Omnimax International LLC v Simon Cullen & Ors

The claimant obtained summary judgment on discrete parts of its assigned breach of fiduciary duty claim against the first defendant. The court treated separately the deceit claim and the assigned breach of duty/proprietary claims and applied the Part 24 summary judgment principles. The judge concluded that the first defendant admitted receipt of significant company funds (£1,666,968.17) and admitted that £932,248.80 of those funds were applied to purchase a property. As director, he bore the burden of showing that those payments were properly made for company purposes (Companies Act 2006 ss.171, 172 and 175). He failed to produce contemporaneous accounting records, offered inconsistent explanations and doctored documents, and therefore had no real prospect of discharging the burden at trial. The court entered summary judgment against the first defendant for two sums: £932,248.80 (proprietary/trace to the property) and £348,393.61 (minimum debit balance on the director’s loan account).

Background and parties: OmniMax International LLC (the claimant) is a North American manufacturer of aluminium products. Alumill Limited and Rolmet Alloys Limited (the Companies), now in liquidation, were controlled by the first defendant, Mr Simon Cullen, who is also sole director and shareholder of the second defendant, Aluinox Limited. The liquidators assigned to OmniMax the Companies’ claims against the defendants, and OmniMax sued for deceit, breach of directors’ fiduciary duties and proprietary remedies (including recovery of a property jointly owned by the first defendant and his wife).

Procedural posture and relief sought: This is a first-instance application for summary judgment/strike out limited to the assigned breach of duty claim. The claimant sought summary determination of discrete issues: whether the first defendant could justify payments received from the Companies as properly applied to his director’s loan account or otherwise, and whether the payments used to acquire a property were recoverable.

Issues framed:

• Did the first defendant have a realistic prospect of proving that payments received from the Companies were properly applied for company purposes (thus discharging the burden on him at trial)?
• Could the indirect payments (allegedly settling a debt with a supplier, Azer) be satisfactorily explained so as to defeat summary disposal?

Evidence and findings: The court relied on the defendant’s admissions in his freezing-order affidavit and bank statements showing receipts from the Companies and payments subsequently used to acquire the property. The defendant gave shifting accounts, admitted altering provided bank statements, and failed to disclose contemporaneous accounting records for director’s loan accounts. The claimant’s detailed analysis of company bank statements established payments to the Companies by the defendant and a net receipt position. The judge applied established Part 24 principles, relevant authorities on directors’ duties and on drawing inferences from missing documentation, and concluded that the defendant had no real prospect of discharging the burden at trial. The judge also rejected the argument that further disclosure was likely to materially change the position.

Reasoning and outcome: Because the first defendant admitted receipt and the documentary record did not support his defence, and because he had not shown reasonable grounds for expecting further material evidence at trial, the court found no real prospect of success on the pleaded defences and entered summary judgment against him in the sums of £932,248.80 and £348,393.61. The court reserved detailed determination of the scope of property relief to a later hearing for formal handing down.

This first-instance application for summary judgment was successful in part. The court entered summary judgment for the claimant against the first defendant in the sum of £932,248.80 in respect of funds used to purchase the property and in the sum of £348,393.61 as the minimum debit balance arising under any alleged director’s loan account. The rationale was that the first defendant admitted receipt of company monies, failed to produce contemporaneous accounting records and gave shifting, inconsistent explanations; accordingly he had no real prospect of showing at trial that the payments were properly made for company purposes (Companies Act 2006 ss.171, 172 and 175), and there was no compelling reason to remit the issues to trial.