Boston Trust Company Limited & Anor v Szerelmey Limited & Ors

This is a first-instance multiple derivative claim brought by Boston (trustees of the Erutuf Trust) against Mr Verhoef and several related companies alleging breaches of directors' duties and diversion of corporate value. The court found that, before his formal appointment on 6 June 2017, Mr Verhoef acted as a de facto director (and alternatively a shadow director) of the Operating Companies and therefore owed the statutory duties in the Companies Act 2006 including sections 171, 172 and 177.

The judge determined that Erutuf did have a one-third interest in the recipient companies (Marmoran/London Stone and Holdings/Szerelmey UK) and that finding was decisive in relation to the asset transfer, trademark licence and labour framework claims because those arrangements did not confer a greater personal benefit on Mr Verhoef than on Mr Krause and so did not bring the claims within an exception to Foss v Harbottle. On the factual and legal analysis the court dismissed the claims in relation to the transfer and leaseback, the trademark licences, the labour framework and the guarantees/loans (including loans to London Stone and most Heritage-related loans).

However, the court held that payments of management/consultancy fees (2016–2019) that resulted in Mr Verhoef receiving the whole of the 25% profit share (previously shared with Mr Krause) were authorised by Mr Verhoef for an improper purpose (to pressure Mr Krause) and amounted to breaches of duty. Boston succeeded in respect of those payments; the recipient companies were liable for knowing receipt.

This derivative claim was brought by Boston Trust Company Limited and Boston Fiduciary Management Limited as trustees of the Erutuf Trust on behalf of three operating companies (Szerelmey, Szerelmey (GB) and Szerelmey Restoration). The claim alleged that Mr Gordon Verhoef used his control of the Operating Companies to transfer money or assets away from them and to benefit companies under his control. The pleaded complaints fell into four broad heads: (1) an asset sale-and-leaseback to London Stone and related trademark licence renewals; (2) a framework agreement for supply of labour through Szerelmey (UK) Limited; (3) guarantees and loans in favour of Heritage-related companies (and loans to Heritage House/Heritage York); and (4) payments of consultancy/management fees to or for Mr Verhoef.

Procedural posture: permission to continue this derivative claim had been granted earlier by Deputy Judges. The claim proceeded to a 10-day first-instance trial where oral evidence was heard from the two principals (Mr Krause and Mr Verhoef) and several company witnesses. The court applied established law on de facto and shadow directorship, the statutory duties in the Companies Act 2006 (notably ss.171, 172 and 177), and the exceptions to the rule in Foss v Harbottle (including fraud on a minority and wrongdoer control). The court adopted the objective “intelligent and honest director” test where it found no evidence of actual honest consideration by the director.

Issues framed by the court included:

• Was Mr Verhoef a de facto or shadow director in the period before his formal appointment on 6 June 2017?
• Did the Erutuf Trust have a genuine one-third interest in London Stone (via Marmoran) and Szerelmey UK (via Holdings)?
• Did the impugned transactions fall within an exception to Foss v Harbottle so as to permit a derivative claim at trial?
• If they did, were there breaches of duties (s.171, s.172, s.177) and was relief available, including knowing receipt against recipient companies?

Reasoning and disposition: The judge concluded Mr Verhoef was a de facto director pre-6 June 2017 (alternatively a shadow director) based on his role as a key decision-maker, his daily presence in the business, and contemporaneous documents and conduct. The judge also found that Erutuf did have a legitimate one-third interest in Marmoran and Holdings (and therefore in London Stone and Szerelmey UK). That ownership finding meant that the asset transfer, trademark licences and labour framework did not confer a disproportionate personal benefit on Mr Verhoef and so those claims did not fall within the Foss v Harbottle exceptions; on the merits they were held not to breach duties (or were capable of being considered by an intelligent and honest director to promote company success). Guarantees and loans to Heritage-related companies were examined but, on the evidence, the court concluded directors had considered company interests (or could reasonably have done so) and there was no breach warranting derivative relief. By contrast, the unilateral alteration of the historic profit-share payments so that Mr Verhoef received the entire 25% profit slice (cutting off Mr Krause) was held to be for an improper purpose and to breach s.171 and s.172; Boston succeeded on that head and on knowing receipt against recipient companies. The remainder of the derivative claim was dismissed.

The claim is allowed in part. The court held that Mr Verhoef acted as a de facto (alternatively shadow) director and owed the duties in sections 171, 172 and 177 of the Companies Act 2006. On the principal issues the judge found that Erutuf held a one-third beneficial interest in Marmoran (London Stone) and Holdings (Szerelmey UK), which defeated Boston’s contention of personal benefit to Mr Verhoef in the asset transfer, licence and labour arrangements; those claims failed. The court found liability, however, for improper self-preferencing in the payment of management/consultancy fees to or for Mr Verhoef (breach of duty) and ordered relief, the recipient companies being liable for knowing receipt. The remainder of the derivative claim was dismissed.