![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] | |
England and Wales High Court (Chancery Division) Decisions |
||
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Davidson & Ors v Looney (Re Kieran Looney & Co Ltd) [2023] EWHC 197 (Ch) (02 February 2023) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2023/197.html Cite as: [2023] EWHC 197 (Ch) |
[New search] [Printable PDF version] [Help]
BUSINESS AND PROEPRTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
In the Matter of Kieran Looney & Co Ltd (in Liquidation)
And in the Matter of the Insolvency Act 1986
B e f o r e :
____________________
(1) Anthony Davidson and Andrew McTear (acting as Joint Liquidators of Kieran Looney & Co Ltd) (2) Kieran Looney & Co Ltd |
Applicants |
|
- and - |
||
Kieran Joseph Looney |
Respondent |
____________________
Kieran Joseph Looney acting in person
Hearing dates: 5, 6 and 7 July 2022
____________________
Crown Copyright ©
Deputy ICC Judge Kyriakides :
The Application
Background
The Company and Mr Looney
The Company's Accounts
Fixed Assets | Debtors | Cash at bank | Creditors | Net Assets | |
2010 Original Accounts | £4,031 | £3,985 | £8,974 | £183,623 (DLA is £179,056) |
-£167,632 |
2011 Original Accounts | £3,225 | £266,337 | £2,207,674 | £1,139,702 (DLA is £0) |
£1,337,749 |
Second Revised Accounts | £3,225 | £755 | £103,498 | £1,740,857 (DLA is £1,724,585) | -£1,633,379 |
2012 Original Accounts | £702,015, (including an addition at cost of £930,000 less depreciation) | £38,794 | £517,902 | £10,356 |
£1,248,355 |
First Revised Accounts | £2,752 | £38,794 | £17,902 | £10,356 (DLA- £0) | £49,092 |
Second Revised Accounts | £702,015 (including an addition at cost of £930,000 less depreciation | £38,794 | £24,955 | £2,488,322 (DLA- £2,477,966) | -£1,722,558 |
2013 Original Accounts |
£561,612 (£935,375 less depreciation) | £222,258 (DLA- £219,902) | £745,543 | £100,334 | £1,429,070 |
First Revised Accounts | £2,202 | £222,258 | £7,681 | £100,334 (DLA-£35,444) | £131,807 |
Second Revised Accounts | £561,612 | £2,867 | £252,603 | £2,186,920 | -£1,369,838 |
2014 Original Accounts |
£456,310 | £2,867 | £951,522 | £93,217 | £1,317,482 |
First Revised Accounts | £1,762 | £2,867 | £6,807 | £93,217 (DLA-£0) | -£81,781 |
Second Revised Accounts | £456,510 | £0 | £3,633 | £1,941,369 (DLA-£1,892,280) | -£1,481,426 |
2015 Original Accounts |
£2,348 (including the disposal of an asset which had cost £930,000) | £334,035 | £951,205 | £41,380 | £1,246,208 |
First Revised Accounts | £1,410 (not including any disposals) | £4,035 (DLA-£4,035) | £2,880 | £161,380 | -£153,055 |
Second Revised Accounts (including within the 2016 accounts) | £1,410 | £0 | £6,915 | £20,350 (DLA £12,797) | -£12,055 |
2016 | £1,128 | £0 | £5,208 | £9,981 (DLA-9,695) | -£3,645 |
The Payments
The Procedural Background
Mr Looney's application to rely on his witness statement dated 28 June 2022
"If a witness statement…for use at trial is not served in respect of an intended witness within the time specified by the court, then the witness may not be called to give oral evidence unless the court gives permission".
35.1.1. the first related to the alleged justification for allocating expenses incurred in relation to the Trafigura Litigation to Mr Looney's DLA. In paragraph 20 of his Points of Defence, Mr Looney sought to justify this allocation by claiming that the Trafigura Litigation was for the benefit of the Company as income from the Trafigura Agreement had been allocated to the Company and it was Mr Looney's intention to allocate any damages awarded in the proceedings to the Company. However, in his witness statement Mr Looney sought to justify the allocation on the basis that: (i) the Company owned the intellectual property rights to the Materials Program that had been licensed to Trafigura under the Trafigura Agreement; (ii) Trafigura had copied that program; and (iii) as the Company owed the intellectual property rights to the program, any damages paid to Mr Looney in the Trafigura Litigation would have to be paid by him to the Company;
35.1.2. the second related to the purchase of a motor yacht in the names of Mr and Mrs Looney. It is the Liquidators' case that the yacht belonged to Mr and Mrs Looney because it was in their names and, therefore, that the sum paid for it could not credited to Mr Looney's DLA. In his witness statement, Mr Looney seeks to explain his belief that the yacht was in their personal names because of Spanish legal requirements, an explanation that had not previously been proffered by him;
The Witnesses
The issues
The Nature of the Payments
"Depending on the other evidence, it may be that the absence of a satisfactory explanation drives the court to conclude that there was no proper justification for the payment. However it seems to me to be a step too far for Mr Aslett to say that, absent any explanation, in all cases the default position is liability for the Respondent directors. In some cases, despite the absence of any adequate explanation, it may be clear from the other evidence that the payment was one which was made in good faith and for proper company purposes".
"a contract whereby one person lends or agrees to lend money to another, in consideration of a promise, express or implied to repay that sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or without interest. In many circumstances, the question whether a particular transaction is, in law, a "loan" or not will be immaterial, since the transaction will take effect according to the intention of the parties, however the transaction is classified";
50.2.1. in his oral evidence, Mr Looney candidly admitted that he just took money from the Company as and when he wanted to by drawing a cheque (and presumably procuring the various other transfers of money to be made) and that no thought was given by him regarding such Payments at the time they were made. He further admitted in his oral evidence that no formalities were carried out by him in relation to the Payments. Clearly, no thought was given by him as to whether any formalities were required and, if so, what considerations he should have taken into account in deciding whether or not to make the Payments. Such conduct is consistent with his making no meaningful distinction between himself and the Company;
50.2.2. the Payments do not appear to have been reflected as forming part of Mr Looney's DLA in either the Original Accounts or in the First Revised Accounts. The first time that they appear to have been classified as forming part of Mr Looney's DLA are in the Second Revised accounts for the years ended 30 April 2012, 30 April 2013 and 30 April 2014 as well as in the Loan Schedule. These significant revisions were made well after the Company had gone into liquidation and significantly during the course of the Liquidators' investigations. In light of this, in my judgment, the Original Accounts and the subsequent First Revised Accounts, which remove the Trafigura income from the accounts, are a better reflection of the original intention regarding the Payments. That intention appears to have been that the Payments were not loans made by the Company to or for the benefit of Mr Looney, but were payments made to him or for his benefit in respect of which there was no intention or agreement by Mr Looney to make any repayment.
Whether the Payments were made in breach of Mr Looney's fiduciary duties
The claim under CA section 171
The Law
"92. The law relating to proper purpose is clear, and was not in issue. It is unnecessary for a claimant to prove that a director was dishonest, or that he knew he was pursuing a collateral purpose. In that sense, the test is an objective one. It was suggested by the parties that the court must apply a three-part test, but it may be more convenient to add a fourth stage. The court must:
92.1 identify the power whose exercise is in question;
92.2 identify the proper purpose for which that power was delegated to the directors;
92.3 identify the substantial purpose for which the power was in fact exercised; and
92.4 decide whether that purpose was proper.
93. Finally, it is worth noting that the third stage involves a question of fact. It turns on the actual motives of the directors at the time: Re a Company, ex parte Glossop [1988] BCLC 570 at 577f-g."
"8. In my judgment the correct approach is as follows. Overall, the burden of proof is on the Applicant. He must prove his pleaded case. To the extent, however, that the Applicant's pleaded case rests on the wrongful transfer to the Respondent (or those connected with her) of money or other assets belonging to SC1, a two-stage process is involved. First, it is for the Applicant to prove, within the bounds of his pleaded case, the transfer of given sums or other assets belonging to SC1. As part of this first stage, where ownership of the asset or money in question is in issue, it is for the Applicant to establish on a balance of probabilities that the asset or money in question belonged to SC1. It is only once the Applicant has established the transfer or payment of assets or money belonging to SC1 that the second stage is engaged. At the second stage, the evidential burden is on the Respondent to prove that the payment or transfer was proper."
Discussion
The Claim under CA s 172(1)
The claim for breach of duty under CA s 175(1)
Whether the breaches of duty were ratified
Whether the claims are statute-barred
Whether Mr Looney should be relieved from liability under CA 1157
"If in proceedings for negligence, default, breach of duty or breach of trust against-
(a) an officer of the company.
(b) ….
it appears to the court that the officer or person is or may be liable but that he acted honestly and reasonably, and that having regard to all the circumstances of the case (including those connected with his appointment) he ought fairly to be excused, the court may relieve him, either wholly or in part, from his liability on such terms as it thinks fit."
The amount of compensation that Mr Looney should be ordered to pay under IA s 212
The Loan Account
Professional and Legal Fees: £2,354,978
The Yacht: £930,000
Miscellaneous Expenditure: £203,131