Carey Street Investments Limited (in liquidation) & Anor v Grant Timothy Brown & Anor
[2024] EWCA Civ 571
Carey Street Investments Limited & Anor. v Grant Timothy Brown & Anor.
28 April 2023
[2023] EWHC 968 (Ch)
High Court
Two companies sued their former director and his employer for selling their buildings too cheaply to avoid taxes. The judge said the director made mistakes and wasn't careful, but didn't intentionally try to cheat on taxes, so the lawsuit was thrown out.
Key Facts
- •Carey Street Investments Limited (CSI) and 245 Blackfriars Road Property Investments Limited (BRP), both in liquidation, owed substantial debts to HMRC.
- •Equity Trust (Jersey) Limited (Equity Trust) was the trustee of trusts connected to Simon Halabi, ultimately owning the claimant companies.
- •Grant Brown, a chartered accountant, was an executive director of Equity Trust and a director of the claimant companies.
- •Claimants alleged Brown, in breach of his duties, transferred properties at undervalues to evade corporation tax.
- •Claims were issued in 2020, outside the normal limitation period, but claimants argued fraudulent breach of duty.
- •Defendants conceded that if breaches were fraudulent, ratification was not a defense.
- •Claimants alleged Equity Trust was vicariously liable for Brown's actions or acted as shadow/de facto director.
- •The total value of the claims was close to £26m.
- •Properties involved were New Court (owned by CSI) and Ludgate House (owned by BRP).
Legal Principles
Section 21 Limitation Act 1980 disapplies limitation periods for fraudulent breach of trust.
Limitation Act 1980
A director has fiduciary duties to the company; Section 21 applies to company actions for breach of these duties.
Gwembe Valley Development Company Limited v Koshy [2003] EWCA Civ 1048
Fraudulent breach of trust means dishonesty; intent to benefit someone other than the trust's object is sufficient.
Armitage v Nurse [1998] Ch 241
In determining dishonesty, consider the director's subjective state of knowledge and objective standards of ordinary decent people.
Ivey v Genting [2017] UKSC 67
'Blind eye' knowledge is sufficient for dishonesty: suspicion of facts and a conscious decision to avoid confirmation.
Group Seven Limited v Nasir [2019] EWCA Civ 614
The burden of proof for fraudulent breach of duty is on the claimant, on the balance of probabilities.
The more serious the allegation, the stronger the evidence needed to prove it; fraud is less likely than negligence.
In Re H (Minors) [1996] AC 563
Consider motive, disincentives to fraud, and lack of personal benefit when assessing dishonesty.
ED & F Man Capital Markets Limited v Come Harvest Holdings Limited [2022] EWHC 229 (Comm); Mortgage Agency Services No. 1 Limited v Cripps Harries LLP [2016] EWHC 2483 (Ch); Armitage v Nurse [1998] Ch 241
A claimant must prove their case; failure of a defendant to provide an alternative explanation does not relieve the claimant of this burden.
The Popi M [1985] 1 WLR 948
An employer's vicarious liability for an employee's actions as a director of another company is generally limited, unless there's fraud or bad faith.
Kuwait Asia Bank v National Mutual Life Nominees Limited [1991] 1 AC 187
Outcomes
Claims dismissed.
No fraudulent breach of duty by either defendant was proven; the extended limitation period in s 21 Limitation Act 1980 did not apply.
No vicarious liability for Equity Trust.
Brown's actions as a director were not in the course of his employment with Equity Trust; even with fraudulent breach (which wasn't found), the principle of limited liability would prevent this.
Equity Trust was not a shadow or de facto director.
Evidence did not show Equity Trust directing the claimant companies' directors or assuming the functions of a director.
Valuation of New Court at £65,179,584 (Whitfield's valuation preferred).
Whitfield's methodology and comparables were deemed more robust; Manley's reliance on development potential and site value was considered unreliable.
Valuation of Ludgate House at £87,665,000 (Manley's valuation preferred).
Manley's yield was considered more realistic given market trends; adjustments were made to account for discrepancies in Manley's analysis.
Similar Cases
Kenneth Davies v Stephen Ford & Ors.
[2023] EWCA Civ 167
L & S Accounting Firm Umbrella Limited (In liquidation) v Idusogie Laurel Oronsaye & Ors
[2024] EWHC 1919 (Ch)
Paul Richard Knell & Ors v Eric Van Loo
[2023] EWHC 2109 (Ch)
Lime and Black BPS Limited (in liquidation) v Dharminder Singh Gill & Ors
[2024] EWHC 1898 (Ch)