Ceredigion Recycling and Furniture Team v Derek Clifford Pope & Ors.
July 26, 2022
CHANCERY DIVISION
United Kingdom
CORAM
- HIS HONOUR JUDGE JARMAN QC
Areas of Law
- Corporate Law
- Equity and Trusts
- Property and Real Estate Law
- Civil Procedure
- Tort Law
July 26, 2022
CHANCERY DIVISION
United Kingdom
CORAM
AI Generated Summary
Following a 2021 High Court judgment finding breaches of fiduciary duty by former directors Mr Pope and Ms Cann, the court convened a disposal hearing to determine relief after an appeal by those directors was dismissed by the Court of Appeal in 2022. The case arises from a scheme whereby the company’s main asset—Station Buildings in Aberystwyth—was transferred into the directors’ personal SIPPs and leased back to the company, imposing substantial rent on a not-for-profit furniture recycling business. The court held that the scheme was ultra vires, breached fiduciary duties and amounted to conversion. Applying flexible equitable remedies, the judge ordered restoration of the property, merger of the lease into the freehold, and judgment for rental payments with interest and costs, rejecting counterfactual arguments and accepting the settlement allocation with professional advisers.
In a judgment which I handed down on 30 June 2021 ([2021] EWHC 1783 (Ch)), I found that the claimant company was entitled to relief against its former directors, the first and second defendants, Mr Pope and Ms Cann, for breach of their fiduciary duties. The question of what relief is appropriate was adjourned to a disposal hearing, which took place before me on 6 July 2022. The delay was because of an appeal by Mr Pope and Ms Cann, which was eventually dismissed by the Court of Appeal ([2022] EWCA Civ 22). This is my judgment on relief.
It was not in dispute that between March 2012 and August 2014, Mr Pope and Ms Cann used the company’s freehold property, from which it run its furniture recycling business, namely Station Buildings, Alexander Road, Aberystwyth (the property), for the benefit of private investment accounts in their names in the form of SIPPs (see [34]–[40] and [47] of the 2021 judgment). They also caused the company to enter into a leaseback of the property and to pay rent into their SIPPs in increasing amounts as the property was transferred in tranches ([36]). This scheme was chosen because the company had insufficient funds or profit base to do it in any other way.
“In my judgment, the establishment of SIPPs for Mr Pope and Ms Cann using the whole of the beneficial equity in the property, does not constitute the establishment maintenance or joining of a pension scheme by the company within the meaning of clause 4.2 of the memorandum, and the contrary was not seriously argued. Moreover, it is clear that the scheme went well beyond the payment of proper wages within clause 5, or reasonable and proper wages within clause 53 of the articles. Even if the payment of sums by way of wages or pension contributions to make up for "previous underpayments" comes within those powers, and that in my judgment is questionable given that that is what the directors had agreed at the time to pay and be paid, then it is clear that no attempt was made to work out the amount of such underpayments. What was paid was determined by reference to what could be paid, not by what should be paid. In my judgment it follows that it cannot be said that the payments were proper, reasonable or in good faith. It follows that the payments were ultra vires…”
Accordingly, I found that their decisions to transfer the main asset of the company into personal investment accounts and expose the company to the payment of rent amounted to: a failure to promote the succ