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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Gencor ACP Ltd & Ors v Dalby & Ors  EWHC 1560 (Ch) (27 July 2000)
Cite as:  EWHC 1560 (Ch),  2 BCLC 734
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B e f o r e :
|GENCOR ACP LIMITED AND OTHERS|
|- and -|
|GLENN BRYAN DALBY AND OTHERS||Defendants|
Mr Adrian Francis (instructed by Jay Benning & Peltz) appeared for the first, second, third, fourth, ninth, eleventh and twelfth defendants
Crown Copyright ©
MR JUSTICE RIMER:
The ACP group
"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."
"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 ..."
A. The Burnstead allegations
(i) Balfour Beatty (UK) Limited ("Balfour Beatty")
(ii) The ACP payment
(iii) The payments from Kirinyaga Construction (Kenya) Limited ("Kirinyaga")
(iv) Tate Export Inc ("Tate")
(v) CJP Tarmac Limited ("CJP")
(vi) Trio Development Limited ("Trio")
(vii) International Construction Consortium ("ICC")
(viii) Nyoro Construction Company Limited ("Nyoro")
(ix) Alfred Schembri & Sons Limited ("Schembri")
(x) White Mountain (Surfacing) Limited ("White Mountain")
(xi) Another ACP payment
(xii) The Midland Bank and sundry payments
(xiv) The claim against Mr Meehan
"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  1 WLR 509 scale of knowledge is best forgotten."
"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."
B. Pacific Holdings Limited ("Pacific")
"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]."
"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."
C. Wingspan Enterprises Limited ("Wingspan")
"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."
D. Swallow International Limited ("Swallow")
E. Mr Brett Dalby ("Brett")
(i) Salary payments
(ii) The Rover
F. The overcharging claim
"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."
G. Mr Dalby's expenses