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Cite as: [2000] EWHC 1560 (Ch), [2000] 2 BCLC 734

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BAILII Citation Number: [2000] EWHC 1560 (Ch)
HC 1999 0204

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
27 July 2000

B e f o r e :

MR JUSTICE RIMER
____________________

GENCOR ACP LIMITED AND OTHERS
Claimants
- and -
GLENN BRYAN DALBY AND OTHERS Defendants

____________________

Mr Christopher Pymont QC (instructed by Hammond Suddards) appeared for the claimants
Mr Adrian Francis (instructed by Jay Benning & Peltz) appeared for the first, second, third, fourth, ninth, eleventh and twelfth defendants

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    MR JUSTICE RIMER:

    Introduction

  1. This is the claimants' application for summary judgment under Part 24 of the Civil Procedure Rules 1998, alternatively for an interim payment under Part 25. The first claimant is Gencor ACP Limited ("ACP"). ACP and the third claimant, ACP Technical Services (Australia) Pty Limited ("ACP Australia"), are both wholly owned subsidiaries of the second claimant, Gencor ACP Holdings Limited ("ACP Holdings"). They all appear by Mr Christopher Pymont QC.
  2. There are 12 defendants. Mr Adrian Francis appears for seven of them. They are Glenn Dalby ("Mr Dalby"), his son Brett Dalby, Kevin Meehan ("Mr Meehan") and Burnstead Limited ("Burnstead"), who are the first to fourth defendants; Swallow International Limited ("Swallow"), the ninth defendant; Wingspan Enterprises Limited ("Wingspan"), the eleventh defendant; and Pacific Holdings Limited ("Pacific"), the twelfth defendant.
  3. The fifth defendant is Roadmec Limited ("Roadmec"). It has not been represented before me. R G Frisby & Small ("Frisby") are its solicitors. The only relief sought against it on this application is a declaration as to the claimants' beneficial title to a property in Australia. Frisby has informed the court that Roadmec has no objection to the court making such declaration if it is minded to do so, but would wish any declaration to record that Roadmec has never claimed any interest in the property. Frisby has also objected to any suggestion that the claimants should ask for costs against Roadmec on this application, but Hammond Suddards, the claimants' solicitors, have put its mind at rest about that and have indicated that they will not.
  4. The sixth defendant is Roadmec International Limited ("Roadmec International"). It has taken no part in the proceedings and has not been represented before me.
  5. The seventh defendant is Recycling Equipment International Limited. No claim is made against it on this application and it has not been represented before me.
  6. The eighth defendant is Intermek Limited ("Intermek"). It was incorporated on 19 May 1998 and its sole director was Stanley Tibbles, who features fairly widely in the evidence. It served a defence and counterclaim but later failed to comply with an "unless" order in relation to the giving of disclosure and on 14 January 2000 Deputy Master Weir struck out its defence and entered judgment for the claimants for damages to be assessed and costs. The claimants proposed to ask the court to assess those damages at the hearing of their Part 24 application against other defendants and on 6 March 2000 they purported to serve Intermek at its registered office with an application for such relief. They then discovered that Intermek had been struck off the companies register on 29 February 2000 under ss 652(4) and (5) of the Companies Act 1985 and was dissolved on 7 March 2000. Thus it no longer exists and, unsurprisingly, no one appeared before me purporting to represent it. Nor can the claimants proceed further with their application against it.
  7. The tenth defendant, Metaphor Limited, is an Isle of Man company. Its solicitors are Jay Benning & Peltz, who instruct Mr Francis. It is not a respondent to the present application and has not been represented on it.
  8. The ACP group

  9. There are some seven companies in the group of which ACP Holdings is the parent. ACP is the main operating company. The business of the group is the design, manufacture and sale of static and mobile asphalt-making plant and equipment and ancillary products used in the manufacture of asphalt, including shredders, screens and related equipment. Mr Dalby was at all the material times until 21 January 1999 a director of ACP, ACP Holdings and ACP Australia. Mr Meehan was at like times and until the same date also a director of each of these companies. He was also the secretary of ACP and ACP Holdings.
  10. On 13 November 1997 the ACP group as I have described it was acquired by the Gencor group (the claimants' names were subsequently changed to their present names so as to include the name Gencor). The takeover was effected by the acquisition by Gencor Industries Limited ("Gencor Industries") of the entirety of the shares in ACP Holdings. Gencor Industries was the UK subsidiary of Gencor Industries Inc ("Gencor Inc"), a Delaware company based in Orlando, Florida. The vendors of the ACP Holdings shares were listed in schedule 1 to the November 1997 agreement. They were Mr Dalby, Swallow, Wingspan, Legis Trust Limited ("Legis"), Paving Plant and Processes (M) Sdn Bhd, The Royal Bank of Scotland Plc, Julius Baer Trust Company Limited, C D Grant and J W Vine. The last three were the trustees of what was described as the GMO settlement. Mr Dalby controlled Swallow, Wingspan and Legis, and Legis was the trustee of a trust of which he was the settlor and is a beneficiary. Part of the consideration immediately payable was 2 million, which was divided between the vendors other than Wingspan. A further part of the consideration was 240,000 shares of Gencor Inc Common Stock, which was allotted to Wingspan conditionally on certain profit targets being achieved by the ACP group. Mr Dalby and Mr Meehan remained as officers of the ACP group after the takeover. Mr Dalby entered into a new service agreement with ACP on 13 November 1997 at a salary of 130,000 a year. Mr Meehan had a service contract dated 1 May 1992 with ACP, which was not replaced by a new one after the takeover, but was varied from time to time.
  11. Ian Hogg became the managing director of ACP with effect from 1 December 1998. Investigations that he carried out into its affairs led to the dismissal in January 1999 of Mr Dalby and Mr Meehan as officers and employees of the ACP companies. That was followed by an application by the claimants to me on 22 April 1999 for freezing and search orders against Mr Dalby and Mr Meehan, which I granted. The freezing orders have since been continued and remain in force. The claimants' case against Mr Dalby and Mr Meehan is that they have dishonestly diverted ACP group assets and opportunities away from the ACP group and either into their own pockets or into companies they control, including Burnstead (the fourth defendant) and Pacific (the twelfth defendant).
  12. The writ is dated 23 April 1999 it must have been one of the last to be issued and the statement of claim has since been amended four times. That should not be read as suggesting that the claimants do not know what their case is. They admit they have no first hand knowledge of what the defendants have been doing. Their knowledge is derived from documents they have obtained pursuant to the original search order or subsequently from various sources and they have learnt more about their case as the action has continued. The fruit of the obviously considerable efforts of the claimants and their advisers is a carefully pleaded statement of claim and some equally carefully prepared evidence in support of this application.
  13. By contrast, the defendants appear to have applied little like care and effort to providing an answer to the case. Their pleaded defence was largely in the nature of denials or non-admissions although it raised at least some positive allegations that the claimants foresaw as potentially presenting an obstacle to a proposed application for summary judgment. The claimants therefore obtained an order for the trial of preliminary issues on those matters with a view to having them finally decided in their favour and so clearing the way for the making of a Part 24 application. That hearing came on before me in January 2000, although Mr Dalby and Mr Meehan then made no attempt to establish the pleaded allegations they had lent their names to and called no evidence in support of them. The result was that the whole of the preliminary issue exercise proved to be a complete waste of costs. I dealt with that aspect of this litigation in my judgment of 26 January 2000.
  14. The defendants' response to this application has also been somewhat casual. They eventually served their evidence nearly a month after it was due and only a matter of days before the hearing was due to commence. They sought to explain their delay by a witness statement from Mr Saffron, their solicitor, which I do not regard as providing any explanation at all. He said it was not until 4 May 2000 that the payment of his firm's costs was sufficiently secured to permit it to continue to act on the defendants' behalf, and said that this was the reason for the delay. But that does not square with the fact that on 8 May 200 he informed Hammond Suddards that counsel would complete the drafting of the evidence by 12 May 2000 and that on 15 May he informed them that he was "aiming to serve that evidence by [19 May 2000]". Despite the lateness of the evidence, Mr Pymont did not ask for time to consider or answer it, and justice obviously demanded that I should permit it to be used on this hearing, as I did. One effect of it has been that the claimants have moderated their application to the extent that they no longer ask for judgment in relation to those issues in respect of which they accept the defendants' evidence has raised an arguable defence.
  15. The claims on this application are in part based on straightforward allegations of misfeasance by Mr Dalby and Mr Meehan by misapplying money or other property belonging to the ACP companies. Examples of this are the procuring of the payment by ACP to Brett Dalby, Mr Dalby's son (then a schoolboy), of a salary and the provision to him of a company car, and also the apparently extravagant use by Mr Dalby of ACP's money for his own purposes. Other claims are based on the principle that a director must not put himself in a position in which his duty to the company and his personal interest are or may be in conflict and that he must account to the company for any profit he makes by reason of his office as a director and in the course of the execution of that office. This is said to apply, in particular, to the transactions involving Burnstead. Burnstead is Mr Dalby's company and it is said that Mr Dalby diverted to it the benefit of business opportunities which put him in just such a position of conflict, and which came to him as a director of ACP and so could and should have been made available to ACP.
  16. This principle is a strict one and has enjoyed a long history. It is illustrated by Regal (Hastings) Ltd v Gulliver and Others [1967] 2 AC 134. Lord Russell of Killowen said at p 144G:
  17. "The rule of equity which insists on those, who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud or absence of fraud, or absence of bona fides; or upon such questions or consideration as whether the profit would or should otherwise have gone to the plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the plaintiff, or whether he took a risk or acted as he did for the benefit of the plaintiff, or whether the plaintiff has in fact been damaged or benefited by his action. The liability arises from the mere fact of a profit having, in the stated circumstances, been made. The profiteer, however honest and well-intentioned, cannot escape the risk of being called upon to account."

    Lord Macmillan said at p 153:

    "The issue, as it was formulated before your Lordships, was not whether the directors of Regal (Hastings) Ltd, had acted in bad faith. Their bona fides was not questioned. Nor was it whether they had acted in breach of their duty. They were not said to have done anything wrong. The sole ground on which it was sought to render them accountable was that, being directors of the plaintiff company and therefore in a fiduciary position to it, they entered in the course of their management into a transaction in which they utilised the position and knowledge possessed by them in virtue of their office as directors, and that the transaction resulted in a profit to themselves. The point was not whether the directors had a duty to acquire the shares in question for the company and failed in that duty. They had no such duty. We must take it that they entered into the transaction lawfully, in good faith and indeed avowedly in the interests of the company. However, that does not absolve them from accountability for any profit which they made, if it was by reason and in virtue of their fiduciary office as directors that they entered into the transaction.
    The equitable doctrine invoked is one of the most deeply rooted in our law. It is amply illustrated in the authoritative decisions which my noble and learned friend Lord Russell of Killowen has cited. I should like only to add a passage from Principles of Equity by Lord Kames, 3rd ed (1778) vol 2, p 87, which puts the whole matter in a sentence: 'Equity,' he says, 'prohibits a trustee from making any profit by his management, directly or indirectly.'
    The issue thus becomes one of fact. The plaintiff company has to establish two things: (i) that what the directors did was so related to the affairs of the company that it can properly be said to have been done in the course of their management and in utilisation of their opportunities and special knowledge as directors; and (ii) that what they did resulted in a profit to themselves."

  18. The principle was recently revisited in the decision of the Court of Appeal in Don King Productions Inc v Warren and Others [2000] 1 BCLC 607. Morritt LJ delivered the main judgment, with which Aldous and Hutchison LJJ agreed. He referred at p 629, with apparent approval, to the judgment of Deane J in the decision of the High Court of Australia in Chan v Zacharia (1984) 154 CLR 178, in which Deane J said:
  19. "Stated comprehensively in terms of the liability to account, the principle of equity is that a person who is under a fiduciary obligation must account to the person to whom the obligation is owed for any benefit or gain (i) which has been obtained or received in circumstances where a conflict or a significant possibility of conflict existed between his fiduciary duty and his personal interest in the pursuit or possible receipt of such a benefit or gain or (ii) which was obtained or received by use or by reason of his fiduciary position or of opportunity or knowledge resulting from it. Any such benefit or gain is held by the fiduciary as constructive trustee ..."

  20. The principles are well established. It is no answer to them that the company could not or would not have taken up the business opportunity that the director took up for his own benefit. Nor is it an answer that the director's own skill or property were also used in the course of making the profit. The only escape from potential accountability is the obtaining of the prior approval of the company's shareholders after full disclosure of all the facts and circumstances.
  21. Before turning to the allegations concerning Burnstead I comment that most of the relevant transactions involved the supply, or ostensible supply, by Burnstead of second hand equipment of one sort or another. Mr Dalby's case is that, by the time of these transactions, ACP no longer dealt in second hand equipment and that by about mid-1993 Mr Oldroyd, the director on the ACP board representing 3i's interest, had made it clear that 3i would not agree to ACP dealing in second-hand equipment. He also gives evidence which, on one view, is to the effect that the ACP board decided that they would endorse 3i's views about such dealing. In the light of the outcome of the preliminary issues to which I have referred, Mr Pymont has reserved his position as to whether it was thereafter open to Mr Dalby to seek to contend, as he now does, that ACP had in any manner determined not to deal in second hand equipment. He indicated that it might be an abuse of the court's process for Mr Dalby to attempt to do so. I need not explain further the precise basis on which Mr Pymont founds that suggestion, since for the purposes of this application he was prepared to take the stance that, even if ACP had made some such determination, it can make no difference to the application of the principle on which the claimants rely. That is because, as I have just said, it is no answer to it that the company either could not or would not in practice have taken up the opportunity which the director has diverted to his own benefit. I turn now to the Burnstead allegations.
  22. A. The Burnstead allegations

  23. Burnstead was incorporated in the British Virgin Islands in 1994. Its registered office is at Tortola. It has always been wholly owned and controlled by Mr Dalby. Its administration was carried out by Augres Secretaries (Jersey) Limited, who acted on Mr Dalby's directions. The individual to whom he communicated his instructions was Mrs Whiteside. It had a bank account with Barclays Bank plc at St Helier, Jersey (No 10362786). Mr Dalby and Mr Meehan both admit that prior to 13 November 1997 they caused Burnstead to deal in second hand asphalt and equipment. The claims against Mr Dalby and Burnstead are based on the assertion that Mr Dalby diverted to Burnstead commissions and business opportunities which ought to have been paid and made available to ACP, that he did so without the prior consent of ACP so that he and Burnstead are now liable to account for the profit so diverted. Mr Dalby did not control ACP, there were outside shareholders in it including RBS and 3i and there is no suggestion that anything of which complaint is made in this litigation had the prior approval and consent of the shareholders of ACP. The claim against Mr Meehan is that, save with regard to the diversion of two commission payments, he dishonestly assisted Mr Dalby in the diversions to Burnstead and so is also liable to account to ACP for the profits wrongly diverted. I turn now to each of the transactions involving Burnstead. I shall take each transaction in turn and deal first with the claims against Mr Dalby and Burnstead. I shall then deal separately with the claim against Mr Meehan.
  24. (i) Balfour Beatty (UK) Limited ("Balfour Beatty")

  25. Burnstead opened its bank account with a payment of 24,043.39 made by Balfour Beatty in May 1994. This was commission payable by Balfour Beatty on the introduction to it of a sale opportunity to WesTrac, an Australian company. The claimants' case is that WesTrac was an ACP customer, ACP made the introduction and the commission was due to ACP.
  26. Mr Dalby's evidence is that during a business trip he made on ACP's behalf he ended up in Perth. He made a cold call on WesTrac and asked its Mr Perich if he would be interested in acquiring any caterpillar earth moving excavators ("CATs"). This was not equipment which ACP could or did ordinarily supply, but Mr Dalby had shortly before seen Mr Hillier of Balfour Beatty, a friend of his, and learnt that Balfour Beatty had three CATs it wanted to dispose of. Mr Perich was interested and Mr Dalby agreed to contact him when he returned to England. On his return he engaged in negotiations with WesTrac for the supply of equipment, including CATs, using photographs of them he had obtained from Mr Hillier. The negotiations started with Mr Dalby's letter of 28 January 1994 on the notepaper of ACP (then known as ACP Technical Services Limited) and he enclosed details of equipment which could be supplied. The correspondence led to WesTrac placing an order with ACP for the supply of equipment, which Mr Dalby acknowledged on its behalf on 21 February 1994. ACP could not itself supply the equipment, but Mr Dalby arranged for Balfour Beatty to do so, as it did. Balfour Beatty then paid the commission on that introduction to Burnstead.
  27. Mr Dalby's case is that this transaction had nothing to do with ACP but was his own personal venture and so he was entitled to enjoy the commission himself through Burnstead. He said it was just laziness on his part that he used ACP notepaper in all his negotiations with WesTrac. Mr Francis emphasised during his submissions that the question raised by this claim is whether or not this particular business opportunity arose only by reason of the fact that Mr Dalby was a director of ACP and in the course of his execution of that office. He submitted that this question is essentially one of fact and degree and that Mr Dalby's evidence supported the conclusion that it was arguable that this particular opportunity was one that Mr Dalby was entitled to enjoy personally.
  28. I agree with Mr Francis that the relevant question will usually be one of fact and degree. For example, if Mr Dalby had a passion for collecting paintings and whilst on an ACP business trip he had spotted a painting in a gallery, had bought it with his own money and had resold it shortly afterwards at a profit, I doubt if ACP would have been entitled to require him to account for the profit. This would, I consider, fairly plainly have been a personal enterprise that could not be said to have arisen because of Mr Dalby's role as a director of ACP. I doubt if the mere fact that he bought the painting during a business trip on behalf of ACP would be enough to bring the relevant principle into play.
  29. This case, however, appears to me to be very different. In my judgment it is no answer for Mr Dalby to explain away ACP's apparent involvement in the matter by saying that he had simply used its notepaper for reasons of laziness. The fact is that, following Mr Dalby's return to England, and whatever his original intentions, he made this business opportunity available to ACP. It was ACP which carried out the negotiations with WesTrac and the correspondence gives no clue that this was in any sense a personal Dalby transaction: Mr Dalby even signed the letters as "group managing director". Most importantly, the end result is that it was ACP with which WesTrac placed its order. In my view that sequence of events makes it impossible for Mr Dalby to pretend that ACP's role in the matter was a mistake. This was a case in which he arranged for ACP to receive the order and, having done so, he could not then divert its benefit into his own pocket. I regard it as a plain case in which the commission earned on the transaction was commission for which, subject to the next point, Mr Dalby is accountable to ACP.
  30. That point is this. Mr Francis submitted that even if he was otherwise wrong on his argument, there is still no one who was, is or can be accountable to ACP for the commission. Mr Dalby is not accountable because he did not receive it: it went straight into Burnstead, albeit at Mr Dalby's direction. Burnstead is not accountable because, although it received the commission, it was and is not in a fiduciary relationship with ACP.
  31. I do not accept that argument which, if correct, would provide the easiest possible escape from the rigours of equity's strict principle of accountability. All that would be required would be for the profiting director to ensure that he diverts the profit into his own creature company. The facts of this case are that Burnstead was an offshore company which was wholly owned and controlled by Mr Dalby and in which nobody else had any beneficial interest. Everything it did was done on his directions and on his directions alone. It had no sales force, technical team or other employees capable of carrying on any business. Its only function was to make and receive payments. It was in substance little other than Mr Dalby's offshore bank account held in a nominee name. In my view this is the type of case in which the court ought to have no hesitation in regarding Burnstead simply as the alter ego through which Mr Dalby enjoyed the profit which he earned in breach of his fiduciary duty to ACP. If the arrival at this result requires a lifting of Burnstead's corporate veil, then I regard this as an appropriate case in which to do so. Burnstead is simply a creature company used for receiving profits for which equity holds Mr Dalby to be accountable to ACP. Its knowledge was in all respects the same as his knowledge. The introduction into the story of such a creature company is, in my view, insufficient to prevent equity's eye from identifying it with Mr Dalby: see generally, as to the readiness of the courts in appropriate cases to pierce the corporate veil, Re H and Others (restraint order: realisable property) [1996] 2 BCLC 500, at 511, per Rose LJ. I hold that Mr Dalby and Burnstead are both accountable for the profit represented by this commission and I will make an order against them accordingly.
  32. (ii) The ACP payment

  33. In August 1994 ACP paid a further sum to Burnstead. It amounted to 47,890.39. There is no suggestion that Burnstead ever rendered any services to ACP justifying this payment, or that ACP was indebted to it in any such sum. The inference, on the face of it, is therefore that the payment was either a loan by ACP or else a purported gift, or else a simple misapplication of ACP's money. Burnstead's draft accounts in fact show this money as deriving from GCM Pacific ("GCM"), an Australian company. There is no journal entry in ACP's books relating to this payment.
  34. Mr Dalby's explanation is that, following a direction from Mr Oldroyd that all ACP's second-hand plant in stock should be sold, he sold some of its second-hand asphalt plant to Steve Bykiw of GCM. Mr Bykiw had in turn negotiated an onward sale to an Australian customer. The customer was proposing to raise a letter of credit in ACP's favour in an amount that was to include GCM's commission. Mr Dalby says that Mr Bykiw asked if the commission amounting to 47,89039 could be kept by ACP on his behalf whilst he looked for second-hand equipment he wanted to buy from dealers in the UK and Europe. Mr Dalby says he agreed to this and, because the financial position of the ACP group was weak, he suggested it should instead be paid to Burnstead. Mr Bykiw agreed and it was. Mr Dalby says that later the whole amount was paid out of Burnstead on Mr Bykiw's instructions as he bought equipment from time to time. He says that Mr Meehan dealt with the accounting of this transaction as between ACP, Burnstead and GCM. Mr Dalby's case is, therefore, that the 47,890.39 never belonged beneficially to either ACP or Burnstead. It belonged beneficially to GCM and was later wholly paid out of Burnstead in accordance with GCM's instructions.
  35. The difficulty with that explanation is that Mr Hogg has identified all the payments out of the Burnstead account and comments on them in his witness statement under various heads. In particular, he identifies payments for which credit is to be given in the claimants' claim, those for which credit is not to be given and those he cannot explain. Mr Dalby comments on all that evidence in his own evidence in answer, and one might expect him to identify which of the payments out are said to make up the 47,890.39. He does not do so and it appears to me that the combined effect of his and Mr Hogg's evidence is that none of the payments out can be said to be even arguably referable to the alleged Bykiw purchases. That would be consistent with information supplied by Mr Bykiw to Mr Hogg which is set out in the latter's witness statement of 7 June 2000 and confirmed as true in a witness statement which Mr Bykiw made on 9 June 2000. This was that the 47,890.39 does not and never did belong to Mr Bykiw or his companies and that Mr Bykiw was adamant that he had no reason to leave any such money in the hands of Mr Dalby or Burnstead.
  36. If there were any truth in Mr Dalby's case about this, he could have supported it by identifying the payments out of the Burnstead account which he claims were made on Mr Bykiw's behalf. He and Mr Meehan must have been able to do that. They have had every opportunity to do so, but have not taken it. Nor have they even attempted to identify the particular purchases for GCM to which they claim the money was applied. In these circumstances, and given Mr Bykiw's wholesale denial of Mr Dalby's story, I do not consider that Mr Dalby has any real prospect of establishing his account at trial. He has simply failed to adduce any evidence suggesting that there is anything to have a trial about. This is a plain case in which Mr Dalby procured a payment of ACP money for his own benefit, a transaction for which there was no justification, and I hold that he and Burnstead must also account to ACP for it.
  37. (iii) The payments from Kirinyaga Construction (Kenya) Limited ("Kirinyaga")

  38. Two payments to Burnstead are in question. 17,000 paid on 24 April 1996; and 151,074.40 paid on 26 November 1996. The claimants originally also had a claim in respect of a payment of 270,000; but, having read Mr Dalby's assertion that the transaction relating to this did not proceed, they do not pursue that claim on this application.
  39. Mr Hogg's evidence about the transactions with Kirinyaga is very detailed. The story starts in October 1995 when ACP wrote to Kirinyaga quoting for the supply of some second-hand equipment, a refurbished M356 Blackmobile asphalt plant. Mr Dalby signed on behalf of ACP. On 12 March 1996 Kirinyaga wrote to ACP saying they were placing an order. Mr Dalby then wrote back saying ACP had a different M356 to offer Kirinyaga. There was further correspondence about this and also a meeting between Mr Dalby and Mr Mama of Kirinyaga on 2 April 1996. On 5 April 1996 Mr Dalby wrote to Mr Mama on ACP notepaper with order acknowledgements for two pieces of equipment: one was a second-hand Bramobile asphalt plant at a price of 170,000 and the other was a Mixabatch mobile asphalt plant at a price of 45,000. He also sent two sets of documents bearing the reference E4926/R1, one of which was on ACP notepaper and the other on Burnstead paper, the latter being for a second-hand refurbished M356 Blackmobile asphalt plant at a price of 153,000. It appears that the latter was produced on ACP's computer system and merely substituted Burnstead's name for ACP. It includes Mr Dalby's reference. The shipping documentation for the M356 to Kirinyaga referred to the seller/consignor as Burnstead or Roadmec International rather than ACP, but it appears that the shipping was arranged by Mr Sherriff, the ACP group's shipping manager, using the ACP group's computer system. On 5 April 1996 Burnstead raised invoices on Kirinyaga for both the 153,000 and a deposit of 17,000 (i.e. totalling 170,000, the price at which ACP had quoted for the M356). On 24 April 1996 Kirinyaga paid Burnstead the 17,000 deposit and on 26 November 1996 Burnstead received the balance under a letter of credit, less interest charges of 1,925.60, ie 151,074.40 net.
  40. The plant supplied to Kirinyaga was sourced in Norway from Bardel Maskin A/S by Roadmec (the original M356 for which ACP quoted appears to have been sold to another customer, Tate Export Inc). The replacement M356 appears to have been invoiced to Roadmec at NOK 685,000, which equated to approximately 68,500. Burnstead paid 20 per cent of this 13,700 on 30 August 1996, and it later paid a further 36,500 towards the price, its total payments therefore being 50,000 out of the 68,500. It appears that the balance was paid by Mr Dalby personally out of his account with the Bank of Valletta International Limited in Malta, although Mr Dalby does not appear to accept this and believes it was paid by Roadmec.
  41. Mr Dalby asserts that the claimants are asking the court to assume that ACP met the costs of the transaction with Kirinyaga. They do not so ask, and I have indicated how the purchase of the M356 appears to have been financed. Mr Dalby also points out that ACP did not pay for the shipping costs to Kirinyaga but Burnstead did. The claimants accept that, and as their claim is only for the profit that Mr Dalby made on this transaction they give credit for those costs in their claim against Mr Dalby and Burnstead.
  42. In my judgment the taking by Mr Dalby, via Burnstead, of the benefit of these two payments of 17,000 and 151,074.40 represented a plain case of a director profiting personally from a business opportunity which came his way as a director. I hold that both Mr Dalby and Burnstead are accountable to ACP for the profit on these transactions. ACP accepts that in calculating the profit credit must be given to the accounting parties for the payments of 13,700 and 36,300 paid by Burnstead towards the cost of the sales to Kirinyaga and for the 42,656.52 shipping costs which Burnstead bore.
  43. (iv) Tate Export Inc ("Tate")

  44. ACP dealt with Tate for the supply of equipment and on 22 November 1995 Tate placed an order with ACP on behalf of their customer, NH International Limited ("NH"), at a price of 155,000, including 15,000 for Tate. ACP, by Mr Dalby, acknowledged the order on 23 November 1995.
  45. In about early December 1995 Mr Dalby diverted the benefit of the order to Burnstead. This is evidenced by a letter of 4 December 1995 from Tate to Mr Dalby in which Tate records that "We have directed our clients to establish the letter of credit with Burnstead Ltd, as requested by you." Tate added that "For the sake of good order would you be so kind as to confirm that Burnstead Ltd and [ACP] will honour all conditions of sale as previously agreed." Mr Meehan gave Tate this confirmation on 8 December 1995 (on ACP notepaper), Burnstead then invoiced Tate for 155,000 on 28 November 1995 and NH established a letter of credit in favour of Burnstead. Burnstead received the payment, less bank charges, on 12 January 1996. The net sum it received was 154,981.
  46. Mr Sherriff arranged the shipment of the plant, although the documents refer to Burnstead as the consignor. ACP paid various costs associated with the supply and it installed the plant. On 21 February 1996 ACP quoted for some parts suitable for the equipment which had been supplied. There were also problems with it. On 7 May 1996 Tate wrote to NH about the matter, referring throughout to ACP as having supplied the plant and the installation engineers. Mr Dalby saw this letter and wrote to Tate on 18 October 1996 confirming its accuracy.
  47. I regard the diversion of the benefit of this contract by Mr Dalby as another plain example of his profiting from an opportunity that was available to ACP. I hold that both Mr Dalby and Burnstead are accountable for the profit they enjoyed. This is in principle the full 154,981.00 received by Burnstead, subject to the question of what credits should be allowed in the calculation of the profit. I deal later with the question of credits.
  48. (v) CJP Tarmac Limited ("CJP")

  49. On 7 June 1995 ACP gave a quotation to CJP in Malta for a free-standing Titan 1500 Asphalt Plant. It appears that CJP placed an order. On 24 November 1995 Mr Penza of CJP wrote to Mr Dalby at ACP asking for a pro forma invoice for the plant at a price of 12,000. An invoice was then issued by Burnstead on 27 November 1995, the equipment being described as "One second-hand Heat Exchange System, fully refurbished installed and commissioned". The price was 12,000. This is consistent with entry no 71 in a list of Burnstead transactions prepared by Mrs Turner (Mr Meehan's assistant in the accounts department), which shows the sale to CJP of a heat exchange system for 12,000 in November 1995.
  50. The equipment was shipped to Malta on 25 January 1996 and the commercial export invoice shows ACP as the seller. Mr Hogg's evidence is that heat exchange units (or pre-heaters) are an integral part of the systems supplied by ACP to its customers and are commonly sold by ACP as part of such systems, although Mr Dalby disputes this.
  51. There is some uncertainty as to what, if any, payment Burnstead received on this transaction. A document dated 21 August 1995 entitled "Charles Penza Plant Budgets" bears Mr Dalby's initials and appears to record a receipt of 10,000 in cash for a pre-heater, apparently relating to this transaction. Mr Hogg's evidence is that ACP did not receive any such cash payment, and so if anyone did it was probably Burnstead. Against this, the Burnstead transaction list as at November 1995 appears to show CJP as a debtor of 12,000 in respect of this transaction, and Mr Penza's request for an invoice for 12,000 was only made on 24 November 1995. The Burnstead bank statements do not show the receipt of any payment in respect of this matter.
  52. Mr Dalby's position is that there is no evidence that any payment was made for this equipment, although he does not expressly deny that payment was made. He appears to suggest that CJP is still a debtor for the 12,000. He does not comment on the document of 21 August 1995. His stance is that the supply by Burnstead of this second-hand equipment played a beneficial part in enabling ACP to obtain an order for new equipment.
  53. Mr Francis submits there is insufficient evidence to justify a finding that any payment was made to Burnstead for this equipment and therefore there is no evidence of any profit having been enjoyed by Mr Dalby or Burnstead. Mr Pymont's submission is that it makes no difference in principle whether the 12,000 has or has not been paid: Mr Dalby and Burnstead are still accountable for the benefit of that debt, and there is no evidence that CJP is not good for the money. He also says that I should anyway find that the only inference from Mr Dalby's statement of August 1995 is that in fact CJP paid Burnstead 10,000 in or towards satisfaction of this contract. The claimants are prepared to give Mr Dalby and Burnstead the benefit of any doubt on the point and to confine their claim to 10,000.
  54. I agree with that approach. I do not see what inference can be drawn from Mr Dalby's schedule other than that CJP did pay 10,000 in cash to Burnstead for this equipment. Mr Dalby has not adduced any evidence that satisfies me that, were the matter to go to trial, he would have a realistic prospect of showing that CJP had not paid the 10,000, or alternatively did not owe and could not pay 12,000. In line with the moderate approach offered by the claimants, I hold that Mr Dalby and Burnstead are each accountable for 10,000 as representing the profit taken by them on this transaction. Again, I will come later to the question of what, if any, credits should be allowable.
  55. (vi) Trio Development Limited ("Trio")

  56. Trio operates in Mauritius. On 24 July 1995 Burnstead received a payment of 113,757.29 from Trio for the sale of an SRM Asphalt plant in March 1995; and on 2 August 1996 it received a payment of 33,627.81 from Trio for the sale of a bag filter in January 1996.
  57. ACP gave a quote to Trio in March 1995 for the asphalt plant. The total cost, ex-works, was 111,000. The technical drawings for the installation were provided by ACP. The plant was shipped to Trio's own customer in Mauritius in June 1995. The shipping documents show the exporter to be Burnstead and the price of the plant 118,000. The shipping papers were forwarded by Mr Dalby to Mrs Whiteside at Augres. Burnstead thereafter received a payment net of a discounts and charges amounting to 113,757.29.
  58. In January 1996 ACP quoted Trio for the supply of a second hand dust collector (or bag filter) at a cost of 30,000 ex works. On 4 January 1996 Burnstead invoiced Trio for the supply of a bag filter at a cost of 30,000 "ex works Leicester" and "inclusive of engineers services for two weeks to install", although Burnstead had no employees who could provide such services. On 5 April 1996 Burnstead sent Trio another invoice for the bag filter, this one for 35,000 ex works Leicester, also inclusive of installation costs. It appears that this was the relevant invoice and payment of it was made under a letter of credit opened in March 1996. The beneficiary under the letter of credit was originally described as ACP, but it was changed to Burnstead. Burnstead then received 33,627.81 in payment, which was the gross sum of 35,000 less bank charges and discounts. It is unclear where the bag filter was originally sourced, but it appears that ACP provided at least the ducting comprised in it. ACP provided an engineer to install the bag filter and also bore the cost of later supplying various replacement and extra parts.
  59. Mr Hogg's evidence is that the equipment supplied to Trio was of a nature commonly supplied by ACP. It was second hand but could have been supplied by ACP. It was anyway ACP that originally quoted for their supply. Burnstead was merely interposed into the arrangement in order to receive the sale proceeds.
  60. I can see no answer to the claim that Mr Dalby and Burnstead should be accountable to ACP for these proceeds, which total 147,385.10, subject again to any allowable credits.
  61. (vii) International Construction Consortium ("ICC")

  62. ICC operate in Colombo, Sri Lanka. The claim here is in respect of a Burnstead receipt for 42,732.16. This was for the supply in January 1996 to ICC of hot storage equipment at a cost of 45,000.
  63. ICC had been a customer of ACP since February 1995. On 10 August 1995 ACP, by Mr Dalby, gave quotes to ICC for the supply of equipment. On 19 October 1995 ACP sent ICC a pro forma invoice for the supply of a new RM750 Mobile Asphalt Production Plant at a price of 176,000. On 25 October 1995 Mr Dalby wrote to ICC acknowledging receipt of their letter of credit and confirming that the order was being processed.
  64. On 27 November 1995 ICC wrote to ACP indicating that they wanted to add a 100 ton storage bin to the plant at a later date. Burnstead invoiced ICC for this item, a second hand one, on 4 January 1996 at a price of 45,000. It received payment for this under a letter of credit on 5 March 1996. The amount received, 42,732.16, was net of various charges. The storage bin was shipped on 3 March 1996. Mr Sherriff arranged the shipment. ACP provided an engineer to assist in the installation and commissioning of the bin. Mr Hogg's evidence is that storage bins are an integral part of systems supplied by ACP, and in this case it was for use with a piece of new plant which ACP had supplied. He says there is no reason why ACP could not have supplied ICC with the storage bin.
  65. Mr Dalby's explanation is that this illustrates the efforts he made to procure sales of new plant by ACP and the benefit to ACP of the provision by Burnstead of second hand plant. Even assuming there may be something in that, it provides no answer to the claim made, namely that the Burnstead receipt represents a personal profit obtained by Mr Dalby in the course of acting as a director of ACP and for which he is accountable to ACP. Mr Dalby also suggests that ACP received a commission of 4,551 from the shipping agent, which it ought to be required in some way to bring into account. I am disposed to agree with Mr Pymont that the suggestion that this sum was a commission is a mistake on Mr Dalby's part. I anyway do not see how it falls to be brought into account in the claim in respect of the profit received by Mr Dalby and Burnstead. I hold that they are both accountable for that profit, represented by Burnstead's receipt of the 42,732.16.
  66. (viii) Nyoro Construction Company Limited ("Nyoro")

  67. Nyoro is a Kenyan company. It purchased a Venturi wet scrubber suppression system in early 1995. It appears to have been purchased as an item ancillary to a Roadbatch 40-ton asphalt plant that ACP had supplied in 1993. Burnstead issued an invoice to Nyoro on 2 March 1995 for the supply of the scrubber at a price of 10,000 ex works Leicester. It received payment of this sum on 1 May 1995. The equipment was not, however, delivered and Nyoro wrote to ACP on 13 January 1996 complaining about this and pressing for its shipment. On 27 June 1996 Mr Dalby wrote to Nyoro on ACP notepaper and referred to the scrubber as having been "purchased from us [ie ACP] some 15 months ago". His complaint was that although Nyoro had paid for it it had of course paid Burnstead the scrubber was still in ACP's yard and was causing the incurring of storage fees. It appears that the scrubber was never delivered because Nyoro decided it no longer wanted it and that some arrangement was made under which the price paid for it by Nyoro would be set off against money due from Nyoro on future purchases from ACP. Whether it was or was not, the 10,000 received by Burnstead for the scrubber was not remitted to ACP. Mr Hogg confirms that scrubbers of this type are items of equipment regularly supplied by ACP to its customers and asserts that there is no reason why ACP rather than Burnstead could not have supplied the scrubber to Nyoro.
  68. Mr Dalby says the scrubber supplied to Nyoro was an obsolete one, because Nyoro could not afford a new one. He denies that ACP could have supplied it, although I do not understand why. Burnstead was simply Mr Dalby in corporate disguise and, if Burnstead could supply the scrubber, so could ACP. Mr Dalby says it was sourced from SJS Engineering ("SJS") but says he does not know how the transaction was accounted for as between Burnstead and SJS. He says the cost should have been passed on to Burnstead, but it does not appear that it was.
  69. This is another plain case of Mr Dalby obtaining a personal profit by taking advantage of a corporate opportunity open to ACP. I hold that he and Burnstead are accountable to ACP for the 10,000, subject again to any allowable credits.
  70. (ix) Alfred Schembri & Sons Limited ("Schembri")

  71. Schembri is a Maltese company. Burnstead made several sales to it in 1995 and 1996. The Burnstead bank statements show five receipts totalling 187,351.86, their dates being 1 March, 5 April, 5 May, 10 July and 24 July 1995. Burnstead's aged debtor analysis also shows Schembri as a debtor for 37,018, although it appears that this has not been paid and the claimants make no claim in respect of it on this application.
  72. Schembri was a prospective customer of ACP from as early as 1991. In 1992 it asked ACP to quote for the supply of a drum mix plant. In February 1995 it placed an order with SJS for the supply of a refurbished cold mix asphalt plant at a cost of 125,000 ex works Leicester. ACP drawings were used for the production of this plant. SJS's invoice was dated 9 February 1995. Although the order was placed with SJS, the plant was ultimately sold by Burnstead, which issued four invoices between February and April 1995 in sums totalling 125,000. Each invoice included the reference 1151/3447 (the same reference as on the SJS invoice) and referred to "our order acknowledgement, dated 9 February 1995, ref. 1151/3447". The inference from this is that SJS and Burnstead were either one and the same outfit, or were at least closely connected. Mr Dalby says the plant was sourced from Roadmec (which had acquired the plant from ACP in the first place), although it is unclear how the transaction was accounted for between Roadmec and Burnstead. Mr Dalby says the background to this transaction was that Mr Goddard of SJS obtained an order from Schembri but that "He could not finance the transaction and approached me for assistance". I find it impossible to conclude otherwise than that the approach to Mr Dalby was made because he was involved in this type of business at ACP and that the business opportunity which Mr Goddard offered him was one which it was open to ACP to take up.
  73. ACP appears to have played a part in arranging the shipping of the plant to Malta. It also carried out engineering work on its installation and invoiced Schembri for this. On 27 April 1995 Burnstead issued a further invoice to Schembri for 5,500 in respect of a supply of extra conveyors to the plant. Mr Dalby says these were supplied by SJS. Complaints about the various supplies by Burnstead to Schembri were all directed to Mr Dalby at ACP, and ACP dealt with them.
  74. In March 1995 SJS corresponded with Schembri about the supply of a dryer unit. Burnstead then took this contract over and issued its invoice to Schembri on 29 March 1995. The invoice was for the supply of a refurbished dryer with a burner, at price of 38,000 ex-works Leicester. Mr Dalby says the equipment was sourced from Roadmec. The unit appears to have been shipped to Malta in April 1995. Schembri paid Burnstead under a letter of credit and Burnstead received a discounted payment of 36,243.86 on 24 July 1995. ACP carried out the work involved in installing and converting the burner, although there is no evidence that it ever rendered an invoice to Schembri for this. No payment for such work has been traced.
  75. In February 1995 Schembri placed an order with SJS for a refurbished Powerscreen Mark 2 screening plant for 10,526. A memorandum from SJS to ACP on 15 March 1995 suggests the supply was to be dealt with by ACP, but Mr Dalby says this is a misunderstanding of it. As before, the goods were invoiced by Burnstead, its invoice being dated 24 February 1995. Mr Dalby says that ACP do not trade in this type of equipment, which plays no part in asphalt production and so in this respect too he disagrees with Mr Hogg's evidence. I am prepared to accept that it is arguable that ACP did not ordinarily deal in that type of equipment. It appears to me clear, however, that the business opportunity to supply was one that came Mr Dalby's way in his capacity as a director of ACP. It involved a sale to the same customer and as part of the same project, and I cannot accept that Mr Dalby was entitled to pocket the benefit of that transaction without first obtaining ACP's informed consent.
  76. On 17 July 1995 ACP, acting by Mr Dalby, quoted Schembri for the supply of a second hand dust collector at a cost of 45,000. The supply was then undertaken by Burnstead. It issued two invoices, for 22,500 each, on 3 July 1995 and 16 February 1996. Mr Dalby says the equipment was sourced from Roadmec, which had originally bought it from ACP, and that the second instalment of the price was not paid. Mr Sherriff arranged the shipment. A job sheet from the ACP group installation department shows that a good deal of work had to be undertaken on the collector, which I have no doubt was done by ACP. Whilst the plant itself was supplied by Burnstead, ACP bore the cost of supplying and shipping many spare parts to Schembri.
  77. I hold that Burnstead's receipts in respect of these transactions, totalling 187,351.86, subject to any allowable credits, represent profit for which Mr Dalby and Burnstead are accountable to ACP.
  78. (x) White Mountain (Surfacing) Limited ("White Mountain")

  79. The claim here is in respect of 23,000 received into Burnstead's bank account on 28 November 1997. The claimants do not know much about this and the highest they originally put their case was that, because White Mountain was a customer of ACP, the payment must represent the fruit of an opportunity for which Mr Dalby is accountable to ACP. They suggested it may have related to a sale of equipment for which ACP, by Mr Dalby, quoted to Lagan Holdings Limited in July 1995 and in respect of which the invoice was later directed to be issued to White Mountain.
  80. Mr Dalby says the claimants are wrong in the inferences they invite the court to draw. He says that the background to this was that he received a telephone call from Michael Lagan whose company had equipment in Hong Kong that had been used on the new international airport. Mr Lagan told him he was on the point of securing a deal for the sale of second hand equipment to Pioneer Asphalt and asked him to speak to the principal of that company "to ascertain the lie of the land, in particular whether he [Mr Lagan] should drop his price". Mr Dalby says he made the call, which took ten minutes. Mr Lagan then effected the sale and paid Mr Dalby a commission of 23,000. Mr Dalby says this was not business in which ACP engaged and nor did it deprive ACP of the opportunity of selling new equipment.
  81. In my view, even if the claimants' evidence might have been insufficient to establish a case in respect of this payment, Mr Dalby's admissions about the matter make their case good. The evidence shows that by July 1995 Mr Lagan's company was a customer of ACP and had placed an order with ACP for the supply of asphalt plants for its work in Hong Kong. The orders were substantial ones, for prices totalling 1,660,000. It is obvious that Mr Lagan's approach to Mr Dalby must have been made because of Mr Dalby's connection with ACP and his knowledge of the type of equipment in question; and the opportunity for Mr Dalby to make a 23,000 commission out of it for his personal benefit was equally obviously something he could not properly take up without the prior, informed consent of ACP. I hold that Mr Dalby and Burnstead are also accountable to ACP for this 23,000.
  82. (xi) Another ACP payment

  83. On 20 May 1998 Burnstead received a payment of 24,575 from ACP's Royal Bank of Scotland account. Mr Dalby wrote to Mrs Whiteside about it on the same day. He said that "This sum will be shown as received from [ACP], but in fact it is a payment of the loan made by Burnstead to Evesham Developments Limited on the 18 November 1996." Another document shows that on 18 November 1996 Mr Dalby had given instructions to Mrs Whiteside to make a payment by Burnstead to R. Driscoll & Sons ("Driscolls"), by way of a loan to Evesham Developments Limited ("Evesham").
  84. On the face of it, Mr Dalby's letter of 20 May 1998 makes little sense. It might make more sense if there had, for example, been some sort of novation between Burnstead, Evesham and ACP under which ACP assumed a direct liability for the repayment of Evesham's loan, although any such transaction would probably be an improper one for ACP to enter into unless it also received some corresponding benefit.
  85. Mr Dalby offers an explanation. He says the transaction illustrates how ACP benefited from Burnstead's trade. He says Driscolls was a small two-man business that supplied lagging and cladding to ACP. It was one of ACP's preferred suppliers, but ran into financial difficulties. These were principally due to ACP's poor payment record, which was in turn due to its cashflow problems. In order to solve Driscolls' immediate difficulties Mr Dalby says "it was agreed that a capital injection of 24,575 would be made". He admits he had an interest in Driscolls. He says that Burnstead had funds for this purpose, whereas ACP did not, and that the plan was that Burnstead's investment was to be made by a loan to Evesham which he says was a dormant company although the money was apparently paid directly to Driscolls. In substance, Mr Dalby's case is that the transaction was one under which Burnstead lent to Evesham and Evesham then lent on to Driscolls.
  86. Mr Dalby says that at the time of the Gencor acquisition he undertook to give up his interest in Driscolls. He says that Burnstead had to be repaid and "this was subsequently achieved by ACP repaying the investment to Burnstead, with a like amount being deducted from the substantial sums due from ACP to Driscolls. Hence, this payment was not at ACP's expense".
  87. In my view, that argument does not work. The short reason is that Mr Dalby's case is that Burnstead's loan was to Evesham, not to Driscolls, and he advances no justification for the assumption by ACP of the burden of repaying Evesham's loan. The procuring of the payment by ACP to Burnstead appears to have been a simple example of self-dealing between Mr Dalby and ACP, resulting in Mr Dalby enjoying a profit at ACP's expense to which he was not entitled In my view there is no answer to a claim by ACP for a repayment of the 24,575 Burnstead can always look to Evesham for the repayment of the money that Mr Dalby says it lent it I hold that Mr Dalby and Burnstead are both liable to repay the 24,575.
  88. (xii) The Midland Bank and sundry payments

  89. On 12 December 1997 Burnstead received a payment of 1,800, identified in its bank statement as "Received from Midland 407037". On 26 March 1999 it received a credit of 767.20 described in the bank statement as "Received from Sundry Persons U 609359 Repurchase." Mr Hogg suggests that "Persons" should read "Pensions".
  90. The claimants do not know what these payments relate to and Mr Pymont does not suggest they are entitled to an order for the payment of this money. But he does submit that they are entitled to an account from Mr Dalby in respect of them, since he says Mr Dalby must be under an obligation to tell the claimants what they represent.
  91. I am unable to agree. Since there is no evidence suggesting that these payments have anything to do with the claimants, it is possible that they have nothing to do with them. Merely because so many of Burnstead's bank transactions are related to the claimants' affairs does not justify the inference that they all are. I am not satisfied that there is any evidence which would justify the court making an order against Mr Dalby requiring him to explain these payments.
  92. (xiii) Credits

  93. It follows from my conclusions on items (i) to (xi) above (and taking account of the total credits of 92,656.52 that the claimants accept should be given in relation to the Kirinyaga transactions) that in principle Mr Dalby and Burnstead are accountable to ACP in the total sum of 747,376.39, but less any further amounts which should be allowable in calculating the profit which they derived from these transactions. It is only their profit for which they are accountable.
  94. The claimants accept that they should also give credit in the calculation of the profit for further sums totalling 361,567.64. This comprises payments by Burnstead to ACP of (i) 300,000 on 31 July 1996, (ii) 40,000 on 18 February 1997, (iii) 10,000 on 5 December 1997 and (iv) 11,567.64 also on 5 December 1997. These were all shown as loans to ACP in Burnstead's books. The claimants' recognition that credit should be given for these payments is on the basis that the so-called loans are not repayable, so that the payments can be regarded as made in part satisfaction of the obligation to account.
  95. I do not understand that I am being asked to, or can, rule on this application on whether or not the alleged loans are repayable. However, the claimants have made plain the basis on which they offer the allowance of a credit for these payments. I propose to allow the offered credits, which further reduces the maximum sum for which Mr Dalby and Burnstead might be accountable to 385,808.75.
  96. Mr Hogg indicates that the claimants are not prepared to allow any credit either for the general banking charges that Burnstead incurred, nor for the fees incurred in the operation of Augres. I agree with that. Those charges and fees were no doubt referable to the general expenses of the operation of Burnstead, but I do not accept that they should be treated as forming part of the charges which ought to be brought into account in calculating the profit made on each of the transactions complained of.
  97. Mr Hogg identifies eight payments out of the Burnstead account that he cannot explain and in respect of which the claimants therefore offer no credit. They total 7,914.84. Mr Dalby suggests that they are referable to expenses of letters of credit, but does not condescend to further detail. I am not at present satisfied that there is any justification for the allowance of a credit in respect of these payments, although I am prepared to accept that the point might be arguable in respect of one or more of them and I will leave open to Mr Dalby and Burnstead the opportunity to do so in the account which, as I explain below, I propose to order.
  98. Mr Hogg also identifies various further payments out of the Burnstead account, in respect of which he ventures explanations and which he says do not qualify for being allowed as credits in the accounting exercise. Mr Dalby says that three of them (for 10,000, 4,000 and 5,250, totalling 19,250) represent "loans made to Roadmec which should have been subsequently accounted for in offsets against equipment supplied by Roadmec". That is a typical reflection of the confused way in which Mr Dalby and Mr Meehan ran their affairs, and on the face of it the assertion is an unimpressive one. Why should the claimants give credit for sums said to represent loans by Burnstead to Roadmec? On the other hand, I have indicated that certain of the equipment ostensibly supplied by Burnstead is said to have sourced from Roadmec, and in principle it would seem likely that that ought to have resulted in a cost to Burnstead which would properly fall to be brought into the account taking exercise. Three further payments identified by Mr Hogg - 8,000 on 15 May 1995, 2,000 on 16 May 1995 and 11,969.78 on 9 January 1996, totalling 21,969.78 are ones in respect of which, in the light of the explanations given by Mr Dalby in his evidence, the claimants accept that it is arguable that a credit should be allowed. This further reduces to 363,838.97 the maximum amount for which I might on this application hold Mr Dalby and Burnstead to be accountable. Mr Dalby also says that a payment of 6,500 on 29 November 1995 relates to a purchase of second hand plant sourced from Roadmec, and whilst I cannot decide that he is right about that, nor can I decide that he is wrong. He makes a similar point about a payment of 5,400 on 18 February 1997. The claimants disagree with it, but again I cannot finally decide it one way or another. Another payment in issue is one for 10,000 made on 7 April 1997, which Mr Dalby says was made on behalf of ACP. If so, which I also cannot decide, then it would be consistent with the claimants' approach to the accounting exercise that this payment too should be treated as made in part satisfaction of Mr Dalby's and Burnstead's liabilities to account. Another payment identified by Mr Hogg is a payment of 150,000 on 26 April 1995, apparently by way of a loan to Wingspan. I do not accept that any credit is allowable in respect of this.
  99. Whilst I have concluded, for reasons given, that Mr Dalby and Burnstead are accountable to ACP in respect of the profit on each of the transactions I have referred to under sub-headings (i) to (xi) above, I am not in a position to take that account. I propose therefore to order an account in respect of these transactions against Mr Dalby and Burnstead and also to order the payment of what is found due on the taking of the account. I consider that I can and should also make orders against Mr Dalby and Burnstead for an interim payment under Part 25.7(1)(b) of the CPR (see also the notes against para 25.7.2). On the figures I have discussed (and giving Mr Dalby and Burnstead the benefit of the matters of doubt I have referred to in the previous paragraph), I consider that the claimants have a solid case to recover at least 341,938.97 on the taking of the account, and in addition they will have claims for interest, I must, however, take care to ensure that I do not award by way of an interim payment a sum which might exceed the sum ultimately found due on the taking of the account and I consider that I ought, therefore, to give Mr Dalby and Burnstead the benefit of any doubts I have on that score. Taking due account of that, and taking account also of the interest to which the claimants will in principle be entitled, I will order an interim payment of 300,000.
  100. (xiv) The claim against Mr Meehan

  101. I have so far dealt only with the liability of Mr Dalby and Burnstead in respect of these transactions. I do not understand the claimants to claim against Mr Meehan in respect of the Balfour Beatty and White Mountain payments, but I understand that they do assert that he is liable to account to ACP for the profits diverted to Mr Dalby and Burnstead on the other transactions. Mr Meehan has no interest in Burnstead and it is not suggested that he personally derived any benefit from the profits so diverted. The case is that he dealt with the accounting matters relating to them and so became mixed up in facilitating them. It is said that by doing so he dishonestly assisted Mr Dalby to commit his breach of fiduciary duty and so became personally liable to account to ACP for the profit for which I have held Mr Dalby and Burnstead to be accountable.
  102. Mr Meehan's liability is therefore said to be in the nature of an accessory liability and is based on what used to be known as "knowing assistance" but is now known as "dishonest assistance". Its origins lie in Lord Selborne LC's statement of principle in Barnes v Addy (1874) LR 9 Ch App 244, at 251, where he explained the circumstances in which a stranger to a trust might become liable as a constructive trustee. The principle was the subject of a modern restatement by Lord Nicholls of Birkenhead in Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378. Lord Nicholls there said, at p 392F:
  103. "Drawing the threads together, their Lordships' overall conclusion is that dishonesty is a necessary ingredient of accessory liability. It is also a sufficient ingredient. A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. 'Knowingly' is better avoided as a defining ingredient of the principle, and in the context of this principle the Baden [1993] 1 WLR 509 scale of knowledge is best forgotten."

  104. The case against Mr Meehan is founded on this principle. There are, however, two aspects of it which have caused me concern, and which have led me to the conclusion that I ought not to enter judgment against Mr Meehan under this head on this application.
  105. First, it is still something of an open question whether the principle identified by Lord Nicholls has any application to what is alleged to be a dishonest assistance in a breach of fiduciary duty, not being a breach of duty involving the misapplication of a trust fund or other property subject to a fiduciary obligation. In Satnam Investments Ltd v Dunlop Heywood & Co Ltd and Others [1999] 1 BCLC 385, after referring to the Royal Brunei Airlines case, Nourse LJ said at p 404 that "Before a case can fall into either category [knowing receipt and dishonest assistance] there must be trust property or traceable proceeds of trust property". That suggests that the answer to the question is clear, but in Goose v Wilson Sandford & Co (a firm), Court of Appeal, 14 March 2000, unreported, Morritt LJ, in delivering the judgment of the court, said that the court did not regard that statement of Nourse LJ as binding on the point and that:
  106. "The issue is whether the dishonest breach of trust in which the defendant assisted must have involved the misapplication of trust property or its proceeds of sale. The formulation of the principle by Lord Nicholls of Birkenhead ... does not embrace such a requirement. Whether or not such a requirement is an essential feature of this head of liability is not a point we have to decide and, like the Court of Appeal in that case, we should not like to shut out the possibility of such a claim in its absence."

  107. The Court of Appeal therefore left the point open. Its relevance is that Mr Pymont advanced the claimants' case primarily on the basis that the breach of fiduciary duty to which Mr Meehan is said to have lent dishonest assistance is a breach of duty to account for profit. He did not in terms submit that the relevant profit should be regarded as trust property, although I understood him to accept that it might be so regarded. A proposition to that effect would, I think, find support in the authorities, including the last line of the passage I have earlier quoted from Deane J's judgment in Chan v Zacharia. I have, however, concluded that I cannot and should not approach this case on the basis that it has been demonstrated that any of the money diverted to Burnstead was in the nature of trust property. Nor am I deciding that it was not. I am simply saying that the point is not a clear one, on which I did not have full argument, and I consider that in those circumstances I should not express a view on it. In particular, bearing in mind that it is only the profit on these transactions for which there is said to be a liability to account that is, at its simplest, the difference between receipts and expenditure I find it difficult to identify a fund that might qualify as a trust fund or be subject to a fiduciary obligation. If the true view is that there was no such fund, then the question arises whether the "dishonest assistance" principle has any application, which is a difficult one.
  108. Secondly, the case against Mr Meehan is that his participation in the diversion of the profit to Burnstead was dishonest: and this is because Lord Nicholls's statement of the principle shows that nothing less will do. Lord Nicholls also pointed out that the question of whether, in this context, a person has acted dishonestly or not has to be answered objectively (see [1995] 2 AC 378, at 389 to 381). In theory, therefore, I ought to be able to form a decision on whether Mr Meehan had been dishonest merely by looking at the papers and ascertaining precisely what he did do. I will simply say that I would not find that an easy exercise on the facts of this case, and would have considerable reservations about making a final finding of dishonesty against a defendant on a summary application such as this. In my judgment fairness to Mr Meehan points to the conclusion that the question of any dishonesty or otherwise on his part is one which ought to be determined at a trial. I am not, therefore, prepared to enter judgment against Mr Meehan under this limb of the claimants' case.
  109. B. Pacific Holdings Limited ("Pacific")

  110. Pacific is owned beneficially by Mr Dalby and Mr Meehan, with 95 per cent and 5 per cent shares respectively. It is incorporated in Malta. Mr Dalby and Mr Meehan used it to acquire a factory property in Australia at 36 Colebard Street East, Acacia Ridge, Brisbane ("the property"). ACP claims this constituted the improper diversion to Mr Dalby and Mr Meehan, via Pacific, of an opportunity that was open to ACP to buy the property. Pacific's knowledge of all relevant matters was the same as that of Mr Dalby and Mr Meehan, and ACP claims it is to be regarded as holding the property on trust absolutely for ACP. ACP claims, both additionally and alternatively, that its own money was anyway used to buy the property so that Pacific holds the property for it beneficially under a resulting trust. Pacific subsequently let the property to ACP Australia and others and ACP not only makes its claim to the property, it also claims an account of the rents received and does so against each of Pacific, Mr Dalby and Mr Meehan.
  111. The claim is complicated by several factors, one of which is that Roadmec International provided money which went towards the purchase price, which might on one view be said to have given it a beneficial interest. However, Roadmec International has played no part in defending the action and although (with the leave of Master Bowles) it has been made a respondent to this application and has been served with the evidence, it has not appeared before me to raise any defensive answer to ACP's claim. Mr Pymont submits this is because the inference is that Roadmec International may have been bought out in some way and no longer has any interest; or else that it never had an interest of its own and merely did what it did on behalf of ACP. Alternatively, it is possible that Roadmec International's only interest was as a lender of the money it put up, although if so the identity of the borrower is unclear.
  112. The story starts on 2 May 1996 when Mr Dalby, on behalf of ACP Australia, spoke to National Australia Bank ("NAB") with an enquiry as to loan finance for the purchase of a commercial property. NAB wrote to ACP Australia on 3 May 1996 with its basic requirements for the provision of such finance. It enclosed, for the attention of Mr Firth at ACP Australia, an indication of the terms on which it might lend Aus$440,000.
  113. The property is a large industrial property. King & Co ("King"), a firm of land agents, was marketing it at an asking price of $1,260,000. The vendor was Roche Brothers (Qld) Pty Limited ("Roche"). On 3 June 1996 Mr Firth wrote to King on ACP Australia notepaper with an offer of $1,000,000. A sale had been agreed in principle by 13 June 1996, when King produced a memorandum recording Roche as the seller and ACP Australia as the purchaser and sent Mr Tibbles of ACP Australia (he had replaced Mr Firth as a director) details as to the payment of the $100,000 deposit, which was to be paid into a King trust account.
  114. Mr Tibbles then sent Mr Dalby and Mr Meehan a copy of the draft contract and asked for instructions. He provided details of King's account number, to which the deposit was payable. The draft contract identified the vendor as Roche, left the purchaser's name blank and showed the price as $1,100,000, with a deposit payable of $100,000. The unnamed purchaser's solicitors were shown as Wheldon & Associates ("Wheldon").
  115. Mr Meehan replied to Mr Tibbles at ACP Australia by an ACP fax dated 17 June 1996. He headed it "ACP Property". He asked questions about fees, stamp duty and so on in order "to enable [Mr Dalby] to finalise matters" and instructed Mr Tibbles to "instruct the solicitor to set-up new Australian Company which will own property". He did not say who was to own the new company. Mr Tibbles replied on 18 June 1996 with answers to Mr Meehan's questions and a list of available names for a new Australian company. He said that at least one Australian director would be required. Mr Meehan replied by an ACP fax on the same day expressing preference for the company to be called Ampaville Pty Limited ("Ampaville"), asked if the solicitors could recommend a "nominee" Australian director and said the deposit would be paid that week. Mr Tibbles replied on 20 June, on an ACP Australia fax, saying that a nominee director was not possible in Australia and that Roche was pressing for the sale to proceed.
  116. At about this time a further draft contract was produced which showed the purchaser as "[Ampaville] or Nominee" (although Ampaville did not exist) but by 27 June 1996 Wheldon appears to have understood that the proposed purchaser was to be Pacific (which did not exist either, although its birth was imminent). Wheldon wrote to "the directors" of ACP on that day with a letter whose heading identified Pacific's interest as a proposing purchaser and saying that they looked forward to being "of further assistance to you in this matter", the natural inference from the letter being that the "you" referred to ACP or its directors.
  117. The incorporation by Mr Dalby and Mr Meehan of a Maltese company had been the subject of consideration since at least April 1996. On 16 April 1996 Mr Dalby had a meeting in Malta at the offices of International Corporate Services Limited ("ICS"), a company which carries on nominee and trustee services. The purpose was to discuss the incorporation of a Maltese company. By 9 May 1996 Mr Curmi, ICS's managing director, had heard nothing further and so he sent Mr Dalby, at ACP Holdings, a fax asking as to the position. On 4 June 1996 Mr Dalby and Mr Meehan responded by sending Mr Curmi instructions for the incorporation of a Maltese company. It was to be an "International Holding Company", its principal object was to be the "holding of foreign international participations", and it was to have an authorised and issued capital of US$10,000 divided into 10,000 shares of US$1 each. ICS was to be the sole director and shareholder and Mr Dalby and Mr Meehan were to own the issued shares beneficially in the proportions 95 per cent and 5 per cent. ICS was to act on Mr Dalby's instructions. Pacific was incorporated on 9 July 1996.
  118. The contract for the sale and purchase of the property was signed on 24 July 1996. Pacific was named as the purchaser. The purchase was completed on 20 August 1996. Mr Dalby was in Australia at the time and no doubt was giving instructions. On 21 August 1996 Wheldon wrote to Pacific giving details of the "settlement figures", which included a breakdown of the payments made towards the deposit and balance of the purchase price. The sources of the purchase money are clear, but there is a question as to whether those sources were providing their contributions as loans either to Pacific or someone else or as contributors to the purchase price. The sources of the money were as follows.
  119. The deposit was Aus $100,000. This was paid in part by Roadmec International. It did so by raising an invoice dated 20 June 1996 on Penza Construction Limited ("Penza Construction") for a deposit of 51,000 said to be payable on the supply of an RM750 Mobile Asphalt Plant and weighbridge at a price of 340,000. By 24 June 1996 Penza Construction, at Roadmec International's request, had paid King 33,943.97 in part satisfaction of the 51,000 and towards payment of the deposit on the property. The balance of the deposit, amounting to Aus $35,305.75, was paid to King on 4 July 1996 by ACP Australia.
  120. Of the balance of the purchase price, (i) 150,000, equating to Aus $294,406.28, came from Mr Dalby's account at the Bank of Switzerland. Mr Dalby has to date failed, despite requests from the claimants and an order of the court, to provide statements in respect of this account; (ii) Aus $626,000 was provided by ACP Australia; and (iii) 43,000, equating to Aus $83,711, came from Roadmec International: it had recently been put in sufficient funds to enable it to pay this by a payment for 35,696 from Gatt Asphalting Limited, a company to which I shall return.
  121. This left a balance of Aus$111.36 to be found, which was paid by Wheldon and added to their bill of costs. That bill totalled Aus $47,837.36 and it was paid by Roadmec Limited (not Roadmec International) by a sterling payment of 24,383.43. Mr Meehan was the secretary of Roadmec. It has never claimed that this payment was other than a loan to ACP and disclaims any beneficial interest in the property. This is made clear by a witness statement from Mr Clive James, the sole director of Roadmec, in which he said he had never heard of Pacific until the commencement of this action and that Roadmec made its payment of the 24,383.43 to Wheldon because Mr Dalby asked him if Roadmec could lend ACP that money in order to enable it to buy a property in Australia.
  122. Audited accounts for Pacific have been produced for its trading period from 9 July to 31 December 1996. Mr Curmi signed them on 28 November 1997, but he would only have done so with Mr Dalby's prior authority. Pacific's only fixed asset is the property, which is shown in the accounts at a cost figure of US $800,457. The notes show the whole of this to have been financed by unidentified third party loans. The balance sheet describes these as "falling due after more than one year" as do the notes, although the notes add that the loans are unsecured, interest free and "have no fixed date for repayment", which would suggest that they were payable on demand. The inference from the accounts is that Pacific is the beneficial owner of the property, which is the case made by Mr Dalby, Mr Meehan and Pacific.
  123. These accounts were prepared following the provision by Mr Meehan to ICS of information about the purchase of the property. By a letter of 8 October 1997 he informed ICS that the total cost had been Aus $1,003,932.74. His figure was Aus $100,000 light as he appears to have overlooked the deposit. He told ICS that the Aus $1,003,932.74 had all been provided by loans made by (i) Burnstead as to Aus $600,000, (ii) Roadmec International as to Aus $83,711 and (iii) ACP (not ACP Australia) as to Aus $320,221.74. It is idle to try and reconcile those figures with what other evidence shows to have been the source of the finance, and I will not attempt it. Even Mr Meehan had a second go on 20 November 1997, when he told ICS that Burnstead's claimed contribution had been by way of a loan to ACP, not to Pacific, and that the only lenders to Pacific were therefore (i) Roadmec International as to Aus $83,711 and (ii) ACP as to Aus $920,221.74.
  124. Whether or not Mr Meehan's second attempt was to any extent a correct analysis and, given his error as to the total cost, it was certainly not a complete one it constituted a recognition by him that Burnstead made no contribution to the purchase such as to entitle it to a beneficial interest in the property. It also appeared tacitly to reflect his recognition that the use by Mr Dalby of his Bank of Switzerland account money had not given Mr Dalby any such interest either, a stance which Mr Dalby himself endorsed by his agreement to the Pacific accounts and his claim in this action that Pacific is the beneficial owner of the property. Mr Meehan was also denying that Roadmec International's contribution to the purchase money had given it a beneficial interest in the property; and as Mr Meehan was secretary of Roadmec International he can presumably claim to have had some understanding of the basis on which it provided its money. It is worth noting that Mr Meehan informed ICS that the loans were interest free with no specific payment date. Thus he was blatantly asserting that ACP had made a present to him and Mr Dalby of interest free finance so that they could buy a property via Pacific.
  125. I return to Roadmec International's position, as to which the picture is obscure. This also requires a return to Gatt Asphalting Limited ("Gatt"), which was incorporated in Malta on 24 July 1996 and had its registered office in Gozo. Gatt had an issued share capital of LM800 (Maltese Lire), divided into four classes of shares, each comprising 200 shares designated A, B, C and D shares respectively. Those four classes were respectively owned by Ranfra Limited, Gatt Development Limited, Asset Investments Limited and Ranfra Limited. Carmel and Joseph Penza appear to have been interested in the Ranfra shares, Raymond and William Gatt in the Gatt Development shares and Sebastian Dalli in the Asset Investment shares. However, the documents all show that Mr Dalby also had an interest in Gatt.
  126. Thus on 19 August 1996 Mr Clive James of Roadmec International wrote to Mr Charles Penza saying he had spoken to Mr Dalby "on the matter of the weighbridge", that Mr Dalby was disappointed he had not been consulted on it and that he, Mr Dalby, "would remind you that he is also a partner in the company as well." Mr Penza appears to have recognised this last point. He replied to Mr James by a Penza Construction fax dated 27 August 1996. He asked him to show it to Mr Dalby "because all the partners of [Gatt] and myself want to clear these matters". The substance of the fax was that Penza Construction would be remitting 10,000 to Roadmec International on the following day, but would not be sending the rest of the money for the weigh bridge because it could not afford to and could anyway "wait to acquire the Weigh Bridge". He complained that Roadmec International had promised to book the paver for shipment to Gozo but had not yet done so. He said the government was pressing Gatt to finish the road in Gozo. He continued:
  127. "As for the rest of the money, tell [Mr Dalby] that we have already presented all the documentation to the Bank of Valletta. But you know what Banks are like. tell [Mr Dalby] also that he is not to worry about the money, because if we come to the worst, and the plant is operating, he will get paid from the hot asphalt we are laying in Gozo. I am not saying that this is going to happen. But the earlier we start production is best for everybody's sake, even for [Mr Dalby] himself as he is one of the shareholders of [Gatt]."

  128. I referred earlier to the Roadmec International invoice to Penza Construction dated 20 June 1996 for the 51,000 deposit payable on a supply contract. Roadmec International generated some further, somewhat confusing, invoices on 11 April 1997. They were directed to Gatt Ready Mix Limited in Gozo, although some manuscript amendments on them suggest that the author was uncertain of the correct name of the addressee and that they may have been intended for Gatt. They were for the supply of (i) a new RM750 asphalt plant for 320,000, (ii) a weigh bridge for 20,000, and (iii) a paver and two rollers for a total of 51,000. The last figure matches the amount of the 1996 deposit invoice to Penza Construction, of which a part payment went towards the deposit on the property. An accompanying statement, also dated 11 April 1997, showed the total invoiced amount to be 391,000, of which 97,750 had been paid by Brookwood Contractors and that a deposit of 35,696 had been received, leaving a net balance due of 257,554. That deposit had been paid to Roadmec International on 19 August 1996 and had enabled it to make the payment of 43,000 (equating to Aus $83,711) to King which went towards the balance of the purchase price for the property. On 30 June 1997 Roadmec International generated similar invoices for the same amounts this time they were indisputably addressed to Gatt.
  129. On 8 July 1997 there was a meeting at Penza Construction's offices attended by the Penzas, Mr Dalli and Mr Dalby. There is a manuscript note of the meeting, signed by Mr Dalby and the others present. The purpose appears to have been to discuss the amount due to Roadmec International from Gatt under the Gozo contract, its payment and certain matters connected with further work on the contract. The note records that any modifications made by Gatt so as to have the asphalting plant operational were to be agreed with Mr Dalby and any expenses incurred would be deducted from the balance due. On 2 November 1997 Mr Meehan wrote on Roadmec International notepaper to Mr Charles Penza at Penza Construction about the Gatt contract at Gozo and enclosed "our" presumably Roadmec International's reconciliation of the contract. He wrote, inter alia, that the calculations "do not include a calculation of [Mr Dalby's] quarter share in [Gatt] which I understand is subject of a separate discussion". On 14 November 1997 Penza Construction generated a manuscript document which purports to show the "Total amount due to Roadmec/Glenn [Roadmec International/Mr Dalby]".
  130. On 3 March 1998 Mr Meehan sent an internal note to his assistants at ACP in relation to the Gatt contract. He said this:
  131. "The selling price for the plant to [Gatt] is the sum of 320,000. I would be grateful if you could raise an invoice to this value.

    At the time of shipping ACP were responsible for freight charges and these were paid by [Gatt} to the sum of 10,348.23. Sue, would you please raise an internal debit note charging the contract with this value and crediting the sales ledger account.

    Roadmec International Limited has collected on our behalf the sum of 223,058.58 as at the 9 December 1997. This sum should be credited against the sales ledger account for [Gatt] and charged against the inter-company account for Roadmec International Limited. Please liaise with Andrea Turner for the relevant entries.

    This then leaves the following entries required to clear up this debtor:
    1. the sum of 33,543.97, this amount will be dealt with by Andrea through inter-company accounts once we can track where this entry has gone to.
    2. the sum of 39.22 which should be written off to small differences.
    3. the sum of 89,000 which will be cleared off in due course."

  132. Someone at some stage crossed out the figure of 89,000. The inference from this note is that ACP was directly interested in the Roadmec/Gatt contract, presumably because the plant which Mr Meehan refers to as having a selling price of 320,000 was an ACP RM750, which had been supplied by Roadmec International at the same figure of 320,000. As for the 33,543.97 payment to which Mr Meehan referred, this was the payment which Penza Construction had made to King at Roadmec International's request and which was applied towards the Aus $100,000 deposit on the property. One inference from Mr Meehan's note is that ACP had been directly interested in the Roadmec International/Gatt contract and that, in so far as Roadmec International had made payments in connection with that purchase, it had been doing so on ACP's behalf and that Mr Meehan's note reflects his efforts to tidy up the inter-company account position as between ACP and Roadmec International.
  133. Reverting now to the property, Pacific granted various leases of parts of it. One was to Green West Pty Limited for a three month term ending on 26 April 1997 at a rent of Aus $1,069.12 per month, and then for a further term at what appears to have been a rent of Aus $1,261.13 per month. Another was to ACP Australia from 1 September 1996 at a rent of Aus $12,500 per month. Another was to GCM (Qld) Pty Limited from 1 September 1996 at a rent of Aus $2,000 per month. Another was a five year lease to Crowmont Investigative Consultants Pty Limited from 9 June 1997 at a rent of Aus $1,750 per month.
  134. The collection of rent was administered from ACP in Leicester under the instructions of Mr Dalby and Mr Meehan. Rent invoices would be sent to the tenants, who would send their cheques to ACP. They were then forwarded to Mr Curmi of ICS where they were banked at Mid-Med Bank in Malta. The accounts records for Pacific show that, during the period 28 May 1997 to 13 January 1999, out of total rent invoiced of Aus $515,972.60, Pacific received Aus $473,733,73. Analysis of the bank statements for the Mid-Med Bank shows that during the period 13 June 1997 to 6 April 1999 identifiable rent receipts of Aus $380,545.70 were paid into Pacific's account. Other payments totalling Aus $70,005.50 were also credited, including interest of Aus $5,059.12. Withdrawals from the account over the same period totalled Aus $449,169.01.
  135. Mr Dalby devoted some 14 pages of his witness statement to explaining the purchase of the property. Its essence was as follows. He started marketing ACP products in Australia in 1993 and in due course decided that the way to make ACP Australia's business viable was to manufacture equipment there. To do this it needed to lease a factory and employ a local workforce. Steps were taken to find premises, and the property was found. However, Mr Dalby says the owners did not want to lease it, they wanted to sell the freehold. Mr Dalby said that ACP was not seeking to buy because it could not afford to and it was clear to him there was no reasonable prospect of NAB financing a purchase by ACP Australia. However, he was anxious that the purchase opportunity should not be lost, and his idea was that he, or a vehicle of his, should buy so that it could then let it on favourable terms to ACP Australia. Pacific was formed for the purpose of making the purchase, which Mr Dalby says was to his detriment and to ACP's benefit. He says that ACP could anyway not have bought the property without the consent of both 3i and RBS under the terms of ACP's agreements with them, and they would have refused their permission to a purchase by ACP; that none of the people who contributed to the purchase intended to profit from it, nor have they done so; that the property is now under a contract for a sale at Aus $1.2 million and that the net proceeds of sale will be likely to be no more than Aus $1,155,149.87; and that the rents received by Pacific do not represent profit either for Pacific or those who contributed towards the purchase price. He says the rents have in part been applied in (i) repayments due to Mr Chong's companies (I come to those below, under the heading Wingspan, but comment here that any such payments appear to have been in discharge of Mr Dalby's personal liabilities, not in discharge of any liabilities of the ACP group), (ii) the purchase of two second-hand crushers, which he says Gencor has since appropriated and sold for about Aus $450,000, and (iii) in meeting the general expenses of Pacific, including the fees payable to ICS and tax liabilities. He believes that actual rent receipts by Pacific have not exceeded the figure of Aus $380,554.70 given by Mr Hogg. He says the purchase has been of great benefit to ACP Australia, which has thrived since the purchase and paid a favourable rent.
  136. Mr Dalby explains the sources of the money paid towards the purchase of the property. He says the money from his Bank of Switzerland account represented commissions earned by him in the same way as he earned the Balfour Beatty commission, although in this case they were derived from Massenza SA, an Italian manufacturer of bitumen, emulsion and polymer equipment, which he introduced to new overseas markets. He said these transactions did not impinge on ACP's business and that, save for bitumen tanks, Massenza's equipment was not of a type which ACP usually supplied. He said he was introduced to Massenza by a business acquaintance, Tony Hill.
  137. He said Burnstead had cash it could contribute to the purchase, and this was the original intention. But he said that by July 1996 ACP was suffering from critical cash flow difficulties and so on 31 July 1996 Burnstead lent it 300,000, which had the effect of reducing the cash in Burnstead's account to about 18,500. The payment of the 300,000 enabled ACP to make a number of payments on 31 July and 1 August 1996. Mr Dalby says the expectation was that ACP could repay the 300,000 shortly afterwards, leaving Burnstead in a position to contribute to the purchase of the property. In fact, ACP did not repay it. What did happen is that ACP Australia paid Aus $626,000 towards the purchase, which Mr Dalby claims represented (i) a repayment by ACP Australia to Burnstead of the 300,000 which had been lent to ACP (but which does not appear to have been transferred by ACP to ACP Australia, but to have been disbursed elsewhere) and, therefore, (ii) a contribution by Burnstead of 300,000 towards the purchase of the property.
  138. Mr Dalby deals with the Roadmec International payments. He believes, consistently with the documents, that Roadmec International's contribution towards the deposit on the property derived from the Gatt contract, and suggests they derived in particular from the supply of the paver and roller at a cost of 51,000. He denies Mr Hogg's suggestion that the payment of this sum was made under an agreement under which he, Mr Dalby, had any personal benefit, although he does not explain the references in the documents which suggest that he was personally interested in Gatt. He says that Roadmec International's contribution of its further Aus $83,711 was accounted for as a loan to Pacific. He says that Roadmec's payment of the Aus $112.36 was also treated as a loan to Pacific (although Roadmec says it believed it was a loan to ACP). He says the balance of the purchase price the Aus $35,305 paid by ACP Australia - was an advance to Pacific of part of the first quarter's rent which would be due from ACP Australia under the lease of the property that Pacific was proposing to grant it. It is accepted that credit in the rent demands was given to ACP Australia for that payment.
  139. Against that complicated factual background, I come to the claimants' assertion that there is no answer to their claim that the property belongs beneficially to them and that they are entitled to an account for the rents received by Pacific against Pacific, Mr Dalby and Mr Meehan. Having reviewed the evidence fairly fully, I have decided that I ought not to enter judgment for the claimants on any part of this claim.
  140. Having so decided, I do not propose to discuss at length the issues arising under this claim. I am disposed to accept (but do not decide) that, even on the basis of Mr Dalby's evidence, the opportunity which he and Mr Meehan took for the purchase of the property arose in consequence of the search by ACP Australia of a factory to lease, and that it follows from the Regal principles that, absent an informed prior consent to their activities by the claimants (and it is not suggested there was any), the claimants have a strong case against Mr Dalby and Mr Meehan and/or against Pacific for an account of the profit achieved as a result of the property purchase.
  141. Moreover, Mr Francis was also disposed to accept that, if contrary to his argument the purchase did infringe the "no profit" principle, then Morritt J's decision in Carlton v Halestrap & Ors (1988) 4 BCC 538 supported the further conclusion that Pacific became a constructive trustee of the property for the claimants and would be accountable to them for the rents it had received from the lettings. However, that authority also shows that if the fiduciary has put up his own money towards the purchase, then he is entitled to be repaid what he put up. In this case Mr Dalby provided 150,000 towards the purchase and, at least on the face of it, he would therefore be entitled to be repaid that on the accounting exercise which would follow if the property is held on trust for the claimants.
  142. I say "on the face of it" because Mr Pymont challenges the suggestion. He referred to an ACP letter written by Mr Dalby to Schembri on 28 June 1996 which appears to show that Massenza was a contact known to Mr Dalby in the context of his role as an ACP director and he says it follows that if, as Mr Dalby claims, his Bank of Switzerland account represented Massenza commissions, then they must be commissions for which Mr Dalby is accountable to ACP for like reasons as he is, as I have held, accountable for the Balfour Beatty commission. Therefore, Mr Pymont submitted, that part of the contribution to the purchase price of the property was really a contribution of ACP's money, not Mr Dalby's, so that there can be no question of there being any obligation on the claimants to have to account to Mr Dalby for the 150,000.
  143. Mr Pymont may be right about that, although I think he would also have to show that the commissions in the Bank of Switzerland account were held on constructive trust for the claimants. But the evidence about the Massenza connection is anyway so exiguous that I am not prepared on this application to rule finally in the claimants' favour on the point. I simply do not know enough about the matter and consider that it would be unfair to deprive Mr Dalby of the opportunity of defending his position in relation to this at trial. Mr Pymont relied also on Mr Dalby's failure to date to provide bank statements of his Swiss account, but I do not regard that as requiring me to take a different view on this point. Those statements, if and when they are produced, may or may not illuminate it. An order has been made for their production, and Mr Francis told me that Mr Dalby has sought their provision by the Bank of Switzerland. In the meantime, no order has been made preventing Mr Dalby from asserting what he does about the source of the money in that account, and I do not consider that I ought on this summary application to draw any inferences adverse to Mr Dalby merely because he has not yet produced the statements.
  144. Mr Pymont also submitted that anyway it is no part of Mr Dalby's case that he personally contributed to the purchase of the property. His case is that the true position is reflected in the Pacific accounts, which were prepared on the basis of Mr Meehan's instructions to ICS, and which purport to show that the purchase was financed by interest free loans to Pacific by Roadmec International and ACP. As to the loan allegedly made by ACP, Mr Pymont submitted that any such loan would be the fruit of self-dealing between Mr Dalby and Mr Meehan (via Pacific) and ACP, the company of which they were both directors, and so ACP is entitled to avoid the suggestion that it made any such loan; and given that the defendants' own documents assert that ACP money was applied towards the purchase, it must therefore follow that it was so applied as a purchaser, not as a lender. As to Roadmec International, I have earlier outlined what Mr Pymont said about its contribution to the purchase: and he is entitled to say that even Mr Dalby's evidence does not justify the conclusion that it provided its money as a purchaser.
  145. I regard Mr Meehan's explanation of the sources of finance for the purchase of the property with considerable suspicion and I doubt if they provide any reliable guide as to the beneficial ownership of the property. My present view is that a rather better guide as to that is to identify who provided the money that actually went towards the purchase and on what basis they did so.
  146. The answer to that is that it was apparently provided by (i) ACP Australia, (ii) Roadmec, (iii) Roadmec International, and (iv) Mr Dalby. Since I do not see how Mr Dalby and Mr Meehan could validly give themselves, via Pacific, an interest free loan of ACP Australia's money, my provisional view is that ACP Australia's contribution should be regarded as having been provided as a purchaser and as having given it a corresponding beneficial interest, which would not have been divested from it by Mr Meehan's subsequent book entries. Roadmec admits it provided its money by way of a loan to ACP, so that the further inference is that ACP's application of that money towards the purchase thereby gave ACP a like corresponding beneficial interest. The Roadmec International contribution is obscure. Since it is obscure I am reluctant to declare on this summary application that it has no interest, and my reluctance is not materially lessened by the absence of any appearance by Roadmec International before me. If the court is to be asked to make a declaration as to rights of property, being a declaration which will exclude someone who might at least arguably have an interest, then I consider that it must first be satisfied as to the evidential basis for the declaration it is being asked to make. Mr Pymont fairly concedes that there are some unanswered questions about Roadmec International's role in this matter. Since it appears to have made a decision not to defend the action, it is unlikely that it will take any part at a trial and so will not itself provide further illumination. But Mr Dalby, Mr Meehan and Pacific would take part in the trial, the first two would be witnesses and their evidence will enable the true position with regard to Roadmec International to be explored further, if not necessarily wholly resolved. As for Mr Dalby I have already accepted that I consider a question arises as to whether the money he provided belonged to him beneficially or is money for which he has always been accountable to ACP or was held on constructive trust for it. If it belonged to him beneficially, then even if the claimants establish that the property belongs to them, he would be entitled to be repaid what he provided. That sum would therefore probably have to be brought into account on any claim by the claimants to an account of the rents received by Pacific. So also, if there is anything in the point, would the Aus $450,000 which Mr Dalby says the claimants have received from the sale of the two crushers that were apparently originally bought with the rents from the property. Mr Dalby's evidence about that is imprecise and vague. But I feel unable on this application to reject it as incredible and untrue.
  147. The result is that I have decided that all claims relating to the property and its rents must be determined at trial. I do not consider that there are any aspects of the claim that are so clear that I can usefully make orders or declarations about them at this stage.
  148. C. Wingspan Enterprises Limited ("Wingspan")

  149. Until about June 1995 Mr Dalby controlled Wingspan, another British Virgin Islands company. Like Burnstead, it was administered by Augres Secretaries, and Mrs Whiteside was the main contact for the passing of information and instructions.
  150. In about March 1994 Mr Dalby or Mr Meehan entered into arrangements with a Malaysian company for the investment by it of 1 million in ACP Holdings. This was Paving Plant & Processes (M) Sdn Bhd ("PPP"), a company in which a Mr Chong ultimately had an interest. The method was that (a) ACP Holdings would issue shares to PPP for an investment of 700,000 and (b) a PPP subsidiary called Sumbangan Pasifik (M) Sdn Bhd ("Sumbangan") would take a 71 per cent interest in Wingspan (with the remaining 29 per cent being held by or for Mr Dalby) and ACP Holdings would then issue further shares to Wingspan in consideration of an investment of 300,000 which was to be lent by PPP to Sumbangan for that purpose.
  151. These arrangements are reflected in some draft minutes of a directors' meeting of ACP Holdings held on 23 March 1994 and attended by Mr Dalby, Mr Meehan, Mr Lockington and Mr Oldroyd. The minutes also recorded a proposal to issue shares in ACP Holdings to Royal Bank of Scotland Plc, the ACP group's bank, in return for a continued overdraft facility of 1.5 million.
  152. The arrangements were put into effect in 1995. The outcome was that, in exchange for a subscription of 300,000 deriving from a loan by Sumbangan to Wingspan, ACP Holdings issued 1873 "A" Ordinary shares to Wingspan, which it retained until the Gencor acquisition in November 1997. Wingspan's issued share capital was, or became, US $480,000 divided into 480,000 shares of $1 each, of which 340,800 (71 per cent) were issued or transferred to Sumbangan and 139,200 (29 per cent) were issued to nominees for Mr Dalby. Mr Dalby also transferred to Wingspan his personal holding of 969 Ordinary Shares in ACP Holdings for 1, and Wingspan also continued to hold these shares until the Gencor acquisition. In addition, and in consideration of its investment of 700,000, PPP was allotted 1404 "A" Ordinary Shares in ACP Holdings, which it also retained until the Gencor acquisition.
  153. In August 1997 Gencor displayed its interest in acquiring the ACP group. In September 1997 it offered to acquire it for 2 million cash and the issue of some Gencor Common Stock. At the same time Mr Dalby engaged in an acquisition of Sumbangan's 340,800 shares in Wingspan. This was negotiated by Stones Porter, Sumbangan's solicitors, and by Spearing Waite, Mr Dalby's solicitors. Spearing Waite were also acting for the proposing vendors in the Gencor acquisition.
  154. Agreement for the acquisition by Mr Dalby of the Sumbangan shares was reached. Its terms are recorded in a draft agreement in evidence and an agreement in this form was executed on 13 November 1997, the same date as that of the agreement for Gencor acquisition. The terms were that he was to buy Sumbangan's 340,800 shares in Wingspan for 324,649. It was to be completed contemporaneously with the completion of the Gencor acquisition and on completion Mr Dalby was to pay to Sumbangan both the purchase price of 324,649 and an amount of 300,000 acknowledged to be outstanding from Roadmec to PPP. If the money due from Mr Dalby was not paid in full within three months of completion, then the overdue amount was to carry interest at 10 per cent per annum compounded monthly. Mr Meehan guaranteed the due payment to Sumbangan of what was due from Mr Dalby, and in consideration of that (and an extra 1) on 13 November 1997 Mr Dalby assigned to Mr Meehan the benefit of a life policy on his life, the sum assured being 750,000.
  155. The due discharge by Mr Dalby of his obligations under this agreement therefore required the prompt payment by him to Sumbangan of 624,649. ACP's complaint is that he sought assistance in discharging this personal liability by the diversion to PPP of money owed to ACP under contracts with an Egyptian company called Transworld for Development & Trading Co ("TDTC"). The facts are as follows.
  156. In June 1996 Mr Dalby, on behalf of ACP, gave quotations to TDTC for the supply of an RM1000 Mobile Batch Production Asphalt Plant. In July 1996 he appointed TDTC ACP's exclusive dealer and sales agent in Egypt. TDTC placed orders with ACP for the supply of various pieces of equipment and on 30 December 1996 ACP rendered three invoices to TDTC for US$322,000, US$499,100 and US$499,100 respectively. Payment in each case was to be made by letter of credit but the beneficiary was not ACP but Asphalt & Crushing Plant (Asia) Sdn Bhd ("ACP Asia"). ACP Asia had been set up by Mr Dalby in 1993 as a joint venture company between ACP International Limited (another subsidiary of ACP Holdings) and PPP. All parties agreed that ACP Asia was required to account to ACP for the full value of these proceeds.
  157. Payment of the first invoice, for US$322,000 was duly made to ACP Asia. Problems arose with the payment of the other two. The letters of credit for them expired and payment was to be made by a bill of exchange drawn on TDTC. The collection instruction to ACP Asia's bank accompanying the bill included an instruction to obtain a guarantee for the payment from TDTC's bank. Such a guarantee was not given and payment was not made. There were then said to be difficulties with the plant that had been supplied and the result was that TDTC refused to pay the full amount. Mr Dalby made representations to TDTC and in due course, in about November 1997, TDTC made two payments of US$200,000 and US$400,000 and Mr Dalby gave instructions to solicitors to take action to recover the balance. This was of course the time of the Gencor acquisition. Instructions with regard to this were still being given at the time that Mr Dalby and Mr Meehan were dismissed from the group in January 1999.
  158. On 10 November 1997 Mr Meehan sent an ACP fax to Binaan Setegap Berhad ("Setegap"), for the attention of Mr Allan Chin Kong Yaw ("Mr Chin"). Setegap was the parent company of PPP, which was the parent of Sumbangan. Mr Meehan referred to "the Egyptian problem", a reference to the TDTC contracts, and said that in view of that "we would like to defer the whole of the monies payable to Sumbangan for three months, but I must emphasise that this is not in any way conditional on the receipt of the Egyptian monies so you would receive your monies regardless three months after completion."
  159. On 12 November 1997 Stones Porter, solicitors for PPP, sent a reply to that fax to Spearing Waite, solicitors for ACP Holdings. That was to the effect that PPP agreed to a deferred payment of the whole 624,649 on the basis of an enclosed draft agreement. An agreement in that form was then executed separately on behalf of ACP Holdings (by Mr Meehan) and, as a deed, by ACP (by Mr Moore and Mr Meehan). Both were in the same form. They were each addressed to PPP and provided as follows:
  160. "We are writing to confirm our agreement regarding the application of USD 998,000 which may be received through [ACP Asia] in relation to the [TDTC] contract in Egypt whether such sums are received from Egypt or from Hongkong Bank Malaysia Berhad through documentary credit reference no. OBCPJA9727O3 COR. We hereby direct that all and any such payment received shall be paid by [ACP Asia] to yourselves in satisfaction of amounts due to you and Sumbangan pursuant to an agreement dated 13 November 1997 and in relation to the transfer of the issued share capital of [Wingspan] subject to your agreement to refund any balance over and above such amounts to us."

  161. The effect of this was that ACP's right to receive the payment due to it from ACP Asia under the TDTC contracts was assigned to PPP and Sumbangan in or towards satisfaction of (i) Mr Dalby's liability to Sumbangan under the Wingspan share acquisition agreement and (ii) Mr Meehan's liability as a guarantor of Mr Dalby's obligations.
  162. One of the documents recovered from Mr Meehan's home under the search order I made on 22 April 1999 was a PPP schedule showing the state of account between Mr Dalby and PPP as at 31 January 1999. This shows a net balance of 145,528.43 still due from Mr Dalby, but also shows that PPP has received under the assignment two payments of US$199,950 and US$400,050 (total US$600,000) both payments being described on the schedule as "from Egypt". It also shows further payments to have been made by Spearing Waite (45,000), Swallow (US$50,000 and US$20,000) and Pacific (US$30,000). The net amount of 145,528.43 still due was arrived at after converting the dollar payments into sterling at agreed exchange rates referred to on the schedule. The claim on this part of the application is for judgment against Mr Dalby and Mr Meehan for US$600,000 by way of compensation for their misapplication of that part of ACP's debt towards the discharge of their personal liabilities under their agreement with Sumbangan of 13 November 1997. ACP also asks for an account of any further payments that have been made to PPP under the assignment since 31 January 1999.
  163. Mr Dalby covered many pages of his witness statement in explaining these transactions, and in setting them in what he would say was their proper context, but I do not propose to extend an already overlong judgment by setting out his explanations. I understand him to accept that the assignment to PPP involved the disposition of an asset of ACP. I do not understand him to contend that it was disposed of in or towards discharge of an obligation owed by ACP, and I am satisfied it was not. It was simply an example of Mr Dalby and Mr Meehan applying ACP's money towards the discharge of their own liabilities. Mr Dalby's defence appears to be that his various transactions with PPP and Sumbangan were all exclusively for ACP's benefit. At the beginning of the relationship with Mr Chong ACP benefited by the receipt of much needed investment, without which Mr Dalby says it would have failed. The events of November 1987 are said to have benefited ACP by facilitating the Gencor acquisition itself.
  164. I do not accept that there is any substance in Mr Dalby's argument, or that they provide any answer to this claim. The short point emerging from a long story is that the purpose of the assignment to PPP was to enable Mr Dalby and Mr Meehan to enjoy a personal profit at the direct expense of ACP by using its money for the purpose of reducing their personal liabilities. I will order an account of all moneys paid to PPP under the assignment and payment of the sums due under such account. I will also make an order against both of them for an interim payment of US$600,000.
  165. D. Swallow International Limited ("Swallow")

  166. Swallow was incorporated in Malta on 9 July 1996 and, like Pacific, is administered by ICS on behalf of Mr Dalby and Mr Meehan. Like Pacific, ICS is again the sole shareholder and director, but the shares are held beneficially by Mr Dalby and Mr Meehan in the proportions 95 per cent and 5 per cent.
  167. When the prospect of a sale of the ACP group emerged in August 1997 Mr Dalby and Mr Meehan conceived the idea that Swallow might acquire 3i's shares in ACP Holdings and then sell them on to Gencor for a capital gain. This saga too has given rise to claims on this application, but in the light of the defendants' evidence Mr Pymont has not pursued it and I will say no more about it.
  168. E. Mr Brett Dalby ("Brett")

    (i) Salary payments

  169. Mr Meehan was responsible for the payroll records of the ACP group. They show that Mr Dalby's son Brett (the second defendant) was employed by ACP from January 1997 to December 1998. He was a schoolboy, but was purportedly paid a salary of 24,000 a year. He was paid all his 1997 salary (less tax) by three payments in November 1997, December 1997 and January 1998 (the gross amounts in fact totalled 25,928.77); and he was paid 2,000 a month (less tax) in 1998. These sums were paid by BACS payments via ACP's bank into an account at Midland Bank plc, Blaby, Leicestershire entitled "Mr G Dalby re Brett Lee Dalby". The payments were all authorised by Mr Meehan. ACP accounted to the Inland Revenue for the tax deducted at source and paid employer's National Insurance contributions at 10 per cent of Brett's salary, totalling 4,800 over 24 months. The total sum of salary, tax and contributions paid out in respect of Brett's employment was 52,728.77.
  170. This exercise, for which Mr Dalby and Mr Meehan were both responsible, was an inexcusable misapplication of ACP money. I need say little about it, because Mr Francis has not resisted this part of the claim. Reducing Mr Dalby's explanation to its essentials he proposed to Mr Meehan that he, Mr Dalby, should have a salary increase and that the increased salary should be "notionally paid to Brett". Mr Meehan agreed and it was done. It appears that the purpose of the arrangement was to enable the pretence to be made the Inland Revenue that this was a separate head of income properly earned by Brett, whereas in fact, as Mr Dalby admits, the money was regarded at all times as his, Mr Dalby's. He alone operated the Blaby account and Brett neither received any of the money nor even, so Mr Dalby claims, even knew anything about it. Brett has made a witness statement that supports this account.
  171. The purported increase in salary was anyway invalid. It only took effect after the Gencor acquisition, and cl 5(2) of Mr Dalby's service agreement provided that his salary of 130,000 a year was to "be reviewed by the Gencor Board based on performance of the Group and [Mr Dalby's] performance." That reference to Gencor was to Gencor Industries Inc, of which ACP was a sub-subsidiary. It was not open to Mr Dalby and Mr Meehan to purport to review Mr Dalby's salary themselves.
  172. The present application seeks judgment against Mr Dalby, Brett and Mr Meehan for the salary wrongfully paid, or purportedly paid, to Brett. The claimants joined Brett as a defendant because they assumed, quite reasonably, that he had enjoyed the benefit of the payments, although it was plain that he had done nothing for ACP to earn them. In the light of the belated explanation now vouchsafed by Mr Dalby, they no longer seek judgment against Brett, who emerges as an innocent pawn in the operation. I will enter final judgment against Mr Dalby and Mr Meehan for the ACP money they wrongly misapplied in carrying out this exercise. That is not just the purported salary but also the associated tax and National Insurance payments. There will be final judgment against each of them for 52,728.77
  173. (ii) The Rover

  174. Mr Dalby also proposed, and Mr Meehan agreed, that ACP should also give Brett the free use of a car, an M registration Rover 216 Coupe. ACP purchased it under a hire-purchase agreement signed by Mr Meehan. It was with Wilson Finance Plc ("Wilson"), was dated 29 August 1997 and committed ACP to payments totalling 12,146.90, of which the last instalment included a 25 payment entitling ACP to acquire title to the car. Brett used the car from September 1997 onwards. ACP recovered it at the end of June 1999. During this period ACP paid a total of 7,816.10 to Wilson comprising the initial deposit of 1,000 and hire purchase instalments.
  175. Brett was involved in an accident with the car in December or January 1999, causing it substantial damage. He took it to repairers who repaired it at a cost of 3,029.14. Brett failed to pay the bill, and ACP had to pay in order to recover the car. The car was covered by ACP's insurance, but prompt notice of a claim was not given at the time of the accident and ACP was advised by its insurance brokers in June 1999 that a claim would not succeed, so none was made. The problem was not just that the accident had happened so long before, it was also that the repairers were not ones the insurers would have recommended and they did not have the chance to inspect the car before work started.
  176. Brett admits he used the car and had the accident but says he was unaware that it belonged to ACP. He thought it was simply a generous present from his father. Mr Dalby confirms this, and says he first told Brett it was a company car in early 1999.
  177. Again, this exercise represented an inexcusable misapplication of ACP money, for which both Mr Dalby and Mr Meehan were equally responsible Mr Meehan knew the car was to be provided to Brett and he agreed it would be all right if it was. Brett, however, was not providing any services to ACP, nor is there any suggestion that the purchase of the car was of any benefit to ACP: it was simply a gift to Brett at ACP's expense.
  178. Following the recovery of the car from the repairers ACP came to an arrangement under which it paid 3,600.18 to Wilson in settlement of the outstanding hire purchase payments less 115.42 and sold the car for 400 more than that settlement figure. It now claims from Mr Dalby and Mr Meehan the 7,816.10 it paid in hire charges to Wilson during the time when Brett was using the car, plus the 3,029.14 it had to pay to the car repairers to recover the car, a total sum of 10,854.24.
  179. Mr Francis does not dispute that Mr Dalby and Mr Meehan are answerable to ACP for something in respect of this episode, but he said I cannot decide what the right amount is on this application. In particular, he said it would be essential to bring into the accounting exercise the value of the car, about which there is insufficient evidence. He also questioned whether I can or should find on this application that ACP could not in fact have recovered the repair costs from its insurers.
  180. As regards the last point, I consider that Mr Francis is right. This is not the trial and I doubt whether I can or should attempt to rule finally on that question on this application. However, it appears to me clear that this episode at least involved the payment by ACP of hire charges amounting to 7,816.10 for the use by Brett of a car which was of no benefit to ACP. I am satisfied that Mr Dalby and Mr Meehan are answerable to ACP for the reimbursement of these payments, even if they may have a defence to the claim in respect of the repair costs. I will order an inquiry as to damages or compensation under this head of the claim and also order an interim payment of 7,816.10 by each of Mr Dalby and Mr Meehan.
  181. F. The overcharging claim

  182. This involves Mr Dalby, Mr Meehan, Roadmec International and Intermek. ACP's business included the supply of filter cages, which are sieves used to sort rock into grades. Until about October 1995 ACP obtained its cages from Hilson Wire Products Limited ("Hilson"). From about then until about June 1998 it instead obtained them from Roadmec International. From June 1998 until about March 1999 (when Mr Hogg learnt what had been going on and stopped it) it obtained them from Intermek.
  183. The complaint is that it is said that both Roadmec International and, later, Intermek obtained their supplies of cages from Hilson at the latter's ordinary prices, but then supplied them to ACP at grossly inflated prices. It is said there is no reason why ACP could not have continued to obtain them from Hilson at the prices at which Hilson supplied Roadmec International and Intermek.
  184. ACP's complaint is well illustrated by the evidence. On 3 April 1997 ACP placed a purchase order with Roadmec International for 960 cages at 11 each, a total of 10,560 exclusive of VAT. On 7 April 1997 Roadmec International placed a purchase order with Hilson for 960 cages at a cost of 5 each, a total of 4,800 exclusive of VAT. The order provided for delivery to ACP and was in the form of a standard order that had been generated on ACP's computer system. Hilson acknowledged Roadmec International's order by a fax to Roadmec International dated 10 April 1997 addressed for the attention of Mr Meehan who was Roadmec International's secretary. Hilson's invoice for the goods dated 28 June 1997 was addressed to Roadmec International. The cages were delivered to ACP on 21 August 1997 under a delivery note dated 28 June 1997 from Hilson to Roadmec International. Roadmec International then invoiced ACP for the cages at the inflated price to which I have referred, the invoices being also generated on ACP's own computer system. ACP administered the payment of Roadmec International's invoices to Hilson. This is illustrated by an ACP fax dated 27 February 1998 from Martine Knight, Mr Meehan's personal assistant, to Hilson, the subject being various Roadmec International orders and Hilson invoices.
  185. The above transaction is merely an example. ACP has analysed the transactions between ACP, Roadmec International and Hilson. It reveals that ACP paid Roadmec International 347,433.28 for cages that the latter purchased from Hilson for 183,552.74, a difference of 163,880.54. It is clear that Mr Meehan was at the centre of the cage ordering operation, both at ACP and at Roadmec International. On 6 January 1997 Mr Hilditch, Hilson's managing director, sent him Hilson's 1997 price list for cages, with copies also to Mr Dalby and Mr Firth. The prices for standard cages were 5 and 5.60. Prices at 17.95 and 4.50 are also added in manuscript for two other items, but it is not suggested they were the subject of any relevant orders. The quotation is headed "Roadmec International Ltd (ACP Group)" and the prices quoted are "per cage, delivered Leicester, and ex-VAT...". Mr Meehan appears to have been assisted in the matter from January 1997 onwards by his assistant Martine Knight, who wrote to Mr Mistry at Hilson on 23 January 1997 to introduce herself. She said:
  186. "I would like to introduce myself as the person who will be dealing with the liaison between yourselves and Roadmec International/ACP with regard to Purchase Orders for cages. You will still continue to speak on a daily basis to our ACP Purchase Department, but all paperwork pertaining to these orders will be processed through myself."

  187. On 5 June 1997 Mr Hilditch wrote to Mr Meehan at ACP to notify him of a move by Hilson into a new building. On 21 January 1998 he sent him, again at ACP, Hilson's 1998 price list, again prepared for "Roadmec International Ltd (ACP Group)". This showed that the prices for the two standard cages had gone up to 5.25 and 5.85 respectively.
  188. In about June 1998 Intermek took over Roadmec International's role in the supply of cages to ACP. A sample order in evidence is one dated 22 June 1998, by which ACP ordered 1276 cages from Intermek at 11 each (VAT exclusive), a total cost of 14,036, although on 2 September 1998 Mr Tibbles of Intermek wrote to Mr Oakes of ACP informing him that it would be necessary to increase the price of the standard cage to 1,250 "due in main to increased manufacturing and material costs". On 19 March 1999 following the removal of Mr Dalby and Mr Meehan from the scene ACP was able to place an order with Hilson for the supply of 960 cages at just 9.45 each (exclusive of VAT), a total of 9,072. A profit and loss account for Intermek for the nine-month period to 31 January 1999 shows its turnover for cages to have been 56,826, at a cost of 24,325, a difference of 32,501.
  189. The claim against each of Mr Dalby and Mr Meehan is for 163,880.54 (in respect of the Roadmec International transactions) and 32,501 (in respect of the Intermek transactions). The claim for the first amount is also made against Roadmec International. There is now no like claim against Intermek, which was dissolved in March 2000. The pleaded allegation against Messrs Dalby and Meehan is that they were parties to a dishonest inflation of the price at which ACP purchased cages from Roadmec International and Intermek.
  190. This claim is roundly disputed by Mr Dalby, who denies he or Mr Meehan had any interest in Roadmec International or Intermek. He says he believes Roadmec International was set up by Mr Tibbles and was controlled by him until he went to Australia in 1996 when, Mr Dalby said, Mr Tibbles told him he was going to resign as a director. He said Mr Tibbles returned from Australia in about May 1998 when he set up Intermek and thereafter controlled it.
  191. Mr Dalby has given an extensive explanation as to why he says there is a good defence to this claim. He said that until about 1993 ACP purchased its cages from one or other of three companies, of which Hilson was one, who operated a cartel and charged 11 or 12 a cage. ACP was apparently a bad payer, which resulted in a stop in its supplies from time to time and it had to move between suppliers to obtain its requirements. Mr Dalby said he asked Mr Tibbles, ACP's production director, to find an alternative source of supply, and this led to Mr Tibbles discovering that another small supplier of cages was on the point of failure and was willing to sell its filter cage machine.
  192. This led to a discussion as to whether ACP should buy it and make its own cages, which Mr Dalby did not favour, partly because Mr Dalby said ACP could not afford to buy the machine. Mr Tibbles then proposed that he should buy it and supply ACP. Mr Dalby agreed, and offered Mr Tibbles the use of a barn at his home from which he, through Roadmec International, then started producing cages for ACP. Mr Dalby said he believed ACP paid Roadmec International slightly less for the cages than it had paid the cartel. There is a dispute on the evidence as to the cost of such a machine. There is no dispute that a machine was installed in Mr Dalby's barn and the view of Mr David Lane, who claims to have installed it (although Mr Dalby disputes that he did), is that it would have cost between 8,000 and 10,000. Against this, Mr Meehan's recollection is that the machine cost between 20,000 and 25,000 and Mr Dalby said it cost about 25,000.
  193. Mr Dalby said that, following this, he had a meeting with Mr Hilditch of Hilson, showed him the machine and explained ACP's arrangement with Roadmec International. He told him he had worked out that the prime cost of producing each cage was 5 and, untruthfully, that ACP was considering going into competition with Hilson and the other cage producers. Mr Dalby said that this led to a visit by Mr Hilditch to Roadmec International as a result of which the latter's machine was moved to Hilson's premises in return for which Hilson agreed to produce machines for Roadmec International at cost price and undertook to keep 1,000 cages on hand at all times so as to satisfy Roadmec International's needs.
  194. Mr Dalby said he regarded this as an extremely satisfying outcome. Quite why I do not understand since the main beneficiary of his piece of bluffing appears to have been Roadmec International, in which he disclaims that he or ACP had any interest. For reasons that are unexplained Hilson was apparently prepared to supply Roadmec International with its cages at cost. Roadmec International, which was now doing precisely nothing with regard to the manufacture or supply of cages, was then able to sell them at a substantial mark up to ACP. Its outlay in the whole venture seems to have been at most some 25,000, which was the key to its later ability to enjoy the enormous profits I have referred to. As far as I can see, the main benefit which Mr Dalby claims that ACP derived from the exercise was that Roadmec International allowed it credit which alleviated what would otherwise have been a serious cashflow problem. The real benefit, however, accrued to Roadmec International and, later, Intermek, which purchased from Roadmec International the machine which was apparently still at Hilson's premises.
  195. I find Mr Dalby's explanation about all this close to incredible. Even after reading it, the picture I am left with is that this appears to have all the hallmarks of having been a cosy little arrangement under which Roadmec International and Intermek profited at ACP's expense, a profit of which Mr Dalby and Mr Meehan (ACP directors) and Mr Tibbles (an ACP employee) were the architects.
  196. I remind myself, however, that the pleaded allegation is that this was an exercise in dishonesty by Mr Dalby and Mr Meehan. I am reluctant to make any such finding against them in relation to this issue on this application. There is too much about it I do not understand. In particular, I feel unable to make any finding that either Mr Dalby or Mr Meehan had a beneficial interest in Roadmec International or Intermek, or were deriving some secret profit from the operation. In short, even though I have considerable suspicions about Mr Dalby's account, I do not regard as fanciful the possibility that he may be able to establish it at a trial. If he can, he and Mr Meehan may have a defence to the claim. I refuse to give summary judgment on this part of the application.
  197. G. Mr Dalby's expenses

  198. A recurrent theme of Mr Dalby's evidence is that the ACP group was always on the edge of insolvency and was only saved from it by his selfless devotion to the obtaining of financial assistance from others (including himself, through Burnstead and Pacific) and Mr Chong's companies. ACP's cash resources were not so limited, however, as to prevent Mr Dalby from procuring it to indulge Brett in the relatively minor way I have referred to or, more particularly, to incur substantial expenditure for his own benefit. Mr Hogg's investigations have not satisfied him that this expenditure was justified. They include expenses totalling 14,922.25 for purchases in relation to Peatling Lodge, Mr Dalby's house; labour costs for work done there totalling 11,973.58; transactions on ACP credit cards totalling 62,386.35; cash payments totalling 2,467.95 where the purpose of the payments has been disclosed; and cash payments totalling 25,900.97 where it has not.
  199. Mr Dalby admits ACP has rendered services to and made purchases for him. He says it was all done lawfully and openly and that if any transaction has not been properly recorded or accounted for he was unaware of it. He has not sought to explain each of the many payments referred to in the evidence and asserts that it would be a burdensome and inappropriate for him to have to undertake that exercise on this application.
  200. I do not have to rule on this part of the claim. Mr Francis admits that Mr Dalby has to account properly for all the payments in question and Mr Dalby is prepared to submit to an order that such an account should be directed and taken. I will make such an order.


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