Ultraframe (UK) Ltd v Fielding & Ors

These are five applications for permission to appeal. They all concern judgments of Lewison J given in a dispute conducted by both sides as if it were a State trial. He heard and determined the main dispute. It took over 90 hearing days and his judgment runs to 1929 paragraphs covering 487 pages. He also heard and determined related disputes and those consequential on his main judgment. Jonathan Parker LJ, having considered the applications for permission on paper directed, most unusually for permission to appeal applications but wholly sensibly given the size of the dispute, that they be renewed for oral hearing for 1 day on notice to the respondents.

Since these are applications for permission to appeal there is no point in attempting to summarise the facts or details of the dispute. The reasons for our decisions, having no precedential value, are only of interest to the parties and can be set out in concise form which will, we hope, be intelligible to them even if the disappointed party does not agree. If the wider world wants to understand in more detail it will have to read what we say having read the main judgment of Lewison J [2005] EWHC 1638 (Ch), his judgment in relation to certain preliminary issues [2004] EWHC 2624 (Ch), his judgment in relation to costs, 7^th October 2005, pp.73-90 et seq. of transcript together with his subsequent written judgment refusing to alter his ruling, [2005] EWHC 2506 (Ch), and his judgment refusing permission to bring contempt proceedings (same transcript. pp.151-155).

The five applications and our decisions are as follows:

The Judge held that the principal Burnden player, Mr Fielding, lied, forged documents, entered into bogus transactions with intent to deceive and perjured himself to defend thoroughly dishonest activities. A large part of the trial was taken up with exposing this. Overall it was held that Mr Fielding orchestrated an illegal conspiracy to gain and keep control of Northstar and Seaquest (“SQ”).

However the Judge also held that the transfer of assets from these companies (principally Northstar) was lawful and that an IP licence granted by SQ was valid. It is these findings which Ultraframe wish to challenge.

Mr Andrew Hochhauser QC for Ultraframe accepts that the test which will be applied on any proposed appeal is whether the decision below was “wrong”. It is not enough to show that the Court of Appeal might take a different view of the evidence on the transcript – after all it is the Judge who saw and heard and assessed the witnesses, immersing himself in the case in a way which is impossible for a Court of Appeal.

Mr Hochhauser suggested a series of possible orders we could make. The three key ones are:

The first of these would, as it seems to us, clearly lead if the appeal were to be successful, to a retrial – which would take at least as long as the original trial if not longer (what was said last time would be put to lots of witnesses). It would be unsatisfactory at best because by then the events would be staler, and the witnesses “rehearsed” by the earlier trial. Nonetheless, if we had concluded that there was a realistic prospect of success, we would have granted permission on this basis.

However we do not think there are realistic prospects of success. The principal attack on the judgment is that it was said to be “blinkered.” What the Judge is said to have done is, having found all the illegalities and dishonest acts concerning control of the shares in the two companies, failed to realise and hold that there was a parallel dishonest operation going on to get “the business” of these companies transferred to other Burnden companies.

As part of that attack Mr Hochhauser showed us material from which he said it could be inferred that Mr Fielding was controlling the two companies from behind the scenes as a shadow director earlier than the date found by the Judge. That may have been so, but, as Mr Richard Snowden QC pointed out, it does not assist the main case which Ultraframe seek to advance. That is about a “wrongful” transfer of the “businesses.” And the key events here all took place after the point in time from which the Judge found Mr Fielding to be manipulating things behind the scenes.

Actually, whilst it is often convenient shorthand to talk about “the transfer of a business,” what is involved in law is the transfer of assets used to conduct a business - chattels, land, plant and machinery and so on, along with intangibles such as goodwill, customer lists, know-how and IP rights generally. The Judge in careful and full detail analysed exactly what assets were transferred and when. We can see no real prospect of this careful and detailed analysis being disturbed on appeal. He concluded that there were good business reasons for the transfers, particularly by reason of the problem that Northstar were in the impossible commercial position of being suppliers to the trade and competitors of those whom it supplied.

Moreover realistically what was transferred was of little value. Mr Hochhauser tried to answer that with a colourful analogy – what was transferred wrongly was an acorn. His clients are entitled to the profits of that acorn – the tree. We are satisfied that that there is no realistic prospect of that case succeeding given the Judge’s detailed findings about the transfer. It makes no difference that Mr Fielding was a dishonest man in many other respects.

As to Mr Hochhauser’s fall-back positions, we do not think (2) is realistic. He drew an analogy with what happened in The Ikarian Reefer [1995] 1 Lloyd’s Law Rep. 455 where the Court of Appeal found on appeal that a trial Judge’s findings of honesty in a witness could not stand. That is of course possible. But there is no analogy with this case. On the contrary the Judge here found that Mr Fielding was dishonest in all the ways he set out. The Judge did not make the error of saying it follows that everything Mr Fielding said was untrue or that everything he did was dishonest. What the Judge did was to analyse with care each detail of what was said and done. There is no realistic prospect of faulting his detailed analysis. Moreover, as we have said, much of the attack, relating as it did to when Mr Fielding first took control of the companies, is beside the point.

Next there are Mr Hochhauser’s suggested points of law. He identified four which he said arose and had a realistic prospect of success even if all the Judge’s findings of fact remain undisturbed. None of them seem to us to arise if the Judge’s detailed findings as to what was transferred and when and why remain undisturbed.

In his oral argument Mr Hochhauser particularly focussed on s.727(1) of the Companies Act 1985. He submitted the Judge was wrong in law not to take into account that Mr Fielding had become a de jure director by dishonest means. He pointed to the words “(including those connected with his appointment)” in the section. We cannot see any error of law here. The problem is that the provision (about relief from liability for negligence etc.) simply does not come into play on the Judge’s findings of fact about the “transfer of the business”. He was considering the section in relation to a failure explicitly to declare an interest which was in fact known. He treated the breach as “no more than a technical breach of duty” and we see no reasonable prospect of that finding of fact being upset.

It is well worthy of consideration by the Court of Appeal whether, where an ultimately successful party has, on the way to success, lied and sought to maintain forgeries and in other ways been thoroughly dishonest and moreover has greatly lengthened the trial in having these matters exposed, the usual rules as to costs are displaced – that given those circumstances the general rule ought to be no order for costs. It is true that a witness for Ultraframe, a Mr Birkett, was also held to be a liar, but it may well be that this is irrelevant – he was essentially just a witness rather than a party.

Moreover there is real room for argument that the Judge’s order ought fully to have reflected the costs of such exposure and that the present order does not do so. So permission to appeal is granted in respect of the costs of the main action. Whether that permission should extend to the costs of other actions remains to be decided.

This was about a claim by Ultraframe that it suffered delay in recovering its shares in Northstar and Seaquest. It says that by reason of the delay it suffered loss in that the shares were worth less when they did take control of the companies than they were worth when they should have had control. This is because the “business” had been transferred out of the companies.

Lewison J dealt with this at [57-75] of his Preliminary Decision. He held in effect that the “delay” claim was really a claim for reflective loss suffered by the companies and as such unrecoverable. That seems right, but even if not the claim is impossible to reconcile with an earlier stance of Ultraframe’s solicitor “that there is no longer anything of practical import to be litigated in the Leeds proceedings. This has been the position of Ultraframe for some months.”

Moreover it was and remains the case that the damages claim remains wholly unparticularised and unrealistic. In truth Ultraframe, if it had had the shares earlier, would simply have closed the businesses down.

In all these circumstances we can see no realistic prospect of success on appeal.

Whether an appeal about this is viable depends entirely upon whether the IP licence granted by SQ for £500,000 can be impugned. It was in fact granted (there is no question of forgery of this document), a part payment was made, and the licence was affirmed by SQ’s liquidator.

The Judge found the grant of the Licence was a genuine transaction – that is a decision of fact and we can see no reasonable prospect of showing that he was wrong.

This was clearly an exercise of discretion. Nothing decided by the Judge would prevent Ultraframe from raising the matter with the CPS. Remarkably that has not been done. Any contempt would have to be proved beyond a reasonable doubt – which would mean re-litigating everything. The Judge quite properly had regard to the overriding objective and whether the exercise could or should be conducted by the litigious Ultraframe.

Mr Hochhauser drew our attention particularly to the passage where the Judge thought that his costs order would be enough punishment. We do not endorse that (and have in any event given permission to appeal on costs), but quite apart from that there was ample material upon which the Judge could and did exercise his discretion.

I agree.