JCL ID Solutions Ltd v Williams & Ors

A director who diverts company property to another company without authority breaches fiduciary duty. Where the recipient knows the material facts making retention unconscionable, it receives the property as constructive trustee and must account.

Rights to recruitment fees depend on the retainer and the work undertaken. A later arrangement with another entity cannot displace the original company’s entitlement to fees arising from introductions and work undertaken while acting for that company.

Where an alleged remuneration arrangement is not proved, the court may determine entitlement by the parties’ actual agreement and order an account of drawings, loans, expenses and remuneration.

The claimant recruitment company sued its former director, Clint Williams, and his company, Global Identifying Solutions Ltd. It claimed repayment of a loan, reimbursement of personal credit-card expenditure, excessive drawings, and recovery of recruitment fees diverted to Global.

The principal disputes concerned whether Global or the claimant was entitled to fees from ICICI Bank, HBOS and Standard Bank, whether the £19,500 payment was a repayable loan, and whether the parties had agreed an “eat what you kill” remuneration scheme.

The court also considered the appropriate relief, including declarations and the taking of an account.

1. ICICI Bank payment. The relevant search requests and introductions arose while Mr Williams was acting for the claimant. No agreement authorised Global to take over the claimant’s contractual rights. Mr Williams therefore diverted company property without authority and breached his fiduciary duty as director. Global, through Mr Williams’ knowledge, received the money in circumstances making retention unconscionable and was liable as constructive trustee. Mr Williams and Global were ordered to account for the payment, subject to credit for £8,000 paid to Mr Dodshon.
2. HBOS and Standard Bank fees. The HBOS placement was undertaken under a retainer made on behalf of the claimant. The Standard Bank introduction and relevant work also occurred before any later arrangement with Global. The claimant was therefore entitled to declarations that the fees belonged to it, whether or not Standard Bank ultimately owed the fee to Global.
3. £19,500 payment. The payment was a loan to Mr Williams, repayable to the claimant. The court accepted that repayment might have been expected to occur by set-off against sums due to him, but that did not extinguish liability unless the loan was fully set off. It was unnecessary to determine the alternative claim under Companies Act 1985, section 330.
4. Remuneration and drawings. The alleged “eat what you kill” agreement was not proved. The evidence instead established a basic annual salary of £75,000 for each of Mr Williams and Mr Endacott, with the possibility of an agreed year-end bonus and any private adjustment between them. The claimant’s excessive-drawings claim could not be determined without comparing Mr Williams’ drawings and remuneration with the remuneration allowed to Mr Endacott.
5. Accounts and final relief. Mr Williams was liable to account for drawings, the loan, credit-card expenditure not incurred bona fide for the claimant, and the remuneration properly due to him. The credit-card claim was not suitable for immediate judgment because individual items required examination. The amount, if any, due was remitted to an account, with further argument reserved on whether the account should be dealt with in the anticipated liquidation.

This was a first-instance decision. The judgment records earlier interim proceedings in which a freezing injunction was granted on 14 November 2007 and recruitment-related restrictions were imposed on 27 November 2007. The court considered that the remaining restrictions should no longer continue.