Wecomm Ltd. v Rosenhoiz

An agent who is required to account for expenditure of a principal’s money bears the burden of showing that it was properly spent. Where proper accounts are not kept, the court may presume facts adversely to the agent, consistently with the proved facts. Contractual reimbursement is limited to expenses reasonably, wholly, exclusively and necessarily incurred in performing the employee’s duties. Where it is impracticable to examine numerous expense items individually, the court may make a fair percentage assessment. A resignation will not amount to constructive dismissal where the employee freely chose to resign after having an opportunity to consider the position. Misrepresentations inducing approval of a contractual condition may be relied upon as a defence to a claim based on that condition.

Wecomm Ltd., a software company, claimed repayment from its former chief executive, Guy Rosenhoiz, of business expenses and £10,000 in cash allegedly received for an agent payment but not properly accounted for. Rosenhoiz counterclaimed for wrongful dismissal, unpaid salary, notice pay and share warrants.

The court determined whether the expenses were recoverable under the service agreement, whether Rosenhoiz had properly accounted for the £10,000, whether he had resigned or been dismissed, and whether he retained entitlement to the warrants after the company had treated the relevant revenue milestone as achieved.

1. Expenses and accounting. The service agreement required reimbursement only of reasonable expenses wholly, exclusively and necessarily incurred in performing the defendant’s duties, supported by appropriate vouchers or receipts. As an agent, the defendant bore the burden of accounting for the company’s money. If he failed to keep proper accounts, the court was entitled to presume matters against him, consistently with the proved facts, applying the principles cited from Gray v Haig [1855] 20 Beav. 219 and Armory v Delamirie (1 Strange, 505).
2. The court found that only part of the entertainment, limousine and travel expenditure was properly incurred. Since the parties accepted that it would be inappropriate to examine each item individually, percentage assessments were made. The claimant recovered £6,475 for entertainment, £9,339.30 for limousines and 60 per cent of the recoverable travel expenditure. It also recovered £2,458.38 for specified other expenses.
3. The defendant could not properly account for the £10,000 transaction. It had not been authorised by the board, no adequate invoice or receipt had been obtained, and the money had disappeared in dubious circumstances. The claimant was therefore entitled to recover it.
4. Termination. The defendant was not overborne or forced to resign. He had considered his position and chose resignation. The counterclaim for notice pay therefore failed. The claimant was entitled to set off against the unpaid nine days’ salary the equivalent period during which the defendant had purportedly, but not genuinely, been absent from work on company business.
5. Share warrants. The board’s decision to deem the revenue milestone satisfied had been induced by substantial misrepresentations about contracted revenues. The claimant was entitled to rely on those misrepresentations as a defence, whether they were innocent or not. The claim for warrants therefore failed.
6. The claimant’s claim succeeded to the extent stated, and the counterclaim failed.

not stated in the judgment.