Electrosteel Castings (UK) Ltd v Metalpol Ltd

Definitions

I shall adopt the following abbreviations

Introduction

This is an application by Electrosteel to restrain the presentation of a winding up petition by Metalpol. It is not in dispute that in a letter dated 7^th March 2014 Metalpol’s solicitors, BRM threatened to present a petition unless £264,091.05 was paid by 15^th March 2014 and that it has not withdrawn the threat.

Electrosteel contends that it has an equitable set off or a cross claim against Metalpol which substantially exceeds the sum owed by it to Metalpol. In those circumstances the presentation of the petition should be restrained.

For the purpose of the introduction the cross claims can be summarised though it will be necessary to look at them in a little detail later in the judgment.

In support of the claims made against Metalpol Electrosteel rely on a number of documents

A summary of the claims/cross claims made by Electrosteel against Metalpol is contained in the following table:

Metalpol accepts that Electrosteel may have a cross claim but denies that quantum could possibly exceed the £241,088 due to it. In those circumstances it contends that the Court should not restrain the presentation of the petition.

The law on Disputed Debts /Cross Claims

There was very little (if any) dispute between Counsel as to the relevant law. In his skeleton argument Mr Lakin summarised the position in this way:

Mr Jory QC referred me to three statements from the authorities:

As Vice-Chancellor Morritt J said in Re: The Arena Corporation Ltd [2004] EWCA Civ 371

“For my part I think that the traditional test of “bona fide disputed on substantial grounds” is in this case, for all practical purposes, synonymous with “real as opposed to frivolous” (para. 53)

As the Chancellor (Sir Andrew Morritt) said in Abbey National Plc v JSF Finance & Currency Exchange Co Ltd [2006] EWCA Civ 328

“….. once it is established that there are substantial grounds for disputing the claim, which may include issues of law, and that they are advanced honestly the court should not go on to consider the prospects of success of either party to the dispute” (para 46)

Furthermore, as Peter Gibson LJ said in Alipour v Ary [1997] 1 WLR 534

“It has long been the practice of the Companies Court when faced with a creditor’s petition based on a disputed debt to dismiss the petition…The reason for the practice has been essentially pragmatic. The vast majority of petitions to wind up [companies] are creditors’ petitions. The Companies Court procedure on such petitions is ill-equipped to deal with the resolution of disputes of fact. There are no pleadings, there is no [disclosure] and there is no oral evidence normally tolerated on such petitions”

In the light of these authorities Mr Jory QC submitted that the test was whether Electrosteel’s claims were real as opposed to fanciful. If the Court was satisfied that they were real it should not investigate them further. He submitted that the test was not a high one.

The allegations of breach of fiduciary duty

It will be recalled that Metalpol was incorporated on 29^th May 2012. There were 5 issued shares all in the name of Mr Radford’s wife.

During the course of its investigation Electrosteel discovered on Mr Radford’s computer a document dated 3^rd July 2012 describing the process and principles behind the establishment of “NewCo”. It followed from meetings with Accountants, Solicitors and key employee and partner (Mr Thornton).

It referred to Mr Radford holding the equity and that when Metalpol Poland put in matched funding there would be sufficient working capital. It proposed that the shareholding would be divided as 40% for Mr Radford, 35% for Metalpol Poland and 15% for Mr Thornton.

However Mr Radford’s interest was to be kept secret:

The Business activities of NewCo included:

In a section headed projections a number of matters were highlighted:

In paragraphs 34 to 36 of his first witness statement Mr Lohia makes a number of points about this document. First he states that neither he nor Mr Jalan knew anything of Mr Radford’s interest in Metalpol. Second, he points out that the commission paid to Metalpol was at the expense of a price increase to Electrosteel. Third he points to the fact that when on his travels (at Electrosteel’s expense) Mr Radford was promoting the interest of Metalpol. Fourth he points to the direct reference to Mr Radford influencing the level of sales to be secured by Metalpol.

On 23^rd August 2012 Mr Radford wrote to Mr Thornton offering him the position of Sales Director of Metalpol reporting to the Managing Director. He signed the letter as Managing Director of Metalpol. The offer included a share incentive.

On 13^th September 2012 the commission agreement between Metalpol and Metalpol Poland was signed. It set out the commissions payable to Metalpol. Commissions were only payable in respect of sales to customers other than Electrosteel unless expressly agreed. The agreement was signed by Mr Radford on behalf of Metalpol.

On 1^st October 2012 Mr Thornton executed a declaration of trust declaring that he held the whole of the shareholding of Metalpol on trust for Mr Radford. In his witness statement Mr Thornton does not explain why the Declaration of Trust was executed. Mr Jory QC submits that it is obvious that it was executed to keep Mr Radford’s shareholding in Metalpol secret.

On 30^th October 2012 Electrosteel and Metalpol signed a Memorandum of Understanding relating to the basis of their relationship. It is not necessary to refer to it in detail save to note that it was signed by Mr Radford as a Director of Electrosteel and Mr Thornton as a Director of Metalpol. In fact Mr Thornton had not been appointed a Director at that time. He was not so appointed until the end of December 2012.

On 12^th December 2012 Mr Radford, Mr Thornton and Metalpol Poland signed a Joint Venture Agreement relating to Metalpol. Under the Agreement Mr Radford would be a 55% shareholder but his shares would be held by Mr Thornton on trust.

The Board had the responsibility for the supervision and the management of Metalpol. It envisaged 3 directors one nominated by Mr Radford, and one by Metalpol Poland. Any decision on reserved matters required written approval by Mr Radford and Metalpol Poland.

Mr Radford’s director held the post of Chairman and a casting vote.

In paragraphs 19 and 20 of his witness statement Mr Lohia makes the point that these arrangements were designed to keep Mr Radford’s interest in Metalpol secret. He also draws attention to clause 6 appears to be contrary to the interests of Electrosteel in that it prevented Electrosteel and Metalpol Poland from dealing directly without Mr Radford’s permission.

On 19^th December 2012 Mr Thornton was appointed a director of Metalpol though he does not seem to have left his previous employment until 31^st December 2012. According to Mr Thornton trading started in January 2013. Mr Thornton ran the business on a day to day basis. Both Mr Radford and Mr Thornton assert that Mr Radford received no salary from Metalpol. [An entry in the bank account suggesting that a payment of £2,765.88 was such a salary payment was, they both say, an error].

It is not in dispute that there was substantial intercompany trading between Electrosteel and Metalpol. It is equally not in dispute that Metalpol occupied part of Electrosteel’s premises in Chesterfield. Metalpol was also allowed access to Electrosteel’s server.

According to both Mr Radford and Mr Thornton, Mr Radford was not involved in the day to day ordering or sale of goods by Electrosteel. This was carried out by Mr Young.

On 27^th February 2013 Mr Radford executed a guarantee on behalf of Electrosteel in respect of goods to be supplied to Metalpol by FWB. When these proceedings were commenced it was believed that there was a contingent liability under that guarantee in the sum of £49,788.83. In his second witness statement Mr Thornton has exhibited documents showing that the maximum liability under the guarantee is £6,875.08. Mr Jory QC accepted that this was the position.

On 10^th September 2013 Mr Radford purported to resign from his post as Managing Director. However following discussions with Mr Lohia and Mr Jalan he agreed to work his notice of 12 months. Investigations into his conduct began in December 2013. It is common ground that he ceased to be employed as Managing Director on 6^th January 2014. He resigned his directorship of Electrosteel at or about that time.

On 14^th November 2013 (that is to say whilst he was still acting as Managing Director of Electrosteel) Mr Radford wrote to Barry Price (then an employee of Electrosteel) offering him a job as technical manager of the Metalpol group at a salary of £29,000 p.a. The letter is signed by Mr Radford as Managing Director of Metalpol.

On 31^st January 2014 IM on behalf Electrosteel sent a letter before action to Metalpol alleging claims totalling £480,672. On 7^th March 2014 BRM replied in detail to the allegations. In the letter BRM threatened to present a winding up petition unless £264,091.05 was received before 14^th March 2014. This deadline was subsequently extended to 24^th March 2014.

These proceedings were commenced on 19^th March 2014. On 21^st March 2014 Judge Raeside QC granted an interim injunction and gave directions. The matter came before me on 29^th May 2014 and 10^th June 2014 when I reserved judgment.

The evidence comprised 2 witness statements from Mr Lohia, two witness statements from Mr Thornton and one from Mr Radford.

Breach of Fiduciary Duty by Mr Radford

It is not necessary to go into this in detail because in paragraph 10 of his skeleton argument Mr Lakin accepts that the court may consider that there is a clear argument that Mr Radford has acted in breach of his duties towards Electrosteel.

It is, to my mind, well and realistically arguable that Mr Radford’s failure to disclose his interest in Metalpol to Mr Lohia and Mr Jalal amounted to a breach of fiduciary duty. It is equally well arguable in the light of the elaborate arrangements disclosed by the documents set out above that Mr Radford deliberately concealed his interest and directorship of Metalpol from Electrosteel.

As Mr Jory QC points out it is also well arguable that Mr Radford was in breach of his contractual duty of fidelity to Electrosteel.

It is, however, not sufficient for Electrosteel to establish a claim against Mr Radford. In order to justify the restraint of the winding up petition it must establish a claim against Metalpol.

Dishonest assistance in breach of fiduciary duty.

Mr Jory QC submitted that Metalpol was an accessory to the breach of fiduciary duty. As Mr Lakin pointed out the ingredients of this liability were summarised by Lewison J in paragraph 1480 of the judgment in Ultraframe [2005] EWHC 1638 (Ch)

In paragraph 1481 Lewison J set out the combined test for dishonesty in the following way:

Morgan J formulated the test in a slightly different way in Aerostar Maintenance v Wilson [2010] EWHC 2032 (Ch) at paragraph 184. After identifying the relevant authorities in paragraph 183 he summarised his conclusion:

Mr Jory QC submits first that Mr Radford’s conduct was dishonest within that test, and second that, as the de facto managing director of Metalpol Mr Radford’s dishonesty is to be attributed to Metalpol. If necessary he submits that Mr Thornton was also dishonest within the test.

Mr Lakin accepted that Mr Radford was the de facto Managing Director of Metalpol until December 2012. He accepted that for that period Mr Radford’s knowledge was to be imputed to Metalpol. When faced with the letter dated 14^th November 2013 written to Mr Price he was inclined to accept that the court might draw the same inference from the date when Mr Radford gave his notice in September 2013. However he contended that the Court could not draw that inference for the period when Mr Thornton was in charge of the day to day running of the business. He also drew my attention to denials by Mr Thornton in for example paragraph 11 of his witness statement that he had any knowledge of the extent of any disclosures by Mr Radford of the extent of his interest in Metalpol.

It has to be remembered that there has been no disclosure by Metalpol, Mr Radford or Mr Thornton. There has been no cross-examination of either Mr Radford or Mr Thornton. To my mind, however there is sufficient material in the documents for Electrosteel to have realistic prospects of establishing a claim based on dishonest assistance against Metalpol. The deliberate attempts to conceal Mr Radford’s interests as demonstrated in the Process and Principles Document, the Declaration of Trust and the Joint Venture Agreement may well lead the Court to infer that Mr Radford was not acting as an honest person would. The extent to which Mr Radford was controlling Metalpol for the period between January and September 2013 can only be determined after a trial. He did after all execute the guarantee in favour of FWB in February 2013. In the light of Mr Lakin’s concessions with regard to the period before January 2013 and after September 2013 it cannot be described as fanciful to submit that Mr Radford was also controlling Metalpol for the intervening 9 months. There are a number of questions surrounding Mr Thornton which are at present unanswered. What was the purpose of the Declaration of Trust and the Joint Venture Agreement, both of which he signed, if not to conceal Mr Radford’s majority shareholding and control of Metalpol? Why did he sign the Memorandum of Understanding if not to give the impression that he was in control of Metalpol? It is, to my mind, not fanciful for Mr Jory QC to submit that after disclosure and cross-examination the Court might find him to have been dishonest.

In my view claims against Metalpol based on dishonest assistance are in principle realistic. It will, however be necessary to look at the individual claims to determine the extent to which they can realistically be made out.

Conspiracy

Both Mr Jory QC and Mr Lakin referred me to the judgment of Morgan J in Aerostar for the ingredients of the tort of conspiracy. Three paragraphs from his judgment are relevant.

In the light of my conclusion in relation to the dishonest assistance claims it is to my mind realistically arguable that there was a combination between at least Mr Radford and Metalpol and possibly in addition Mr Thornton to injure Electrosteel by unlawful means (breach of contract or breach of fiduciary duty). I note that both Mr Radford and Mr Thornton assert that there was no intention to injure. However in the light of the discussion in paragraph 174 of Aerostar it is, to my mind not fanciful to suggest that it may be established.

Accordingly claims against Metalpol based on conspiracy are in principle realistic. It will, however be necessary to look at the individual claims to determine the extent to which they can realistically be made out.

Cumulative nature of claims

Before considering the individual claims it is important to bear in mind two points that have been drawn to my attention by Mr Lakin in his supplemental skeleton argument.

The first relates to the difference between cumulative and alternative remedies. As is pointed out in Snell’s Equity 32^nd Ed paragraph 7-052:

Authority for this proposition is Tang Man Sit v Capacious Investments [1996] 1AC 514 at 520. Electrosteel does not need to elect at the time the proceedings are brought but must make an election when judgment is given in its favour. It is then binding.

The second relates to the nature of a claim for loss of profit against an accessory who is found to have dishonestly assisted a fiduciary. This point was considered in some detail by Lewison J in paragraphs 1589 – 1601 of the judgment in Ultraframe. In effect he held that the dishonest assistant could be made to disgorge any profit that he (the dishonest assistant) made but this did not extend to profits made by the fiduciary. At paragraph 1600 Lewison J put it thus:

This view is repeated without adverse comment in paragraph 30-081 of Snell.

The Claims by Electrosteel

It is convenient to deal with the claims in a different order from the order set out above.

This is a straightforward claim for breach of contract. It is alleged that some of the flanges supplied are defective and that it will cost £14,001 to replace them. There is some dispute in the evidence (paragraph 67 of Mr Radford’s statement) as to whether the remedial work was caused by a breach of contract by Metalpol. However the claim plainly has realistic prospects of success.

I would accordingly allow the £14,001 as a genuine set off/counterclaim.

Commissions were received by Metalpol pursuant to the Distribution Agreement. This is thus a case of knowing receipt of monies received in breach of fiduciary duty rather than dishonest assistance. For reasons that I have given such a claim has realistic prospects of success. There is a dispute as to whether the total of such commissions amounts £17,672 or £27,254.50 which it is unnecessary for me to go into in detail. In my view the claim for £27,254.50 is not unrealistic.

I would accordingly allow the £27,254 as a genuine counterclaim. It is, however, an equitable claim for account of profits rather than a claim for loss.

The sum is now relatively small and is unlikely to make a real difference to the result of the case. In his supplementary skeleton Mr Lakin has reminded me that the surety does have rights against the principal debtor even before he has paid the debt. Those rights include a right in equity to compel the principal to relieve him of his obligation. The surety can sue in a quia timet action for an order that the principal debtor pay whatever is due to the creditor.

There is no authority as to whether such a claim is a cross claim for the purpose of the law relating the restraint of the presentation of winding up petitions. The existence of the potential liability under the guarantee is a cloud hanging over Electrosteel under which it might be liable. Metalpol has not discharged the liability under the guarantee. In those circumstances it seems to me as a matter of discretion right to take the contingent liability under the guarantee into account when assessing the value of the cross claim.

I would accordingly allow the £6,875 as a genuine counterclaim.

In paragraph 22 of his supplementary skeleton argument Mr Lakin drew my attention to paragraph 7-062 of Snell’s equity which includes:

Most of the authorities cited relate to claims for commission by agents who have acted in breach of fiduciary duty. There is a full review of the authorities in the Court of Appeal decision in Imageview Management v Kelvin Jack [2009] EWCA Civ 63. In the course of his judgment Jacob LJ set out a number of strong statements of law from the authorities including:

An attempt was made to apply this doctrine to the salary of a Bank employee who had acted in breach of fiduciary duty in Bank of Ireland v Jaffery [2012] EWHC 1377. The attempt failed on the facts of the case. In paragraphs 371 – 373 of his judgment Vos J (as he then was) said:

Mr Jory QC argues that this passage shows that such claims are maintainable even though they failed on the facts of that case. It will only be after a trial that the Court will be able to make necessary findings in relation to Mr Radford’s behaviour in relation to the period after June 2012. He relies in particular on the “Process and Principles’ Document” He accordingly submits that there are realistic prospects of establishing a Counterclaim for the full sum of the salary and expenses paid to Mr Radford after June 2012.

To my mind there are considerable difficulties facing Electrosteel’s claim. It will be difficult for Electrosteel to establish that Mr Radford’s breach of trust related to the sole subject matter of his employment; there is no authority where this principle has been applied to expenses paid out in respect of the employee’s employment. I do not however need to decide whether these difficulties are so great as to make the claim unrealistic.

In my judgment this claim is answered by paragraph 1600 of Lewison J’s judgment in Ultraframe. Whilst it is possible (and I put it no higher) that there is a claim against Mr Radford for the return of the salary and expenses there is no such claim against Metalpol. It is not a profit that Metalpol has made as a result of assisting in the breach. It is not a loss that Electrosteel has suffered.

It follows that the claim has no realistic prospect of success and I reject it.

In the letter before action IM described the claim thus:

In paragraph 69 of his first witness statement Mr Lohia describes differently:

In paragraph 106 of his witness statement Mr Radford draws attention to the lack of detail in the claim and invites the court to be sceptical about the claim.

In paragraph 64 of his second witness statement Mr Lohia attaches a breakdown which may be summarised:

Apart from this breakdown no detail has been provided of the nature of the claim. Thus it is not clear what investigations have taken place, what damage it is alleged has been caused to the workforce, why it was necessary to carry out work in India, why the travel expenses were necessary, why employees of the parent company were used.

I was referred to two authorities on this claim – paragraphs 294 – 299 of the judgment of Newey J in Avrahami v Biran [2013] EWHC 1776 (Ch) and paragraphs 84 – 87 of the judgment of Wilson LJ in Aerospace v Thames Water [2007] EWCA Civ 3

In paragraphs 294 and 296 of Avrahami Newey J said:

In Aerospace Wilson LJ summarised the law in relation to claims based on staff time. In paragraph 85 he approved the approach of Gloster J in this passage of a judgment.

In paragraph 86 he summarised his conclusions;

In my view the details provided by Mr Lohia do not come within a measurable distance of satisfying the above tests. It is not clear how the time was spent, whether it was spent investigating the claim. Furthermore in so far as employees of the parent company were used it is not clear why this gives a claim to Electrosteel.

In the absence of such details I regard the claim as unrealistic and would not allow it as a genuine set off/cross claim.

In paragraphs 50 – 52 of his first witness statement Mr Lohia alleges that Mr Radford deliberately placed orders for flanges with Metalpol rather than sourcing supplies in the best interests of Electrosteel. He suggests that if the orders had been placed with Electrosteel India the cost would have been significantly less. He submits that the only reason that the orders were not placed through Electrosteel India was because of Mr Radford’s influence over the ordering/purchasing process of Electrosteel.

Mr Lohia exhibited a one page schedule which purports to show that 4,250 flanges which were purchased from Metalpol at a total price of £143,751.28 could have been purchased from Electrosteel India for £79,276.18. The Schedule does not attempt to identify the individual contracts or the dates of the contracts. It simply identifies the total number of flanges of each type bought and compares what it alleges are the unit rate against the unit rate of Electrosteel India.

Mr Radford answers these allegations in paragraphs 68 to 72 of his witness statement. In summary:

Mr Lohia deals with these allegations in paragraph 47 of his second witness statement. He repeats that he cannot understand why Electrosteel purchased invoices from Metalpol at, what he asserts is, “such a high price”. He does not deal with Mr Radford’s assertions at all. He produced a second schedule giving more details of the price comparison schedule originally produced. The new schedule seeks to justify the figures and purports to show that the prices quoted by Electrosteel India would not have involved sale at a loss. A number of invoices are produced which are said to show the prices at which Electrosteel India purchased flanges and at which it could have supplied Electrosteel.

In paragraphs 53 to 57 of his first witness statement Mr Lohia asserts that Metalpol has supplied some £217,253.95 of bespoke items to Electrosteel since May 2012. Bespoke items are items which do not appear on supplier’s regular lists and it is thus not easy to compare prices.

He produced a Schedule of some 321 bespoke items. This shows that the cost to Electrosteel of these 321 items was £118,083.48. He asserts that an alternative supplier would only have charged £84,312. The difference amounts to £33,771.25 (or 29%). When this is scaled up over all the bespoke items the overcharge amounts to £52,503.04.

He also exhibits two separate invoices dated 15 and 16 October 2013. These are said to show that in respect of one order there was a mark up of £8,870 of approximately 100% by Metalpol from the price it had paid Rivitswade the previous day.

Mr Radford answers these allegations in paragraphs 73 to 82 of his witness statement:

In Mr Lohia’s second witness statement he denies the allegation of selectivity. He points out that Electrosteel got Metalpol’s invoice by mistake. He points out that the margin on bespoke items was 34% in 2011.

In paragraphs 59 and 60 of Mr Lohia’s first witness statement he asserts that Mr Radford supplied Metalpol with goods at discounted prices. He asserts Electrosteel’s margin was reduced. He exhibits a table showing loss of margin:

It is worth commenting that within each heading that there are wide variations within individual items. Thus in the pipe section (where the loss is alleged to be £7,860) the margins vary from -5% to 26%.

Mr Radford answers these allegations in detail in paragraphs 84 to 97 of his witness statement. I do not intend to set out his evidence in detail. In paragraph 89 he points out that as Metalpol did not commence trading until January 2013 its impact on sales up to December 2012 would be nil. There was no change in the margin at the end of the 2012/2013 financial year.

In paragraph 94 he summarises the position:

Mr Radford stresses that at no time was he involved in individual product procurement. All was done by Mr Young and his team.

In his reply Mr Lohia exhibits further invoices showing that in respect of some products the prices charged to Metalpol was lower than that charged to third parties. The obvious reason for the discrepancy is said to be that Mr Radford exerted his influence.

Mr Jory QC accepts that I cannot decide the trading claims on the limited information before me. He accepts that in any trial there would need to be disclosure and expert forensic evidence. He however submits that there is sufficient material in Mr Lohia’s evidence and the supporting schedules for me to hold that the claims are realistic. He draws to my attention the questionable conduct of both Mr Radford and Mr Thornton and invites me to view their evidence with scepticism. He relies on the experience of Mr Lohia in the field. He reminds that the test is not a high one.

Despite the force of these submissions I cannot accept them. To my mind these claims are largely speculative. My reasons for this view may be summarised.

There are two claims that I have not dealt with – the claim for Mitchell’s Investigation (£8,250) and for Development Work (£8,500). These claims total only £16,750 and thus will not affect the overall result. As a result I heard no argument on them and say no more about them.

Conclusion

In the light of my conclusion on the individual claims it is plain that the set offs or cross claims do not approach the sum of £241,088 which is due to Metalpol. In those circumstances I decline to continue the injunction granted by Judge Raeside QC.

I cannot leave this case without expressing my gratitude to both Counsel for the clear and helpful way the numerous issues in the application have been presented and dealt with. Their assistance has made a complex application manageable.

Handing Down

Following the conclusion of the argument on 10^th June 2014 I prepared a draft judgment which was circulated to the parties on 19^th June 2014. On 24^th June 2014 I received a number of uncontroversial proposed corrections from Mr Lakin on behalf of Metalpol and Mr Payne, the solicitor at IM with conduct of the matter, on behalf of Electrosteel. Mr Jory QC was at that time involved in a different trial and did not have an opportunity to consider the judgment. In the result I prepared the “Approved Judgment” (as set out in paragraphs 1 to 97 above) which substantially incorporated the corrections. Arrangements were made for the judgment to be handed down on 2^nd July 2014.

At some time between 24^th and 30^th June 2014 Mr Payne had the opportunity to discuss the draft judgment with Mr Jory QC. In the result on 30^th June 2014 Mr Payne emailed a letter to the Court in which he invited me to reconsider my judgment on 2 grounds. First, he submitted that I had failed to deal with Electrosteel’s submission that the salary and travel costs, which I dealt with in section 9.4 of the judgment, could be recovered as damages for conspiracy and/or inducing breach of contract. Second, he submitted that there was a factual error in paragraph 94.2 of the judgment. He drew my attention to paragraph 46 of Mr Lohia’s second witness statement.

Fortunately the case that I had been due to try this week compromised and I was thus able to hear full argument on these submissions on 2^nd July 2014. After hearing submissions from Mr Jory QC and Mr Lakin I indicated that I would prepare an addendum dealing with the two matters raised by Mr Jory QC.

The Factual Error

In Section 9.9 of the judgment I discussed and came to a conclusion on the trading claims. In paragraph 94 I expressed the view that the claims were largely speculative. I summarised my reasons in paragraphs 94.1 – 94.4. In paragraph 94.2 I said it was significant that :

Mr Jory QC submitted that he had in fact dealt with it in paragraph 46 of his second witness statement where he said:

I agree with Mr Jory QC that there is a factual issue between Mr Lohia and Mr Radford as to the instructions which were given in relation to the purchase of flanges. I also agree that paragraphs 94.2 and the third sentence in paragraph 81 are inaccurate. However this does not affect my overall conclusion that the trading claims are speculative. It is to be noted that Metalpol was not incorporated until 2012. Thus, there were two years after the resolution of the quality issues that Electrosteel could have purchased from Electrosteel India. It is, to my mind remarkable that if the sort of savings suggested by Mr Lohia could have been made that more forceful steps were not taken by Mr Lohia and/or Mr Jalan. It is not clear what motive it is suggested that Mr Radford might have had for not making these savings in the period before the incorporation of Metalpol.

The Loss of Salary

Although Mr Jory QC’s skeleton argument made it clear that Electrosteel had a claim for conspiracy and/or inducing breach of contract it was by no means clear that the claim for loss of salary was alleged to be damages resulting from those claims. In setting out the individual claims he did not distinguish between claims for damages as a result of tort and claims for breach of fiduciary duty.

In those circumstances I accept that I assumed that the claim was a claim for breach of fiduciary duty and that I did not deal separately with the claim as a head of damages for tort. It was for that reason that in section 9.4 of the judgment I dealt with the claim as a claim for breach of fiduciary duty.

Mr Jory QC referred me to paragraph 63 of Mr Lohia’s first witness statement in which Mr Lohia asserts that if Mr Radford had disclosed his wrongdoing he would have been dismissed. To my mind it does not begin to follow from that assertion that any salary paid to and expenses paid in respect of Mr Radford after June 2012 is a “loss” to Electrosteel. There is no evidence as to what would have happened if he had been dismissed. The appointment of a replacement Director would have incurred costs. Equally there is no evidence that suggests that no benefit at all was obtained from Mr Radford’s appointment. More fundamentally I do not see that the continued employment of Mr Radford is a recoverable loss in tort. I note that Mr Jory QC has not drawn to my attention any authority in which they were so recovered. In my view the salary is recoverable, if at all, as a claim for breach of fiduciary duty. For the reasons set out in paragraph 65 of the judgment that claim is not maintainable against Metalpol. Furthermore it is, in any event an alternative to the claim for damages.

Conclusion

In the result my views remain unaltered and the application to continue the injunction is refused.