Bates v Microstar Ltd & Anor

At the permission stage, an appeal should not proceed where the trial judge’s essential findings provide no reasonable prospect of reversal or retrial, even if the judgment contains an error in background figures or could be better expressed. A company can be bound by an agreement made for it by a director with authority, and subsequent corporate conduct may ratify that agreement; tax-residence arrangements do not negate the agreement actually made. Conduct by a contracting party is repudiatory only if sufficiently serious to bring the contract to an end. In assessing a freezing order, risk of dissipation may be inferred cumulatively from substantial proceeds, striking-off, lack of explanation and the judge’s assessment of the respondent. A later freezing order containing disclosure obligations can render an earlier standalone disclosure challenge academic.

Mr Bates claimed that he had an employment agreement with Microstar and Mr Combrinck entitling him to remuneration, a share of profits and shares. The central dispute concerned whether terms were agreed at a meeting in March 1998 and whether later conduct repudiated the contract before Microstar’s sale of shares for £10 million.

The High Court, presided over by Mr Martin Mann QC as deputy judge, found for Mr Bates. It held that the agreement was binding, that he had not repudiated it, and that he had not accepted Microstar’s repudiation until after the sale. The defendants sought permission to appeal that decision, the freezing order and earlier disclosure orders, and Mr Bates sought to adduce further evidence.

The Court of Appeal, in a judgment delivered by Lord Justice Waller and agreed to by Lady Justice Hale and Lord Justice Carnwath, dismissed all applications for permission to appeal.

1. Main action. The defendants identified no realistic basis for overturning the deputy judge’s essential factual findings or ordering a retrial. An error in the draft judgment concerning the amount recovered at the summary judgment stage, and weaknesses in expression or treatment of some facts, did not demonstrate that the judge’s reasoning process was fundamentally flawed.
2. Authority, formation and ratification. The judge had found that Mr Combrinck made a binding agreement on behalf of Microstar at the March 1998 meeting. His position as a substantial shareholder and director supported his authority to contract for the company. The company’s tax-residence arrangements could not negate the agreement actually made. The subsequent payment to Mr Bates also supported the judge’s conclusion that the agreement had been ratified.
3. Repudiatory conduct. Mr Bates’s conduct after his suspension, including voting to remove Mr Combrinck as chairman of a related company, excluding a personal assistant from its premises, negotiating for his own interests during the dispute and operating through another company, did not establish a breach of good faith or fidelity to Microstar. In any event, the conduct was not sufficiently serious to be repudiatory or to bring the contract to an end.
4. Freezing order. The evidence was sufficient to justify the order. The judge was entitled to consider cumulatively the £10 million proceeds, Microstar’s striking-off, the absence of information about the funds and his poor assessment of Mr Combrinck’s evidence and conduct. The order for disclosure made as part of the freezing order was also justified.
5. Earlier disclosure order and fresh evidence. Once the freezing order included disclosure obligations, the challenge to the earlier standalone disclosure order was academic. The court declined to determine that issue or the related costs question, and there was no need to consider the fresh evidence application.

The applications were dismissed. The defendants were ordered to pay the costs of all applications. The stay on the order of Evans-Lombe J remained.

• Court of Appeal (Civil Division): Applications for permission to appeal against the High Court judgment, the freezing order and disclosure orders were dismissed. The application to adduce further evidence was not required to be determined.
• High Court of Justice, Chancery Division: Mr Martin Mann QC, sitting as a deputy judge, gave judgment for Mr Bates on 18 April 2002, finding that the March 1998 agreement was binding and that Mr Bates had not repudiated it.
• Earlier procedural history: Mr Lawrence Collins QC had granted Mr Bates limited summary judgment on 9 December 1999. That decision was substantially overturned by the Court of Appeal on 4 July 2000. Evans-Lombe J made a standalone disclosure order on 6 July 2001, and a freezing order with disclosure provisions was later made on 18 April 2002.