should follow his advice. Mr Kirpatrick went on to say that it would be necessary for the assets of the Company to be sold to CLL and then leased back by the new company as no liquidator of the Company would deal with the Claimant directly. The Claimant was told that as a validation order was required the Court would not approve a direct arrangement with the Claimant when there was a pending winding up petition. g. At no time was the Claimant told that it would be open to the new company to buy the assets back from a liquidator at a substantial discount. h. Because the Company had been slow in paying trade creditors they were insisting on payment up front so the Company did not have many trade creditors. The Claimant indicated that he was looking to raise about £350,000 to pay off all of the creditors, including HMRC, and that he thought there were sufficient assets to cover this level of borrowing. i. The Defendant and Mr Kirkpatrick told the Claimant that were two ways for the Company to raise money to pay off creditors. The first was to arrange a sale and lease back of the land with the second involving the sale and leaseback of the Company’s plant and equipment. CLL would buy the Company’s assets and then lease them back to new companies that the Claimant would need to set up for both this purpose and to carry on the business of the Company. The Defendant confirmed that he would pre-package the whole deal, which the Claimant understood meant the liquidation would only follow when the finance was in place to pay the creditors in full. j. Following the meeting, the Defendant sent the Engagement Letter. The content of this letter was consistent with what he understood would be happening i.e. the liquidation of the Company and the buying back of its assets so the Business could continue. These assets included the Company’s book debts in addition to the land and plant and equipment and the finance raised was anticipated to be £350,000. The Defendant’s fees were put at £15,000 and the Claimant was happy with this and always believed that this would be the only deduction from the monies raised by the sale and leaseback of the Company’s assets. k. Therefore, the Claimant signed the Engagement Letter on 17 November 2004 on behalf of the Company, and the Defendant secured the adjournment of HMRC’s winding up petition. The Claimant did not know how this was achieved or what the Court was told to secure this, but the Defendant told the Claimant he would sort all of this and appoint solicitors to act for the Company for this purpose. The Defendant said he would be appointing Peter Rees of Beachcroft Wansbroughs (“ BW ”) to act for the Company. At no time did the Claimant ever agree to the Defendant acting for him in his personal capacity. The Claimant was only seeking advice on behalf of the Company as he was obliged to do as the Company’s only director in circumstances where it could not pay its debts and was going to be wound up. All of the discussions, and advice given, related only to the Company’s financial position and how the business could be saved whilst at the same time ensuring creditors were paid. l. Although the Claimant knew BW would be acting for the Company, he never spoke to, gave instructions to, or received advice from Mr Rees/BW. It was the Defendant who drafted the Minutes of the Meeting of the Board of Directors which were annexed to the Engagement Letter. The Claimant convened the Board Meeting on 17 November 2004 and authorised the Defendant to act on behalf of the Company in taking the steps he had said were necessary to preserve the business and raise funds to pay the creditors. m. Subsequently, it became clear that CLL was not prepared to lend £350,000 but only £210,000 net of vat. Mr Kirkpatrick told the Claimant that the Company’s plant and equipment was worth very much less than the Claimant had thought and that the Land was only worth £110,000 because it was subject to enforcement notices. As the Claimant was under immense pressure to preserve the Business and safeguard the employment of its around thirty members of staff he therefore went along with the advice being given to the Company by Mr Kirkpatrick and the Defendant. n. In the days leading up to the second meeting on 29 November 2004 the Defendant told the Claimant that BW needed to be paid £10,000 plus vat (i.e. £11,750) to cover their costs of securing the adjournment of the winding up petition and then a validation order from the Court which would authorise the sale of the Company’s land and plant and equipment to CLL in advance of a winding up order being made. The Claimant did not have £11,750 to lend the Company and in any event could not use the bank account of the Company as it was frozen. Mr Kirkpatrick and the Defendant therefore advised him to transfer assets owned by the Company to GPSL so that GPSL could then sell them to CLL to raise the £11,750 and receive the sale proceeds into its account. The two assets in question were a Kubota excavator and a Benford Roller. Both these assets were shown on the Company’s asset register and were used by the Company in its business. The Company (and then Newco1) continued to use this plant and equipment even after it had been sold to CLL. GPSL’s business was haulage and tipping – it had no need to own these large pieces of machinery which were used for demolition and clearance. Mr Kirkpatrick told the Claimant that transferring assets from the Company to GPSL was an acceptable practice and was sensible as there was no intention to liquidate GPSL at that time. Naively, the Claimant accepted this advice. o. On 29 November 2004, on behalf of GPSL the Claimant signed the CLL sale and lease back agreement, which included the Benford Roller and the Kubota. CLL paid £10,000 plus vat for these two pieces of equipment to GPSL. On 2 December 2004, on GPSL’s headed notepaper, and at the request of the Defendant, the Claimant authorised CLL to pay the £10,000 plus vat paid for the Kubota and Benford machines to BW. p. Following this the Defendant’s advice changed and he said that following discussions with Mr Valentine it would be better that the Company be put into administration rather than liquidation as this was the best way to preserve the Business and enable it to be carried on by Newco1 given there were ongoing contracts and a business to be preserved. However, the Claimant was told this meant that further money had to be raised to pay the legal fees associated with the application for an administration order. q. On 2 December 2004 the Company entered into a separate finance agreement with CLL. This involved the sale and lease back of the balance of the Company’s plant and equipment. This remaining plant and equipment was sold to CLL for £90,000 plus vat on 2 December 2004. The following day, again at the request of the Defendant, the Company sent a letter to Mr Kirkpatrick authorising CLL to pay £25,000 on account of the sum of £90,000 due and payable for the balance of the Company’s plant and equipment to BW to cover the further legal fees associated with the application for an administration order. r. Through the Defendant, BW was subsequently instructed to apply for an administration order and to draft a witness statement for the Claimant to sign on behalf of the Company in support of the application. Again BW did not correspond with the Claimant direct about this. Instead a draft statement was brought for the Claimant to sign at Blackbridge Farm by the Defendant. It was the Defendant, who handled the whole process and dealt with the solicitors throughout. s. It was agreed with Mr Kirkpatrick and the Defendant that CLL would enter into a finance agreement with respect to the sale and leaseback of the Land. The Claimant cannot now remember why it was decided Newco1 would not enter into the lease. The agreed price was £110,000 and an offer of finance was made by CLL on 16 December 2004. The Defendant again dealt with the sale day to day and instructed solicitors, Wilson Browne in Kettering, to act on behalf of the Company. Contracts were exchanged on 22 December 2004 but the Claimant does not know if a deposit was paid or who signed the contract on behalf of the Company. The sale of the land was completed on 31 January 2005, three days after the appointment of Mr Valentine as Administrator, and on the same day Newco2 entered into a leaseback agreement with CLL. The net proceeds of sale were £105,193.25 as the first lease payment due under the agreement was deducted from the purchase price of £110,000. t. The Claimant had always believed that the Land had development potential. On 12 March 2015, the land was sold by CLL to the Trustees of Mr Kirkpatrick’s pension fund for £250,000, who in turn sold it to Rushton Meadows Limited for £575,000 on 21 September 2020.

57. In summary, it was the Defendant’s written evidence that: a. The Defendant traded as "Chard Wallis" in various forms providing specialised professional introduction services to Licensed Insolvency Practitioners (“ IPs ”). The Defendant’s main work was to provide introductions to IPs through a creditor identification and proxy solicitation system. At one time the Defendant had up to 14 staff working across the introduction and asset realisation operations, with staff who would find and call creditors asking for their proxy to attend the meeting that the Defendant would attend. The issue was that under the insolvency rules the Defendant could not be paid for his votes. Therefore, he found a way of being compensated by offering to act as agent in realising company assets and debts. The combination of insolvency rules restrictions on vote payments and his personal undertaking not to act as a director made the agency model legally necessary. This dual necessity - statutory compliance and personal legal restrictions - made the IPs agency appointment the viable structure for the Defendant’s continued professional involvement in insolvency work, explaining why all arrangements were structured through formal agency rather than direct corporate involvement. b. At the time the Defendant handled the Company, he had reduced his business considerably from the peak staffing levels due to significant personal legal challenges. He had been declared bankrupt in late 2004, and prior to that he had given an undertaking not to act as a director in relation to a £14,000 PAYE payment for one of his companies. These circumstances necessitated a dramatic reduction in business operations and prevented the Defendant from holding director positions, requiring a shift to agency work and personal service provision rather than corporate directorships or large-scale operations. c. Despite the bankruptcy and director's undertaking restrictions, the Defendant still maintained the Monaco and US offices as well as a remote staff member in the UK, who acted effectively as his PA. This streamlined structure enabled the Defendant to continue providing professional asset realisation services through agency appointments rather than corporate directorships, which was precisely the arrangement that Mr Valentine sought when he appointed the Defendant as his agent on 31 January 2005. The personal bankruptcy actually enhanced the appropriateness of the agency structure, as it eliminated any potential conflicts of interest whilst maintaining the Defendant’s professional expertise and international infrastructure. d. The fact that Mr Valentine, as a Licensed IP, chose to engage the Defendant’s services despite his bankruptcy and director's restrictions demonstrated his confidence in the Defendant’s professional abilities and the legitimacy of the agency arrangements, as did many other IPs. Mr Valentine was aware of the Defendant’s personal circumstances when he made the formal appointment on 31 January 2005, indicating that he recognised the distinction between personal financial difficulties and professional competence in asset realisation work. This professional endorsement by a Licensed IP provides validation of both the Defendant’s capabilities and the appropriateness of the agency structure. e. At the initial meeting with the Claimant, Mr Kirkpatrick introduced the Defendant as an independent consultant specialising in business rescue and insolvency. The collaborative professional framework established in November 2004 was designed to serve the Claimant’s commercial objectives whilst providing legitimate structure for the asset arrangements he required to achieve his business goals. The Defendant’s role was established as providing strategic professional guidance to the Claimant on navigating insolvency procedures that would enable him to achieve his stated objective to arrange the liquidation of the Company and the 'buy back' of all of the Company's assets including plant and equipment, land and book debts. Mr Kirkpatrick's involvement provided the financial resources necessary for the Claimant to achieve his commercial objectives, whilst the Defendant’s involvement provided the professional expertise needed to structure these arrangements within proper legal frameworks. This arrangement was a legitimate professional response to the Claimant’s commercial requirements, designed to help him achieve his stated objectives. f. The Defendant wrote a standard letter of instruction to the Claimant. The Chard Wallis letter dated 16th November 2004 provides clear evidence of the Claimant’s personal instruction. The letter (i) was addressed "Dear Mark", and (ii) stated "Thank you for instructing us to act for you in the above matter" and "You have asked us to arrange the liquidation of the company and the 'buy back' of all of the company's assets including plant and equipment, land and book debts which should cost no more than £350,000.00." The letter contained a clear disclaimer: "It is important that you understand that neither I nor Chard Wallis are Solicitors or Insolvency Practitioners. The advice given is mine/ours unless stated otherwise in correspondence." This showed that the Claimant had explicit written notice of the Defendant’s non-professional status and the basis on which services were provided. The letter also stated that the cost of dealing with the insolvency for the Claimant, known in the industry as the Statement of Affairs Fee, would be around £15,000.00 g. The Defendant was not introduced to the Company, and never advised, acted for, or owed duties to the Company. The Defendant’s professional relationship was with the Claimant personally, as evidenced by the Chard Wallis Letter being addressed to him personally and stating: "Thank you for instructing us to act for you." All the Defendant’s advice, recommendations, and actions were taken pursuant to his engagement with the Claimant personally, not as adviser to the Company. h. Based on the Defendant’s initial assessment of the Claimant’s situation and his stated objective to "arrange the liquidation of the company and the 'buy back' of all of the company's assets," he recommended that the Company should enter creditors' voluntary liquidation (“ CVL ”) as the most straightforward route to achieve the Claimant’s commercial goals. However, following a meeting with Mr Valentine, who was to be appointed as the Licensed IP, Mr Valentine explained to the Claimant that if he used the CVL route he could be liable for TUPE obligations regarding the Company’s employees, and most importantly if HMRC chose to vote at the meeting of creditors they could change the liquidator. This professional assessment by Mr Valentine highlighted critical risks that the Defendant’s initial strategic advice had not fully considered. Recognising Mr Valentine's superior professional expertise as a Licensed IP, the Claimant decided on Mr Valentine's advice to use the Administration procedure instead of the CVL route the Defendant had originally recommended. This decision demonstrated that, whilst the Defendant provided initial strategic guidance to the Claimant, the ultimate procedural choices made by the Claimant were made based on professional insolvency advice from Mr Valentine. i. Mr Valentine's override of the Defendant’s initial CVL recommendation established the pattern that would characterise the entire arrangement - whilst the Defendant provided strategic business rescue guidance to the Claimant, all critical procedural and legal decisions were made by Mr Valentine as the licensed professional with statutory authority and expertise. Mr Valentine's identification of the HMRC voting risk and TUPE liability issues demonstrated his role as the professional decision-maker who would control the formal insolvency proceedings, with the Defendant’s involvement limited to helping the Claimant understand and navigate the commercial aspects of his objectives. This early demonstration of Mr Valentine's professional authority shows that he, not the Defendant, held the decision-making power over the insolvency procedures and asset realisation processes that would follow. The fact that the Claimant immediately accepted Mr Valentine's professional judgement over the Defendant’s initial recommendation confirms that Mr Valentine was established as the controlling professional authority from the outset. j. Mr Kirkpatrick confirmed to the Defendant that CLL was only prepared to enter into the transactions if commission of £50,000 was paid to cover their potential exposure in the event that the transaction defaulted, which was a very significant possibility. The transactions, including the commission payments, were authorised by Mr Valentine, who also authorised the Defendant to act on behalf of the Company for the realisation and collection of the Company’s assets. k. It was Mr Valentine as the appointed Administrator that had primary professional responsibility for the transactions in question, which is reflected by the Misfeasance Proceedings and Settlement Deed.

58. Overall: a. It was the Claimant’s narrative that the Defendant took advantage of the financial plight of the Company, the Claimant’s lack of understanding of insolvency procedures, and the Claimant’s desire to preserve the business (i) to deceive him and the Company about his true intentions, and (ii) then once appointed to strip whatever value the Defendant and his business associates could get out of the Company for their own personal financial benefit. b. It was the Defendant’s narrative that he only ever provided initial strategic advice to the Claimant personally, but which was then overtaken/overridden by the professional advice given by Mr Valentine to the Claimant, who acted upon that professional advice. Upon his appointment as Administrator, Mr Valentine instructed the Defendant as his trusted agent to realise and collect the Company’s assets. Any payments made by the Defendant out of those realisations/collections were legitimate and specifically authorised by Mr Valentine in his capacity as Administrator. Burden and standard of proof

59. The legal burden rests upon the Claimant to prove the facts essential to the claim.

60. This is not a criminal trial where the standard of proof is beyond reasonable doubt so that I must be sure before making a finding of fact. Rather, I must apply the lower civil standard of proof being the balance of probabilities. In other words, in making a finding of fact, I must be satisfied that more likely than not it is true.

61. The Claimant alleges that the Defendant acted dishonestly, which is a serious allegation to make. However, in Bank St Petersburg PJSC & Anor v Arkhangelsky [2020] EWCA Civ 408 , it was held that the trial judge had been wrong to have applied what appeared to be a heightened standard of proof in relation to allegations of fraud. Whilst it is right to consider the inherent probability of an allegation in light of the particular circumstances of the case in determining whether it has been proved on the balance of probabilities, there is no legal requirement that the more serious the allegation, the more cogent the evidence needed to prove it. The civil standard of proof (balance of probabilities) does not vary with the gravity of the alleged misconduct. As Lord Justice Males said in Arkhangelsky : “[117] In general it is legitimate and conventional, and a fair starting point, that fraud and dishonesty are inherently improbable, such that cogent evidence is required for their proof. But that is because, other things being equal, people do not usually act dishonestly, and it can be no more than a starting point. Ultimately, the only question is whether it has been proved that the occurrence of the fact in issue, in this case dishonesty…, was more probable than not."

62. In Ivey v Genting Casinos [2017] UKSC 67 , the Supreme Court formulated the following two stage test for determining dishonesty: “[74.] …………… When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”

63. Dishonesty is often a matter of inference from circumstantial evidence, although the court should generally take great care when assessing whether or not inferences can properly be drawn in any particular circumstances. The court should necessarily avoid a piecemeal consideration of circumstantial evidence – per Rix LJ in JSC BTA Bank v Mukhtar Ablyazov & Others [2012] EWCA Civ 1411 at [52], albeit there dealing with a committal application to which the criminal standard of proof applied. Approach to fact finding in the present case Earlier adverse findings

64. Adverse findings were made against the Defendant as a witness in, but not a party to, the Enforcement Proceedings. The Claimant has rightly not sought to rely upon those findings before me, and I have ignored them in making my own findings. The parties’ witness evidence

65. The Claimant and the Defendant were seeking to recall events and conversations that took place many years ago, which necessarily gives rise to problems. Apart from the fact that, quite understandably, it is often difficult for witnesses to remember accurately what happened or what was said so long ago, witnesses can easily persuade themselves that the accounts they now give are the correct ones.

66. In Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) , Leggatt J, as he then was, made the following observations about the interference with human memory introduced by the court process itself: “[19.] The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party’s lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces. [20.] Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness’s memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.”

67. The Claimant and the Defendant cannot be regarded as detached or objective observers: a. They have a financial interest in the outcome of the proceedings, although the amounts in dispute are relatively modest and appear to be wholly disproportionate to the time and expense devoted to the dispute. b. More importantly, the Claimant says that these proceedings are the culmination of his efforts over many years to seek justice in respect of the outrageous conduct on the part of the Defendant. By contrast, the Defendant says that these proceedings are simply another attempt by the Claimant to harass the Defendant by making false allegations in circumstances where the Claimant is not out of pocket. Indeed, not only did the sales and leaseback enable the business of the Company to survive when the Claimant did not have the financial means available to buy the business equipment from a liquidator, it was the Claimant who was in breach of his own fiduciary duties by not repaying his director’s loan account and/or transferring without payment the Company’s book debts to Newco1 to collect. The Claimant and the Defendant were subject to significant motivating forces and powerful biases.

68. Further, contrary to the Civil Procedure Rules PD57AC, much of the parties’ written evidence contained commentary upon the contents of the documents as opposed to evidence known personally by them.

69. In all the circumstances, I have approached the evidence of both the Claimant and the Defendant with a substantial degree of caution. Importance of corroborating documents

70. In The Ocean Frost [1985] 1 Lloyd’s Rep 1 , Robert Goff LJ observed (and which observation was described as “salutary” by Lord Mance in Central bank of Ecuador v Conticorp SA [2015] UKPC 11 at [164]): “[57.] ………….. It is frequently very difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses’ motives, and to the overall probabilities, can be of very great assistance to a Judge in ascertaining the truth.”

71. Similarly, in Gestmin SGPS SA v Credit Suisse (UK) Limited, Leggatt J, having commented upon the unreliability of human memory, concluded that: “[22.] In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses’ recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.” Conclusion

72. I am unable safely to accept the parties’ evidence unless it is corroborated by other reliable evidence, or is contrary to their own interests.

73. In making my findings of disputed facts in this case, I have had particular regard to the contents of the contemporaneous documents, the undisputed facts including what the parties subsequently said and did, the objective inferences properly to be drawn from those undisputed facts, and the overall probabilities including by reference to the parties’ motives. Was the Defendant engaged on behalf of the Company?

74. Notwithstanding that it was the Defendant’s evidence that he only ever acted for the Claimant personally, I find for the following primary reasons that the Defendant was engaged on behalf of the Company: a. The Engagement Letter expressly stated that the Defendant’s fees would be paid from realisations of the Company’s assets. b. The Minutes of the Board of Directors of the Company, which were drafted by the Defendant, annexed to the Engagement Letter, and then signed by the Claimant on 17 November 2004, resolved (“ the Board Resolution ”) that – “[4.] Chard Wallis be empowered to realise the assets of the company and collect all monies due to the company and to hold monies on trust for the company pending the appointment of a liquidator. Chard Wallis are further authorised to make such payments out of company funds held by them as may be necessary prior to the appointment of a liquidator. c. By email dated 9 January 2005, the Defendant instructed Peter Rees at BW as follows – “Basis of deal is that [Newco 1] wishes to purchase the Plant and Equipment and that [Newco 2] wishes to purchase the land for which you have a separate valuation. Both deals are being financed by [CLL] who will be the actual purchasers, the invoice from the company will be made out to [CLL] as they will actually be buying the asset and leasing it to the new co’s. ……. Can we get this done asap please, Meting of Creditors is happening on the 17 th at Valentines, Winder is back in Court on the 19 th , we will have to arrange representation for that as well. ” d. On 31 January 2005, Mr Valentine wrote to the Defendant – “Following my appointment as administrator last Friday I would be obliged if you would continue acting, this time on my behalf, to complete the sale of the plant and equipment (and if necessary, assist in the transfer of the land). I recognise that you have been involved with the company prior to the administration order and it seems commercially sensible for me to continue with those instructions. I enclose a copy of the order governing my appointment as your authority.” e. In both his witness statement dated 22 February 2021 (at paras [2.8] and [2.9]) made in support of his strike out application and in his original Defence dated 22 November 2021 (at paras [11.] and [12.], the Defendant admitted that – “The claimant authorised me, trading as [Chard Wallis] to act on behalf of the [Company]…. Subsequently, through [Chard Wallis], a number of agreements were entered into … and CLL paid £110,000 to purchase the Land owned by [the Company] and a further £115,000 to purchase various items of Equipment from [the Company]….” Did the Defendant owe a fiduciary duty to the Company?

75. Snell's Equity , 35th Ed., in comparing trusts with other relationships states (at para [21-035]) as follows: “2. Fiduciary Relationships The relationship of express trustee and beneficiary is one of a number of relationships generally described as fiduciary. A fiduciary relationship arises where one person has undertaken to act for another in a particular matter in circumstances giving rise to a relationship of trust and confidence. Some of the common categories of fiduciary relationship are agent and principal, solicitor and client, and director and company. The distinguishing feature of such a relationship is the fiduciary’s duty of loyalty to this principal. He must act in good faith, not profit from his position, and not place himself in a position where his duty and his interest may conflict. But not all fiduciary relationships can properly be described as trusts. A fiduciary is a trustee only if he has vested in him a fund of property or a power of disposal over it…..”

76. The Board Resolution, drafted by the Defendant, empowered the Defendant to take control of the Company’s assets, to arrange for their disposal to third parties, to hold the proceeds of the realisations on trust for the Company, and to direct payments out of the Company’s funds as may be necessary. That appointment, which was continued by Mr Valentine as Administrator, necessarily rendered the Defendant at all material times a fiduciary agent of the Company and a trustee of the Company’s property.

77. It was argued by the Defendant that any appointment under the Board Resolution was void because: a. At the time, the Company was subject to a winding-up petition such that the Company could not validly appoint a fiduciary agent/trustee without court approval; and/or b. The Claimant, in breach of Article 11 of the Company’s Articles of Association and s.317(1) of the Companies Act 1985 , failed to disclose that he had a personal interest in the Board Resolution such that he was not entitled to vote upon it.

78. For the following reasons, I disagree that the Board Resolution was ineffective: a. Section 127 of the Insolvency Act 1986 (“ ”) provides that “any disposition of the company’s property…. made after the commencement of the winding up is, unless the court otherwise orders, void.” Section 127 b. However, the Board Resolution appointing the Defendant was not a disposition of the Company’s property, and so was not caught by Section 127 . c. Any realisations of the Company’s assets subsequently made by the Defendant pursuant to his appointment would potentially be void, which is why the Defendant had initially advised upon the need for the Company to apply for a validation order. The Police interview records the following exchanges – Defendant - Yeah well there was a winding up order down so we.. had to seek a validation order to sell the plant and equipment and the land….. So it was mainly Mr REES was handed the report side of it. Officer - And who was, sorry who was doing that? Who, who Defendant ... Mr REES. Officer - Right okay. Was the validation order gained? Defendant - Yes. Officer - Gained? Defendant - Yes. d. Despite what the Defendant told the Police, no validation order was in fact obtained because there was a change in the advice given to the Claimant by the Defendant, since on reflection it was felt better for the Company to go into administration rather than liquidation. In his witness statement made in the Enforcement Proceedings, the Defendant explained – [28.] Following my meeting with [the Claimant] I went to see Mr Philip Gautier of Valentine & Co, Insolvency Practitioners (" Mr Gautier ”). I indicated to him the situation in relation to the Company and that the Company was looking to go into either administration or liquidation. I asked if Valentine & Co were interested in being involved as Administrator and/or Liquidator and Mr Gautier confirmed that they would be but that money would be required up front to cover the required legal fees in connection with obtaining the Administration Order. I advised him that I had already spoken with Peter Rees of Messrs Beachcroft Solicitors and he was willing to do this work. [29.] After my discussions with Mr Gautier, it was agreed with the Claimant that the best route was for [the Company] to go into administration on the basis that there were ongoing contracts which needed to be preserved. If there had not been those contacts, then the [Company] would have gone straight to liquidation. [30.] The proposal approved by Mr Gautier was that the sale of the Assets would proceed and that Valentine & Co would be kept appraised of all events pending the obtaining of the Administration Order. As a result of the above, a Validation Order was no longer necessary….” e. Mr Valentine wrote to Mr Rees on 24 August 2006 as follows - “You will recall that you acted for a company called Michael Green Plant Limited by assisting with the company's application for an Administration Order….. I am investigating the affairs of the company and have to inform you that I am not satisfied that the sale of the company's tangible assets has been properly accounted for. I would therefore be grateful to receive, at your kind earliest convenience, the undermentioned information in order that I may have a better understanding of the position:- ………

2. May I please have a copy of the Validation Order that you obtained on behalf of the company.” f. In his letter of response dated 19 September 2006, Mr Rees further explained why a validation order had not been required – “A validation order was not necessary in this matter…… The prior winding up petition would have been dismissed automatically on the making of the administration order under paragraph 40(1)(a) of Schedule B1 to the Insolvency Act 1986 .” g. Paragraph 40(1) of Schedule B1 to the Insolvency Act 1986 provides as follows (with my emphasis added): “A petition for the winding up of a company— (a) shall be dismissed on the making of an administration order in respect of the company, and (b) shall be suspended while the company is in administration following an appointment under paragraph 14.” h. On 28 January 2025, an Administration order was made in respect of the Company, which had the effect of dismissing the winding-up petition such that Section 127 was not engaged. i. Further, the Board Resolution empowered the Defendant to realise the Company’s assets. Pursuant to that authorisation, the Defendant sold the Company’s assets to a third party, CLL. Therefore, the Claimant had no personal interest in the matters specifically dealt with by the Board Resolution that he was obliged to declare.

79. Finally, I agree with counsel for the Claimant that, even if there was some formal deficiency in the Defendant’s appointment, the simple fact remains that the Defendant acted as a fiduciary agent and trustee of the Company. He disposed of the Company’s assets. In addition, in his statement in support of the strike out application, the Defendant admitted that: “[3.9] I may have told the various parties what to do with the proceeds of sale from the Land and Equipment, but I have never held the money as a trustee or otherwise..” Whilst the Claimant denied he was a trustee, he there acknowledged that he was at all material times directing what happened to Company’s funds that were generated from the disposals of the Company’s assets that he had facilitated. In short, even if I am wrong that the Defendant was an express trustee, he was in any event a de facto trustee having assumed responsibility for the disposal of Company property. Alleged fraudulent misrepresentations made by the Defendant Applicable legal framework

80. Clerk & Lindsell on Torts , 24th Ed., says: “[17-01] The modern development of the tort of deceit (sometimes called simply “fraud”) dates from Pasley v Freeman in 1789. There, the defendant falsely represented to the claimant that a third party was creditworthy when he knew he was not; the claimant suffered loss as a result of extending credit to him. The claimant was held to have an action. The tort involves a perfectly general principle: where a defendant makes a false representation, knowing it to be untrue, or being reckless as to whether it is true, and intends that the claimant should act in reliance on it, then in so far as the latter does so and suffers loss the defendant is liable. Although most cases concern claimants duped into entering into commercial transactions, deceit extends well beyond this. …….. [17-05] To found an action in deceit the claimant must show a misrepresentation of present fact or law (or, at the very least, something done which was aimed at inducing action on the basis of false information). However, a representation may be either express or implied from conduct; furthermore, adopting the representation of a third party can be sufficient. ……. [17-06] The representation must of course be false. Where an issue arises as to whether a representation is true or not, the court normally looks to the reasonable meaning of what the defendant said; indeed, this is often decisive……. ……. [17-10] In certain cases, notably where there is a fiduciary relation between the parties, there may be a duty to reveal information so that (for example) non-disclosure will make any resulting transaction voidable. It now seems accepted that in such cases non-disclosure may equally be capable of amounting to fraud at common law. Thus in Conlon v Simms , a solicitor who in partnership negotiations failed to mention a number of shady dealings in which he had previously been involved was held liable in deceit to his co-partner……” Representations

81. In his witness statement made in the Enforcement Proceedings, the Defendant stated as follows – [1.] I trade as a sole trader under the trading style of Chard Wallis. I have over 17 years experience in the area of insolvency, debt reconstruction and assisting distressed companies. I am also involved in debt recovery and investigative work. I have offices in the UK, USA and Monaco. ……. [4.] In or around November 2004, 1 was first introduced to Andrew Kirkpatrick… …… [8.] I advised Mr Kirkpatrick that I traded as Chard Wallis and that I lived in Kent. I confirmed that I had offices in the UK, USA and Monaco.”

82. Indeed, on his own written evidence in the present proceedings, the Defendant does not dispute, and I find, that when he met with the Claimant the Defendant represented (whether expressly or impliedly by conduct) that he was an independent and suitably experienced consultant operating internationally with offices in Monaco and the USA. False representations

83. On balance, I find that those representations were knowingly false for the following primary reasons: Suitability a. On 11 June 2003, the Defendant was disqualified from acting as a company director. b. The Company Directors Disqualification Act 1986 (“ ”) mandates the Court to disqualify a person as a director where their past misconduct makes them unfit to be concerned in the management of a company. The primary purpose of disqualification is to protect the public against the future conduct of companies by a person whose past misconduct as a director of an insolvent company has shown them to be a danger to others – the 1986 Act Re Barings plc (No.5) [1999] 1 BCLC 433 . c. In his defence, the Claimant stated that he was disqualified for a period of 14 months, but in his oral evidence he admitted that the period of disqualification was 3 ½ years from 11 June 2003 to 10 December 2007. The actual period of disqualification is important because under the 1986 Act the period of disqualification must reflect the gravity of the misconduct analogous to a sentencing exercise. d. By order dated 30 September 2004, the Defendant was made bankrupt. e. The Defendant sought to argue that he remained a suitable consultant because Mr Valentine, as a Licensed Insolvency Practitioner, chose to engage the Defendant’s services despite knowing of his bankruptcy and director’s disqualification, which demonstrated Mr Valentine’s confidence in the Defendant’s professional abilities and competence. However: i. On 13 October 2006, Mr Valentine wrote to the Defendant – “I have now had further information from County Leasing in relation to the £80,750 that they paid out and they have confirmed that these monies were paid to you personally. I have to inform you that I cannot conceive of any circumstances in which this money would be properly payable to you and you will be aware that if I become aware of any prima facie evidence of criminal activity I am under an obligation to report it to the authorities. I think it only fair to tell you that if you do not give me a substantive and complete reply within the next few days I will feel that I have no alternative other than to involve the authorities.” ii. On the 16 October 2006, the Defendant wrote in reply to Mr Valentine – “It is clear that we find ourselves in the same position as the Smudge Limited – in liquidation case, in that you now seek to distance yourself from the deal you initially agreed to. I am confident, given the documents that I hold, that the deal agreed by you can be proven if required. There is no criminality as you suggest in your letter of 13 th October 2006, and I have already stated that what monies cannot be accounted for….. will have to be paid over. That said, I am confident that it can be accounted for.” iii. Whether Mr Valentine suspected the Defendant of criminality or was merely seeking to distance himself from the Defendant to protect his own position, either way this can hardly be said to demonstrate Mr Valentine’s confidence in the Defendant’s professional abilities and competence. f. On 15 November 2004, HMRC wrote to the Defendant – “I am aware that you have been a director of three companies that have variously been named Chard Wallis Ltd. However I note that each company has been struck off, or notice to strike off has been issued, none have made returns to Revenue, and no Corporation Tax or PAYE deductions have been remitted to Revenue. None of these companies have existed prior to the year 2000. I have therefore concluded that you have traded on a self employed basis. I have therefore arranged for estimated, protective, discovery assessments to be raised to protect the revenue’s interest. Copies of these assessments are enclosed.” g. In his oral evidence, the Defendant said that at the time he was not panicking about the HMRC assessments because they were being dealt with by his trustee in bankruptcy. However, the Defendant was in the practice of secretly recording his conversations with others and which recordings were subsequently obtained by the Police as part of a criminal investigation into the Defendant, although the Defendant was never charged with any offences. In the transcript of a recording of a telephone conversation with Mr Kirkpatrick, who was requesting an update on matters, the Defendant said – “I’m in absolute dire straits, so even if I’ve got to go and fight [in court] about the 50, at least that gives me 25, I’d give you 20 or something and at least I’ll have 5 to get going with.. …. Well mainly I’ve got to get some money in first. I mean I haven’t done anything about it this week cos all I’m doing is chasing my arse until one of these lands aren’t I? I mean I can’t tell you what position I’m in unless and until one of these hits and I mean I can’t tell you, I mean I’m in dire straits until one of these money hits so I can do nothing else can I, until one of these amounts of money hits.” When that transcript was put to the Defendant in cross examination, he changed his oral evidence to claim that he could not now remember what his personal finances had been some 20 years ago. Overseas offices h. The footer to the Defendant’s Engagement Letter was – “OFFICE LOCATED IN MONACO - UNITED STATES - UNITED KINGDOM” i. The Defendant’s business card was – j. However, the record of the Police interview on 19 March 2008 records the following exchanges: “ Officer : Is that correct… you work from your office [is that] your home address in Maidstone Defendant : I do yes …… Defendan t: My letters come to a mailing address currently at 5 Liberty Square, Kingshill, West Mailing in Kent, previously to that they came to Coal Port House, which is Sir Thomas Longley road, in Medway, they are purely postal addresses, letters go there, I go and pick them up, bring them back. ….. Officer : Ok. And those addresses you have just given are purely for postal mail? Defendant : They’re post boxes. Officer : Post boxes. Ok they don’t take any phone calls? Defendant : No. …… Officer : Ok. Your business as such, works from two, works from a postal address in Kingshill. Defendant : Ye ……. Officer : On your letter head and what have you you talk about Monaco is also mentioned on there and USA Defendant : I did have an apartment in Monaco up until 2004, May 2004, and I gave that up then and nothing else happened. Officer : And that apartment, what was that, rented owned, owned? Defendant : Rented…. Two bedroom….1,600 Euros a month….we used it for holidays and we just used it as an apartment for the Grand Prix etc. Officer : Mmm ok. And the USA? Defendant : The USA I did a lot of work, 4, 5 years ago now, I run a carting centre in Indianapolis for a particular F1 racing driver…. And whilst there, I set up a mailing box address again. I have recently moved that mailing box address… to a cheaper one in New York…” k. Indeed, despite having told the Police in 2008 that he had been operating as a sole trader from his home and had given up his rented holiday apartment in Monaco in 2004, when writing to Mr Valentine on 31 October 2006 the Defendant was falsely representing himself as being in an international partnership that was headquartered in Monaco as per the footer to that letter - “INTERNATIONAL OFFICES INDIANAPOLIS, UNITED STATES - TELEHONE: +1 (317) 575 4059 FAX: +1 (317) 575 4180 HEAD OFFICE; MONTE CARLO, MONACO - TELEPHONE: +33 611 95 5236 FAX +33 8 2056 3 (A list of partners and their qualifications is available upon written request to the above offices.)” Independent l. In his oral evidence, the Claimant admitted having worked with Mr Kirkpatrick in the past, but maintained that he was independent of and not tied to Mr Kirkpatrick. m. However, on 17 May 2006, Mr Kirpatrick wrote to the Defendant – “Further to our telephone conversation earlier today. I am writing to formally terminate the Broker Agreement signed on 3 rd December 2004, between [CLL] and [the Defendant] t/a Chard Wallis under Clause 5b(iv). As discussed, I am regrettably forced to take the above action following information passed to me…” n. When that letter was put to the Defendant in cross examination, the Defendant said in evidence that he had arrangements with lots of professionals and similar arrangements, but he could not now remember the precise arrangements. He was sure that there would have been something in it for him, but couldn’t remember even the broad terms. He couldn’t remember if he was paid commission, but there must have been some payment. o. The Defendant was so closely connected with Mr Kirpatrick that he even had his own CLL business card – When this business card was put to the Defendant in cross examination, he said in his oral evidence that he was looking for opportunities for CLL, which might lead to opportunities for him personally. p. In the transcript of a recording of another conversation (with a Robert Musk), the Defendant described his working relationship with Mr Kirkpatrick as follows – “…Andy [Kirkpatrick] and I are in the same shark pool aren’t we? He creates the victims. I just deal with them. I mean we work very well together and unfortunately it is your case that showed that we did…… …. And it is coming round to and we need to talk about his because you know the right people, its coming back now to old fashioned asset stripping days. Now if you are in the right side of someone like Andy and I’ve got two others now you walk into a live company, I’m not saying an insolvent company, live company – strip it.” q. The transcript of the recording of the conversation with Mr Valentine records the following further exchanges – Defendant : …and the other thing [the Claimant] was going to deal with you about was the directors loan account ….. Mr Valentine : hmmmmmmm so all I need to do, could I, you don’t care if I do this properly do you Defendant : no not at all, I mean I, in fact I’ll be completely transparent with you it’s better for me if [the Claimant] falls over, alright, because on the back end of it, he’s an asset that he financed, right, now if he falls over on it then the asset suddenly rears it’s head.. The reasonable inference is that if the Claimant fell over he would then be unable to exercise the option to purchase the Land back from CLL, which would be to the benefit of the Defendant because he had entered into a brokerage agreement with CLL on 3 December 2004. Reliance

84. At a time when the Claimant was desperately seeking to rescue the Business, it is inconceivable that he would have engaged the Defendant to advise and assist him in doing so by raising finance through CLL, if the Claimant had been told the truth that: a. the Defendant was an undischarged bankrupt, who was in dire financial straits of his own and willing/able to exploit distressed companies for personal gain; b. the Defendant was a sole trader operating from his home having been disqualified as a director because of misconduct that rendered him unfit to be involved in the management of a company; and c. the Defendant was not independent but in a business arrangement with Mr Kirkpatrick/CLL for their own mutual financial benefit. Conclusion

85. I find that the Defendant was guilty of deceit by knowingly making false representations, which induced the Claimant to appoint the Defendant as a fiduciary agent and trustee of the Company.

86. Once appointed the Defendant was under a fiduciary duty to act in the best interests of the Company and to correct his deceit. He failed to do so and as such was also guilty of a dishonest breach of his fiduciary duty. Alleged fraudulent breaches of trust Applicable law

87. A trustee commits a breach of trust where he deals with the trust assets in a manner which exceeds the authority conferred upon him. Although, the liability of a trustee is usually strict, the law recognises that for “a breach of trust to be fraudulent it is not enough to show that it was deliberate. There must also be an absence of honesty or good faith. This can include being reckless as to the consequences of the action complained of” – First Subsea Ltd v Balltec Ltd [2017] EWCA Civ 186 (at [64]) per Patten LJ. An account

88. The Defendant realised the Company’s assets as follows: a. CLL paid £11,750 for the Additional Items. b. CLL paid £105,750 for the Equipment. c. CLL paid £105,193.25 for the Land (after deduction of the amount of the first instalment due under the lease back). d. Total realisations - £222,693.25. The Claimant seeks an account. Proceeds of sale of the Additional Items

89. By fax dated 1 December 2004, the Defendant directed Mr Kirptarick to pay the sale proceeds of £11,750 to the following accounts: a. £2,500 to BPC Consultancy Ltd (“ BPC ”); and b. £9,240 (after deduction of a £10 transfer fee) to – i. Coutts & Co ii. Account number - 00738239; and iii. Account name - Beachcroft Wansbroughs client account (“ the Client Account ”).

90. The payments were made on 3 December 2004.

91. So far as the £9,240 payment to the Client Account, the Defendant claimed in his oral evidence that he was not aware that Mr Rees had opened an account in the name of CW Asset Management (“ CWAM ”), and he knew nothing about the Client Account. The Defendant told the Police much the same thing and as recorded in the interview: Defendant - Yes I had a company, years ago I had a company called CW Management…...Which was a company registered in Nevis and administered in Monaco….But no, there is no client account I would have. Officer - Did that ever trade over here? Defendant - No. Officer - So it never had a bank account? Defendant - Not here no. Officer - Okay. And it never had a client account? Defendant - Definitely not, definitely not.

92. I find on balance that the Defendant’s claims (i) that he was not aware of the Client Account, and (ii) that CWAM was not trading in the UK, are not true: a. As already noted, the Defendant by fax on 1 December 2004 provided the Client Account details to Mr Kirkpatrick. b. A copy of the Client Account ledger (“ the Ledger ”) was included in the trial bundle. It is headed “Various Winding Up Petitions”. c. In their response letter to Howes Percival (then instructed on behalf of Mr Valentine) dated 9 January 2007, BW explained “This matter [the Company in liquidation] was originally introduced to the firm by CW Asset Management (CWAM) and most of the work was done from late 2004 through to mid 2005. When first approached the matter was handled under a CWAM general file (as was the practice for matters where it was initially uncertain if a full instruction would materialize. When it was clear that the case would proceed, a case file was opened in the normal way under the name of Valentine and co who were to be the company's administrators and by whom we would be instructed following their appointment.” d. BW issued the following invoice addressed to CWAM – e. As recorded in the Ledger, that invoice was paid from the Client Account on 21 February 2005. Proceeds of sale of the Equipment

93. On 3 December 2004, CLL transferred £25,000 to the Client Account in part payment for the Equipment.

94. CLL’s bank statements record that the balance of the proceeds of sale, being £80,750, was paid to Mr Cook’s Nationwide Building Society Account on 31 January 2005. Proceeds of sale of the Land

95. The Ledger records that the net proceeds of £105,193.25 (after deduction of the amount of the first instalment due under the lease back) were paid into the Client Account on 31 January 2005. Receipts

96. Therefore, the contemporary documents confirm the movement of Company funds as follows: a. Paid to BPC on the Defendant’s direction - £2,500. b. Paid into the Defendant’s Client Account – £139,443.25. c. Paid into the Defendant’s Building Society Account - £80,750 d. Total funds under the Defendant’s direction/control - £222,693.25. Deductions

97. From the figure of £222,693.25, I find the following were legitimate deductions: a. The Defendant’s agreed fee - £15,000. b. Wilson Browne’s fees for dealing with the sale of the Land – £1,090.38. c. BW’s fees for dealing with the completion of the sale of the Land - £9,193.50. d. BW’s fees for dealing with the application for an administration order - £7,495.04. e. Total deductions - £32,778.92.

98. Also, I account for the sum of £60,903.62 paid out of the Client Account to Mr Valentine on 17 March 2005.

99. This leaves an unaccounted balance of £129,010.71 Unaccounted balance Payment to BPC

100. There was no legitimate reason why the Defendant directed that there be a payment of £2,500 to BPC, which never undertook any work for or on behalf of the Company. Alleged additional fees

101. The Ledger records the following payments – a. £10,000 paid to the Defendant’s wife on 7 December 2004 ‘on account of fees’. b. £30,000 paid to the Defendant’s wife on 22 March 2005 in respect of an invoice from Clover Warren Limited dated 16 March 2005 for fees in relation to the following work – “Arrangement of On Site Valuations inc mileage Assistance in extraction of financial information from the Company’s books and Records Negotiations with various finance Companies and Retention of Title Claims”

102. In his oral evidence, the Defendant confirmed that his wife had given him permission to funnel payments through her building society account, although she was not aware of what those payments were for.

103. Of the £80,750 paid to Mr Cook’s Nationwide Building Society Account, the Defendant admits at para [36(7)] of his Amended Defence that £58,750 was paid to Mr Kirkpatrick with the balance being retained by him in respect of fees.

104. Therefore, by my calculation, the Defendant took additional fees (over and above the agreed fee of £15,000) totalling £62,000.

105. The Defendant was engaged to (i) dispose of land and equipment, and (ii) to collect monies due to the Company.

106. The Land and Equipment were of modest value, and the disposals were relatively straightforward e.g. no marketing exercises were undertaken.

107. So far as the book debt, Mr Valentine wrote to the Defendant on 5 December 2005 as follows: “As long ago as May you indicated to me that you were actively collecting the debtors of the company having previously received instructions from my former partner, Mr Gautier. Would you please therefore explain to me why you appear not to have been proactively pursuing the debtors.” The Defendant responded by letter dated 14 December 2005: “ I am surprised to say the least at the tone of your letters, the inaccuracies they contain and the omission of any-thing discussed or agreed at our meetings, these include;

1. The fact that we have written to each and every- [Company] debtor at least 4 times, plus numerous telephone calls — yet you ask us to explain why we have not been proactively pursuing the debtors? Please explain to me what more you could have expected us to do. We also bought to your attention the fact that your office has been instructing debtors who telephone your office NOT to pay!” Ultimately, Mr Valentine’s Income and Expenditure Account to 6 December 2005 recorded income by way of book debts of £575.75. In short, it appears that the Defendant could not have spent any significant time collecting the book debt for the benefit of the Company.

108. According to the Engagement Letter the Defendant’s hourly rate was £95 per hour. Applying that hourly rate to the agreed fixed fee of £15,000 corresponds to 158 hours of work. In my assessment, the agreed fixed fee was more than enough to cover the time spent by the Defendant in realising the assets and collecting book debts.

109. There was no breakdown ever provided of the time allegedly spent in relation to the additional fees, but again applying the Defendant’s hourly rate to additional fees of £62,000 corresponds to time spent of some 652 hours, or (assuming a 7 hour working day) 93 days, or (assuming a 5 day working week) 18 ½ weeks. The additional fees claimed by the Defendant were plainly false, and the Defendant knew them to be false as evidenced by the following email he sent to another business associate, Jeanette Hunt, on 3 May 2006: “I'm laying out the details on a spreadsheet for you to see. I've called Valentine and he is taking advice and coming back to me on the VAT issue. When we spoke that was an estimate of what we expected, we hadn't got it and that was prior to Peter Rees holding back £47,000.00 for his fees, me receiving a credit note for County Leasing VAT of £8,750.00, remembering that I paid them £50,000.00 and Robert asking me to account to him for the VAT element of the sale of the assets, that is £15,750.00. In insolvency cases you have to account for the VAT on the asset sale UNLESS it is WIP (work in progress) in which case it is zero rated, the advice he is taking is if I can invoice as WIP. He is also asking for me to account for the fees meaning a full list of time, letters etc; I'm doing that as well now. The main problem there is that we used Clover Warren Limited to bill some of it and he is questioning that with Peter Rees. Currently we have not produced an invoice for fees on CW because I didn't want to pay the £11,407.87 Vat and then try to claim it back. Our main problem is that we agreed this with Philip Gautier and he has left. Whatever we cannot account for we will have to give back - it's as simple as that. I am trying to get him to challenge Rees bill as this would make the whole job look much better and relieve the pressure for us to account to him as it stands he has sold all the assets for about £210,000.00 and received about £40,000.00 after fees. I think Peters bill should be £5K at most giving RV another £42K and making his figures look much better. In quick figures (I'm doing a spreadsheet) that means; £90,000.00 Gross = £76,595.74 Net (if it as a break-up the agent uses the company's VAT number, so he will produce an invoice for £76,595.74 on MGPH paperwork and therefore Valentine have to account to the VAT for that element - if it is WIP we can 'keep' that 17.5% element.) - £50,000.00 CL £26,595.74 (the agreed kick-back) . - VAT CL of £8,750.00 = £17845.74 (I'd tried to hold onto that 17.5% if I could) I then have to invoice him for CW fees which would be £76,595.74 (£65,187.86 plus VAT) inc VAT so another £11,407.87 in VAT = £6,437:87 ( I had tried to let me invoice him from Monaco but this cannot be done) Less of course monies that we have taken already; I'm going through those invoices as well now.”

110. The contents of that email are striking: a. They demonstrate the Defendant’s willingness to reverse engineer and falsify invoices to justify illegitimate payments taken from Company funds. b. Even the Defendant accepted that remaining Company funds of only £40,000 being available for creditors after realisations of £210,000 was problematic, although the Court of Appeal in the Enforcement Proceedings was less charitable and more realistic in its assessment of that outcome being scandalous. c. In order to take the pressure off the Defendant to account, he claimed that he was seeking to persuade Mr Valentine to challenge the £47,000 held back by Mr Rees for his own fees, which the Defendant considered excessive. d. It was not however true that Mr Rees had held back the sum of £47,000 in respect of his fees. The problem was not Mr Rees’ fees, but rather the grossly inflated fees taken by the Defendant.

111. For all those reasons, I find that the additional fees were illegitimate payments

112. The Defendant claimed that the additional fees had been authorised by Mr Valentine, which on the face of it appears doubtful in light of the contents of the above quoted exchanges. In any event, on the 31 October 2006, the Defendant wrote to Mr Valentine: “Upon reviewing the documentation that I have for the above case I have found a tape recording of our meeting held at your offices on the 4th April 2006. The tape was created at 12.39pm and lasts for the duration of the meeting; 1 hour 11 minutes and 30 seconds. Amongst other things the following cases were discussed;

1. Telerate Limited - in Liquidation

2. Smudge Limited - in Liquidation

3. Go Barking Mad Limited - in Liquidation

4. PUS Limited - in Liquidation I am currently having this recording transcribed and a copy of the transcription will be made available to the Professional Standards Office of the ICAEW as soon as it is ready. I am confident that anyone listening to the tape will understand fully that your recent communications do not in any way reflect the agreements made between us. When a licensed insolvency practitioner says things like ‘... we have seventy grand in the kitty that need: spending' there is clearly something wrong with that practice.” When that letter was put to the Defendant in cross examination, he admitted in his oral evidence that he knew that Mr Valentine had been behaving improperly, but claimed that this was common practice for the majority of small insolvency firms.

113. Therefore, either Mr Valentine did not authorise the payments of additional fees, or if he did authorise those payments then the Defendant knew that Mr Valentine in discharging his own fiduciary duties to the Company could not properly have authorised payments that were illegitimate. Alleged Commission

114. Out of the £80,750 paid by CLL to the Defendant’s Nationwide Building Society Account on 31 January 2005, the Defendant then re-directed that the sum of £58,750 (inclusive of VAT) be paid to County Leasing Services, a partnership of Mr Kirkpatrick and his wife, in respect of an invoice dated 21 December 2004 for “professional Services for [the Company]”.

115. However, County Leasing Services, like BPC, did not provide any professional services for the Company.

116. On 24 August 2006, Mr Valentine wrote to the Defendant; “I have seen certain documentation that [CLL] received £50,000 plus VAT over and above its nominal finance charges and fees and I must be frank and say prima facie this would appear to be an improper payment and, accordingly, unless I receive a satisfactory explanation I will be requesting repayment of this money to my administration.”

117. On 29 November 2006, Mr Kirkpatrick wrote to Mr Valentine seeking to clarify the situation as follows: “Following the liquidation of [the Company] and your appointment as Liquidator, [the Defendant] approached me to see if [CLL] were prepared to finance a deal at a lower figure of £200,000. While this appeared to be a more realistic option, I was clearly conscious of the factors that had prevented [CLL] making an offer previously. At all material times, [the Defendant] represented to me that he was an authorised agent of Valentine & Co and therefore had the authority/consent of your firm to agree a deal. In this respect, I understand that [the Defendant] was liaising with Philip Gautier of your firm. I indicated to [the Defendant] that [CLL] was only prepared to enter into the transactions in respect of the Assets provided that a commission of £25,000 per transaction was paid, totalling £50,000. This was to cover [CLL's] potential exposure in the event that the transactions defaulted, which was a significant possibility. It was therefore a matter for [the Defendant]/Valentine & Co as to whether they agreed to the proposed deal. I would, however, point out that, as far as I was aware, no other lenders were prepared to get involved in the proposed deal. [The Defendant] subsequently confirmed to me that the deal was acceptable and [CLL] therefore wrote the two transactions in respect of the Assets, details of which have previously been provided to you. I requested that the commission be paid to County Leasing Corporate Services ('CLCS") and CLCS issued the relevant invoice dated 21 December 2004 to Chard Wallis in this respect. A copy of that invoice was enclosed with your letter of 14 November…”

118. In summary, it was Mr Kirkpatrick’s narrative that: a. The payment was in respect of commission. b. Without that commission being agreed in advance, CLL would not have been willing to enter into the transactions. c. The commission was authorised by or on behalf of Valentine & Co in its capacity as Insolvency Practitioner appointed for the Company.

119. By reference to the timeline, Mr Kirkpatrick’s narrative was clearly not true: a. The sale and leaseback of the Equipment completed on 2 December 2004. b. Contracts were exchanged for the sale of the Land on 22 December 2004. c. Mr Valentine was appointed Administrator of the Company on 28 January 2005.

120. If not professional fees or commission, then what was the payment for? In his own words: a. According to the interview record, the Defendant told the Police “it was agreed that there would be a fifty thousand pounds kickback to County Leasing company”. b. In the email to Jeanette Hunt, quoted above, the Defendant stated it was “the agreed kick-back”.

121. I find that the £58,750 payment was an illegitimate kick-back wholly contrary to the Company’s interests. Again the Defendant claimed that Mr Valentine had authorised the kick-back payment, but even if he had, and for the reasons already given, Mr Valentine could not properly authorise a payment that he and the Defendant knew to be illegitimate. Conclusion

122. I find that: a. As part of a pre-meditated strategy to asset strip the Company, the Defendant committed breaches of his fiduciary duty by paying away Company funds under his control/direction to himself and his associates for their own financial benefit at the expense of the Company. b. The Defendant was dishonest because he committed the breaches of fiduciary duty knowing that those breaches would injure the Company and intending that they should. Equitable compensation

123. Whilst the Claimant has established both forms of the claim, it is accepted that the Claimant cannot receive compensation for both and must elect for whichever proves the more advantageous. Dishonest misrepresentations which the Defendant failed to correct once he assumed his fiduciary role

124. It is argued on behalf of the Claimant that the Company is entitled to equitable compensation calculated as if the Company had not proceeded with the sale and leaseback scheme, but rather had gone into liquidation.

125. The Claimant seeks compensation calculated as follows: a. The Land and Equipment were worth £110,000 and £90,000, a total of £200,000. b. Allowing for- i. costs of sale of £2,500 ii. legals costs (including costs of applying for the insolvency process) of £17,500. c. Compensation - £180,000

126. However, in the Enforcement Proceedings, Newco1 was awarded damages of £55,000 on its counterclaim. I repeat that the basis of the award was that, if the leaseback agreement had had not been entered into, the Company would have gone into liquidation, and Newco1 would have purchased the equipment from the liquidator for the discounted sum of £55,000.

127. Further, the estimated outcomes statement filed in support of the Administration Order recorded deductions of agents fees (£2,585), legal costs (£13,160), and ad valorem fees (£33,660).

128. I therefore calculate the equitable compensation by reference to the alternative scenario of a liquidation as follows: a. Land and Equipment - £165,000. b. Deductions (including fees due to the Insolvency Service) - £49,405. c. Net - £115,595. Breaches of fiduciary duty by paying away Company funds

129. The Defendant directed and is liable to account for the following illegitimate payments: a. £2,500 paid to Mr Rees via BPC. b. £62,000 paid to the Defendant directly or via his wife. c. £58,750 paid to Mr Kirkpatrick via County Leasing Services. d. Total - £123,250. Equitable Defences

130. In my assessment, compensation payable for the breaches of fiduciary duty by paying away Company funds is more advantageous in monetary terms. The defences raised by the Defendant are considered in the context of that claim.

131. Ultimately, the award of equitable compensation is the exercise of a discretion. Therefore, having found that the Claimant has made out his claim for equitable relief, I must now consider whether or not there are any equitable discretionary factors that mean compensation should not be awarded. Delay

132. Having decided that the Defendant (i) was appointed a fiduciary agent and trustee of the Company, and (ii) was in fraudulent breach of trust by paying away Company funds to himself and his associates, there is no applicable statutory limitation period: s.21(1) of the Limitation Act 1980 .

133. However, laches is a discretionary bar to equitable relief. The classic statement of the principle of laches was given by Lord Selbourne LC in Lindsay Petroleum Co v Hurd (1874) L. R. 5 P.C. 221 [at 239,240] as follows: “Now the doctrine of laches in Courts of Equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.”

134. In his written evidence, the Claimant stated that, following the conclusion of the Enforcement Proceedings in late 2010, he took immediate steps to make an application (i) to restore the Company to the register and to appoint an independent liquidator to investigate the conduct of the Company’s affairs by Mr Valentine, and (ii) for the Limitation Direction. However, I find that there has been significant delay on the part of the Claimant in bringing this action for the following reasons: a. On 15 September 2006, the Claimant wrote to The Insolvency Service making many of the allegations against the Defendant (including dishonesty) that he now makes in the present proceedings. b. The Claimant admits that on 25 June 2008, and prior to the Company being dissolved, he was offered the opportunity to take an assignment of the claims he now pursues. c. The Claimant took the Assignment in February 2013 d. In April 2014, the Claimant as assignee issued the First Set of Proceedings, but which were struck out in May 2017 as being out of time under the statutory limitation period. e. In April 2018, the Claimant issued the present claim alleging dishonesty, but which was not served upon the Defendant until August 2020.

135. However, laches is not concerned with mere delay. Rather it is concerned with delay during which there is a change in the Defendant’s circumstances where to allow the Claimant to maintain his claim would cause the Defendant to suffer such prejudice/disadvantage that it would be unconscionable for the Claimant to be granted equitable relief. In his Amended Defence, the Defendant asserts that “the parties’ recollections of the events in 2004 and 2005 will have dimmed and will be questionable and relevant documents will have been lost during the intervening period.”

136. For the reasons I have already given, I have placed little weight upon the parties’ recollections, but have relied heavily on the documents. The volume of documents disclosed in this case is substantial, which no doubt reflects the fact that the events of 2004/2005 have been the subject of extensive investigations/litigation in the intervening period. The parties in their written evidence make extensive reference to the contents of those documents.

137. In his witness statement dated 21 February 2021, which was made in support of the strike out application of the present claim as an abuse of process, the Defendant stated that this was “yet another attempt by the Claimant to bring essentially the same claim against me, which has just been put to me and others in various forms over the last 12 years, and which has already been litigated in the Northampton County Court, the High Court, the Court of Appeal and the Supreme Court….. When I first met the Claimant, I was in my early forties. Now I am nearing 60 and still have this litigation hanging over me, being required to litigate issues that were originally brought against me as a younger man.” In his oral evidence, the Defendant admitted that he knew that the Claimant was furious about what had happened and was desperate to secure justice. Therefore, there can be no suggestion that the Defendant had acquiesced in the Defendant’s wrongdoing or had led him to believe that no claim would be pursued against him.

138. Further, nowhere in his strike out witness statement or his trial witness statement did the Defendant make any reference to relevant documents having been lost through the passage of time. In his oral evidence, the Defendant said for the first time that between 2018 and 2020 he had destroyed all his records. When asked why he had made no reference to that in his written evidence, the Defendant then said he had no clear recollection of destroying his records, and he was not saying he destroyed all his records, but he had moved house in the period between 2018 to 2020. However, in his strike out witness statement, the Defendant stated, “I have been to significant cost in trying to dig out all the documents myself and work out the Claimant’s case against me.” When that written evidence was put to the Defendant, he then changed his evidence again to say that he had paid £6,000 to go through the files of his previous counsel and solicitors to retrieve the documents. I find that the Defendant has not suffered any prejudice/disadvantage as a result of any relevant documents being lost during the delay in the Claimant bringing the present claim

139. In balancing the interests of justice, I find that the award of compensation is not barred by the equitable defence of laches. Unclean hands Applicable law

140. Another bar to equitable relief is the application of the equitable maxim that: ‘He who comes to equity must come with clean hands’.

141. In UBS AG (London Branch) v Kommunale Wasserwerke Leipzig GmbH [2017] 2 Lloyd’s Rep. 621 Lords Briggs and Hamblen LJ (as they were then) observed that: “The key part of it, which dates back to the 18th century, is that the misconduct or impropriety of the claimant must have “an immediate and necessary relation to the equity sued for”, and that it must be shown that the claimant is “seeking to derive advantage from his dishonest conduct in so direct a manner that it is considered unjust to grant him relief” . . . this is one of those multi-factorial assessments to be conducted by the trial judge, with which an appellate court will be slow to intervene, unless the judge’s conclusion was clearly wrong, or based upon some evident failure of analysis.” Director’s loan account

142. The Defendant alleges that the Claimant was in breach of his own fiduciary duties to the Company by failing to repay his director’s loan debt.

143. Mr Valentine’s estimated statement of affairs and outcome statement as of 7 March 2005 recorded that the Defendant’s director’s loan account was overdrawn in the amount of £70,000.

144. However, I do not consider that a failure by the Claimant to repay his director’s loan account has “an immediate and necessary relation to the equity sued for”. The equity sued for is the Company’s entitlement to equitable relief arising from the Defendant’s deliberate and dishonest scheme to asset strip the Company for his own and his associates’ benefit. The Defendant argues that the equitable doctrine of unclean hands extends to an assignee who seeks to enforce equitable rights derived from another’s wrongdoing such that an assignor’s misconduct remains part of the equitable landscape and assignment cannot cleanse that stain. However, in the present case I am concerned with the alleged misconduct of the assignee, not the assignor. The Company itself was not guilty of any wrongdoing in relation to the operation of the director’s loan account that might bar the claim. The fact that the Company might also have had a claim against the Claimant for an unpaid director’s loan debt is not a good reason to bar its claim, brought by assignment, against the Defendant.

145. Even if I am wrong about that and there is a sufficiently close connection between the alleged misconduct and relief sought, I do not find that the Claimant (unlike the Defendant) was “seeking to derive advantage from his dishonest conduct”.

146. It was the Claimant’ evidence that the director’s loan debt was mistakenly recorded, since he did not owe the £70,000 but rather he was owed the £70,000. He explained that he had raised this money from refinancing his home and which he had then lent to the Company to assist with the purchase of the Land. In his oral evidence at the trial of the Enforcement Proceedings, the Defendant confirmed that he had produced the draft statement of affairs.

147. The contents of the contemporaneous documents evidence that the Claimant disputed the director’s loan debt from the outset: a. The minutes of the meeting of creditors held on 6 April 2005 recorded that the Defendant “adamantly maintains that he is a creditor for that amount as opposed to a debtor”. b. On 7 April 2005, Mr Valentine wrote to the Claimant - “I also require a full analysis of your loan account, ie funds injected into the company or expenses paid on its behalf by you as whilst I note that you contend you are a creditor, the draft statement of affairs which I have received shows you to be a debtor for £70,000….” c. On 5 December 2005, Mr Valentine again wrote to the Claimant - “It has been indicated that your director's loan account is overdrawn to the extent of £70,000 yet you refute this but you have not provided any evidence to disagree with this despite numerous requests. If you. do not have it I require you to reconstruct your director's loan account from your personal records, again within the period stipulated.”

148. Genuinely disputing a debt does not amount to dishonesty. Ultimately, Mr Valentine took no action against the Claimant in respect of the director’s loan debt. Further, the very lengthy Points of Claim filed in the Misfeasance Claim make no mention of the director’s loan debt and do not allege that Mr Valentine failed to take any proper or sufficient steps to recover the director’s loan debt from the Claimant, which suggests that the Liquidator was satisfied that the debt was disputed on substantial grounds. Book debts

149. Again, Mr Valentine’s estimated statement of affairs and outcome statement as of 7 March 2005 recorded book debts valued at £259,000 with an estimated realisation of £200,000.

150. It is not seriously disputed that the Claimant through Newco1 collected part of the Company’s book debts to the value of some £106,000. Whilst the act of the Claimant diverting Company book debts to Newco1 is arguably similar in nature to the Defendant diverting Company funds to himself and his associates, it remains a question of assessing whether there are any equities that the Defendant can assert against the Company so as to lead to a denial of relief. Again, the Company itself was not guilty of any wrongdoing in connection with the book debts that might bar its claim, brought by assignment, against the Defendant for diverting Company funds to himself and his associates.

151. If I am wrong about that and there was a sufficiently close connection, then whilst the Defendant’s conduct can be characterised as naïve and possibly foolish, I do not find that the Claimant (unlike the Defendant) was “seeking to derive advantage from his dishonest conduct”. It was the Claimant’s evidence that it was his understanding that Newco1 would have the right as part of the rescue plan devised by the Defendant to collect the book debts of the Company in addition to having the use of its assets. This was all necessary so that Newco1 could carry on the Company’s business. In advance of the appointment of Mr Valentine as Administrator, the Claimant was again told that there was no issue with Newco1 using the book debt money as the whole of the work force (some 30 plus employees) had TUPE’d across to Newco1, which had saved the Company from making redundancies/redundancy pay outs. If Newco1 had not taken over the contracts which were ongoing the projects would not have completed and in those circumstances the customers would have likely refused to make payments and indeed sued the Company for breach of contract. He only collected the book debts for a relatively short period of time before being told by the Defendant that Mr Valentine was not happy about that arrangement, and so the Defendant would have to take over the collection. The Claimant’s explanation is corroborated by the following: a. The Engagement Letter expressly recorded (with my emphasis added) “You have asked us to arrange the liquidation of the company and the 'buy back' of all of the company's assets including plant and equipment, land and book debts which should cost no more than £350.000,00. County Leasing Limited will provide the necessary finance for the 'buy back'.” b. On 8 February 2055, Mr Valentine wrote to the Defendant: “As discussed, you have my full authority to collect outstanding debts due [the Company] including investigating the previous payment by customers and the fate of the proceeds.” c. On 24 February 2005, Mr Valentine wrote to the Defendant: “Would you please let me know what progress is being made in collecting the outstanding ledger and tracing the proceeds of those debtors who may have ‘inadvertently’ been baked into [GMSL].” d. 14 December 2005, the Claimant wrote to Mr Valentine; “The Banked sum of £105,667,70: The amount collected was used to pay for wages, fuel, and materials to complete projects that had commenced before December 04 which if left incomplete would not have been paid for. My understanding that upon refinance, I personally guaranteed and paid a considerable amount of money to Valentine & Co for the book debts of unfinished work to enable the new company to finish the said work, pay fuel and ensure that we gave continuity of employment. This was discussed and agreed with Mr.P.Gautier at the aforementioned meeting. Please note the payment to Valentine & Co was also for assets of [the Company]. I cannot see how this can be fraudulent conversion when it was agreed by your company. e. On 21 August 2006, the Defendant wrote to Mr Valentine: “I understand from [the Claimant] that no further action has been forthcoming regarding the book debts that he banked into the 'new co' bank account. The purpose of this letter is to offer to purchase, for cash, the book debts of the [Company]….” f. On 29 September 2006, the Claimant wrote to Mr Valentine: “Firstly it was agreed by [the Defendant] that monies collected from the old company book debts would be used to fund wages and materials to complete work that had already commenced under the old company. Without these funds the new company would never have survived.” g. On 6 October 2006, Mr Valentine responded to the Claimant: “I will enquire of [the Defendant] what he did or did not say to you but bluntly the point you are making in relation to the book debts is nonsense……. unless I receive a sensible proposal from you in relation to the repayment of the book debts ….. I will ….. pursue you personally for misfeasance.” h. Mr Valentine did not pursue any claim against the Claimant or Newco1 in respect of the book debt. The Points of Claim filed in the Misfeasance Claim alleged: “During the period of the Administration Mr Valentine failed to take any proper or sufficient steps to recover from Mr Hawkes, or his new company, the sum of £105,667.70 that had been collected by him in respect of book debts that ought to have been paid to the Company.” i. The Points of Defence to the Misfeasance Claim responded that: “Mr Valentine took reasonable steps to recover the book debts collected by Mr Hawkes….Mr Valentine….. instructed Howes Percival in relation to the civil recovery of the book debts and Mr Gordon conducted an interview of Mr Hawkes on Mr Valentine's behalf. By letter dated 16 March 2007, Mr Gordon advised Mr Valentine that "the interview with [the Claimant] has convinced me that our targets here are [the Defendant] and also [CLL]"”.

152. I find that the Claimant collected Company book debts via Newco1 in the genuine belief that he was entitled to do so with the aim of saving the Business and preserving the jobs of the Company’s employees. That conduct can be sharply contrasted with the Defendant’s own dealings with the Company’s book debts: a. The transcript of the audio-recording of the conversation with Mr Valentine records the Defendant saying – “ Defendant : The monies that were held on my client account with Paul Sayers [the Defendant’s Trustee in Bankruptcy]…. I’m devil and blue sea here because I’ve provided him with a list of debtors, a photocopy of some of the cheques that were paid in, a statement saying that’s what the monies were it was in my client account that was a genuine trust client account anyway so what I don’t know, and you are both writing to me saying for Christ’s sake sort this out Gordon and I don’t know what more I can do…. he closed the account…. He wrote to Abbey National banking, where it was, saying I’m the trustee send me the money, so they closed the account and sent him the money, well the money in there was yours…. Mr Valentine : well if you would kindly send me the stuff then I can say look [the Defendant], after pressure from me, has provided this to me. ….it was clearly designated client account.” b. When that extract from the transcript was put to the Defendant, he admitted that he had collected Company book debts, which money he had then paid into his Nationwide Building Society account, which was a personal rather than a trust/client account. He was unable to say whether the book debt he collected ever went back to the Company, but clearly it did not since Mr Valentine’s Income and Expenditure Account as at 6 December 2005 recorded book debt receipts of £575.75. Fabricated evidence

153. The Claimant disclosed the Shellplant Invoices to evidence that the Company had purchased the Additional Items in 2003. However, the Claimant subsequently accepted that the Shellplant Invoices contained a number of discrepancies such as the wrong logo and VAT number. The Defendant alleges that the Claimant forged these documents.

154. In his evidence, Mr Payne, a partner in Shellplant LLP, confirmed by reference to the firm’s underlying electronic accounting records that the Additional Items had been sold to the Company. He said that the Claimant played no part in the production of the Shellplant Invoices, which had been produced by the firm’s accounts team. Rather than reprints, the accounts team had produced new composite documents, which was the reason for the discrepancies.

155. Mr Payne was a detached and objective observer. He has no financial or other interest in the outcome of these proceedings. I have no reason to doubt his evidence. I find that the Claimant did not forge the Shellplant Invoices as alleged. Conclusion

156. I do not find that there are any discretionary factors, whether taken in isolation or together, that bar the Company’s claim for equitable compensation, brought by assignment, against the Defendant. Settlement Deed

157. It is argued by the Defendant that the Settlement Deed compromised all claims arising from the Administration, and so the Claimant is precluded from bringing this claim. The settlement related to the same transactions and time period as those forming the basis of the claims now made against the Defendant.

158. In Heaton and others v AXA Equity and Law Life Assurance Society plc and another [2002] UKHL 15 , it was held that where a claimant had overlapping claims against two defendants and had concluded a compromise agreement “in final settlement” with one defendant, the proper approach to the question whether he could pursue an action against the other defendant was to ascertain the intended effect of the compromise agreement by interpreting the words used in the context of the particular circumstances, and where the agreement had not fixed the full measure of the claimant’s loss his action would not be precluded.

159. For the following reasons, I do not conclude that, on construing the Settlement Agreement, the Claimant is precluded from bringing this claim: a. The Settlement Deed defined the subject “Claims” as being those claims “the Company ever had or may have against Mr Valentine arising out of or connected with…[Proceedings] against Mr Valentine issued on 31 March 2016 under claim number 8103 of 2016.” b. The Settlement Deed stated that: “This deed is in full and final settlement of, and each party releases all or any Claims it has against the other party.” c. The language used in the Settlement Deed is of settlement/release as between the parties to the Settlement Deed rather than in satisfaction of the Company’s claims as a whole and against whomever. Indeed, the Settlement Agreement expressly stated that “a person who is not a party cannot enforce or enjoy the benefit of any terms of this deed under the contracts (Rights of Third Parties) Act 1999 .” d. Some of the losses pursued in the Misfeasance Claim did mirror the losses pursued in the present claim e.g. in the Misfeasance Claim it was alleged that Mr Valentine authorised or allowed the Defendant to receive from CLL the balance of £80,750 due in respect of the Equipment when Mr Valentine knew there was no legitimate justification for payment of that sum to the Defendant. Mr Cook…”. However, other losses pursued in the Misfeasance Claim did not mirror the losses pursued in the present claim such that Mr Valentine and the Defendant were not concurrent wrongdoers in respect of all of the losses e.g. in the Misfeasance Claim it was alleged that Mr Valentine ought (i) to have taken appropriate steps to collect in and/or secure book debts of £105,667.70, and (ii) to pay the sum of £108,388 in costs and expenses that had been incurred by the Liquidator in investigating the actions and omissions of Mr Valentine. e. Consistent with the Settlement Deed not having the intended effect of satisfying the Company claims against non-parties, the Liquidator sold claims to third parties. In his Receipts and Payments Account, the Liquidator explained: “ASSIGNMENT OF CLAIMS Initial investigations led me to believe that there were possible claims against parties who were involved in the 'sale' and purchase of Company assets and certain transactions that took place during 2004 and 2005. Whilst there was certain evidence of claims, it was not considered cost effective to pursue in the liquidation. The claims were therefore sold via "blind auction", the winning offer being from the former director in the sum of £17,250 and as such the claims were assigned to him.” f. The Settlement Deed was a compromise expressed to be without “an admission of liability or wrongdoing from either party to this deed.” It defined the settlement amount as “£335,000…. inclusive of interest, VAT, costs, and any other sum”. There is nothing in the language of the Settlement Deed to justify an inference that the Company was accepting this sum as representing the full measure of its claims arising out of the events in 2004/2005. Indeed, the clear inference from the surrounding circumstances is that the Company was not accepting this sum as representing the full measure of its claims. g. The total amount claimed from Mr Valentine in the Misfeasance Claim was £426,839.71 plus interest and costs when compared to a settlement amount of £335,000 inclusive of interest and costs. h. The Liquidator’s Abstract of Receipts and Payments from 12 December 2005 to 9 December 2019 recorded the following: i. It is apparent from the Abstract that the legal and other fees incurred in connection with the Misfeasance Claim were substantial. By my calculation those fees totalled £210,386.57 and ignoring the office holder’s fees of £140,011, although undoubtedly a very large proportion of the office holder’s fees were also incurred in connection with the Misfeasance Claim. The agreed settlement did not therefore represent the full measure of the Company’s estimated losses, but rather sought to cover the Liquidator’s fees and expenses. j. In conclusion – i. The language of the Settlement Deed is entirely consistent with an intention to release Mr Valentine individually rather than create a situation in which any further action against parties not identified in the Settlement Deed were to be barred. ii. The Settlement Deed cannot properly be construed as representing the full measure of the Company’s losses in respect of the Defendant as well as Mr Valentine.

160. It is conceded on behalf of the Claimant that credit must be given for any sums recovered from Mr Valentine insofar as they were in respect of the same loss pursued against the Defendant, since otherwise the Company would effectively recover in aggregate an amount in excess of its loss. As already noted, the Settlement Deed failed to fix any measure of any particular loss. In any event, the entirety of the settlement monies were absorbed by the costs and expenses of the Liquidation, and certainly neither the Company nor its creditors derived any benefit from them. Allegations of professional misconduct

161. In his closing arguments, the Defendant made serious allegations of professional misconduct against the Claimant’s solicitor and the Liquidator (Mr Nicholson). It would be procedurally unfair for me to make any findings in relation to those allegations when those allegations had not been put to the professionals so that they had the opportunity to respond to them - MRH Solicitors -v- The County Court sitting at Manchester [2015] EWHC 1795 (Admin) .

162. In any event, I consider that those allegations were merely another attempt by the Defendant to divert attention away from his own fraudulent conduct, which lies at the heart of the events in 2004/2005. Overall Conclusion

163. The Defendant is liable to pay equitable compensation in the amount of £123,250 being the total of Company funds dishonestly paid away by the Defendant for the financial benefit of him and his associates at the expense of the Company and in breach of the fiduciary duty that the Defendant owed to the Company.