Aston Risk Management Ltd v Lee Jones & Ors

The court applied established principles of equitable compensation (as explained in Target Holdings v Redferns and AIB Group v Mark Redler) to measure losses at trial with the benefit of hindsight. It accepted that common law remoteness rules do not apply but that there must be a causal connection between the fiduciary breach and the loss. The judge found breaches of fiduciary duty by Mr Jones (including under Companies Act 2006 s.172 and s.175) in causing certain payments and in causing the transfer of the substance of ASS's Business and Undertaking to AMR around the time ASS entered administration.

The court dismissed a late application by Mr Jones for disclosure of office‑holders' working papers and declined to permit new defences that had not been pleaded at liability. It treated the expert evidence of Mr Fairhurst as admissible and gave it substantial weight for valuation purposes.

Using an income approach and a but‑for counterfactual (ASS continuing under renegotiated terms similar to those between AMR and QLS), the court awarded equitable compensation in respect of: improper payments to Neutrino and Cumulo, and loss caused by transfer of the Business and Undertaking to AMR. Other heads (work‑in‑progress/debtors; administration and liquidation costs) were rejected as not causally established on the pleaded case.

This is a first instance quantum judgment following an earlier liability judgment. The claimant, Aston Risk Management Ltd (assignee of ASS), sought equitable compensation for (a) payments made by ASS to Neutrino and Cumulo, and (b) loss caused by Mr Jones transferring the substance of ASS's Business and Undertaking to AMR contemporaneously with ASS entering administration. ARM relied upon findings of breach of fiduciary duty made at the liability trial (including breaches of s.172 and s.175 Companies Act 2006) and pursued valuation evidence on quantum.

• Procedural and interlocutory matters: The defendants applied late for disclosure of the administrators' working papers and for permission to commence committal proceedings; the court dismissed the disclosure application and adjourned committal permission. ARM disclosed a preliminary appraisal prepared by its expert; the court held the expert remained admissible.
• Issues for decision:
  • whether payments to Neutrino and Cumulo made in breach should be restored;
  • whether and to what extent ARM is entitled to equitable compensation for the transfer of ASS's Business and Undertaking to AMR;
  • whether other heads (work in progress/debtors; administration and liquidation costs) were recoverable.
• Evidence and approach: ARM called one expert accountant, Mr Fairhurst, who adopted an income approach to value the deprived business, applying hindsight and a one‑year multiplier given the subsequent short duration of AMR's profitable relationship with QLS. The court applied the Target/AIB principles: equitable compensation is assessed at trial with hindsight; foreseeability is not the test, but there must be a commonsense causal link between breach and loss.
• Reasoning and disposition: The judge held that (i) certain invoices/payments to Neutrino were unjustified to the quantified extent and were recoverable; (ii) a realistic valuation of the Business and Undertaking deprived from ASS and enjoyed by AMR should follow the income approach, with adjustments to reflect commercial realities (notably third‑party charges that appeared excessive) and then a risk discount; and (iii) claims for loss of work‑in‑progress/debtors and for administration and liquidation costs failed because they were not properly pleaded as part of the pleaded cause of action or were insufficiently causally linked on a commonsense view. The final awards were quantified and interest at 1% above base was directed to be paid unless further submissions indicated otherwise.

The claim succeeded in part. The court awarded equitable compensation to ARM for (a) misapplied payments to Neutrino (£130,418.95) and Cumulo (£33,900), and (b) loss caused by Mr Jones transferring the substance of ASS's Business and Undertaking to AMR (£1,235,285). The court refused the defendants' late application for disclosure of office‑holders' working papers and refused to allow new unpleaded defences at the quantum stage. The awards were made applying the principles in Target Holdings v Redferns and AIB Group v Mark Redler: losses are assessed at trial with hindsight and by reference to what was caused by the fiduciary breach; valuation used an income approach with appropriate adjustments and discounts.