Kings Security Systems Ltd v King & Anor

INTRODUCTION

This judgment follows the trial of the claim brought by the Claimant (“KSSL”) against the First Defendant (“Mr King”), its former Chief Executive Officer, and of the counterclaim brought by Mr King against KSSL.

KSSL is a security and surveillance business based in the North of England which was established in the 1960s by James King, Mr King’s father. Prior to December 2013, KSSL was a family business, owned and run by the King family. Mr King became Chief Executive Officer of KSSL in 2005, having previously worked for the business in other roles.

In late 2013, KSSL ran into financial difficulties. It obtained funding from outside investors acting through a company called Primekings Holding Limited (“Primekings”) which acquired a majority shareholding in KSSL’s parent company Kings Solutions

Following the investment by Primekings, relations between the King family and the two representatives of Primekings on the board of KSSL soured. In 2015, Mr King and other members of the King family brought proceedings in the Chancery Division against Primekings and its representatives claiming rescission of the agreements under which Primekings had acquired its shares and invested in KSGL (“the Misrepresentation

The trial of the Misrepresentation Proceedings was listed for 20 days before Marcus

After the conclusion of the Misrepresentation Proceedings, Mr King and KSSL entered into a settlement agreement under which it was agreed, amongst other things, that Mr King’s employment was terminated and that KSSL would make an ex gratia payment to Mr King of £70,000 (“the Settlement Agreement”). Soon afterwards, however, the board of KSSL became aware of information suggesting that Mr King had been misusing company funds and KSSL purported to rescind the Settlement Agreement.

In these proceedings, which were started in August 2017, KSSL is claiming that the Range Rover Transaction constituted a bribe by TCH and gave rise to breaches of duties on the part of Mr King as a director and employee of KSSL. It seeks damages and other relief including rescission of the Settlement Agreement. The claim against the Second Defendant (“Mr Evans”), its former Chief Operating Officer, was that he dishonestly assisted with Mr King’s breaches of duty and that he himself received the use of a second Range Rover in exchange for KSSL paying more to TCH for the use of certain

Mr King denies that the Range Rover Transaction was a bribe, that it entailed any breach of duty or that KSSL is entitled to rescind the Settlement Agreement. He contends that he was unaware that KSSL was funding his use of the Range Rover, and that this was arranged by Mr Evans without his knowledge. Mr King is counterclaiming £70,000 pursuant to the Settlement Agreement together with damages for the tort of abuse of process. This counterclaim is put on the basis that the KSSL’s predominant purpose in bringing these proceedings, on which it has incurred some £2.5 million in costs, is an improper one, namely to enable Primekings to acquire the King family’s minority shareholding in KSGL at an undervalue and/or to damage Mr King’s reputation and his ability to find alternative employment. In response to the counterclaim, KSSL questions whether the tort of abuse of process still exists in English law but, if it does, it denies that these proceedings were brought for any improper purpose or that Mr King has pleaded or proved any recoverable loss.

THE WITNESSES

KSSL called ten witnesses, listed below, all of whom gave evidence from the witness box with the exception of Mr Pownall and Mr Pashley who gave evidence by video link. Mr King gave evidence himself but did not call any other witnesses.

Barry Stiefel

Mr Stiefel has been a non-executive director of KSSL since 2013. He has spent most of his professional life working for the Kirsh Group in senior management positions.

He clearly takes his responsibilities as a director seriously. He made clear that when a decision might give rise to a conflict of interest, he recused himself from the decisionmaking process. Mr Stiefel said in his witness statement, and I accept, that he has a strong moral sense and sets himself high standards of integrity. He was clearly very upset at being accused of fraud and criminal wrongdoing by Mr King in the context of the Misrepresentation Proceedings and incensed by what he considered to be Mr King’s dishonesty in connection with the Range Rover Transaction and his subsequent refusal to acknowledge his wrongdoing. Mr Stiefel did not attempt to conceal the contempt he now feels towards Mr King. Despite these strong personal feelings, I consider that Mr Stiefel was a reliable and honest witness.

Robin Fisher

Mr Fisher is also a non-executive director of KSSL. His background is similar to Mr

Geoffrey Zeidler

Mr Zeidler has been a non-executive director of KSSL since September 2015 and chairman since May 2016. He has wide experience as a company director in various commercial sectors including the private security industry and acted as Chairman of the British Security Industry Association. He was an impressive witness with a clear sense of his responsibilities as a director and chairman of KSSL. Unlike Mr Fisher and Stiefel, he was not personally involved in the Misrepresentation Proceedings. He gave considered and dispassionate evidence about Mr King’s performance as Chief Executive Officer, the termination of Mr King’s employment and the reasons for bringing these proceedings. When it was put to him in cross-examination that he was seeking to give false evidence so as to retain his job, he made it clear that he has independent means and does not need the remuneration he is paid by KSSL. He had no reason to give false evidence and, in my assessment, he did not do so.

Robert Forsyth

Mr Forsyth is the Chief Executive Officer of KSSL. He was appointed on 25 May 2017 in succession to Mr King and gave evidence about the investigations into the allegations of unauthorised expenditure by Mr King and Mr Evans. He was an honest and credible witness.

Mark Pownall

Mr Pownall was the Chief Financial Officer of KSSL from April 2014 to December 2017. His evidence dealt with, amongst other things, his knowledge of the arrangements with TCH relating to the Range Rovers.

I consider that Mr Pownall was an honest and reliable witness. He has no ongoing connection with KSSL or Primekings and has no motive to lie. The fact that in 2017 and 2018 he sent texts supportive of Mr King and critical of the majority shareholders does not affect the credibility of his evidence in support of KSSL’s claim. It was clear from his own evidence and the evidence of Mr Zeidler that Mr Pownall is a man who dislikes conflict. He had been close to Mr King and sought to maintain a friendly relationship with him. There was no basis for the submission that Mr Pownall gave evidence supportive of KSSL’s claim because he was scared of Primekings and its representatives.

Stephen Evans

Mr Evans was an important witness in relation to the central question of Mr King’s knowledge of the profit share element of the Range Rover Transaction with TCH.

Mr Evans joined KSSL as a senior accounts manager in 2002 and was appointed as a director in 2004. He was a close colleague and friend of Mr King for over 15 years.

I accept that there were grounds for doubting Mr Evans credibility as a witness. He was summarily dismissed by KSSL on the ground that he had concealed from the board unauthorised expenditure by members of the King family. In the settlement agreement reached with KSSL in August 2018 he admitted the wrongdoing alleged against him in these proceedings. His assertion in his Defence (paragraph 15.7) that Mr Pownall was aware of the arrangements with TCH regarding the Range Rover leased to Mr King was incorrect.

I consider nevertheless that Mr Evans’ evidence concerning Mr King’s knowledge of the payment arrangements underlying the Range Rover Transaction was honest and reliable. Mr King alleged in his witness statement that Mr Evans is fearful of the threats and intimidation that he will have received from those controlling KSSL. There was no credible basis for this suggestion. Mr Evans had no reason to lie or falsely to implicate his friend. His evidence in relation to the Range Rover Transaction was consistent with the statements he made to Mr King in private text messages.

Paul Pashley

Mr Pashley was formerly the procurement manager of KSSL. His evidence concerned his reporting of a request made to him by Mr Evans to conceal the use of private phones used by members of the King family and paid for by KSSL. Mr Pashley had no reason to lie in support of KSSL (indeed, he gave evidence that he recently left his position at KSSL due to what he considered to be poor treatment by his line manager) and did not do so.

Emma Shaw

Ms Shaw has been a non-executive director of KSSL since May 2016. She has held a number of directorial positions in the security industry. Alongside Mr Zeidler, Mr Stiefel and Mr Fisher, she was responsible for the decision-making relating to these proceedings. She gave her evidence in a straightforward manner and I consider that she was a reliable witness.

Jacob Telemacque

Mr Telemacque has been employed by KSSL as fleet manager since 2016, reporting to Mr Evans. In his witness statement he said he was told by Mr Evans in 2015 that the two Range Rovers were personal vehicles to Mr King and Mr Evans and that he only discovered that the rental for Mr King’s Range Rover was being paid for by the profit share arrangement in 2017 after Mr King’s departure. I consider that Mr Telemacque was an honest witness who was seeking to assist the court.

Kelly Fisher

Ms Fisher is the human resources director for KSSL She gave mostly uncontentious evidence about the circumstances of Mr King’s departure from KSSL. I consider that she was a reliable witness.

Mr King’s main witness statement is a lengthy document setting out his case that he was innocent of any wrongdoing or dishonesty in connection with the Range Rover Transaction and that these proceedings are part of a vendetta masterminded by Primekings and its representatives who wish to ruin him out of revenge for the Misrepresentation Proceedings.

His evidence in cross-examination, which lasted two and half days, was mostly concerned with the Range Rover Transaction. The main thrust of his evidence was that Mr Evans misled him as to the payment arrangements underlying the transaction; he believed that Mr Evans had skilfully negotiated for him a personal lease which did not involve any impropriety and which had nothing to do with KSSL.

After considering Mr King’s evidence, together with the documentary evidence and the evidence of Mr Evans, I have come to the conclusion that Mr King was aware of how the Range Rover Transaction was being funded by KSSL and of the impropriety of the transaction. Mr King came across as an intelligent individual with an eye for detail. His evidence as to his belief that Mr Evans had simply managed to negotiate a “great deal” with TCH at a token level of rental was inherently implausible. The private texts exchanged between Mr King and Mr Evans in 2017 are of particular relevance to the assessment of Mr King’s credibility. They provide confirmation that Mr King was aware of the funding arrangements. Mr King’s attempts in his evidence to reconcile these texts with his case that he was unaware of those arrangements were unconvincing.

THE FACTS

KSSL was incorporated by Mr King’s father, James King, in 1971. Initially, its business consisted of installing television aerials. Later it moved into the provision of security services and grew substantially. It now provides a wide range of security services to site operators across the UK, including major retailers and a number of police forces. Mr King joined KSSL as an apprentice after leaving school at the age of 17, He became a director of the company in 1999 aged 30 and Chief Executive Officer in 2005, aged 36.

Prior to the Primekings investment in December 2013, KSSL was a family company.

By late 2013 KSSL was in serious financial difficulties. It had gross tax liabilities of over £2.5 million, overdrawn directors’ loans in excess of £550,000, and trade creditors exceeded £5.2 million. According to the information memorandum produced on behalf of KSSL, KSSL was seeking an initial £2 million to £2.5 million equity investment to replenish its balance sheet and fund future growth.

In November 2013 Mr King and his father were introduced to the Kirsh Family Office, the investment wing of Nathan Kirsh, a South African billionaire. They met Mr Fisher and Mr Stiefel, who both represented the Kirsh Group, and Peter Swain, an associate of Mr Fisher, in London to discuss the possibility of the Kirsh Group investing in the Kings group. Mr Fisher had heard that KSSL was in need of investment and believed that KSSL was a good business and quality brand that fitted with the growth strategy of his company Prime.

A completion meeting took place on 18 December 2013. What happened at that meeting was subsequently the subject of the Misrepresentation Proceedings. Prior to the completion meeting, the Primekings representatives had proposed acquiring 60% of the shares in KSGL, KSSL’s parent company, but at the meeting insisted that the deal change from the previously negotiated 60:40 split to 76:24. Mr Fisher’s evidence was that the change was necessary because of concerns about KSSL’s financial situation; he wished to ensure that Primekings was in a position to pass special resolutions if necessary as they were taking all the financial risk. It was, however, agreed that once the business had stabilised and certain EBITDA targets had been met, the Primekings stake would dilute to 60%. The perception on the part of the Kings family appears to have been that the change to the terms of the deal had been unfairly forced on them.

Under the terms of the agreements entered into on 20 December 2013:

Ki Finance SARL (the finance arm of the Kirsh group) also agreed to lend KSSL £3 million by way of working capital. It was also agreed that other than Mr King, all King family members should resign and cease to work for KSGL or any group company.

After the transaction, James and Susan King resigned as directors and were replaced by Mr Fisher and Mr Stiefel as non-executive directors. Mr King entered a three-year employment contract.

On 19 December 2013, thinking that the transaction had closed, Mr Stiefel sent an email to Mr King and his father welcoming them into the Kirsh group. James King replied on 4 January 2014 in a lengthy email in which he expressed his unhappiness about the changes to the deal at the completion meeting. At a lunch meeting with Mr Stiefel on 15 January 2014, James King complained about feeling forced to sign the deal they did rather than a deal providing for a 60:40 split. Mr Stiefel explained the reasons for the change and that the shareholding would revert to 60% when the business had stabilised.

In the first quarter of 2014, KSSL’s cash flow remained tight. It was agreed that

In emails to Mr Fisher on 3 and 4 July 2014 Mr King expressed his gratitude for the acceleration of the shareholding change. On 3 July 2014, he wrote “I will give you a big

As this email indicates, there was simmering resentment on the part of the Kings towards Primekings. In an email to Mr Stiefel sent nearly a year later on 19 December

By the start of 2015, KSSL’s finances were in a stronger position. It was submitted on behalf of KSSL that this optimism encouraged the Kings to launch the

On 31 March 2015, the day on which the final part of the deferred consideration was paid to James and Susan King, pre-action protocol letters were sent by the Kings’ solicitors, DWF, to Mr Stiefel, Mr Fisher and Mr Swain. The letters alleged that the agreements under which Primekings acquired shares in and invested in KSGL were procured by fraudulent misrepresentation, economic duress and conspiracy on the part of Mr Stiefel, Mr Fisher and Mr Swain. At the heart of the claim was an allegation that during a telephone call made at the completion meeting Mr Swain misrepresented the content of a meeting he and an independent consultant, Alison Lord, had held that day with GE Capital (at that time KSSL’s invoice financing provider) so as to give the impression that the business was in a more financially precarious position than the actuality. The letters went on to accuse Mr Stiefel, Mr Fisher and Mr Swain of committing criminal offences under section 89 and 90 of the Financial Services Act 2012 and reserved the right to report them to the Financial Conduct Authority and/or the Police without further notice.

The Misrepresentation Proceedings were launched in mid-July 2015 against Mr Swain, Mr Fisher and Primekings as defendants. The Kings sought rescission of the investment agreements and damages. Although Mr Stiefel was not joined as a defendant, it was said in the Particulars of Claim that the claimants suspected that he may also have known about and participated in the deception of the claimants. Subsequently in the course of his evidence at the trial Mr King said that Mr Stiefel was complicit in the alleged fraud.

The defendants contended that the claim was hopeless and that the extremely serious allegations advanced by the Kings should never have been made. It was their case that there was no conspiracy, no misrepresentations and no loss. Mr Swain had accurately set out what GE Capital had told him, which was that unless a deal was done to invest in KSGL, it (GE Capital) would not advance further funds to the business which was well known to the Kings in any event. It was the defendants’ case that the Kings were not tricked into agreeing the deal and they did not suffer any loss by reason of the deal in any event: on the contrary, entry into the deal saved the business which would otherwise have entered into a formal insolvency process resulting in the Kings losing the value of their shareholdings and calls on personal guarantees they had given.

The issues raised in the Misrepresentation Proceedings are not relevant to these proceedings and I make no findings in relation to them. What is of some relevance, in

At the time of the Primekings’ investment, Mr King drove an Aston Martin which was provided to him by KSSL as a company car. The Primekings representatives considered this to be too extravagant and costly a vehicle in light of the financial distress the business was in and required Mr King to obtain a more reasonably priced vehicle. He complied with this instruction and began driving an Audi A7, which he bought on finance using part of a car allowance of £850 per month provided to him by KSSL. Mr King was unable to give evidence as to the monthly payments he was making for the Audi A7. He initially denied making monthly payments at all, claiming that he had purchased the vehicle “outright” but subsequently admitted that he made monthly finance payments in respect of the vehicle. It seems likely that the payments were approximately £480 per month as Mr Evans sent Mr King a quotation in that sum for a personal lease for an Audi A7 in January 2014.

In 2015, Mr King was looking to obtain a more luxurious vehicle than the Audi A7, which he referred to disparagingly as an “accountant’s car” in an email to Mr Evans. Mr Evans spoke to him in February 2015 about the possibility of TCH providing him with a better car.

In March 2015, in anticipation of being provided with a new vehicle, Mr King took steps to obtain a valuation for his Audi A7. He initially had it valued by the website We Buy Any Car at £27,610 in March 2015. He emailed this quotation to Mr Evans on 24 March 2015 who suggested that, instead of selling the vehicle privately, Mr King could sell it to KSSL. Mr King replied the same day, stating, “Yeh, that could be a better way of doing it, I could sell it for 30k then instead.” In cross-examination, Mr King stated for the first time that he could recall obtaining another valuation suggesting that the

“face value” of the vehicle was £30,000.

A. And so the actual face value of the [car] was 30, which I what I felt okay I can actually get the face value.

Q. Where did you get the face value from?

A. I think I must have googled it and got the actual face value –

Q. You don't mention that in your email, do you?

A. It hasn't got my Google history in here, no.

Q. So you -- do you remember doing this now?

A. No, I don't remember doing it. I'm just surmising as to how I came to that valuation, but obviously We Buy Any Car is a depressed or subsidised lower value valuation from We Buy Any Car.

Q. It's the market value bought on the terms that We Buy Any Car buy on?

A. Absolutely, which is a lower value than the actual value of the car. Obviously they want to sell it on for a profit.

Q. We can debate that up hill and down dale. You had a valuation of 27 and you believe now, but you don't remember, that you found another value at around about 30?

A. I believe I must have had a reference point somewhere for £30,000, yes, of what the actual value of the car

(Transcript day 5 pages 40 - 41)

On 15 April 2015 Mr King emailed members of KSSL’s executive board, of which Mr King was chairman and the other members of were all his subordinates, to declare a “personal interest in a transaction between the business and myself”. He was proposing to sell it for £34,000. He did not disclose to the executive board the lower valuation (or valuations) he had received and did not disclose the transaction at all to the main board as he ought to have done consistently with his duties of disclosure as a director. Mr King’s attempt in cross-examination to justify his conduct was unconvincing:

KSSL leased a fleet of motor vehicles for use in its business from TCH. Mr Evans managed KSSL's relationship with TCH from around 2010, with the assistance of the Fleet Administration Assistant, Jacob Telemacque.

The terms on which KSSL leased motor vehicles from TCH were contained in various documents/discussions, including a letter dated 3 August 2010 (the “August 2010 Agreement”). The August 2010 Agreement provided for a profit-sharing arrangement under which, in broad terms, KSSL would share 50/50 annually any profits made by TCH on the resale of vehicles which had been leased by TCH to KSSL and subsequently returned by KSSL to TCH. The amount of the profit share would depend on the number of vehicles and the prices which they could command on resale. The profit share fluctuated from one year to the next as illustrated by the level of KSSL’s profit share for 2015, 2016 and 2017 which turned out to be £31,402.55, £4,635.14 and £4,628.78.

On 4 February 2015, Mr Evans emailed Ken Buckley, head of sales at TCH, to ask if there was any news on the profit share value for KSSL. Mr Buckley responded the next day to inform Mr Evans that it appeared from initial estimates that KSSL would receive a cheque for around £11,000 in respect of the profit share relating to vehicles returned to TCH in 2014. On the same day Mr Evans responded to Mr Buckley to ask if the profit share could be used to fund a vehicle for the use of Mr King.

“I still want to try and do something for Anthony on a Range Rover so perhaps this could go towards funding the vehicle instead of a cheque.”

Mr Evans’ evidence, which I accept, was that he discussed this proposal with Mr King, with whom he was working side-by-side on a daily basis and that there were a number of conversations between them about the particular car that Mr King wished to obtain. These conversations took place in the office of KSSL and/or by telephone. The reference to “still” wanting to try and do something suggests that there had been previous discussions between Mr Evans and Mr Buckley about a Range Rover. Mr

On 9 February 2015 Mr Evans emailed Mr Buckley to ask if the profit share amount had been confirmed and proposed to Mr Buckley that in return for a Range Rover Vogue put into KSSL as a “long-term demo” for 24 months, KSSL would make TCH a solo supplier for the next 24 months and TCH could keep the rebate.

“I have a proposal for you. If Kings make TCH a sole supplier for the next 24 months and you keep the rebate this year and next would you be prepared to put a Range Rover Vogue into Kings as a long-term demo for 24 months.

The mileage would be about 8000 per annum.”

Following a chasing email from Mr Evans on 23 February 2015, Mr Buckley replied by email on the following day, explaining that they were still working out the numbers on his proposal. Mr Buckley explained that the rental value for the “most basic” Range Rover was “circa £1200 pm”.

“Sorry for the slow response Steve, I’ve looked at a 24 month contract at 8,000 pa on the most basic vehicle, Range Rover Diesel Estate 3.0 Tdv6 Vogue 4Dr Auto, which has an on the road price of £74k. The rental on this is circa £1200 pm which means I would need to have circa £29,000 available from the overall profit share over the 2 years to make it work. I am working with Chris to try and make a prediction for vehicles returned in 2015, as soon as I’ve finished that exercise I will be in a position to let you know if it's financially viable to achieve this.

I’ll come back to you as quickly as I can.”

On 12 March 2015 Mr Buckley emailed Mr Evans to explain that the agreement needed to be over 3 years for it to work for them. Mr Buckley had not sought to negotiate such a deal previously but wanted to see whether Mr Evans would be open to such a proposal.

“If you could accept a 3 year sole supply arrangement we would be quite happy for any surplus in the 3rd year to be either refunded or reserved for another 3 year demonstrator program?

This will be the first time we have ever done anything like this and at the moment we are just trying to define how we would actually account for the vehicle, but I’m confident we can come to a solution over the next few days, so if you can let me have your thoughts on a 3 year lease/sole supply arrangement I’m sure we can get moving on this fairly quickly?”

At this time, Mr Evans was working side-by-side with Mr King on a daily basis. They

On 22 March 2015, Mr Evans emailed Mr Buckley a link to a demo car that Mr King had seen in the Farnell Land Rover Garage which Mr King used to drive past on his way to and from work. Mr King had told Mr Evans he had seen this particular vehicle and it was the type of Range Rover he wanted, which is why Mr Evans sent the link to

Mr Evans chased Mr Buckley on 7 April 2015 as to whether he had managed to source a new car (for Mr King). Mr Buckley replied the next day, 8 April 2015, saying that stock was “non-existent”. He also attached a draft letter dated 7 April 2015 for Mr Evans’ signature and return. This letter confirmed the agreement reached for TCH to supply a "Range Rover Vogue 3.0 Tdv6 4dr Auto in Black with Privacy Glass" for a period of 36 months. The letter included the following:

“The cost of this vehicle will be funded by your profit share agreement over the next 3 years and in return for this addition to our standard contractual terms we require you to agree, by signing this agreement, to allow TCH Leasing to be your sole supplier for vehicle contract hire/leasing/fleet management for a 3 year period. This is subject to the current fleet size as at the end of March 2015 and option to benchmark process with industry competitors

The vehicle will be invoiced to the driver Mr Anthony King on a short-term monthly rental contract.”

Mr Evans emailed Mr King later on the same day (8 April 2015) with the message:

“Couldn’t find a stock car for you but will be July delivery but it will be black with privacy glass”.

At the same time, he forwarded Mr Buckley’s email to Mr King about the non-existent stock together with the preceding email exchanges with Mr Buckley going back to 24 February 2015 but not including the draft letter dated 7 April 2015 from Mr Buckley.

The subject heading of the email exchanges between Mr Buckley and Mr Evans was

“Re: Profit Share”. When Mr Evans forwarded the emails to Mr King on 8 April, the subject line was blank. Mr Evans does not recall deleting those words from the subject line and cannot think why he would have done so. His evidence was that he did not remove the words in order to mislead Mr King.

Q.

You say at paragraph that you forwarded that e-mail to Mr King on the same day: "... and as the documents show the subject heading of the e-mail exchanges was 'profit share', when I forwarded the e-mail the subject line is blank. I do not recall deleting those words and I cannot think why I would have done that. I confirm that I did not remove the words to mislead Mr King." That is your evidence? A. Correct.

Q. I want to suggest to you that that is wrong and you did remove the words to mislead Mr King?

A. No. Mr King knew the vehicle was being funded by a profit share.

(Transcript Day 2 pages 77 – 78)

Mr King’s case was that Mr Evans removed the words “Profit Share” in order to hide from him the fact the Range Rover would be funded by profit share and that he had every motive to do that because he enjoyed his reputation as a “great negotiator” and wanted praise from Mr King for that, which, according to Mr King, he in fact in due course received in an email dated 29 April 2015: in answer to the question whether his boys liked the car, Mr King’s answer was “They love it. So proud. Thank you bro”.

Whilst there is no obvious explanation for the removal of the words “Profit Share”, I accept Mr Evans’ evidence that they were not removed in order to conceal them from Mr King. If his intention had been to mislead Mr King by concealing the profit share arrangement, he would not have forwarded, as he did, the chain of emails in which he had negotiated the arrangements for the Range Rover with TCH which make clear the profit share arrangement and which have “Profit Share” as their stated subject.

Mr King’s evidence was that he did not notice those emails, as he read Mr Evans’ email on his Blackberry telephone and did not scroll down to the other emails. Assuming in Mr King’s favour that he did not read the forwarded emails, Mr Evans could not have known that he would not read them. The fact that Mr Evans forwarded the emails to Mr King with no attempt at concealment strongly suggests that the arrangements had been openly discussed between them. The different explanations put forward by Mr King as to why Mr Evans would have wanted to conceal the profit share from him (because he wanted praise from Mr King for his skills as a negotiator or because he wanted to do something nice for him but did not want him to know the details because he knew that Mr King was honest) are unconvincing given their close friendship. Moreover, I consider that if Mr Evans had deliberately concealed the profit share from Mr King for

Mr King’s evidence was that he understood the provision of the Range Rover to be by way of a “long term demo” vehicle enabling the customer to evaluate the vehicle. I do not consider it plausible that Mr King believed that this was the arrangement given that, as noted above, he was informed of the true nature of the arrangement by Mr Evans. It is also inherently unlikely that a luxury car would be provided as a “demo” vehicle free of charge on a long-term basis. Mr King’s evidence that he failed to realise that the provision of the Range Rover would cost TCH anything was evasive.

The assertion in Mr King’s witness statement that he told Mr Evans that “everything needs to be above board” and that he needed to pay something towards the hire of the vehicle indicates an awareness that the arrangement with TCH might not be appropriate and that there must have been a cost to TCH in providing the vehicle. His reluctance to accept in cross-examination that there must have been a difference between the £100 charge and the cost to TCH was implausible:

On 11 April 2015 Mr Evans emailed Mr Buckley explaining that he had found a Range Rover for Mr King at a dealership in Huddersfield and asked him to contact the dealer. On 12 April 2015, following a call with him, Mr Evans emailed Mr Buckley with amendments to the draft letter dated 7 April which Mr Buckley had provided for his agreement. The amendments included a provision that the Range Rover would be “rented to the required driver on a short-term personnel [sic] monthly rental contract at a token rental not exceeding £100 per month”. This token £100 charge was included for tax purposes and was intended by Mr Evans and Mr King to give the impression to the HMRC, if need be, that the car was a private arrangement rather than a company car even though in reality the bulk of the cost was being paid by the company.

The covering email also referred to Mr Evans’ plan to arrange for his own Range Rover to be provided by TCH at KSSL’s expense:

“Once we have this one sorted I'm looking to do a 2nd vehicle for myself on similar terms but will look to cover your costs by increasing the rental of the 10 skodas we have on order by the required amount to cover the vehicle cost and run for the same contact [sic] term as these vehicles.”

On 13 April 2015 Mr Evans emailed Mr Buckley to confirm the position following his amendment to the letter.

“... Just to confirm you will be invoicing him £100 per month: Think this will cover the £3000 option of the extras too over the term so good with you guys too. ...”

Mr Evans could not recall any specific discussion with Mr Buckley about the amount of the £100 plus VAT per month payment, although he noted from the email that he referred to this amount covering the optional extras on Mr King's Range Rover. It is not clear what the “optional extras” were, given that the car was previously described by

On 14 April 2015 Mr King emailed Mr Buckley a copy of the letter agreement dated 7 April which he had now signed. Mr Evans did not recall receiving an actual breakdown from TCH for the monthly cost of the Range Rover but estimates that it was approximately £1,243.52 plus VAT which was the cost of his nearly identical Range Rover.

On or about the same date Mr Evans signed a Short Term Rental Agreement between TCH and KSSL in respect of the Range Rover. Mr King was specified as the main driver and the rental rate was said to be £100 per month. The value of the vehicle was recorded as £76,680.

Mr King picked up the Range Rover from the garage in Huddersfield on 29 April 2015.

In an email to KSSL employee Jacob Telemacque dated 30 April 2015, Mr King said that the First Range Rover was not a company car, and in a further email of the same date from Mr Evans to KSSL’s insurance brokers, Mr Evans said the First Range Rover was a private rental to Mr King.

On 5 May 2015 Mr Evans chased Mr Buckley again for the contract in Mr King’s name. On 18 May 2015, Mr Buckley sent Mr Evans two draft agreements in respect of the

Mr Evans then forwarded Mr Buckley’s email together with the draft agreement in Mr

When Mr Evans forwarded this email to Mr King he made two changes. First, he changed the subject heading from “Kings Agreements” to “Agreements – Personnel

Mr Evans’ use of the words “just so everything is above board and off Kings” suggests that, without the signed agreement, the arrangement would not be “above board” and would involve KSSL. If Mr King believed that the arrangement with TCH was a purely personal contract, as he now contends he believed, there would have been no need to ensure that the arrangement was “above board” and there would have been no need to mention “Kings”.

The Master Agreement is not in the form of a personal contract for the lease of a vehicle to an individual. It is a Master Agreement setting out terms between TCH and a commercial leaser of multiple vehicles. It is headed “Master Agreement”. It does not contain any term for the hire of the Range Rover. It does not set out the rental payments or mention the Range Rover. Mr King contends that he did not read the contract when

I consider that this is implausible. Mr King is, as already noted, an intelligent individual with a keen eye for detail, as his main witness statement and much of his oral evidence demonstrated. Even if Mr King did not read the Master Agreement in detail, it is implausible to suggest that he did not notice that it is not a personal lease agreement. If he had genuinely believed that he had a personal lease agreement, I consider that he would have raised with Mr Evans the issue as to why the agreement was in an inappropriate form.

The Range Rover Transaction resulting from the exchanges set out above was, in summary, a tripartite arrangement on the following terms:

It was implicit in the arrangement that TCH would be liable to make up any shortfall between the rental that it would normally have charged for the Range Rover and the income from KSSL’s profit share plus the £100 per month payable by Mr King and that it would be entitled to keep any excess, in the event that the profit share plus £100 rental was more than the anticipated rental. Although it was originally suggested by TCH that KSSL could retain the excess in the third year, ultimately this does not appear to have been agreed.

KSSL’s case is that Mr King authorised Mr Evans to enter the Range Rover Transaction with TCH on his behalf. This is disputed by Mr King who asserts that he did not know about the use of the profit share to cover the costs of rental and thought that he was entering a personal contract with TCH.

Mr Evans’ evidence (which I accept) in his third witness statement in response to Mr King’s profession of ignorance on this point was follows:

“I understand that Anthony’s defence in this matter is that he did not know that KSSL was effectively paying for his Range Rover and that he thought it was personal to him. When I found out about this I was extremely surprised by the position he has taken; it is not true. I am certain that he knew that KSSL had forfeited its profit share to cover the costs of the car: as I have explained, we discussed this before he took the car on. Apart from the fact we had discussed KSSL forfeiting its profit share to cover the costs, £100 per month is obviously not remotely reflective of the actual costs of the type of vehicle he had which would have been more like in excess of £1,200.” (paragraph 36)

Mr King knew that Mr Evans was arranging for TCH to supply him with a Range Rover and that Mr Evans was proposing that KSSL’s profit share would be used to cover the cost of the Range Rover. Moreover, Mr King must have realised that £100 per month did not cover TCH’s costs and that the Master Agreement did not reflect the terms agreed by Mr Evans. It is be inferred from these facts that Mr King assented to Mr Evans entering the Range Rover Transaction on his behalf and impliedly authorised him to do so.

KSSL accepts that its directors were aware of the existence of the Range Rovers used by Mr King and Mr Evans. Mr King’s case goes further and alleges that Mr Pownall knew that Mr King was paying £100 per month rental to TCH. This allegation is based on:

Mr Pownall’s evidence, which I accept, is that he did not know any details of the arrangements between Mr Evans, Mr King and TCH. He knew no more than that the Range Rovers were rented from TCH on favourable terms negotiated by Mr Evans. His evidence was that:

Mr Pownall was adamant in cross-examination that he did not know the details of the transaction:

Mr Zeidler was appointed as a director (non-executive) on 29 September 2015 and as Chairman in May 2016. The relationship between Mr Zeidler and Mr King was acrimonious from the start. Mr King raised various objections to his appointment which

During 2016 and 2017 Mr Zeidler and Ms Shaw began to have doubts about Mr King’s ability to run a Company with external investors. They considered that Mr King did not understand the responsibilities and duty of care that he owed to the other shareholders and debt providers, had little understanding of finances and that, although he paid “lip service” to the board, his management of the Company was as if he and his family still owned the business. Mr King disputes that these concerns had any valid foundation. It is not necessary for me to make findings as to whether the concerns about Mr King were justified. I am satisfied that they were genuinely held.

By March 2017 the position was coming to a head. Mr Zeidler emailed Mr King on 9 March about outstanding sales, revenue forecasts and asked for information to be provided by 17 March. On 10 March Mr King emailed Mr Zeidler in which he said:

“…my focus is very much now on not working together and finding a way to end this miserable and dysfunctional board and relationship. I’ve made that position clear today to Barry as well privately and my 100% focus will be on separation. ...”

On 16 March 2017 Mr Zeidler sent Mr King an email complaining about Mr King’s refusal to work with the rest of the board and the absence of an agreed budget. In an email in response dated 23 March 2017 Mr King said:

“The reality is we are heading for a divorce but you seem to suggest I should be planning a strategy to buy the house and name the kids still”

The issue of Mr King’s performance and the appropriate way forward for KSSL was discussed with the non-executive directors at meetings on 14 March 2017 and 21 March 2017. Mr Zeidler assumed that in the event Mr King lost the Misrepresentation Proceedings, he would leave of his own accord and, in the event that chose not to leave, he would need to be removed in light of his conduct to date.

The trial of the Misrepresentation Proceedings was listed for 20 days before Marcus Smith J in May 2017. On 15 May, day 10 of the trial, following cross-examination of the Kings’ witnesses, they discontinued the claim, made a public apology (through their Counsel) in Court and agreed to pay indemnity costs to the defendants. The apology included an acceptance that the Kings had “got it wrong” and that this had unfortunately soured their relationship with the defendants and the Kirsh interests. The apology continued: “This claim made serious allegations, but those allegations and the assault on the reputations of those involved are unreservedly withdrawn.” Marcus Smith J made an order requiring payment of £1.7m on account of those costs.

Since the conclusion of the Misrepresentation Proceedings Mr King’s stance with regard to the alleged misrepresentations which were the subject matter of the Misrepresentation Proceedings has changed again. The King family now contend that they were wrong to discontinue the Misrepresentation Proceedings. This has led to two further sets of proceedings. First, a commercial court claim against their own lawyers who acted for them in the Misrepresentation Proceedings in which they allege, amongst other things, collusion between their legal representatives and the legal representatives acting for the defendants and, second a Commercial Court claim against the defendants in the Misrepresentation Proceedings, their solicitors and Counsel alleging a fraudulent conspiracy to procure the discontinuance of the claim. They have also presented a section 994 petition against Primekings, Mr Fisher, Mr Stiefel and Mr Zeidler in which they allege, inter alia, that the respondents have engaged in a campaign against them by which they seek wrongfully to appropriate their shares in KSGL (“the Section 994 proceedings”).

At a board meeting of KSGL on 17 May 2017 Mr Stiefel reported on the outcome of the Misrepresentation Proceedings, noting as follows:

“The Kings family’s biggest asset is the company Ordinary & B shares, chances are that RF’s shareholdings is likely to go up with the family losing some shares and Primekings increasing its shareholding. The downside of winning is that it increases responsibility, with 500+ families to think about, there is a lot of work to be done to get on track. A further cash injection may be needed as there is too much time spent on managing cashflow. Information will need to be supplied to determine this. …The B shares only have value when there is cash and the family will get value out of that. It is not a case of victors taking the spoils and losers taking the toil at all.”

At a board meeting of KSSL on the same day Mr Stiefel stated as follows;

“… up to the resolution of the court case there was a residual thought that things might go the other way, things will move forward dramatically now it is out of the way. There is the possibility of the shareholding increasing to 75-80%, which increases responsibility. We will look back at this moment in time as an inflection point.”

On the same day, at a meeting attended by Mr Zeidler, Ms Shaw and Mr King, Mr

Mr King alleges that when discussing his departure from the business, Mr Zeidler stated that if the parties did not reach agreement, KSSL would investigate Mr King’s mismanagement and that this would inevitably result in his dismissal. Mr King alleges that he asked, “what mismanagement?” to which Mr Zeidler replied, “we’ll find something”. Mr King relies on this alleged threat to support his claim that this claim was issued for improper purposes.

Mr Zeidler does not recall the precise words he used and in particular whether or not he used the precise words “we’ll find something” but accepts that it is possible that these words were used. He denies that this was a threat to manufacture or concoct material against Mr King. He says that it would not have made a lot of sense for him to have said

“we’ll find something” as the various issues had already been communicated to Mr King. When Mr King asked Mr Zeidler to identify the specific mismanagement to which he was referring, Mr Zeidler recalled telling Mr King that, if an agreement was not reached, KSSL was likely to undertake a full investigation which Mr Zeidler expected would set out sufficient evidence to dismiss Mr King.

Whatever the precise words used by Mr Zeidler, I am satisfied that he genuinely believed that KSSL would have no difficulty in establishing sufficient grounds for Mr King’s dismissal. I reject Mr King’s contention that the words used by Mr Zeidler indicated that KSSL was prepared to concoct allegations of mismanagement and/or other impropriety against Mr King, come what may.

The Settlement Agreement between KSSL and Mr King was entered into on 19 May 2017.

Under the terms of the Settlement Agreement KSSL agreed:

Clause 10.1 of Mr King’s employment contract provided:

“Where any losses are sustained in relation to the property or monies of the Company, client, customer, visitor or other employee, during the course of your employment caused through your carelessness, negligence, recklessness or through breach of the Company’s rules or any dishonesty on your part, the Company reserves the right to require you to repay a part of, or the total amount of, the said losses, either by deduction from salary or any other method acceptable to the Company. The Company may also require you to repay any loans, damages, expenses or any other monies paid or payable by the Company to any third party for any act or omission for which the Company may be deemed vicariously liable on your behalf.”

Mr King’s case is that, by the time of the Settlement Agreement, Mr Pownall knew about the actions giving rise to the claims in these proceedings and that his knowledge is to be imputed to the board. In addition to the matters referred to at paragraph 86 above, Mr King relies in support of this case on:

Mr Pownall had no recollection of any reference to an amnesty in 2017. Mr King had asked him not to mention the fact that his father’s Porsche was owned by KSSL and on 30 May 2017 he provided Mr Zeidler a list of expenditure of which the board may have been unaware. He was, however, adamant that he had no knowledge of the detail of the Range Rover Transaction. Mr Pownall and Ms Campbell wondered whether Mr Telemacque had known more than he was letting on, hence the email exchange on 13

I conclude that by the time of the Settlement Agreement Mr Pownall knew, as he did in 2015 - 2016, only that Mr King claimed to have the use of the Range Rover on a personal lease with TCH. He did not know about any details of the Range Rover Transaction.

Shortly after the Settlement Agreement was entered into, information came unprompted to Mr Zeidler’s attention concerning unauthorised expenditure by Mr King and this led to further investigations.

On the evening of 22 May 2017, Mr Zeidler received a call from Mr Pownall, informing him that the Porsche used by James King, Mr King’s father, was owned by KSSL, not

Mr King alleges that Mr Pownall was threatened with dismissal if he did not disclose all he knew about Mr King to the board and that this was improper. Mr Pownall denied that any such threat was made and said that he agreed with what Mr Zeidler said in the email above. Mr Pownall suggested to Mr King in a text message that he had been threatened with gross misconduct but, as he explained in his witness statement, he did this so that Mr King would not hold anything against him personally.

On 23 May 2017, following his conversation with Mr Zeidler the night before, Mr Pownall emailed Mr Zeidler a list of further areas to consider following Mr King’s departure. Mr Zeidler forwarded that list to Mr Forsyth (KSSL’s newly appointed CEO following Mr King’s departure).

In view of the investigations into possible unauthorised expenditure, KSSL decided that it would pay the £5,000 to Mr King, which it did on 31 May 2017, but that it would withhold the payment of £70,000 (less PAYE) pending further investigations.

The evidence of the non-executive directors, on which they were not challenged in cross-examination, was that, had they known about the Range Rover Transaction and other unauthorised expenditure discovered after the Settlement Agreement, they would not have approved of KSSL entering into the Settlement Agreement.

On around 31 May 2017 Mr Forsyth called Mr Zeidler to say that he had just been informed by Mr Pashley, the Company’s Procurement Manager, that Mr Pashley had been asked by Mr Evans to conceal certain information relating to unauthorised expenses, in particular, mobile telephones, on KSSL’s account used by Mr King’s family members.

As a result of the disclosure by Mr Pashley to Mr Forsyth, Mr Forsyth then met with Mr Evans and dismissed him for gross misconduct.

In the period 6 June 2017 to 13 June 2017 the arrangements concerning the Range Rover transaction came to the attention of KSSL’s board, as follows.

I am satisfied that, prior to the disclosures referred to above, the board of KSSL (with the exception of Mr King and Mr Evans) did not know any of the details of the Range Rover Transaction.

On 9 June 2017 a meeting took place between Mr King’s parents and Mr Stiefel and Mr Fisher at which they were told about the expenditure which had come to light. On the following day Mr King sent an email to Mr Stiefel in which Mr King accepted that he had paid less than the cost of hire of the vehicle and expressing contrition for his actions but claiming that he did not know how the balance of the cost had been paid.

In an email dated 13 June 2017 the Primekings representatives made a without prejudice offer to settle with Mr King on the basis that their costs excluding VAT would be agreed in the sum of £2.7 million to be satisfied by the transfer to Primekings of the shares in KSGL owned by members of the King family and the family trust (“the King Family Shares”). The Primekings representatives also offered to pay to each of James and Susan King the sum of £1,000 per month for 5 years. This was intended as a clean break but the offer was not accepted by the Kings.

On or about 21 June 2017 charging orders were obtained over the Kings’ homes and the King Family Shares (made final in August 2017) by way of enforcement of the costs order in the Misrepresentation Proceedings. The charging orders were followed by Part 8 proceedings which were commenced on 27 October 2017 in which Primekings sought an order for sale of the King Family Shares. Mr King alleges that in the Part 8 proceedings KSSL attempted to obtain the King Family Shares at an undervalue. This is denied by KSSL. The Kings subsequently paid the amount of the on-account costs order and the Part 8 proceedings were discontinued.

Following Mr King’s departure from KSSL, he was in regular contact by text with Mr Evans. He was also in contact by email with representatives of KSSL by email in connection with the Range Rover Transaction. Mr King’s case is that, in the course of these communications, he came to understand the true nature of the Range Rover Transaction. That case is not borne out by the texts which indicate that Mr King was already aware of the profit share arrangement and aware that the Range Rover Transaction was not an above-board personal lease with TCH, unconnected with KSSL.

The texts and emails include the following:

Mr Evans replied:

“You was aware we used the profit share to fund etc but like you said the other day at the time didn’t take a lot of attention to it. Also I’ve said I signed the actual letter for yours and you didn’t know the contents of the agreement.

There is also an issue with Kings bribery act that’s its incorrect apparently and is a massive problem for Kings they are going to use in the next stage.

I have only told the truth on this and this is why Walker Morris I think separated us as it’s the same I told them. I asked Alistair to check with your lawyers that everything was covered off.

Bro there is nothing in there that isn’t true I promise you”

On 21 July 2017 a meeting took place at KSSL’s offices between Mr Forsyth and Mr Pownall on behalf of KSSL and Tony Coar and Mark Hammond on behalf of TCH to discuss the issue of the Range Rovers provided to Mr King and Mr Evans. The meeting was held on an agreed “without prejudice save as to costs and subject to contract” basis, at TCH’s request.

Mr King relies on the meeting to establish either that KSSL accepted an offer by TCH to pay compensation of £60,000 to £70,000 with the result that KSSL has not suffered any loss as a result of the Range Rover Transaction. He contends, in the alternative, that TCH made an offer to pay this amount which KSSL did not accept and thereby failed unreasonably to mitigate its loss.

Before the trial, KSSL applied for directions as to the disclosure of documents relating to the meeting. It contended that the documents were privileged from disclosure because of the without prejudice nature of the meeting.

Miles J held that the documents were admissible under the second and sixth exceptions to the without prejudice rule as identified in Unilever v Procter & Gamble Co [2000] 1 W.L.R. 243. It was necessary to see the without prejudice documents in order to determine whether (i) a concluded agreement had been reached at the meeting with TCH and (ii) whether KSSL had failed reasonably to mitigate his loss in its conduct of negotiations with TCH. Following Miles J’s order, further disclosure was given and further witness statements dealing with the meeting were served.

Mr Forsyth’s evidence about the meeting was, in summary, that after he had set out KSSL’s position and TCH had responded, there was a discussion about the potential way forward to resolve the matter and avoid legal action. He wanted to make sure that all KSSL’s losses were covered, which he estimated to be about £54,000 as well as to ensure that there was some kind of gesture of goodwill from TCH by way of a financial payment. TCH eventually put forward an offer of around £65,000 but on the basis that TCH was excluded from any legal action and also that TCH’s name did not come up in any other legal action. The meeting ended on the basis that Mr Forsyth would get back to them. Mr Coar emailed after the meeting as follows:

“It was good to meet with you and Mark today. I believe that we had a productive and positive meeting. Just to confirm, we will await to hear from you regarding the proposals in principle we discussed today once you have discussed further with your shareholders. ...”

Mr Forsyth prepared a detailed note of the meeting for the board. This recorded, amongst other things, that he had made clear at the meeting that the discussions were about options to move forward and that nothing discussed on that day would be binding. Mr Forsyth remembers telling Mr Zeidler, Mr Fisher and Mr Stiefel that he thought the deal offered by TCH was as good as they were going to get, by which he meant that he did not think that TCH would budge on the sum offered.

On 26 October 2017 Mr Forsyth emailed Mr Fisher, Mr Stiefel and Mr Zeidler to remind them of the outstanding position but that the general view at the time was that any decision would be parked until the outcome of the litigation against Mr King and Mr Evans was known.

“Just as a reminder I had negotiated the below settlement with TCH back in July at £65k listening to the legal view the other day it struck me as perhaps we need to close this out with TCH — I am not sure what the view is here but we wanted to remind you that we have not officially communicated back as yet to them. The other point is that as our fleet shrinks we may become less valuable and our negotiation position may weaken.”

It is clear from the contemporaneous documents referred to above and the witness evidence that no concluded agreement was reached with TCH regarding compensation for the Range Rover Transaction.

Mr Zeidler explained in his witness statement why he considered that the proposal from

On 13 August 2017, after receiving notice of his removal as a director from KSSL, Mr King wrote to the KSSL board, quoting from the Bible and stating that his father was ill in bed. In his response, Mr Stiefel stated:

“You (and your Dad/mother) have brought all of this onto yourselves... Maybe the following needs reflecting on?

Hosea 8:7 ...…They have sown the seed, now reap the whirlwind”.

Mr Fisher (to whom the email was forwarded) replied to Mr Stiefel: "Great reply!”.

The Claim Form was issued two days later on 15 August 2017. The decision to initiate the present claim was taken by KSSL’s non-executive directors. After the claim had

KSSL did not send a pre-action protocol letter to Mr King. Mr Zeidler’s evidence was that he took the view, based on his experience of Mr King’s conduct, that sending such a letter and engaging in a pre-action process would be a waste of time and money as KSSL could see no honest defence to the claim and wanted to pursue it as quickly as possible. I accept that these were genuine reasons for not sending a pre-action protocol letter and that a pre-action protocol letter would probably not have caused Mr King to react any differently to the claim to the way in which he reacted after the issue of proceedings, which was to put forward what I have concluded was a false case. That does not, however, excuse the failure to send a letter.

On 31 August 2017 Mr King emailed Mr Stiefel pointing out that for KSSL:

“to issue a High Court action against Steve and I, without even trying to discuss it with us first, or trying to resolve and investigate the allegations, knowing that neither of them had the personal funds to defend such an expensive action, suggested that no consideration has been given for us to have the ability to defend ourselves and that KSSL brought this action relying on that fact they did not have the personal funds to be able to defend it and so place more pressure on myself, the King family and Mr Evans.”

Later that day Mr King received an eight-page letter before action intimating a further claim for around £400,000 in respect of his usage of an American Express card, mobile phones used by his family members, and insurance for personal vehicles. After the complaints in the letter were responded to by Mr King’s solicitors on 13 October 2017, no further action was taken. Mr Zeidler accepted that KSSL was at some point advised that “This won't stand up to court scrutiny.”.

KSSL’S CLAIMS

The endorsement on the Claim Form reads as follows:

“The claim relates to bribes received by the Defendants from the company from which the Claimant hires its fleet of vehicles (“TCH"). The First Defendant received the use of a Range Rover from TCH in exchange for which the Company (acting through the Second Defendant) agreed to forego various contractual payments from TCH and agreed that it would use the services of TCH exclusively for three years. The Second Defendant received the use of a Range Rover from TCH in exchange for the Claimant agreeing to pay more for the hire of certain vehicles than it would otherwise. The Claimant was unaware of these bribes and contractual arrangements.

The Claimant claims declaratory relief; damages and/or equitable compensation; an account and enquiry and an order revesting in the Claimant any profits and benefits which accrued to the Defendants as a result of the bribes; an indemnity; rescission of the settlement agreement further to which the First Defendant’s employment was terminated and restitution of sums paid further to that agreement and interest whether compounded or not further to the Court’s equitable jurisdiction or section 35A of the Senior Courts Act 1981.”

The Amended Particulars of Claim set out the duties owed by Mr King to KSSL pursuant to section 172, 175, 176 and 177 of the Companies Act 2006 (“the 2006 Act”) and his contractual duties which included:

Paragraph 43 of the Amended Particulars of Claim set out Mr King’s breaches of duty as follows:

“Mr King breached his fiduciary, statutory and contractual duties to KSSL by authorising Mr Evans to enter into the agreement dated 7th April 2015 and the First Rental Agreement with TCH on KSSL’s behalf in respect of the First Range Rover and by gaining the use of the First Range Rover as follows:

(a)

Mr King did not act in good faith or in the best interests of the Company: the

Company received no benefit in exchange for TCH retaining KSSL’s part of the Profit Share further to the agreement between KSSL and TCH set out in the letter of 7th April 2015, and it did not benefit from the three-year period of exclusivity in respect of TCH’s services. The Company did not benefit from the First Rental Agreement. Mr King benefitted personally from both agreements.

(b)

Mr King placed himself in a position in which his personal interests conflicted with those of the Company: it was not in the Company’s interests to exchange the Profit Share and exclusivity in respect of the hire of its fleet of vehicles for Mr King’s private use of the First Range Rover.

(c)

Mr King received a benefit from TCH in the form of use of the First Range Rover in his capacity as director of the Company.

(d)

Mr King failed to declare to the Company any interest in the transaction under which KSSL agreed to exchange its Profit Share and exclusivity in respect of the supplier of its hire vehicles for the hire of the First Range Rover.

(e)

Mr King accepted the use of the First Range Rover from TCH, which was a bribe: it was an inducement made to Mr King as a director of KSSL in circumstances where TCH knew Mr King was a director. The provision of the First Range Rover to Mr King and/or the terms on which it had been provided was not known by KSSL (acting through its board of directors and/or shareholders).

(f)

Mr King failed to comply with the Company’s anti-bribery policy as set out in paragraph 2.8.5 of the KSSL Staff Handbook.

(g)

Mr King failed to report his own wrongdoing and/or that of Mr Evans to the board of directors of KSSL immediately upon becoming aware of it.

The Amended Particulars of Claim also set out grounds for rescission of the

Mr King’s grounds of defence to the claim, as advanced at the trial, were in summary, as follows:

ISSUES ARISING OUT OF THE CLAIM

The main issues arising out of KSSL’s claim are accordingly as follows:

Benefit from TCH

The Range Rover Transaction is significantly different from the bribery transactions described in the authorities cited above in that the benefit received by the agent (Mr King), being the use of the Range Rover for a token rent of £100, was largely paid for by the agent’s principal (KSSL), not by the alleged briber (TCH).

It was common ground between the parties that, in order for a benefit to constitute a bribe, it must come from the briber. The briber must do something giving rise to a “real possibility of a conflict of interest”. If a third party does no more than provide an agent with an asset on arm’s length terms, there may be no risk of an agent feeling any sense of obligation to the third party so that the possibility of a conflict of interest may not arise.

Mr Newman submitted that in the present case TCH ensured that all its costs were met by KSSL via the profit share and via Mr King’s monthly rental; TCH did no more than provide the Range Rover for which it was paid the market rate. Therefore, he submitted, TCH did not jprovide any relevant benefit to Mr King. He referred to the email from Mr Buckley to Mr Evans dated 24 February 2015 (paragraph 54 above) showing that TCH calculated the profit share which it stood to receive before agreeing to the transaction. He submitted that TCH “drove a proper bargain”.

I accept that if all that TCH agreed to do was to supply a Range Rover fully paid for by KSSL/Mr King, the Range Rover Transaction might not have constituted a bribe. But Mr Downes submitted that TCH did provide a benefit to Mr King by (i) assuming the risk that the profit share might not cover the ordinary rental costs for the vehicle and (ii) breaching its own procedures in providing a “personal” (as opposed to corporate) lease.

There is no direct evidence from TCH as to its calculation in April 2015 of the likely profit share during the three-year period covered by the Range Rover Transaction. I am nevertheless satisfied that TCH did provide a benefit to Mr King in the respects contended for by Mr Downes. It assumed a material risk that the profit share would leave a shortfall and provided a personal lease which it would not normally have done. Furthermore, the fact that TCH required Mr Evans to agree to exclusivity for three years indicates that TCH considered that it was providing a benefit for which it expected to be rewarded.

A further argument raised on behalf of Mr King was that the Range Rover was a company car rather than a personal benefit. KSSL did not challenge Mr King’s evidence that the Range Rover was used 85% for business purposes. However, I reject the argument that it was not a personal benefit. KSSL had no interest in providing Mr King

Conflict of interest

Mr King, as the Chief Executive Officer of KSSL, was clearly in a position to influence the relationship between TCH and KSSL. The Range Rover Transaction personally benefitted Mr King and gave rise to a real possibility of a conflict of interest. Mr King’s evidence in cross-examination that he did not have significant influence over all areas of KSSL’s business and did not even have even potential influence over the relationship between KSSL and TCH was implausible:

Secrecy

The Range Rover Transaction was not known about by the board of KSSL (see paragraphs 86 - 88, 107 and 117 above).

In these circumstances, I conclude that the Range Rover Transaction gave rise to a bribe received by Mr King. As noted above, I have reached this conclusion without hearing from TCH. My findings in relation to the bribery claim are relevant to my consideration of the claim for breaches of the general duties to which I now turn.

Mr King’s duties

Sections 172, 175, 176 and 177 of the 2006 Act include the following provisions:

Under Mr King’s employment contract, he was required (amongst other things) to:

Breach of duty

Mr Newman’s main argument in response to the breach of duty claims was that KSSL’s claims were in substance claims in respect of the misappropriation of company property; he contended that a misappropriation of company property does not entail a breach of fiduciary duty because no third party is involved; a claim might have been brought for unauthorised expenditure in breach of Mr King’s employment contract but such a claim was not pleaded. Mr Newman referred to KSGL’s 2016 accounts in which the cost to KSSL of the Range Rover Transaction was treated as unauthorised remuneration.

I do not accept this submission. The fundamental rule underlying fiduciary duties is that a fiduciary is not allowed to put himself in a position where his interest and his duty conflict; see Snell’s Equity (34^th Ed) para 7-018. As held by Millett LJ in Bristol & West Building Society v Mothew [1998] Ch. 1 at 18:

“The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal.”

A misappropriation of company property by a director would prima facie give rise to

I consider that the Range Rover Transaction entailed the following breaches of duty on the part of Mr King.

It was contended on Mr King’s behalf that his general duties have effect subject to any rule of law enabling KSSL to give authority to anything that would otherwise be a breach of duty and that authority was given pursuant to the principle of implied unanimous shareholder consent under the Re Duomatic principal. It was contended that the board and all of the shareholders of KSSL were sufficiently aware of the Range Rover that they informally consented to the arrangement and/or ratified it.

As I have found, there is no evidence that, with the exception of Mr King and Mr Evans, the board or the shareholders were aware of the Range Rover Transaction prior to June 2017. There was no implied authority.

It was contended on behalf of Mr King that KSSL’s claim was settled pursuant to the Settlement Agreement. This was on the basis that:

KSSL’s response is as follows:

As to the first point, I consider that, contrary to KSSL’s case, the terms of Clause 10 of the Employment Contract (see paragraph 104 above) were sufficiently broad to encompass all the claims in these proceedings.

As to the second point, the board was not aware of the claims by 19 May 2017.

It follows that KSSL’s claims have been not been settled pursuant to Section 10.3 of the Settlement Agreement, irrespective of whether the Settlement Agreement has been validly rescinded.

Although I have found that the Settlement Agreement, correctly construed, does not apply to Mr King’s claims in these proceedings, it is nevertheless necessary to consider whether it has been rescinded. This is because KSSL is relying on its purported rescission as the basis for claiming restitution of the sum of £5,000 which it paid to Mr King pursuant to clause 11.2 of the Settlement Agreement on 31 May 2017.

KSSL’s case is that it is entitled to rescind the Settlement Agreement on the following grounds:

Mr King contends that the rescission claim should be dismissed on the following grounds:

The issues arising in connection with the claim to rescission are therefore:

Misrepresentation

Silence does not ordinarily amount to a positive misrepresentation but it can do so where the misrepresentor has a positive duty of disclosure in connection with the matter about which he has remained silent. In Conlon v Simms [2008] 1 WLR 484, Jonathan Parker LJ stated, at para 130:

“Non-disclosure where there is a duty to disclose is tantamount to an implied representation that there is nothing relevant to disclose”

Similarly, in Ross River v Cambridge City Football Club [2008] 1 All ER (Comm) 1028 Briggs J stated at para 194:

“Although silence as to the material facts is not in general capable of constituting a misrepresentation, it may do so where the defendant is under a positive duty of disclosure, for example when negotiating a species of contracts regarded as uberrimae fidei, or where an existing relationship between the parties, such as a fiduciary relationship, imposes an obligation of disclosure.”

As a fiduciary with a duty to act in good faith towards KSSL to promote the success of KSSL pursuant to section 172 of the 2006 Act, Mr King was under a duty to disclose to the board his own wrongdoings see Item Software (UK) Limited v Fassihi [2004] EWCA 1244. He was under a similar duty pursuant to his Contract of Employment to disclose any conflicts of interest or fraud concerns, including details of the Range Rover Transaction, of which the board was unaware. By not making any disclosures, Mr King impliedly represented that he had not committed any breaches of duty, conflict of interest or fraud concerns. That representation was untrue.

Inducement

The test for inducement of non-fraudulent misrepresentation is a “but for” test. Where a party has entered a contract after a misrepresentation has been made to him, he will not have a remedy unless he would not have entered the contract (or at least not on the same terms) but for the misrepresentation; see Chitty on Contracts (33^rd Edition) para 7-039. It is not necessary that the misrepresentation be the sole cause which induced the representee to make the contract, provided it was one of the inducing causes; Edgington v Fitzmaurice (1885) 29 Ch. D. 459, Chitty (ibid) para 7-038.

KSSL’s case at the trial was that Mr King’s misrepresentation was fraudulent in that he failed to disclose the arrangements concerning the Range Rover knowing that they should have been disclosed. The test for inducement of fraudulent misrepresentations is a looser one: was the misrepresentee materially influenced by the misrepresentation in the sense that it had some impact on his thinking? see Chitty at para 7-040 and Ross River at para 202. Thereafter, inducement is presumed; see BV Nederlandse Industrie Van Eiprodukten v Rembrandt Entreprises Inc [1920] Q.B. 551 at para 25.

The evidence of KSSL's non-executive directors Mr Stiefel, Mr Fisher, Ms Shaw and Mr Zeidler was that, if they had known about the underlying arrangement relating to the Range Rover, they would not have signed off on the Settlement Agreement and no agreement to pay any sums would have been forthcoming. That evidence is inherently plausible. It would be surprising if KSSL would have been willing to pay Mr King a substantial severance payment if they had been told that the hire of Mr King's Range Rover had been secretly funded by KSSL for two years. I reject Mr King's case that (in substance) such was the determination of KSSL to remove Mr King from the business in order to punish him and to leave him without remedies for unfair dismissal that no other factors operated on their minds. This evidence establishes reliance, even on the stricter test for non-fraudulent misrepresentations.

Bars to rescission

The right to rescind a voidable contract is lost when the party entitled to rescind, with knowledge both off the facts giving rise to the right to rescind and of the right to rescind itself, unequivocally manifests an intention to affirm once free from the effects of the vitiating factor; see O'Sullivan, Elliott and Zakrzewski, The Law of Rescission (2nd Ed) para 23.39, Peyman v Lanjani [1985] 1 Ch 457. Although the Court of Appeal decision in Peyman v Lanjani was concerned with a right to terminate a contract for breach of condition, rather than a right to rescind a voidable contract ab initio, the Court's reasoning indicated that the same knowledge of rights is required in both contexts. The decision has been subsequently treated as authority for the principle that affirmation of a voidable contract requires full knowledge of the right to choose to affirm or rescind; see Chitty (ibid) para 7314, Moore Large & Co Ltd v Hermes Credit & Guarantee plc [2003] 1 Lloyds Rep IR 315d.

Mr King contends that KSSL affirmed the Settlement Agreement by the following:

In my judgment, none of the matters raised by Mr King amounted to affirmation.

It is a bar to a claim for rescission that restitutio in integrum is impossible; see O'Sullivan, Elliott and Zakrzewski (ibid), para 18.01. The requirement is that the defendant should be put back into substantially the same position it was in at the time the contract was entered into. Mr King contends that there cannot be restitutio in integrum because any employment claims that he might have had at the time of the Settlement Agreement, and which were compromised under the Settlement Agreement, would be out of time.

The evidence indicates that Mr King chose not to pursue his employment claims after he was aware of KSSL’s rescission (or request for rescission) of the Settlement Agreement and before those claims became time-barred. It follows that any loss of employment rights flowed from this decision rather than from the Settlement Agreement. He could have made a reference to ACAS to extend time for any employment claim at any time before 18 August 2017. He received the Particulars of Claim in the present proceedings, in which the claim for rescission is set out, on 16 August 2017. He sent a text message to Mr Evans on 18 August 2017 noting the rescission claim and expressing pleasure that, because the Settlement Agreement had been rescinded, he considered that this would mean he would be able to work with Mr Evans. He confirmed in cross-examination that he was receiving legal advice at the time and that he deliberately decided not to proceed with any employment claim on the basis of that legal advice:

“Q. You deliberately decided not to bring an employment claim didn’t you? A. Well, that would’ve been on legal advice”

(Transcript Day 6 page 42)

Even if this were not the case, I accept KSSL’s submission that equity does not require restitutio in integrum to be precise. It is willing to give appropriate undertakings to the Court to enable any employment claims to be addressed. This would ensure that justice is done and remove any possible objection to rescission on the ground that restitutio in integrum is impossible.

Rescission is also barred where innocent third parties have acquired rights which would be defeated if the contract were set aside; see O'Sullivan, Elliott and Zakrzewski (ibid) para 20.01. Mr King contends that Gordons LLP’s entitlement to and receipt of £2,000 plus VAT under the Settlement Agreement means that the rights of an innocent third party would be affected by the rescission.

Those rights would only be affected by rescission if KSSL sought recovery from Gordons LLP of the £2,000 plus VAT paid to it. KSSL has indicated that is does not intend to do so and is prepared to give an undertaking to that effect if necessary.

Where a contract has been induced by misrepresentation, a party may rescind at common law or may seek rescission at equity from the Court; Snell’s Equity at paras 15-011 and 15-012. As Longmore LJ stated in Salt v Stratstone Specialist Ltd [2015] 2 CLC 269 at para 24, “The normal remedy for misrepresentation is rescission…This remedy should be awarded if possible…”. Whilst equitable rescission is a discretionary remedy, it should be granted unless there is a bar to rescission.

KSSL has established that Mr King’s misrepresentation induced it to enter into the Settlement Agreement. There are no bars to rescission. I therefore consider that KSSL is entitled to rescind the Settlement Agreement and to repayment of £5,000.

It is Mr King’s case that, if he was in breach of duty as a director, he should be relieved of liability pursuant to section 1157 of the 2006 Act on the ground that he acted honestly and reasonably and, having regard to all the circumstances of the case, he ought fairly to be excused.

Given my findings as to Mr King’s knowledge of the profit share arrangement and the impropriety of the transaction vis a vis TCH, there is no basis for the application of section 1157. Mr King did not act honestly and reasonably and there are no grounds upon which he ought fairly to be excused from liability.

As set out at paragraphs 123 – 131 above, at the meeting on 21 July 2017 between representatives of KSSL and TCH, KSSL was offered compensation of £65,000. Mr

KSSL submits that Mr King’s argument is contrary to the principle that a victim of a tort has an absolute right as to which of two tortfeasors it recovers compensation. The fact that KSSL chose to sue Mr King rather than accept TCH’s offer therefore has no bearing on its claim against Mr King.

The principle that a claimant is free to choose from which of two tortfeasors to recover compensation for a loss for which they are both liable, without regard to the doctrine of mitigation, was first established in The Liverpool (No 2) [1963] P 64. The facts of that case were that two vessels, the Liverpool and the Ousel, collided in the port of Liverpool. The Harbour Board had a statutory right to recover the cost of removing the wreck of the Ousel from its waters both from the owners of the Liverpool, who had been responsible for the collision, and from the owners of the Ousel. The sum for which the owners of the Ousel were liable was limited to £10,000 by reason of limitation of liability provisions available to those owners under the Merchant Shipping Acts. As against the owners of the Liverpool the prospects of recovery were stronger as her limitation fund was larger and was expected to pay about 30% i.e. closer to £20,000. The Harbour Board preferred to sue the owners of the Liverpool. The issue arose as to whether the Harbour Board was required to give credit for the sum tendered by the owners of the Ousel. The Court of Appeal held that it was not. Harman LJ giving the judgment of the Court of Appeal held that, in claiming against the owners of the Liverpool, the Harbour Board was not required to give credit for the amount it could recover from the owners of the Ousel. Harman J’s reasoning can be found at page 82:

“Let it be conceded that if the Board had recovered the £10,000 from the Ousel under its statutory power that would have been satisfaction pro tanto of the damages; still the fact is that the Board has not recovered this sum, and, in our judgment, there is no duty upon it to do so. It is true that at the trial of the issue the Ousel owners declared themselves ready to pay and in fact tendered the money, which is now on deposit with stakeholders, but we cannot see that this makes any difference, for the tender has never been accepted.

… this case, in our judgment, has nothing to do with the duty to mitigate. It concerns the Board's legal rights, and no duty rests on it at the demand of a tortfeasor to satisfy part of the damages by resorting to another tortfeasor; still less by resorting to an innocent party made liable merely by statute.

If it were otherwise there would be no necessity for the Law Reform (Married Women) and Tortfeasors Act, 1935, and the law about contributions between tortfeasors, for any tortfeasor could oblige the creditor to sue the other debtors in order to alleviate his burden.”

The rationale for the principle was explained by Rix LJ in Haugesund Kommune v Depfa Bank [2011] EWCA Civ 33 at para 40:

“In my judgment, the principle in The Liverpool is not in doubt. If it were otherwise, no claimant with remedies against more than one defendant could ever get judgment against either, for each defendant could play off the claim against him by referring to the claim against the other. And where the claimant has sued only one out of a number of possible defendants, the litigation before the court would become embroiled in satellite litigation involving the alleged position relating to other parties. It is rather for the defendants involved to bring contribution or other similar proceedings against each other, or for the sole defendant to implead other parties if it is thought prudent to do so.”

The principle is set out in McGregor on Damages (21^st Edition):

“A claimant need not take steps to recover compensation for his loss from parties who, in addition to the defendant, are liable to him for the same loss

9-094 This is an undoubted principle and it is a principle which, strictly speaking, stands on its own feet independently of mitigation. It is mentioned here largely because it quite often becomes associated with mitigation in the minds of both judges and commentators. On this matter The Liverpool (No 2) is the central case. It was in this case that Harman LJ made the first clear statement of the principle, pointing out that otherwise it would have been unnecessary for the legislature to make provision for contribution and indemnity between joint and several tortfeasors. Indeed The Liverpool (No 2) goes as far as to show that, even if the third party offers payment of the amount for which he is liable, the claimant is not required to accept it in mitigation.”

This passage was approved by Bryan J in Natixis v Marex [2019] 2 Lloyd’s Rep 431 in which it was held that a claimant had not been obliged to take any steps to recover compensation for its loss from third parties who, in addition to the defendant, were liable to it for the same loss.

Whilst it might appear that the rationale for the principle given by Rix LJ (the avoidance of satellite litigation involving issues as to the liability of an alleged joint tortfeasor) does not apply to a situation where compensation has actually been offered by a joint tortfeasor, it is clear from the facts of The Liverpool (No 2) itself that the principle does apply to such a situation. This is confirmed in the passage from McGregor. The application of the principle to an offer of compensation avoids the need to consider, in this case, potentially complicated issues as to whether it was reasonable not to accept TCH’s offer given that it was made in settlement of TCH’s potential liability not only in relation to the Range Rover Transaction, but also in relation to Mr Evans’s Range Rover.

It follows that TCH’s offer of compensation is irrelevant to the assessment of KSSL’s loss.

KSSL is claiming damages to compensate it for the losses it has suffered by reason of Mr King’s breaches of duty, comprising (i) the lost profit share in the sum of £40,666.47 and (ii) the cost of insuring the Range Rover in the sum of £2,126.25. I am satisfied that KSSL is entitled to damages for the lost profit share.

Mr King contends that KSSL was obliged to insure the Range Rover even if it was a benefit obtained in breach of duty and/or a bribe. This argument rests on clause 20.5.1 of his Employment Contract which states:

“The Company will … pay you an allowance of £850 per calendar month (the “Car Allowance”) on condition that you provide a car for your use for business purposes in order to perform the duties of your employment. The Company will ensure that the vehicle is insured on its fleet policy”

KSSL submits that Mr King was not entitled to require KSSL to insure his Range Rover pursuant to clause 20.5.1 because it was not a vehicle “provided” by Mr King (under clause 20.5.1 or at all). It was a vehicle provided partly by KSSL, partly by TCH.

In my judgment, Mr King did “provide” the Range Rover in the sense of making it available for business purposes, irrespective of how it was paid for. It follows that KSSL was obliged to pay the insurance on the car and is not entitled to recover the cost of insurance by way of damages.

As set out above under Issue 5, KSSL is also entitled to rescission of the Settlement Agreement and to repayment of the sum of £5,000.

Apart from a claim for payment of £70,000 pursuant to the Settlement Agreement, which cannot succeed given my decision as to the rescission of the Settlement Agreement, Mr King is counterclaiming damages on the basis that KSSL has committed the tort of abuse of process, as recognised in Grainger v Hill (1838) 4 Bing N.C. 212, by commencing and pursuing these proceedings for collateral and improper purposes.

These purposes are alleged to be:

Mr King’s pleaded claim is that he has incurred the costs and expenses of defending the claim and damage to his reputation. There is also a claim for aggravated and exemplary damages.

KSSL’s case in response to the Counterclaim is, in summary, as follows.

ISSUES ARISING OUT OF THE COUNTERCLAIM

The issues on the Counterclaim are accordingly:

The facts of Grainger v Hill, in which the tort of abuse of process was first recognised, were, in summary, that the claimant had mortgaged his vessel to the defendant with the mortgage debt payable after a year. In the meantime, the claimant was to retain the register of the vessel in order to pursue his voyages. Before the date for repayment of the debt, the defendants, who were concerned about the sufficiency of their security, decided to get hold of the ship’s register and for this purpose brought assumpsit proceedings against the claimant, threatening him with arrest unless he could provide bail or the ship’s register. The claimant gave up the register and repaid the loan. He subsequently sued for the loss caused by his inability to carry on business because of the defendants’ conduct. The defendants applied to non-suit the abuse of process claim on the ground, amongst others, that it had not been established that the original proceedings had been determined against them.

The Court of Exchequer Chamber dismissed the non-suit on the grounds that it was immaterial whether the defendant’s proceedings had been determined and whether or not it was founded on reasonable and probable cause. Proof that the defendant’s proceedings had been found to be without reasonable or proper cause would be essential elements for an action for malicious arrest or malicious prosecution but the claim in this action was for abusing the process of the law. The abuse consisted of applying the process of law for the ulterior purpose of obtaining by duress the ship’s register, to which the defendants had no claim and which was not within the scope of the court’s process.

A similar conclusion was reached in Gilding v Eyre (1861) 10 CBNS 592, although Grainger v Hill was not mentioned. The defendant brought proceedings in order to extort money which he knew had already been largely paid by the claimant under an earlier judgment. The Court of Common Pleas rejected the defendant’s contention that the abuse of process claim was not sustainable because the original proceedings had not terminated in the claimant’s favour.

Goldsmith v Sperrings Ltd [1977] 1 WLR 478 is the first of a series of cases in the modern era in which the Grainger v Hill tort has been considered. Sir James Goldsmith brought proceedings against wholesale and retail distributors of the magazine, alleging libel. The distributors applied to strike out the proceedings as an abuse of process on the ground that the claimant’s purpose in pursuing the action was not to protect his reputation but to destroy the magazine by cutting off its retail outlets. The application failed. The majority of the Court of Appeal (Scarman LJ and Bridge LJ) were not satisfied on the facts that the claimant’s purpose was other than to vindicate his reputation.

Lord Denning MR held as follows (page 489C):

“In a civilised society, legal process is the machinery for keeping and doing justice. It can be used properly or it can be abused. It is used properly when it is invoked for the vindication of men’s rights or the enforcement of just claims. It is abused when it is diverted from its true course so as to serve extortion or oppression: or to exert pressure so as to achieve an improper end. When it is so abused, it is a tort, a wrong known to the law. The judges can and will intervene to stop it. They will stay the legal process, if they can, before any harm is done. If they cannot stop it in time, and harm is done, they will give damages against the wrongdoer.”

Bridge LJ held as follows in relation to the concept of “collateral advantage” in the context of the tort of abuse of process (503F):

“In my judgment, one can certainly go so far as to say that when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance. On the other hand, if it can be shown that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all, that is an abuse of process. These two cases are plain; but there is, I think, a difficult area in between. What if a litigant with a genuine cause of action, which he would wish to pursue in any event, can be shown also to have an ulterior purpose in view as a desired by product of the litigation? Can he on that ground be debarred from proceeding? I very much doubt it. But on the view I take of the facts in this case the question does not arise and it is neither necessary nor desirable to try to lay down a precise criterion in the abstract.”

In Digital Equipment Corporation and another v Darkcrest Ltd [1984]1 Ch 512 Falconer J dismissed an appeal against the striking out of paragraphs in a Counterclaim which alleged that the proceedings, in which an Anton Piller order had been obtained on misleading evidence, were an abuse of process Falconer J questioned whether the

In Broxton v McClelland and another [1995] EMLR 485 Drake J had struck out a libel claim as an abuse of process on the basis that the claimant’s objective was to secure the defendant’s financial ruin. The Court of Appeal allowed the appeal against the strike out. Simon Brown LJ (with whom Nourse LJ and Waite LJ agreed) held as follows:

“Rather than cite at length from these authorities, I propose instead to set out what I believe to be the central principles emerging from them:

1)

Motive and intention as such are irrelevant (save only where "malice" is a relevant plea): the fact that a party who asserts a legal right is activated by feelings of personal animosity, vindictiveness or general antagonism towards his opponent is nothing to the point. As was said by Glass JA in Champtaloup -v- Thomas 1976 2 NSWLR 264,271 (see Rajski -v- Baynton 1990 22 NSWLR at p 134):

"To impose the further requirement that the donee [of a legal right] must be actuated by a legitimate purpose, thus forcing a judicial trek through the quagmire of mixed motives would be, in my opinion, a dangerous and needless innovation."

2)

Accordingly the institution of proceedings with an ulterior motive is not of itself enough to constitute an abuse: an action is only that if the Court's processes are being misused to achieve something not properly available to the Plaintiff in the course of properly conducted proceedings. The cases appear to suggest two distinct categories of such misuse of process:

i)

the achievement of a collateral advantage beyond the proper scope of the action - a classic instance was Grainger -v- Hill where the proceedings of which complaint was made had been designed quite improperly to secure for the claimants a ship's register to which they had no legitimate claim whatever. The difficulty in deciding where precisely falls the boundary of such impermissible collateral advantage is addressed in Bridge LJ's judgment in Goldsmith -v- Sperrings Limited [1977] 2 ALL ER 566,[1977] 1 WLR 478 at page 503 D/H of the latter report

ii)

the conduct of the proceedings themselves not so as to vindicate a right but rather in a manner designed to cause the Defendant problems of expense, harassment, commercial prejudice or the like beyond those ordinarily encountered in the course of properly conducted litigation.

3)

only in the most clear and obvious case will it be appropriate upon preliminary application to strike out proceedings as an abuse of process so as to prevent a Plaintiff from bringing an apparently proper cause of action to trial. In my judgment even if one were here to impute to the Plaintiff the motivation of her maintainer, this would not be so clear and obvious a case as to justify striking it out at this stage.”

In Speed Seal Ltd v Paddington [1985] 1 W.L.R. 1327, the Court held that a counterclaim in which the defendant alleged that proceedings for breach of confidence had been brought for the purpose of damaging the defendant’s busines provided an arguable case of abuse of process for which permission to amend should be granted.

In Land Securities plc and others v Fladgate Fielder [2010] Ch 467 the Court of Appeal dismissed a strike out of a claim which asserted that the defendants’ dominant purpose in bringing judicial review proceedings in connection with the grant of planning permission to the claimant had been to put pressure on the claimant to assist in the relocation of their business. Etherton LJ, with whom Moore-Bick LJ and Mummery LJ agreed, carried out a comprehensive review of the authorities, noting that Grainger v Hill itself and Gilding v Eyre were the only two recorded cases in which a claim of this nature had succeeded, both cases involving compulsion by arrest and imprisonment to achieve a collateral advantage. Etherton LJ concluded that there was no basis for extending the tort to judicial review or to a claim for pure economic loss beyond the heads of damage that must exist for the tort of malicious prosecution, that is to say, injury to the person, the costs of defending maliciously brought proceedings and damage to reputation.

“73.

… What, in my judgment, emerges clearly from the authorities is that the tort is not committed by a person who institutes proceedings with a genuine interest in, and an intention to secure, their successful outcome, even if the claimant’s motives are mixed and they hope that they may also achieve an objective not itself within the scope of the proceedings.”

Moore-Bick LJ observed that, although rarely applied, the principle in Grainger v Hill has never been seriously doubted but that the tort of abuse of process now has a much reduced role following the abolition of arrest in support of civil proceedings and the introduction of a power to award costs when it is in the interests of justice to do so. Mummery LJ was hesitant about placing too much reliance on Grainger v Hill, without doubting the correctness of the decision on its facts, as a good guide to the shape of a tort for abuse of process by an application for judicial review.

In JSC BTA Bank v Ablyazov and others (No 6) [2011] 1 WLR 2996 the defendants applied to stay the proceedings on the basis that they were being pursued by the bank for a collateral purpose, namely to damage the defendant’s reputation, diminish his wealth and assist his elimination as a political opponent of the president of Kazakhstan. Teare J addressed the issue of whether a claimant who has two purposes for commencing proceedings, one legitimate and the other illegitimate, commits abuse of process by commencing the proceedings. In Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, 469 it had been suggested that if the predominant purpose was illegitimate the proceedings would be an abuse whereas in Goldsmith v Sperrings Ltd Bridge LJ had indicated that they would not be. Teare J preferred the approach of Bridge LJ: if one of two purposes is legitimate, the claimant should in principle be entitled to proceed with his claim, so avoiding the need to embark upon the difficult exercise of establishing which of two purposes is the claimant’s predominant one. Teare J therefore concluded on the facts that, even though it was arguable that the President of Kazakhstan had caused the directors of the claimant bank to bring the proceedings predominantly for the collateral purpose alleged by the defendants, the application for a stay could not succeed because the bank had a legitimate reason for bringing the proceedings, namely to recover the assets which it alleged the defendant had misappropriated.

In Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2013] UKPC 17 the defendant insurers had brought proceedings in fraud with the predominant intention of destroying the claimant professionally. The Privy Council agreed with the first instance judge that, since it was not alleged that the defendants intended to achieve his destruction other than through the initiation and successful prosecution of the action, the action had not been brought for a purpose other than that for which it was intended.

Lord Wilson held as follows:

“63.

What is an improper purpose? A helpful metaphor suggested by Isaacs J in the High Court of Australia in Varawa v Howard Smith Co Ltd (1911) 13 CLR 35, 91, is that of a stalking-horse:

If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim on which the court is asked to adjudicate they are regarded as an abuse of process for this purpose . . .”

The metaphor aids resolution of the conundrum raised by the example of a claimant who intends that the result of the action will be the economic downfall of the defendant who may be a business rival or just an enemy. If the claimant’s intention is that the result of victory in the action will be the defendant’s downfall, then his purpose is not improper: for it is nothing other than to achieve victory in the action, with all such consequences as may flow from it. If, on the other hand, his intention is to secure the defendant’s downfall or some other disadvantage to the defendant or advantage to himself by use of the proceedings otherwise than for the purpose for which they are designed, then his purpose is improper.”

On the question of whether a subsidiary legitimate purpose negatived abuse even if the predominant purpose was illegitimate, Lord Wilson disagreed with Teare J on the ground that his conclusion failed to allow for the ease with which a claimant with a predominantly improper purpose can point to a legitimate purpose, however slight (para 65).

Lord Wilson’s conclusion was as follows:

“79.

Sagicor did not commit the tort of abuse of process. Henderson J found that the predominant factor which led Sagicor to allege fraud and conspiracy against Mr Paterson had been Mr Delessio's obsessive determination to destroy him professionally. But he did not proceed to find that Mr Delessio intended to achieve Mr Paterson's professional destruction other than through the initiation and successful prosecution of the action. One can only speculate why, in that he was aware that Mr Purbrick's reports were not a proper basis for the allegations, Mr Delessio anticipated that the action would succeed. But Mr Jacob failed in his attempt to persuade the Court of Appeal that the judge should have found that Mr Delessio, and thus Sagicor, had no intention of bringing the action to trial. In the absence of a finding of that character Mr Delessio's purpose cannot be regarded as outside the scope of the action.” 226. In Willers v Joyce [2018] AC 779, the claimant brought proceedings seeking damages for malicious prosecution following the discontinuance of earlier proceedings brought by the defendant against the claimant for fraud. The judgments of the Supreme Court are mainly concerned with the scope of the tort of malicious prosecution, which it was held, extended to civil proceedings, but they also include observations on the Grainger v Hill tort. Lord Toulson (delivering the majority judgment) queried whether the tort existed as a separate cause of action at all (albeit without finally deciding the point):

“25.

Grainger v Hill has been treated as creating a separate tort from malicious prosecution, but it has been difficult to pin down the precise limits of an improper purpose as contrasted with the absence of reasonable and probable cause within the meaning of the tort of malicious prosecution. This is not entirely surprising because in Grainger v Hill itself there plainly was no reasonable or probable cause to issue the assumpsit proceedings, since the debt was not due to be paid for another ten months as the lenders well knew. It might be better to see it for what it really was, an instance of malicious prosecution, in which the pursuit of an unjustifiable collateral objective was evidence of malice, rather than as a separate tort. … It is unnecessary to express a firm view on this point, but Grainger v Hill does at any rate illustrate the willingness of the court to grant a remedy, in what it regarded as novel circumstances, where the plaintiff had suffered provable loss as a result of civil proceedings brought against him maliciously and without any proper justification.”

Since Willers v Joyce, the continued existence of the tort of abuse of process (as distinct from that of malicious prosecution of civil proceedings) has been recognised by Nugee J in Holyoake v Candy [2017] EWHC 3397, para 413.

The following propositions can be extracted from these authorities.

There are conflicting authorities on the question of whether the tort can be committed where the claimant has mixed purposes. It was submitted on behalf of Mr King that I should follow the approach of the Privy Council in Crawford v Sagicor and hold that the tort is committed if the predominant purpose is improper rather than the contrary approach of Teare J according to which a proper purpose negatives an improper one. Given my findings on the facts, both approaches lead to the same result and it is not necessary for me to choose between them.

KSSL does not suggest that the purposes of the proceedings alleged by Mr King (namely the enabling of a purchase by Primekings at an undervalue of the King family shares and/or the causing of gratuitous damage to Mr King by permanently damaging his reputation and employment prospects) are other than improper purposes. The issue to be determined is therefore whether the evidence establishes that the proceedings were either or both of these purposes.

Mr King relied on the following allegations in support of his case that the purpose of KSSL in issuing this claim was to pressurise the King family into giving up their shares at an undervalue:

In my judgment these allegations fall far short of establishing that these proceedings have been brought for the purpose of enabling Primekings, through pressure on Mr King, to obtain the King Family Shares at an undervalue. This is for the following reasons.

First, the fact that in 2017 Primekings and its representatives were interested in acquiring the King Family Shares does not support the inference that the purpose of these proceedings was to enable that objective to be achieved, still less to be achieved by obtaining the shares at an undervalue. Following the collapse of the Misrepresentation Proceedings, Primekings and its representatives had the benefit of a costs order in their favour in the sum of £1.7 million with detailed assessment to follow, which they were entitled to enforce. They quite understandably proposed to satisfy that liability by obtaining a transfer of the Kings’ only substantial asset apart from their homes, namely the King Family Shares. Having sought unsuccessfully to reach a settlement agreement on terms that the shares were transferred, they obtained a final charging order over the King Family Shares on 3 August 2017. By the time these proceedings were started on 15 August 2017, they were therefore in a position to bring Part 8 proceedings to obtain an order for sale of the shares. The current proceedings were not needed in order to enable Primekings to obtain the King Family Shares and did not further that objective in any way.

Second, whilst there is no doubt that costs spent by KSSL on these proceedings, which I understand are in the region of £2.5 million plus VAT, are grossly disproportionate to the relatively small amount at stake, this does not support the contention that the proceedings were brought for the purpose of obtaining the King Family Shares. The evidence of KSSL’s witnesses, which I accept, was that when the claim was launched it was anticipated that the claim would be relatively straightforward and swift to resolve. Once the costs had increased substantially, KSSL was not prepared to discontinue and expose itself to an adverse costs order. The costs of proceedings have been significantly increased by Mr King’s counterclaim. The willingness of KSSL to spend such large sums on the proceedings and the failure to accept TCH’s offer of compensation indicates that these proceedings were not brought for the predominant purpose of obtaining compensation but not that they were brought for the improper purposes alleged by Mr King.

Third, the criticisms made of KSSL’s conduct of these proceedings do not provide any real support for Mr King’s case that KSSL’s predominant purpose in bringing the proceedings was the improper one alleged.

As already noted, I accept Mr King’s contention that KSSL ought to have sent a preaction protocol letter. There was no good explanation for its failure to do so. I do not, however, believe that KSSL was thereby attempting to put additional pressure on Mr King. I accept that a pre-action protocol letter was not sent for the reasons put forward by Mr Zeidler (paragraph 134 above).

KSSL accepts that it should not have resisted disclosure of the Master Lease document after it was requested, without the need for Mr King to make a specific application for disclosure. There has been no satisfactory explanation for its delay in providing disclosure. That said, I consider that Mr King overstates the importance of the Master Agreement. The Master Agreement does not provide powerful support for Mr King’s case that he had a personal lease. It is not in the form of a personal lease. It sets out terms between TCH and a commercial leaser of multiple vehicles and does not mention the Range Rover or the hire charges. The document is consistent with an intention to conceal the true arrangements with sham paperwork. The fact that the document was eventually disclosed is at odds with the suggestion that KSSL was intent on concealing it and misleading the court.

The letter to AIG threatening a third-party costs order, though misguided, was not improper. I do not accept that KSSL’s intention was to frighten AIG into stopping funding Mr King’s defence rather than to indicate that KSSL would seek to hold AIG responsible for its costs.

The letter to the Court seeking an assurance as to when Deputy Master Cousins’ judgment would be ready, with a threat to report to the Judicial Conduct Investigation Office, was also inappropriate but it was not, in my view, improper and it does not support the inference which Mr King seeks to draw as to the purpose of the proceedings.

The assertion that KSSL’s witness evidence was deliberately drafted in order to mislead the court is a serious allegation for which there is, in my judgment, no valid foundation.

Mr King relies on the following allegations in support of his case that the predominant purpose of KSSL in issuing this claim was to ruin his reputation and employment prospects:

Again, these allegations fall far short of establishing that these proceedings were brought for the purpose of ruining Mr King’s employment prospects.

It is clear that KSSL intended to hold Mr King to the restrictive covenants in his Shareholder and Subscription Agreement as it was entitled to do. It does not follow that the purpose of these proceedings was to interfere with his employment prospects.

If KSSL’s predominant purpose in bringing these proceedings had been to ruin Mr King’s reputation and employment prospects, I would have expected it to seek to generate media interest in the proceedings. It is not suggested that it has done so. In fact, it appears to have gone out of its way not to publicise the proceedings in order not to damage its own reputation. According to a board minute dated 30 November 2018, it was agreed that, should anyone ask about the claim, they should be referred to Mr Zeidler and any comments kept neutral and minimal. It is Mr King who has sought to generate media interest in the proceedings. In December 2019 he contacted a documentary maker at ITV to make a programme about the dispute with KSSL who attended one of the hearings and is, according to Mr King, now waiting to see how the proceedings end.

There is no evidence that KSSL used the legal proceedings to interfere with Mr King’s employment prospects with VSG. The note of the meeting between Mr Zeidler and VSG shows that he drew VSG’s attention to Mr King’s restrictive covenants.

I do not consider that the board’s decision to give him an “honest” reference alerting

Mr King’s case as to the supposedly improper purposes imputed to KSSL in bringing these proceedings is further undermined by the open offer to settle the proceedings contained in letters dated 9 June and 23 June 2020 from KSSL’s solicitors. The offer was along the same lines as the offer made to and accepted by Mr Evans, namely a payment in respect of KSSL’s damages claim, a contribution to KSSL’s costs and an open acceptance, with hindsight if necessary, that the transaction should have been the subject of disclosure/board approval i.e. not involving Mr King in having to acknowledge any conscious impropriety. This offer was not accepted by Mr King. In the absence of a settlement, the proceedings have been brought to a conclusion, which in itself counts heavily against a finding of an abuse as observed by Lord Wilson in Crawford v Sagicor (paragraph 220 above).

KSSL contends that its actual purposes in bringing these proceedings were to obtain compensation, to vindicate KSSL’s rights as against Mr King and Mr Evans and to protect KSSL’s reputation in the security industry by publicly demonstrating that KSSL would not tolerate conduct of the kind perpetrated by them.

I accept that those purposes played some part in KSSL’s decision to bring the proceedings although, as noted above, it must have been obvious to KSSL from early on that the irrecoverable costs of the litigation would dwarf any compensation it was awarded and that if recovery of compensation was KSSL’s main objective, it would have accepted the compensation offered by TCH and discontinued the proceedings.

It is clear to me that, aside from these purposes, the anger felt by Mr Stiefel and Mr Fisher towards Mr King, as a result of what they considered to be the unfounded allegations made against them in the Misrepresentation Proceedings, compounded by anger at what they considered to be his dishonesty and failure to accept responsibility for his actions, must have influenced KSSL’s decision to bring these proceedings and also had an effect on the combative, sometimes over-combative, manner in which the proceedings have been conducted. As the authorities cited above make clear, however, motive and personal antagonism are in themselves irrelevant to the question whether proceedings have been brought for an improper purpose.

Given my conclusion that Mr King has failed to establish that these proceedings were brought for an improper purpose, issues of recoverable losses fall away. Had it been necessary to determine those issues, I would have given directions for a separate assessment of damages as Mr King’s damages claim has not yet been particularised in detail and the damages claim has not been the subject of disclosure.

CONCLUSION

Mr King is liable to pay KSSL the sum of £45,666.47. Mr King’s counterclaim is dismissed.