Omnimax International LLC v Simon Cullen & Ors

On an application for summary judgment, the court must assess whether the relevant claim or defence has a realistic prospect of success and whether there is any other compelling reason for trial. It must avoid a mini-trial, but it must critically examine the evidence and may decide a short, self-contained issue where the necessary material is available. A company director who admits receiving company money bears the burden of showing at trial that the payments were made for a proper purpose. The director cannot rely on the absence of accounting records which he was responsible for maintaining, or on unsupported assertions that further evidence may emerge. Where the issue is a documentary reconciliation of company and personal bank accounts, questions of honesty and motivation may be immaterial to summary disposal.

OmniMax International LLC applied for summary judgment or strike out against Simon Cullen in relation to claims assigned by the liquidators of Alumill Limited and Rolmet Alloys Limited. The assigned claims alleged that Mr Cullen, as director, had caused company funds to be paid to himself and used some of those funds to purchase a jointly owned property. Mr Cullen relied on an alleged director’s loan account, salary credits, payments made to the companies, and an asserted indirect settlement of liabilities owed to Azer Aluminium LLC.

The application concerned whether those parts of the breach of fiduciary duty claim had any real prospect of being successfully defended, and whether there was any compelling reason for the issues to proceed to trial.

The application was granted in relation to the Breach of Duty Claim.

1. Summary judgment principles. Under Civil Procedure Rules r 24.3, the court considered whether Mr Cullen had a realistic prospect of establishing at trial that the payments were proper and whether there was any other compelling reason for trial. The court had to avoid a mini-trial, but was required to examine the evidence critically. It could decide a short, self-contained issue where the evidence necessary for determination was before it. The principles in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch), approved in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098, were applied.
2. Burden concerning company money. A director receiving company money is treated as being in a position analogous to a trustee in respect of company assets under his control. Once receipt is shown, the director must establish that the payment was proper: Sinclair Investments (UK) Ltd v Versailles Trade Finance Ltd [2011] EWCA Civ 347; Gillman & Soame Ltd v Young [2007] EWHC 1245 (Ch); GHLM Trading Ltd v Maroo [2012] EWHC 61 (Ch).
3. Director’s loan account. Mr Cullen admitted receiving £1,666,968.17. After allowing credits of £33,000 for salary and £353,325.76 for payments made to Rolmet, the reliable contemporaneous evidence showed an overdrawn balance of at least £348,393.61. He had not maintained a ledger recording the alleged credits and could not rely on the absence of records for which he was responsible. The court relied on the approach to missing company records in Re Mumtaz Properties Ltd, Wetton v Ahmed [2011] EWCA Civ 610 and GHLM Trading Ltd.
4. Indirect payments and the property. Mr Cullen’s shifting accounts, doctored bank statements, inconsistencies about the debt owed to Azer, and failure to disclose the alleged customer list or supporting agreement meant that he had no realistic prospect of proving that £932,248.80 used to purchase the property was applied for a proper company purpose. Even taking the Defence at face value, a customer list belonging to Rolmet could not realistically create a debt owed to Mr Cullen.
5. Order. Summary judgment was entered against Mr Cullen for £932,248.80 in respect of the property purchase and £348,393.61 as the minimum debit balance under the alleged loan account. The scope of relief concerning the property was reserved for the hearing on formal hand-down.