Analysis
The Claimants were a group of companies (“Angel Group”) comprising a holding company (“AGL”) and three wholly owned subsidiaries which were in the business of property development and commercial and residential lettings. Its business was substantially dependent on contracts with the UK Border Agency to provide accommodation for asylum seekers. The Defendant, who was the sole Director of the Angel Group, held (directly or indirectly) all of the shares in AGL. The Defendant, and one of the subsidiaries, purchased a number of real properties located in Israel, Northern Cyprus and California (“Properties”) and, by Declarations of Trust dated 30 April 2007 and 30 April 2008 (“Trust Deeds”), declared that she held them and other specified assets, which included deposits in two bank accounts, “in trust for [AGL] or various of its subsidiaries [“the beneficiaries”] who have funded the acquisition of [properties listed on the attached Schedule]” and she undertook to transfer or otherwise deal with them in such manner as the beneficiaries may direct and to account to them for all monies in respect thereof.
As a result of the non-renewal of the contracts with the UK Border Agency, the turnover of the Angel Group fell from £31m in 2009 to £17m in 2010 and, in reliance on purported Resolutions of AGL dated 30 April 2009 and 11 May 2010 (“Resolutions”) declaring dividends of £7.2m and £11m respectively, the beneficial interest in the Properties was transferred back to the Defendant. Following a meeting between representatives of AGL and the Bank held on 15 June 2011, a review of the businesses carried on by the Angel Group was undertaken by KPMG and this revealed the need to restructure due to significant financial difficulties. In the event, the Angel Group went into administration in October 2012 or April 2013 and then liquidation in December 2015. With the possible exception of real properties located in Northern Cyprus, the Defendant succeeded in selling the Properties between 2012 and 2017. The Angel Group, acting by their liquidators, brought claims against the Defendant to recover the Properties (or their proceeds of sale) and for compensation for breach of trust or breach of fiduciary duties.
Held (allowing the claims):
The Defendant’s argument that the Trust Deeds created a trust of the Properties only to the extent that AGL or its subsidiaries funded their acquisition had no merit. She retained no beneficial interest and, on the natural interpretation of the words used, the trust took effect in favour of AGL or, where a subsidiary had funded (in whole or in part) the purchase price, in favour of that subsidiary. Further, the Properties were not restricted to real properties as they included rights of participation in a project and a general partnership and, accordingly, there was no repugnancy in using the words “various properties” to include the deposits in the two bank accounts. On the basis of the available evidence, the documents recording the Resolutions could not have been created before their respective dates and, therefore, AGL did not declare dividends and resolve to transfer the Properties at meetings referred to in the Resolutions. Those events did not take place. Instead, those documents were produced on behalf of and signed by the Defendant to give the impression that such events did occur at those times; they were deliberately produced to give the impression to the Bank, creditors and any future office holder of AGL that a dividend had been declared and the Properties transferred at a time when those transactions could not be challenged on the ground of the impending insolvency of the Angel Group.
The Resolutions had been prepared for and signed by the Defendant dishonestly, as deliberately false records of events which did not take place, with the intention of deceiving those who might read them. The fiduciary duties of a company director which is insolvent, or bordering on insolvency, differ from duties in respect to a company which is able to meet its liabilities; in the former case, the director’s duties are to have proper regard for the interests of the company’s creditors and prospective creditors. In this case, it was clear that the Defendant acted solely in her own interests and in breach of her fiduciary duties to the creditors of AGL. It followed that the Defendant was in breach of trust in selling the Properties either because they remained held in trust for AGL or its subsidiaries or, alternatively, because any transfer of the beneficial interest in the Properties was a breach of fiduciary duty and so the Defendant thereafter held them as constructive trustee. In either case, the Properties (or their proceeds of sale) belonged to AGL and its subsidiaries and, to the extent that they had been sold and the proceeds of sale dissipated, the Defendant was liable in damages for breach of trust.
The date of assessment of the measure of damages was usually the date of trial; however, in this case, had the Properties not been appropriated by the Defendant, the administrators or liquidators of the Angel Group would probably have sold them within a reasonable time of being appointed but, because it was not possible to say when precisely that would happen, the prices achieved when the Properties were actually sold was a more appropriate basis for calculating the compensation due than their current market value. In the absence of evidence of the prices achieved for the sale of the real properties in Northern Cyprus, the appropriate value for which compensation should be paid was the value given in evidence by the expert valuer. In the event that any real property was still owned by the Defendant, no compensation would be payable as title would still belong to AGL.
JUDGMENT THE HONOURABLE MR. JUSTICE FANCOURT: Introduction [1] The Claimant companies, acting by their liquidators, bring these claims against the Defendant, Ms Davey, to recover properties (or their proceeds of sale) in California, Israel and Northern Cyprus (“the Properties”) and for compensation for breach of trust or breach of fiduciary duty. [2] Before the Claimant …Continue reading "Angel Group Ltd & ors v Davey [2019] WTLR 359"