Raffermati v Capello Hair Designs Ltd & Anor, Court of Appeal - Chancery Division, December 04, 2017, [2017] EWHC 3134 (Ch)

Issuing Organization:Chancery Division
Actores:Raffermati v Capello Hair Designs Ltd & Anor
Resolution Date:December 04, 2017
 
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Case No: CH-2017-000091

Neutral Citation Number: [2017] EWHC 3134 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION APPEAL CENTRE

ON APPEAL FROM THE COUNTY COURT AT OXFORD

ORDER OF HHJ MELISSA CLARKE

CLAIM NUMBER AD7YX 861

Royal Courts of Justice

7 Rolls Building, Fetter Lane,

London, EC4A 1NL

Date: 04/12/2017

Before :

MR JUSTICE ZACAROLI

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Between :

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Mr Patrick Routley (instructed by Franklin Solicitors) for the Appellants

Mr Caley Wright (instructed by Heald Solicitors) for the Respondents

Hearing dates: 16 November 2017

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JudgmentMr Justice Zacaroli :

Introduction

  1. Capello Hair Designs Ltd (the claimant Company) was incorporated in 2008 to run a hairdressing business. Its sole director and shareholder is Mr Paul Roberts, the third party. At the time of the Company's incorporation, Mr Roberts and Ms Rosa Raffermati were in a relationship and living together. Ms Raffermati was an experienced hairdresser, and for the next six years worked hard in the business. Their relationship broke down in 2014, following which Ms Raffermati asked Mr Roberts to transfer the business to her. Mr Roberts refused but suggested she buy his shares. No agreement having been reached, Ms Raffermati began trading the business from the same premises for her own account, subsequently setting up a new company to which the business was transferred. She also diverted to herself payment of sums from the Company's PDQ machine.

  2. The Company commenced proceedings against Ms Raffermati, claiming that she had misappropriated the business, in breach of fiduciary duties owed by her to the Company. It sought an account of profits, damages and other relief.

  3. In her defence and counterclaim, Ms Raffermati averred that the shares in the Company were held by Mr Roberts on trust either for her absolutely, or for Mr Roberts and her together. Alternatively, she averred that the business was held by the Company for her benefit. The basis of those claims was said to be representations made to her by Mr Roberts that he would incorporate the Company on the basis that they would both be shareholders, which representations were false and known to be false, such that Mr Roberts was acting dishonestly. She counterclaimed for a declaration that she was beneficially entitled to the business. There was no counterclaim for a declaration of trust in relation to the shares in the Company, but it was indicated that such a claim would be brought in third party proceedings against Mr Roberts.

  4. Ms Raffermati did indeed commence third party proceedings against Mr Roberts. In the particulars of additional claim she sought, among other things, a declaration that Mr Roberts held his shares in the Company on trust for each of them in equal proportions or such other proportions as the Court might find, alternatively a declaration that she was the sole beneficial owner of the business. While the particulars of additional claim included similar assertions of misrepresentation by Mr Roberts to those made in the defence, it also included allegations that there had been an express agreement between Mr Roberts and Ms Raffermati that the shares would be held equally by them, that Mr Roberts had made representations to her to that effect, and that she relied on the agreement and representations in various ways.

  5. The trial of the claim, counterclaim and third party claim was listed for a three day hearing commencing on Monday 13 March 2017, before Her Honour Judge Melissa Clarke sitting in the County Court in Oxford.

  6. In the skeleton argument served by counsel for Ms Raffermati on the Thursday prior to the start of the trial, the only basis asserted for the defence, counterclaim and third party claim was that the shares or the business were held on trust as a consequence of either an express agreement, or a common intention, to that effect. No claim in fraudulent misrepresentation was advanced. Having sought clarification (in solicitors' correspondence and via counsel) that the claim in fraudulent misrepresentation had been abandoned, counsel for the Company and Mr Roberts asked the judge to determine, as a preliminary matter, that the claims which counsel for Ms Raffermati did intend to pursue were neither properly pleaded, nor supported by evidence, and should be struck out, alternatively that summary judgment should be given to the Company/Mr Roberts in respect of them.

  7. Having heard argument, the Judge - essentially in agreement with the Company's and Mr Roberts' counsel - ordered that the defence and counterclaim, and the third party claim, be struck out. In an Order dated 13 March 2017 she ordered that Ms Raffermati provide a full account of all takings and profits from the business, and gave consequential directions. By paragraph 7 of the Order, Ms Raffermati was required to pay the Company £44,041, being the amount alleged by the Company to have been paid for equipment and fitting out of the premises upon commencement of the business in 2008, which equipment and fittings had been appropriated by Ms Raffermati in 2014.

  8. Ms Raffermati appeals against that decision with the permission of Newey J (as he then was), granted on 8 June 2017. By a further order dated 12 April 2017 Newey J stayed the effect of paragraph 7 of the Order.

  9. In considering this appeal, the starting point is to identify precisely what was pleaded, and what evidence was provided in support of the pleaded case.

    The Statements of Case

  10. Ms Raffermati's pleaded case is to be found in the defence and counterclaim, and the particulars of additional claim.

    Defence

  11. Ms Raffermati's positive case (as opposed to a paragraph by paragraph response to the particulars of claim) is contained in the opening eight paragraphs of the defence. By paragraph 1, it is averred that Mr Roberts holds the shares in the company on trust either for Ms Raffermati alone or on trust for each of them.

  12. By paragraph 2 it is averred that the hairdressing business was established by Mr Roberts for the benefit of both of them, that Ms Raffermati financed the establishment of the business from her own monies together with funds loaned by Mr Roberts and that she established the business by her own work. It is further averred that Mr Roberts offered to incorporate the Company for her as a vehicle for the business, and represented to her that they would both be shareholders and that she should leave the incorporation of the business entirely to him.

  13. By paragraph 3 it is averred that, unbeknownst to Ms Raffermati, Mr Roberts placed the Company into his sole name as shareholder and director and that she did not discover the truth of this until about May 2014.

  14. By paragraph 4 it is alleged that, in the premises, the representations made by Mr Roberts that the business would be placed in their joint names were false and made dishonestly.

  15. By paragraph 5 it is alleged that Mr Roberts acted in breach of contract, in incorporating the company with him as the sole shareholder. A claim for specific performance of that agreement is asserted in paragraph 8.

  16. By paragraph 6, it is further averred that between 2008 and 2014 Ms Raffermati built up the business by her own work without assistance from Mr Roberts and in reliance upon the representations made to her that she owned the company. In the premises it is averred that Mr Roberts holds his shares on trust for her or for both of them.

  17. An alternative claim is made in paragraph 7 that the hairdressing business established by the company was beneficially owned by her and not by the company. The basis of this plea appears to be that where the company deliberately misrepresented to her, by its sole legal shareholder, that it was a company she owned, then the transfer of any business that she established to the claimant company was void.

  18. According to a note prepared by the Company's solicitors of the hearing before the Judge, Ms Raffermati's counsel had indicated to the Judge that Ms Raffermati did not rely on each of paragraphs 3 to 8 inclusive. Mr Routley, appearing for Ms Raffermati before me, accepted that he had gone through the exercise, before the Judge, of identifying paragraphs in the defence and counterclaim which were no longer relied upon, and that these included the paragraphs asserting claims for breach of contract, and for fraudulent misrepresentation. He was unsure whether he had expressly abandoned paragraph 6 of the defence (which asserted a claim that the shares of the Company were held on trust for Ms Raffermati or for Ms Raffermati and Mr Roberts together).

  19. As I have already noted, the only relief asserted in the prayer in the counterclaim is for a declaration that Ms Raffermati is beneficially entitled to the hairdressing business, and accounts and enquiries flowing from that declaration. The only pleaded basis for this relief is that in paragraph 7, which Mr Routley accepted before me had been abandoned before the Judge. Importantly, the counterclaim includes no claim for a declaration that the shares in the Company were held on any trust.

    The Particulars of Additional Claim

  20. By paragraph 3 of the Particulars of Additional Claim, Ms Raffermati states her case as being that Mr Roberts holds the shares in the company on trust for her.

  21. By paragraph 8 it is asserted that there was an agreement reached between Ms Raffermati and Mr Roberts that they would be equal shareholders in the company. It is further pleaded that Mr Roberts represented to her that in incorporating the company he would arrange for both of them to be shareholders.

  22. By paragraph 10 it is asserted that when Mr Roberts incorporated the company...

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