ZENITH LOGISTICS SERVICES (UK) LIMITED & ORS. v PETER JAMES KEATES & ORS.

The court tried three consolidated commercial claims arising from alleged misuse of company assets, breaches of directors’ duties and related conspiratorial activity centred on the conduct of the first defendant, Mr Peter Keates. Key legal principles applied include directors’ fiduciary duties (Duty of loyalty / single-mindedness), the Companies Act duties (sections 170, 172, 175 and 176 were considered), equitable liability for knowing receipt and dishonest assistance, unjust enrichment and the reach of section 281(3) Insolvency Act 1986 (fraudulent breaches of trust surviving discharge from bankruptcy).

The judge made extensive credibility findings: the claimants’ witnesses were largely truthful; several defendant witnesses (notably Mr Read and members of the Bundock family) were found to be unreliable. On the facts the court concluded that:

• the Biosol contract (transport of woodchip) was an oral open‑book contract from 3 April 2017 and Zenith was entitled to recover its costs under it; Biosol’s denial and asserted October 2017 novation/termination failed and the Biosol claim succeeds except for a limited deduction for a low‑loader trailer;
• the Read Claim succeeded: Mr Read was liable to Zenith for unjust enrichment / equitable compensation in respect of company cars provided to him; the court awarded £34,912.42 (after disallowing £4,400 in respect of an early lease cancellation that was not recoverable from Read);
• the Main Claim was partly successful against Mr Keates and against Mr Claridge: the judge found multiple dishonest breaches of contract and fiduciary duty by Mr Keates leading to identifiable misapplications of claimant assets (including payments to Agco Finance, payments recorded as to "DC Driving Services" to Alfred Properties, container costs, certain hospitality and other items) and held that some of those liabilities survived Keates’ bankruptcy under s.281(3) because they were tainted by actual dishonesty; Mr Claridge was held liable in knowing receipt/unjust enrichment for certain benefits; however claims against other corporate defendants (Biosol, Spring companies) and against Mr Bundock and most claims against Mr Read for conspiracy/dishonest assistance were dismissed.

Background and parties: The case comprised three linked claims (the Main Claim, the Biosol Claim, the Read Claim) arising from alleged diversion and misapplication of the claimants’ assets by the first defendant, Mr Peter Keates, and by associates. The claimants are Zenith Logistics (UK) Limited, Uniserve (UK) Limited and James Kemball Limited (the Uniserve Group). Defendants included Mr Keates, employees (notably Mr Christopher Read and Miss Nicola Horsley), commercial associates (Mr Derek Claridge) and companies involved in the biomass business (Biosol Renewables UK Limited and the Spring companies). The trial lasted several days; some defendants settled before trial and several (including Mr Keates) did not produce witness statements.

Nature of relief sought: The claimants sought money judgments for (inter alia) unpaid invoices under the transport contract with Biosol; restitution/equitable compensation and damages from Mr Read for company cars and related benefits; broad damages, equitable compensation and/or an account of profits against Mr Keates and other defendants for breaches of contract, breaches of fiduciary duty, dishonest assistance, knowing receipt, unlawful means conspiracy and unjust enrichment. They also sought to preserve claims against Mr Keates notwithstanding his bankruptcy, invoking section 281(3) Insolvency Act 1986.

Issues framed:

• What were the terms, duration and effect of the contract between Zenith and Biosol and was it terminated in October 2017?
• Are particular payments and benefits properly chargeable to the claimants (were they misapplied by Mr Keates) and if so who is liable (knowing receipt/unjust enrichment, dishonest assistance, breach of fiduciary duty or contract)?
• Was Mr Read unjustly enriched or liable in equitable compensation for company cars he used and for other benefits?
• Was there an unlawful means conspiracy or dishonest assistance by other defendants and did such conduct cause quantifiable loss?
• Do any liabilities survive Mr Keates’ bankruptcy under s.281(3) as resulting from fraud/fraudulent breach of trust?

Court’s reasoning and findings:

• Credibility and documents: the court relied closely on contemporaneous documents and found considerable documentary support for an oral open‑book transport contract between Zenith and Biosol starting 3 April 2017; it rejected defendants’ self‑serving oral explanations where documents contradicted them.
• Biosol contract and account: the court found the contract provided for dedicated transport capacity acquired by Zenith to service Biosol and that Zenit’h invoicing was consistent with an open‑book arrangement; Biosol failed to establish termination or novation in October 2017; the Biosol claim therefore succeeded except that charges relating to a low‑loader (used at the Farm rather than on the Biosol contract) were disallowed.
• Read Claim and unjust enrichment: applying the reasoning in Relfo (as cited) and the general law of unjust enrichment and equitable compensation, the court held Mr Read liable to account for benefits from company cars (£34,912.42 recoverable), rejecting an unpleaded contention that costs had been recovered under another contract.
• Main Claim – fiduciary breaches and misapplication of assets: the court found that Mr Keates (a managing director and director) owed and breached statutory and equitable duties (single‑minded loyalty; duties under the Companies Act), that he pursued personal and Spring group biomass ventures without informing the Uniserve Group, and that he caused the claimants to pay monies and confer benefits that were not legitimately theirs to pay (Agco payments for Spring, payments to Alfred Properties labelled as "DC Driving Services", container costs, hospitality and other items). Several such payments were found to be dishonest misapplications; accordingly Keates was held personally liable and those liabilities survived his bankruptcy under s.281(3) because they were tainted by actual dishonesty. Some payments (e.g. low‑loader usage) were partly disallowed.
• Accessory liability and conspiracy: the court found that a conspiracy/unlawful means existed in relation to the exploitation of biomass opportunities (certain defendants knowingly pursued a venture outside Uniserve), but it rejected broad claims for consequential loss of profits and most claims for dishonest assistance/compensation against Mr Read, Mr Bundock, Biosol and the Spring companies because either no active dishonest assistance was proved for particular misappropriations, or loss was not shown with sufficient precision or causal link; the court emphasised the need to distinguish between acts forming the unlawful means and separate misappropriations by Keates.
• Remedies and quantification: the court awarded money judgments on particular heads (Biosol debt save low‑loader deduction; Read Claim £34,912.42; various sums payable by Mr Keates and Mr Claridge in respect of identified misapplied payments and benefits) and left the precise order and any possible account inquiries to a further short hearing.

This was a first instance trial. The court allowed parts of the consolidated claims and dismissed other parts. In brief: the Biosol Claim succeeded (Zenith entitled to the invoiced sums under the open‑book transport contract, save for a reduction in respect of a low‑loader trailer); the Read Claim succeeded against Mr Read for unjust enrichment/equitable compensation in the sum of £34,912.42; the Main Claim succeeded in part against Mr Keates (the judge found multiple dishonest breaches of contract and fiduciary duty resulting in recoverable misapplications of claimant assets and held some liabilities to survive the defendant’s bankruptcy under s.281(3) Insolvency Act 1986) and against Mr Claridge (knowing receipt/unjust enrichment in respect of certain receipts); claims for broad loss of profits, many conspiracy‑based recoveries and substantial awards against other defendants (Biosol, Spring entities, Mr Bundock, most claims against Mr Read for conspiracy/dishonest assistance) were dismissed for want of proof or causal connection. The court’s reasoning rested on documentary evidence, detailed credibility findings and established equitable and restitutionary principles (fiduciary duties, knowing receipt, dishonest assistance, unjust enrichment) applied to the facts.