On 23 February 2022, Mr Justice Foxton handed down judgment in the case of Hotel Portfolio II UK Limited (In Liquidation) & Elizabeth Aird-Brown (as Hotel Portfolio II UK Limited (In Liquidation)) v Andrew Ruhan & Anthony Stevens  EWHC 383 (Comm).
The Claimants successfully proved a complex fraud perpetrated by the Defendants which began in December 2004 and early 2005, by establishing that Andrew Ruhan, a director of the First Claimant (“HPII”), used Anthony Stevens and companies ostensibly associated with him (known as “Cambulo Group”) to act as his secret nominees and to masquerade as independent purchasers of three large hotels owned by HPII, located near Hyde Park in London (“Hyde Park Hotels”).
Elizabeth (Libby) Aird-Brown, of The MacDonald Partnership, and HPII’s liquidator, commented that she was “very pleased with the outcome. Hopefully, we will now be able to recover substantial funds for the company’s creditors”.
In 2004-2005, the Hyde Park Hotels were owned by HPII, and had been earmarked as assets with exceptional potential for redevelopment into luxury residences. Mr Ruhan then obtained planning permission to re-develop two of the Hyde Park Hotels through a joint venture with the Candy Brothers, the British luxury property developers. In 2006 and 2008, Mr Ruhan achieved onward sales of the Hyde Park Hotels to independent third parties, generating a secret profit in excess of £100m. The Claimants proved that Mr Ruhan fraudulently breached his fiduciary duties as a director of HPII (and breached his duties under ss.317 and 320 Companies Act 1985) and deceived HPII’s board and shareholders when declaring that he had no interest in the purchasing companies within the Cambulo Group, which companies were presented to HPII as being ultimately beneficially owned by Mr Stevens. The Claimants achieved this by establishing at trial that Mr Ruhan used Mr Stevens and the relevant Cambulo Group companies as his secret nominees throughout this time (and at various times thereafter – until at least April 2016).
That nominee allegation was denied by the Defendants in the strongest possible terms, and the Claimants’ claim has been defended vigorously since it was issued in 2018. During their management of the proceedings, the Claimants’ team handled several interim applications for, among others, security for costs and extensions of time to comply with Extended Disclosure in the context of novel issues brought forth by the COVID-19 pandemic.
In order to make out their nominee allegation, the Claimants benefited from information and documents obtained from third parties following the application of HPII’s liquidator’s powers under s.236 Insolvency Act 1986. A number of useful documents were obtained from, among others, Investec Bank, a multinational bank which Mr Ruhan had used from late-2007 in relation to a major property development in Qatar, Doha. The documents obtained from the bank provided an extremely revealing insight into their perception of the relationship between Mr Ruhan and Mr Stevens. Such documents only ever came to light through the use of the liquidator’s investigative powers under that section.
The Judge made several observations regarding the treatment of documentary evidence for use in making out allegations in fraud cases, most notably that even if it is far from the case that every document is consistent, or only consistent, with one’s case, two documents pointing in inconsistent directions do not cancel each other out, still less do two documents in one direction destroy the evidential force of twenty in the other.
Based on the contemporaneous documents and evidence before the Judge, he ultimately concluded that Mr Ruhan fraudulently breached his duties as a company director of HPII and that Mr Stevens dishonestly assisted Mr Ruhan in his breaches of duty against HPII. Mr Justice Foxton also found that Mr Ruhan and Mr Stevens lied to him during the trial, as well as in other proceedings before him and in other Court proceedings.
The Claimants overcame the Defendants’ defences based on limitation (by relying on ss. 21 and 32 Limitation Act 1980), and based on the equitable doctrine of laches. In doing so, the Claimants were successful on virtually every single point that was argued and will be seeking judgment against the Defendants for over £100m.
In this case, the Judge considered and provided clarification on several legal principles, including:
- Breaches of statutory and fiduciary duties by a company director
- Dishonest assistance by a nominee for the benefit of a company director
- Unlawful means conspiracy
- Adverse inferences for the failure by a party to call relevant witnesses
- Limitation defences
- Laches defences
- Remedies for (and the election between) an account of profits or equitable compensation as against company directors and their dishonest assistants
The case was heard over 12 days in the Commercial Court as a fully remote trial. Our firm and HPII’s liquidator instructed James Pickering QC and Samuel Hodge of Enterprise Chambers. Spring Law’s team was led by James Russell (Partner), assisted by Alexander Erman Ünal (Solicitor). Ms Aird-Brown commented that she was “very grateful to her team and we should be proud of the outcome, following our tireless efforts to get to the truth of the situation”.
A link to the judgment is available at the following link.
This is a significant judgment with implications for claimants seeking to establish that individuals and/or companies are acting as secret nominees for defaulting trustees/directors. It also provides important clarification regarding the remedies open to beneficiaries in cases of breach of fiduciary duty, and dishonest assistance, where secret profits are made as a result of a misuse of trust property. Please contact James Russell for further enquiries.
Spring Law is a boutique disputes firm, specialising in all areas of commercial litigation, with an emphasis on commercial disputes, fraud, and insolvency disputes, with lawyers based in London, the South of England, and Gibraltar. The firm regularly acts for high net-worth individuals, professionals, and corporates on a wide variety of matters and across all stages of litigation.