Popely v Popely

The claim was a double derivative action brought by family beneficiaries alleging that Ronald Popely, as the controlling figure behind Casterbridge, took company funds and rights for the benefit of himself or related trusts in breach of fiduciary duty and fraud. The judge analysed whether Ronald acted as a de facto director (or as a shadow director) and whether payments and transfers were improperly caused by him and constituted a fraudulent breach of trust within s.21 of the Limitation Act 1980. The court placed emphasis on objective proof of directorial capacity, the need to distinguish acts done as a de facto director from acts as a shadow director, and the requirement of dishonesty to bring a claim outside limitation under s.21.

The judge found that the claimants had not established that any payments to Mars Trust or others were improperly caused by Ronald in his capacity as a de facto director, that the documentary and witness evidence was deficient and inconsistent, and that fraud (dishonesty) had not been proved. Consequently the pleaded cash claim, vendor-rights claim and profits claim all failed and the claim was dismissed.

This first instance judgment resolves long-running family litigation concerning timeshare businesses in Northern Cyprus and Hever. The claimants (two sons and beneficiaries of the Blue Ridge Trust) brought a double derivative action asserting that the defendant Ronald Popely diverted Casterbridge assets and profits to Mars Trust or himself and thereby deprived the Blue Ridge Trust of its entitlement to 30% of those assets.

Nature of the claim: a double derivative action seeking recovery of cash payments, the value of so-called Vendor Rights and an account of profits, contending fraudulent breaches of fiduciary duty by Ronald as a de facto director of Casterbridge. The claimants relied on s.21 Limitation Act 1980 to avoid limitation, asserting fraud or fraudulent breach of trust.

Issues framed by the court:

• Whether particular payments (aggregating the pleaded sums) were caused by Ronald and were improperly taken from Casterbridge;
• Whether Ronald was a de facto director of Casterbridge (or a shadow director) in respect of the acts complained of;
• Whether any breach of fiduciary duty occurred and, if so, whether it was fraudulent (dishonest) so as to invoke s.21 Limitation Act 1980;
• Whether the Vendor Rights and profits claims were made out on the evidence.

Court's reasoning and findings: The judge stressed the established authorities on de facto and shadow directorship (including Holland, Smithton and related authorities) and set out principles: the inquiry is fact- and degree-driven; not every influential actor is a de facto director; acts must be directorial in nature and not merely directions given as a shadow director; and an act cannot simultaneously be characterised both as shadow directorship and de facto directorship. The court found that the documentary and oral evidence was often inconsistent and in many respects unreliable. Although certain payments by Casterbridge to Mars Trust and to Ayton were recorded, the provenance, purpose and justification of the payments were not proved. The claimant’s later reformulation of the cash claim (relying on account-ledger balances and other post-hoc constructs) was not the pleaded case and was inadequately evidenced. On the balance of probabilities the judge accepted that some payments were caused by Ronald but concluded they were not shown to have been caused in his capacity as a de facto director; rather, they were attributable to acts authorised by corporate directors or by him as a possible shadow director. Crucially, the claimant failed to prove dishonesty; under the authorities fraud requires proof of the requisite dishonest state of mind and there was insufficient evidence to establish that. The vendor-rights and profits claims likewise failed for absence of contractual or proprietary basis, absence of evidence of benefit to Ronald or Mars Trust, and the failure to prove breach or fraud.

Remedy/outcome: The claim was dismissed for failure to prove the pleaded breaches or fraud.

The claim is dismissed. The court found that the claimants failed to prove that Ronald caused the challenged payments or transfers in his capacity as a de facto director, failed to prove any fraudulent breach of fiduciary duty required by s.21 Limitation Act 1980, and failed to establish the vendor-rights or profits claims on the evidence.