Factual and Procedural Background
The Claimant, Barrowfen Properties Limited ("Barrowfen"), a company incorporated in England and Wales in 1984, is part of a family business group owned by four brothers. The principal asset of Barrowfen is a commercial property in London ("the Tooting Property"). The dispute involves a complex family business disagreement, particularly concerning share ownership and control of Barrowfen, and the conduct of its directors and solicitors between 2013 and 2016.
Girish Patel ("Girish") was a long-standing director and company secretary of Barrowfen until his resignation in February 2016. The Second Defendant, Stevens & Bolton LLP ("S&B"), acted as solicitors for Barrowfen and Girish in relation to various corporate matters. The Third Defendant, Barrowfen Properties II Limited ("Barrowfen II"), was incorporated in 2015 and became involved in the administration of Barrowfen.
The dispute centers on whether Girish breached his statutory duties as director by removing a shareholder, Bedford Development Ltd ("Bedford"), from the company’s register of members, forging resignation documents of another director, Suresh Patel ("Suresh"), and wrongfully maintaining control of Barrowfen. Barrowfen also alleges that S&B breached fiduciary and professional duties by preferring Girish’s interests over those of the company.
The litigation includes claims related to corporate governance breaches ("the Company Claims") between 2013 and 2015, and a further claim ("the Administration Claim") concerning the administration of Barrowfen in 2015-2016. The claims involve allegations of forgery, breach of directors’ duties, negligence, deceit, dishonest assistance, and conspiracy.
Extensive factual and expert evidence was heard over remote hearings in 2021. The court also considered related family disputes and multiple proceedings in various jurisdictions. The judgment addresses liability and quantum, reserving certain issues for further determination.
Legal Issues Presented
- Whether Girish breached his statutory duties as a director of Barrowfen by removing Bedford from the register of members and forging resignation documents to maintain control of the company.
- Whether S&B breached fiduciary and professional duties by acting in conflict of interest and failing to advise Barrowfen properly in relation to the shareholder disputes and administration.
- Whether Girish’s plan to put Barrowfen into administration was a breach of fiduciary duties and whether S&B negligently assisted or advised him in this plan.
- Whether claims of deceit, dishonest assistance, and unlawful means conspiracy against Girish, S&B, and Barrowfen II are established.
- The appropriate assessment of damages or equitable compensation for losses caused by breaches of duty, including the application of loss of a chance principles and credit for collateral benefits.
- Whether the defence of illegality or compromise applies to Barrowfen’s claims.
Arguments of the Parties
Claimant's Arguments
- Girish deliberately breached his duties by tampering with the register, forging documents, and concealing his plan to put Barrowfen into administration to preserve personal control.
- S&B breached fiduciary duties and were negligent by failing to recognise and address conflicts of interest, preferring Girish’s interests over the company’s, and failing to advise proper independent legal action.
- Barrowfen suffered loss by delayed development of the Tooting Property and costs of administration, which should be compensated on loss of a chance basis.
- The defence of illegality is not applicable as the alleged criminal conduct is not central to the claims and no criminal prosecution was brought.
- The settlement agreement between family members expressly excludes Barrowfen’s claims and does not bar this litigation.
Defendants' Arguments
- Girish did not breach fiduciary duties and acted in the best interests of Barrowfen or its creditors, including by putting the company into administration to preserve value.
- S&B acted reasonably, took independent counsel’s advice, and did not consciously prefer Girish’s interests over Barrowfen’s.
- The claims for deceit, dishonest assistance, and conspiracy are not made out due to lack of dishonesty or intention to injure.
- Prashant and Suresh were not motivated by the company’s interests and would not have funded or developed the property absent the administration.
- The loan from Aumkar to Barrowfen was tainted by illegality due to alleged fraudulent acquisition of shares in Aumkar.
- Girish’s claims are compromised by the 2019 settlement agreement.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 |
Directors must exercise powers for proper purposes and not to favour one group of shareholders in takeover battles. |
Applied to assess Girish’s improper use of powers to prevent shareholder rights. |
| Eclairs Group Ltd v JKX Oil & Gas Plc [2016] 1 BCLC 1 |
Directors’ fiduciary powers must be exercised for proper purposes; the proper purpose rule is crucial in battles for control. |
Reinforced the principle that directors cannot use powers to disenfranchise shareholders improperly. |
| Regentcrest plc v Cohen [2000] 2 BCLC 80 |
Section 172 duty to promote company success is subjective, focusing on director’s honest belief. |
Applied to assess Girish’s state of mind regarding the company’s interests. |
| Item Software (UK) Ltd v Fassihi [2005] 2 BCLC 91 |
Directors must disclose their own misconduct as part of duty of good faith. |
Supported finding that Girish had duty to disclose tampering with register. |
| Sequana SA v BAT Industries plc [2019] EWCA Civ 112 |
Duty to consider creditors’ interests arises when directors know or ought to know company is insolvent. |
Considered in relation to Girish’s duties when Barrowfen was cashflow insolvent. |
| Bristol & West BS v Mothew [1998] Ch 1 |
Solicitors’ fiduciary duties include undivided loyalty and avoidance of conflicts of interest. |
Applied in assessing S&B’s duties and conflicts acting for multiple clients. |
| Boardman v Phipps [1967] 2 AC 46 |
Client conflicts require solicitors to avoid situations where duties to different clients conflict. |
Supported analysis of S&B’s conflicts and duties. |
| Newcastle International Airport Ltd v Eversheds LLP [2014] 1 WLR 3073 |
Solicitors owe duty to ensure all clients are properly advised, especially where conflicts exist. |
Guided court’s view on S&B’s duty to advise Barrowfen and to manage conflicts. |
| Henry Ansbacher & Co Ltd v Bins [1998] PNLR 221 |
Solicitors can be liable in deceit to third parties not their clients. |
Considered in relation to Barrowfen’s deceit claim against S&B. |
| Group Seven Ltd v Notable Services LLP [2020] Ch 129 |
Elements of dishonest assistance in breach of fiduciary duty. |
Applied in assessing claims of dishonest assistance against S&B and Barrowfen II. |
| Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 |
Objective test for dishonesty in accessory liability. |
Applied in considering dishonesty element of claims against S&B. |
| Ivey v Genting Casinos (UK) Ltd [2018] AC 391 |
Refined test for dishonesty combining subjective knowledge with objective standards. |
Applied in assessing dishonesty of parties. |
| Kuwait Oil Tanker Company SAK v Al Bader (No 3) [2000] 2 All ER (Comm) 271 |
Elements of unlawful means conspiracy. |
Considered in relation to conspiracy claim against Girish, S&B and Barrowfen II. |
| Patel v Mirza [2017] AC 467 |
Modern approach to illegality defence balancing public interest considerations. |
Applied in rejecting illegality defence based on family dispute and loan source. |
| Fulton Shipping Inc of Panama v Globalia Business Travel SAU [2017] 1 WLR 2581 |
Principles on collateral benefits and causation in damages claims. |
Considered in assessing credit for increased developer’s profit. |
| Primavera Ltd v Allied Dunbar Assurance Plc [2003] PNLR 12 |
Assessment of damages including credit for subsequent increase in asset value. |
Applied in assessing developer’s profit and damages. |
| Tiuta International Ltd v De Villiers Surveyors Ltd [2017] 1 WLR |
General principle that benefits caused by breach must be accounted for unless collateral. |
Considered in relation to damages and credit for benefits. |
Court's Reasoning and Analysis
The court undertook a detailed factual and legal analysis of the conduct of Girish, S&B, and Barrowfen II in the context of the family dispute and corporate governance of Barrowfen. It found that Girish deliberately removed Bedford from the Register of Members and forged the resignation letter of Suresh and trustee resignation documents to maintain his control over Barrowfen. These acts were dishonest and in breach of statutory duties under the Companies Act 2006, including duties to act within powers, promote the success of the company, exercise reasonable care, and avoid conflicts of interest.
S&B was found not to have breached fiduciary duties but was negligent by failing to recognise Girish's conflicts and allowing loyalty to him to inhibit proper advice to the company. The firm failed to advise Barrowfen to take independent legal advice or to resolve conflicts promptly, contributing to the continuation of the dispute and delay in rectifying the Register.
The court rejected claims of deceit against S&B and Girish based on alleged misrepresentations at a meeting in December 2015, finding that the representation was about loan terms and not a deliberate half-truth or misrepresentation about enforcement intentions.
The court found that Girish planned and implemented a scheme to put Barrowfen into administration through Barrowfen II to preserve control of the Tooting Property. He failed to disclose this plan to fellow directors and acted in breach of duties under sections 172 and 175 of the Act. S&B was negligent in failing to advise Barrowfen of conflicts arising from these actions.
Claims for dishonest assistance and unlawful means conspiracy were dismissed for lack of evidence of dishonesty or intention to injure.
On causation, the court applied loss of chance principles. It found a strong likelihood that had Girish and S&B complied with their duties, Prashant and Suresh would have taken control of Barrowfen by late 2014 or end of 2015 and proceeded with the Amended Original Development Scheme, avoiding administration and delay.
On quantum, the court accepted expert evidence on rental income and developer’s profit for the Original, Amended Original, and Revised Development Schemes. It held that Barrowfen suffered loss of rental income and costs due to delay caused by the breaches. It also held that Barrowfen must give credit for the increased developer’s profit from the Revised Development Scheme, which formed part of a continuous transaction caused by the breaches.
The court rejected the defence of illegality based on the family dispute over shares in Aumkar, finding no criminal property or relevant public policy bar to Barrowfen’s claim. It also rejected Girish’s defence of compromise, as the settlement agreement expressly excluded Barrowfen’s claims.
Holding and Implications
HOLDING: The court found in favour of Barrowfen on its claims against Girish and S&B. It held that Girish committed multiple breaches of statutory duties, including dishonesty and forgery, and that S&B was negligent in failing to recognise and address conflicts of interest arising from Girish’s conduct. Barrowfen’s claims for deceit, dishonest assistance, and unlawful means conspiracy were dismissed. The defence of illegality and compromise were also dismissed.
IMPLICATIONS: The decision confirms the strict application of directors’ duties under the Companies Act 2006, particularly the duty to maintain proper company registers and to avoid conflicts of interest. It emphasises that solicitors acting for companies and directors must carefully manage conflicts and advise companies to seek independent advice where conflicts arise. The judgment illustrates the application of loss of chance principles in assessing damages for delayed corporate developments and highlights the court’s reluctance to allow claims to be defeated by illegality absent clear criminal findings. The decision has direct effect on the parties by awarding damages to Barrowfen and holding Girish and S&B liable as set out. No new precedent beyond the application of established principles was created.