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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Queensgate Place Ltd v Solid Star Ltd & Ors (No. 3) (Consequential Matters) [2024] EWHC 2139 (Ch) (21 August 2024) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2024/2139.html Cite as: [2024] EWHC 2139 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMPANIES COURT (Ch D)
IN THE MATTER OF SOLID STAR LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
7 Rolls Buildings Fetter Lane London EC4A 1 NL |
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B e f o r e :
(Sitting as a Deputy Judge of the High Court)
____________________
QUEENSGATE PLACE LIMITED |
Petitioner |
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- and - |
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(1) SOLID STAR LIMITED (IN LIQUIDATION) (2) VIKING WORLD INVESTMENTS SA (3) PRAKASH BHUNDIA (4) MINESH BHUNDIA (5) PROPERTY X1 LIMITED |
Respondents |
____________________
____________________
Crown Copyright ©
Mr David Rees KC :
Introduction
(1) A judgment dated 20 January 2023 of HHJ Jarman KC ([2023] EWHC 93 (Ch)) dismissing an application for summary judgment on the petition ("the Summary Judgment Decision").
(2) A judgment on mine dated 20 September 2023 ([2023] EWHC 2277 (Ch)) determining the liability of the Second, Third and Fourth Respondents for unfair prejudice that I found to have been suffered by the petitioner ("the Liability Judgment").
(3) A further judgment of mine dated 17 July 2024 ([2024] EWHC 1816 (Ch)) determining the remedy to be awarded to the petitioner following my findings in the Liability Judgment ("the Remedies Judgment").
(1) From the petitioner, written submissions dated 31 July 2024 prepared by Mr Fenner Moeran KC.
(2) From the Second and Third Respondents (Viking World Investments SA ("Viking") and Mr Prakash Bhundia ("Prakash") respectively), written submissions dated 9 August 2024 from Prakash (who is also the sole director of Viking) acting as a litigant in person.
(3) From the Fourth Respondent, Mr Minesh Bhundia ("Minesh") written submissions dated 9 August 2024 from Ms Sarah Bayliss and Mr James Kane of counsel.
As on previous occasions I am grateful to all of the advocates, including Prakash, for their submissions.
Corporation Tax – the "Paragraph 67" Issue
"A final point that I need to consider is the impact of Corporation Tax on the counter-factual scenarios that I have analysed above. This was not the subject of any argument by the parties, and I have not therefore included it in my analysis. However, it does appear to me likely that in the scenarios postulated above a charge to Corporation Tax would have arisen as a result of the sale of the properties on the open market and that accordingly an allowance should be made for this additional tax liability in calculating QPL's loss (and thus the purchase price for the shares). I will give the parties an opportunity to make submissions on the extent (if any) to which the figures I have set out above should be amended to reflect this additional liability."
Scenario | Net Sale Price | Chargeable Gain (20% of net Sale Price) | Tax (19% of Chargeable Gain) |
Remedy against R2 and R3 | £14,006,700 | £2,801,340 | £532,254 |
Remedy against R4 | £6,323,700 | £1,264,740 | £240,300 |
Scenario | Net Sale Price/FONT> | Chargeable Gain (44% of net Sale Price) | Tax (19% of Chargeable Gain) |
Remedy against R2 and R3 | £14,006,700 | £6,162,948 | £1,170,960 |
Remedy against R4 | £6,323,700 | £2,782,428 | £528,661 |
Scenario | Net Sale Price | Chargeable Gain (30% of net Sale Price) | Tax (19% of Chargeable Gain) |
Remedy against R2 and R3 | £14,006,700 | £4,202,010 | £798,381 |
Remedy against R4 | £6,323,700 | £1,897,110 | £360,450 |
Scenario | Amount payable to QPL as per Remedies Judgment | Less 50% of notional corporation tax | Revised Amount payable to QPL |
Remedy against R2 and R3 | £7,081,468 | (£399,190) | £6,682,278 |
Remedy against R4 | £3,239,968 | (£180,225) | £3,059,743 |
(1) Prakash, Viking and Minesh are to be jointly and severally liable for 45.8% of the total sum due.
(2) Viking and Prakash are jointly and severally liable for the remaining balance of 54.2%.
(3) Any sums recovered by QPL in the liquidation of SSL shall be set against liability (1) in priority to liability (2); and
(4) Any sums recovered by QPL from Prakash and Viking shall reduce liability (1) in priority to liability (2).
Costs – QPL Costs Budget
"It is most appropriate however to leave the detail of this issue to the costs judge but, doubtless, he or she can take into account what I have said".
Costs - Liability
(1) As against Minesh he seeks the petitioner's costs of and occasioned by the petition, subject to a detailed assessment on the standard basis, save for the costs of the summary judgment application against Viking and Prakash.
(2) As against Viking and Prakash he seeks all of the petitioner's costs to be subject to a detailed assessment on the indemnity basis, at least until the conclusion of the liability trial. In justification of an award on the indemnity basis Mr Moeran argues that until mid-2022 Prakash concealed the fact that the six properties had been disposed of to PX1, rendering the relief initially sought by the petitioner impossible. He also points to the failure of Prakash to make reference to the Lazuli litigation which ultimately affected the nature and value of the remedy sought.
(1) The petitioner has exaggerated its claim. The Estimate of Value filed by the petitioner on 4 October 2021 in support of the petition put a non-binding estimate value on the petitioner's shares in SSL of £18,000,000. In the liquidation of SSL and in Prakash's bankruptcy the value of QPL's claims is put at £20,000,000.
(2) He observes that the costs actually incurred by the petitioner will be less that those allowed for in its approved budget. In my judgment, this point is not relevant to issues of liability for costs, but it is a matter to be taken into account on a detailed assessment, and it is also a point that I have borne in mind below when ordering a payment on account of costs.
(3) Prakash also refers to the various offers that were made to QPL between April 2017 and August 2019 for a distribution of the assets of SSL between its two members. QPL was controlled for part of this period by Mr Temi Ugboma (to whom I refer in the Liability Judgment at [21] and [22]), and Prakash suggests that QPL would have been better off accepting these offers rather than pursuing the action.
(4) Prakash also relies upon Mr Temi Ugboma's behaviour generally as justifying a departure from the usual costs rules.
(5) Prakash also argues that the petitioner identified 13 matters in his particulars of unfair prejudice at paragraph 54 of the Points of Claim. These were then reduced to six (Prakash states five) grounds at trial on which the petitioner was successful, or partially successful, on four of them.
(6) Prakash also seeks to criticise the petitioner for (a) not following the arbitration protocol within the shareholder agreement and (b) failing to provide disclosure of discussions with Mr Ugboma.
(1) Minesh successfully defended two of the six heads of loss claimed by QPL and was partially successful in relation to a third head (it being accepted that he did not bear any liability for the first two property transfers to PX1).
(2) In total the outcome of the Remedies Judgment is that Minesh has been found to be responsible for 45.7% (now slightly increased to 45.8%) of the sums due to QPL.
(3) It may be appropriate to depart from the general rule in a case in which a party makes an allegation of dishonesty against another party which fails at trial (Thakkar v Mican [2024] EWCA Civ 552).
(4) Here the petitioner unsuccessfully alleged dishonesty against Minesh.
(5) Given the intertwined nature of the issues and the guidance in CPR 44.3(7) an issues-based costs order is neither desirable nor practical. A better solution would be to apply the same percentage reduction already found to apply in relation to Minesh's liability for the sum he has been ordered to pay towards the buy-out order to the costs order as well.
(1) Although the "non-binding" value ascribed by the petitioner to its shares in SSL was put at £18,000,000, that was in circumstances in which the petitioner was in ignorance of the true financial position of SSL. That ignorance arose from the manner in which Prakash had managed the company, and the lack of financial information that was available to QPL. The value that QPL has sought to place upon its claims in SSL's liquidation or in Prakash's bankruptcy is not a matter that I consider that I need to take into account when determining costs in these proceedings.
(2) I do not consider that the offers made between April 2017 and August 2018 take matters further. Prakash may be correct that if the parties had wound up SSL at that stage, the petitioner would have received more than they will now receive under my award. However, that is because most of the acts which I have found caused unfair prejudice to the petitioner had not yet taken place. Four of the properties which were ultimately transferred to PX1 remained in SSL's hands. No liability had been crystallised against SSL in the Lazuli Claim. In the circumstances I do not consider that these are offers which can or should be taken into account in determining liability for costs; these were proposals in the course of the events that have given rise to this claim; indeed they were made before the greater part of the wrongful acts which have given rise to these proceedings had even taken place. The same analysis applies to the conduct of Mr Temi Ugboma. He was ceased to be a director of QPL no later than December 2019. The proceedings were not issued until February 2021.
(3) Whilst QPL did not succeed on every ground of unfair prejudice that it advanced, it succeeded on a number of valuable grounds, and as a result it has achieved a remedy against the Second and Third Respondents in a sum of over £6.6M, and in a sum of over £3M against the Fourth Respondent. By far the largest amount of time at the Liability Hearing was spent on those issues upon which the petitioner was successful. The issues upon which it failed took up a relatively small part of the hearings and did not cause a significant increase in the length or costs of the proceedings.
(4) In the circumstances I take the view that the petitioner has largely succeed on its petition and should be entitled to its costs under the general rule. No relevant offers (that is to say offers made after the petitioner's cause of action had accrued and after the claim had been brought or was in in active contemplation) have been brought to my attention and I see no reason to depart from the general rule as to costs.
(5) Although the quantum of the award against Minesh is less than the quantum of the award against Viking and Prakash, I do not propose to differentiate between the respondents as to their respective liability (save that Minesh is not responsible for QPL's costs of the summary judgment application against Viking and Prakash). The difference in the quantum of the two awards, reflects my finding (and QPL's concession) that Minesh was not liable for the sale of the first two properties to PX1. However, as Mr Moeran has observed the costs of dealing with issues in relation to those two properties was entirely subsumed with the issues in dealing with the properties transferred to PX1 generally. At the Remedies Hearing Minesh unsuccessfully argued that any remedy ordered against him should be limited to a modest percentage of the award against Prakash and Viking. Moreover, as a consequence of Minesh being professional represented at trial, the reality has been that the greater part of submissions at both the Liability Hearing and the Remedies Hearing dealt with issues as between QPL and Minesh.
(6) As to the point taken by Ms Bayliss and Mr Kane regarding QPL's unsuccessful case that Minesh was dishonest, I have nevertheless found Minesh was indeed responsible for the breaches of fiduciary duty which were alleged against him. That I did not find those breaches to be dishonest, can be regarded as a modest victory for Minesh. However, I do not consider that authorities such as Thakkar v Mican (nor Clutterbuck v HSBC [2015] EWHC 3233 (Ch) – referred to in Thakkar at [22]) where the substantive claim itself failed, provide guidance as to how the costs discretion should be exercised where (a) the petitioner has made out its case for breach of fiduciary duty, but (b) failed to show that the breach of duty was also dishonest.
(1) Prakash, Viking and Minesh are to be jointly and severally liable for QPL's costs of the petition (save for the costs of the summary judgment application against Prakash and Viking) such costs to be assessed on the standard basis.
(2) Viking and Prakash are jointly and severally liable for QPL's costs of the petition up to the date of the Liability Judgment, such costs to be subject to detailed assessment on the indemnity basis.
(3) Any sums recovered by QPL in the liquidation of SSL shall be set against liability (1) in priority to liability (2).
(4) Any sums recovered by QPL from Prakash and Viking shall reduce liability (1) in priority to liability (2).
(5) As between each other, if Minesh seeks a contribution from Prakash and Viking, their respective culpability should be assessed as 40% Minesh and 60% Prakash and Viking. This reflects the fact that although the primary responsibility for the underlying liabilities to QPL lie with Prakash / Viking (see paragraph [66] of Remedies Judgment), a significant portion of the costs of the two trials reflected the arguments being made by Minesh for his own benefit.
Payment on Account
(1) The petitioner's approved budget in this case is £827,079.42.
(2) Although this is a case which has been costs-budgeted, there are elements of the petitioners' approved budget which seem likely to be significantly greater than the costs that will ultimately have been incurred for those phases.
a) £61,200 was permitted for the ADR/Settlement phase, although no ADR / mediation ever took place.
b) £166,750 was permitted for expert reports. In the end only two property valuations were filed by the petitioner.
c) £173,018 was permitted for disclosure. It is recognised by all parties that the disclosure given by the respondents (and in particular by Viking and Prakash) was significantly less than would have been envisaged at the CCMC.
(3) These three phases amount to just over £400,000 – nearly one half of the petitioner's approved budget. Nonetheless, although the petitioner is unlikely to have incurred costs to the level of its budgeted costs under these heads, it will still have incurred a level of costs in respect, at least, of the disclosure and expert report phases.
(4) Further the petitioner has incurred additional unbudgeted costs in relation to the Remedies Hearing and, as I have set out above, I have concluded that there are good reasons for the court to depart from the approved budget in this regard.
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