Key Facts
- •Carey Street Investments Ltd (CSI) and 245 Blackfriars Road Property Investments Ltd (BRP), both in liquidation, sued Grant Brown (former director) and Equity Trust (Jersey) Ltd for breach of director duties, alleging tax evasion.
- •The High Court dismissed the claim, finding no fraudulent breach of duty.
- •The appeal focused on whether Brown acted dishonestly regarding the undervalue transfer of properties New Court and Ludgate House, a dividend payment, management charges, and interest.
- •The transfers were made to minimize tax liability; the properties were transferred for less than market value.
- •The issue was whether Brown's actions constituted a 'fraudulent breach of fiduciary duty' under section 21 of the Limitation Act 1980 to avoid the statute of limitations.
Legal Principles
Appellate courts should only interfere with a trial judge's findings of fact in limited circumstances (e.g., material error of law, lack of evidence, misunderstanding of evidence).
Henderson v Foxworth Investments Ltd [2014] UKSC 41
A judgment must provide sufficient reasons to show the principles applied and the reasoning behind the decision, but need not be exhaustive.
Fage UK Ltd v Chobani UK Ltd [2014] EWCA Civ 5
Appellate courts should be slow to conclude that a tribunal misapplied legal principles, unless a different principle was clearly applied.
DPP Law Ltd v Greenberg [2021] EWCA Civ 672
Dishonesty is determined by applying objective standards of ordinary decent people to the individual's subjective knowledge and belief. 'Blind eye' knowledge may suffice.
Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 and Armitage v Nurse [1997] Ch 241
Outcomes
Appeal dismissed regarding the transfer of New Court and Ludgate House.
The Court of Appeal found the trial judge's findings that Brown believed the transfer prices reflected market value were supported by the evidence, despite the absence of contemporaneous independent valuations. The judge considered Brown's reliance on advice from property specialists and the overall context.
Appeal dismissed regarding the dividend.
The Court upheld the trial judge's finding that Brown did not appreciate the deficiency in the interim accounts and believed the tax liability would be met through a share subscription agreement.
Appeal dismissed regarding management charges and interest.
The Court of Appeal found that the trial judge's conclusion that Brown believed the charges to be justified, even if he acted carelessly, was reasonable.
Appeal dismissed regarding the outstanding £766,000 on the Ludgate House transfer.
This ground of appeal also depended on proving Brown's knowledge of undervalue, which the Court found was not established.