Aktieselskabet Dansk Skibsfinansiering v. Wheelock Marden & Co. Ltd. and Others

CACV000104A/1994

1994, Nos 24, 25, 36, 37 & 104
(Civil)

H E A D N O T E

If done with due regard to the rules of pleading, it is permissible to plead that a person was a de facto and/or "shadow" director of a company at the same time.

1994, Nos 24, 25, 36, 37 & 104
(Civil)

IN THE COURT OF APPEAL

_______________

________________

________________

Coram: Bokhary, J.A. and Mayo, J.

Dates of hearing: 8, 9, 10 and 11 November 1994

Date of judgment: 17 November 1994

________________

J U D G M E N T

________________

Bokhary, J.A.:

INTRODUCTION

1. These interlocutory appeals and cross-appeals were first called on in July this year before a division of this Court in which I sat with Liu J. By our judgment delivered on the 13th of that month, we disposed of so much of Civil Appeals Nos 24 and 25 of 1994 as pertained to conspiracy and misrepresentation. Everything else was adjourned, in the hope that the same would come before the same two judges but without any requirement to that effect.

2. The background to this matter is outlined in our judgment of July 13, 1994. But to save anyone reading this judgment having to turn to that one, I will repeat that outline, which is as follows.

3. ADS, which is how we refer to the plaintiff corporation, is a Danish financial institution which made loans to two Hong Kong companies to enable each of them each to purchase a bulk carrier to be built at the same Danish shipyard.

4. A vital feature of the complex arrangements entered into was that the loans were guaranteed by the borrowers' common parent, Wheelock Maritime International Ltd, a Hong Kong listed company which, through its many subsidiaries, owned and operated a sizeable merchant fleet.

5. In the result, the vessels were delivered, but the borrowers defaulted, while Wheelock Maritime became insolvent, went into liquidation and left its guarantees unhonoured.

6. Left out of pocket to the tune of about $542 million including interest to date, ADS started two actions: one by originating summons in 1988 and the other by writ in 1989. Those actions have been consolidated. ADS has delivered a consolidated statement of claim. That pleading has been amended. It shows that the persons sued by ADS are a company and a number of individuals. The company is Wheelock Marden & Co. Ltd, a Hong Kong listed company and conglomerate, which had been Wheelock Maritime's general manager, secretary and parent. Additionally, as we shall see, there is an issue, on the pleadings as they presently stand, of whether Wheelock Marden had also been a de facto director of Wheelock Maritime.

7. Of the 11 individuals sued, only nine remain. That is because: Mr Hussey who had been the 8th defendant has died; and the consolidated action has been discontinued as against Mr Ying who had been the 11th defendant.

8. The individual defendants had all been directors of Wheelock Maritime at the material time. The 2nd to 7th defendants were also directors of Wheelock Marden at the same time.

9. By our judgment of July 13,1994, reversing a refusal by Barnett J, we ordered the striking out of: (1) the whole of the conspiracy plea; and (ii) the plea in misrepresentation save as against the two defendants facing that plea who did not seek to strike it out, namely Mr Brothers, the alleged author, and Wheelock Marden, who is said to be vicariously liable for Mr Brothers's alleged misrepresentations.

10. That leaves these pleas in the Amended Consolidated Statement of Claim: (i) fraudulent trading against all the remaining defendants; and (ii) misrepresentation against Mr Brothers and Wheelock Marden.

11. As to fraudulent trading, ADS pleads that the guaranteed indebtedness was incurred and allowed to continue when, as it did not know but the defendants knew or ought to have known, Wheelock Maritime was insolvent, or at least had no reasonable prospect of honouring its guarantees.

12. As to the misrepresentation plea, what is left is as follows. Mr Brothers and vicariously Wheelock Marden induced it to enter into the arrangements under which the loans were made and the vessels were delivered. They so induced it by misrepresenting that Wheelock Maritime's financial position was far stronger than it really was: doing so fraudulently; failing that, recklessly; or, at the very least, without reasonable grounds.

13. Conspiracy has gone.

THE REMAINING APPEALS AND CROSS-APPEALS

14. In order of the relative importance ascribed to them by the parties, the remaining appeals and cross-appeals are as follows:-

(1) Wheelock Marden's appeal (in Civil Appeal No. 104 of 1994) against the grant (by Barnett J's Order of March 31, 1994) of leave to ADS to amend the Consolidated Statement of Claim to include an averment (in paragraph 1.4) that Wheelock Marden was a de facto director of Wheelock Maritime at the material time.

(2) ADS's cross-appeal (in Civil Appeal No. 24 of 1994) against the striking out (by Barnett J's Order of January 19, 1994) of paragraph 30 of the Consolidated Statement of Claim, which paragraph alleged "fraudulent purposes within the Companies Ordinance (1975 and 1984)".

(3) ADS's cross-appeal (in Civil Appeal No. 25 of 1994) against such striking out.

(4) ADS's appeal out of time (in Civil Appeal No. 36 of 1994) against Barnett J's refusal (by his judgment delivered on October 20, 1993) to order certain further and better particulars of Wheelock Marden's Defence.

(5) ADS's appeal out of time (in Civil Appeal No. 37 of 1994) against Barnett J's refusal (by that judgment) to order identical further and better particulars of the individual defendants' Defence.

(6) Wheelock Marden's appeal (in No. 24) against the refusal (by Barnett J's above-mentioned Order of January 19, 1994) to order certain discovery in its favour.

(7) The individual defendants' appeal (in No.25) against the refusal (by that Order) to order identical discovery in their favour.

15. We agreed to hear the remaining appeals and cross-appeals in that order of priority: first (1) on its own; secondly (2) and (3) together; thirdly (4) and (5) together; and finally (6) and (7) together.

16. On this occasion: Mr Bunting represents Wheelock Marden, which was represented by Mr Heslop and Mr Scott in July; and Mr Kotewall leads Mr Chua instead of Mr Barma for the individual defendants. Mr Cullen and Mr Smith who represented ADS in July still represent it now. As on the earlier occasion, we have been greatly assisted by all counsel and are most grateful to them.

DE FACTO DIRECTORSHIP: Appeal (No.104) by Wheelock Marden

17. The question of de facto directorship arises in the context of the question of fraudulent trading.

Fraudulent trading: section 275

18. ADS's case in fraudulent trading is based on section 275 of the Companies Ordinance, Cap.32.

19. Until that section was amended on August 31, 1984, subsection (1) thereof read:-

"If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the Official Receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any of the directors, whether past or present, of the company who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct."

And it included a subsection (5) which read:-

"For the purposes of this section, 'director' includes any person in accordance with whose directions or instructions the directors of a company have been accustomed to act."

20. As a result of the amendment of section 275 on August 31, 1984, subsection (1) thereof reads:-

"If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose, the court, on the application of the Official Receiver, or the liquidator or any creditor or contributory of the company, may, if it thinks proper so to do, declare that any persons who were knowingly parties to the carrying on of the business in manner aforesaid shall be personally responsible, without any limitation of liability, for all or any of the debts or other liabilities of the company as the court may direct."

And subsection (5) thereof has been deleted.

21. ADS's contention is that even for the period before August 31, 1984, a person could be liable under section 275 even if not a director whether de jure, de facto or "shadow". Wheelock Marden contends to the contrary.

22. Originally, ADS's case was that even if Wheelock Marden were right on that issue as to the ambit of section 275, Wheelock Marden was nevertheless caught as a shadow director by subsection (5). ADS's pleading as to that is contained in paragraph 1.3 of the Consolidated Statement of Claim, which reads:-

"For the purpose of Section 275(5) of the Companies Ordinance (1975) [Wheelock Marden] was a person in accordance with whose directions of instructions [the directors of Wheelock Maritime] were accustomed ... to act."

23. Then, by the amendment which the judge allowed and is now attacked on appeal, an averment that Wheelock Marden had been a de facto director of Wheelock Maritime was added as one further or in the alternative to the averment of shadow directorship. That amendment is contained in paragraph 1.4 which reads:-

" Further or in the alternative, at all material times [Wheelock Marden] was a director of [Wheelock Maritime] within the meaning of the said Ordinance in that it occupied the position of director.

PARTICULARS

The Plaintiff refers to the requests numbered 1(1) to (3), (5), (6) and (9) made by [Wheelock Marden] under Paragraph 1.3 of the Consolidated Statement of Claim for Further and Better Particulars thereof. [ADS] relies upon all the acts, decisions, instructions and directions of [Wheelock Marden] as set out in the answers and further or supplemental answers thereto numbered (1), (3), (3A), (5), (7), (8) and (10) to (18) inclusive. [ADS] also relies upon the powers possessed by, and the duties owed to, [Wheelock Marden] in relation to the conduct of the affairs of [Wheelock Maritime] as particularised in the answers or further or supplemental answers thereto numbered (9) and (19) to (26) inclusive."

Wheelock Marden's primary argument

24. For Wheelock Marden, Mr Bunting's primary argument is that the addition of the de facto directorship plea as one further and in the alternative to the shadow directorship plea is impermissible. That, Mr Bunting urges, is so for two reasons. First, because those two forms of directorship are inherently mutually exclusive concepts. Furthermore, because if someone was a de facto director (Wheelock Marden conceding for the purpose of this appeal only that de facto directors are caught by subsection(1) of section 275) then there can be no scope left for his being caught by subsection (5) as well.

De facto and shadow directors

25. As a matter of commercial reality, the general statement that de facto and shadow directors are very different is one which, in my view, can safely be made. What they share in common is that they are not de jure directors (as validly appointed directors are called to distinguish them from de facto and shadow directors).

26. But what makes someone a de facto director is his assumption of functions which only a de jure director can properly perform. While what makes someone a shadow director is his directing the directors, whether de jure or de facto, how to act in relation to the company's affairs, so that it becomes their custom so to act in accordance with his directions rather than their own judgment.

27. It follows that, in general at least, a de facto director takes on the appearance of a director, by which I mean one validly appointed as such, while a shadow director does not take on the appearance of a director in any shape or form, choosing to remain, as his name implies, in the shadows - from where he pulls the strings like a puppeteer.

28. That is generally so. But would it be prudent to insist that it must always be so? I do not think that it would be. It would, in my view, be going too far: further than Millett J, a judge of very considerable experience in these matters, was prepared to go in Re Hydrodan (Corby) Ltd [1994] BCC 161 when he said (at p.163C) that de facto and shadow directorships "are alternatives, and in most and perhaps all cases are mutually exclusive". (My emphasis).

Conceivably both at the same time

29. Although not validly appointed a director, with sufficient power or influence, a person, either human or corporate, might well succeed in barging his or its way on to the board of a company: and not only exercise the functions of a director but even turn the other directors into puppets.

30. Conceivably, such a person could be a de facto and shadow director at the same time. His shadow directorship might be less shadowy than such directorships usually are. Or one might say that it was more blatant. Either way, it must be remembered that the expression "shadow director" is merely a convenient one to describe a person in accordance with whose directions or instructions the directors of a company have been accustomed to act. Such a person generally stands in the shadows. But he cannot escape liability for what he does just because he does it openly.

In the alternative at least

31. Moving on, I would add this. Even if, contrary to my view, it would be prudent to go so far as to say that de facto directorships and shadow directorships must always be mutually exclusive, that would not mean that they cannot be pleaded in the alternative at least. If a pleader is confronted by circumstances in which each is a reasonable possibility, he is entitled to plead them in the alternative, and he would be wise to do so.

32. Of course, as with any other set of alternatives - indeed as with anything else at all - he must not plead them in such a way as to create anything which is embarrassing or which otherwise offends against the rules of pleading. But all of that is quite apart from Wheelock Marden's primary argument, which I summarised earlier.

33. I should just mention that Mr Bunting indicated that he was not interested in merely reducing the shadow directorship plea to one in the alternative, as opposed to one further and in the alternative, to the de facto director plea.

34. Finally in this connection, I would mention Re Tasbian Ltd (No.3) [1993] BCLC 297. There the Court of Appeal in England was concerned with the position of a Mr Nixon against whom the Official Receiver had obtained leave to seek a disqualification order out of time. Speaking with his vast experience in these matters, Balcombe LJ, with whose judgment the other two members of the Court agreed, observed (at p.304 f-g) that "the evidence disclosed an arguable case that Mr Nixon was either a shadow or a de facto director" (My emphasis).

35. In my judgment, Wheelock Marden's primary argument fails.

Wheelock Marden's secondary argument

36. That brings us to the secondary argument on de facto directorship advanced by Mr Bunting on Wheelock Marden's behalf. It is that none of the particulars put forward by ADS for the purpose of supporting that plea are capable of supporting it.

37. Shortly stated, those particulars consist of:-

(1) What ADS says were directions and instructions by Wheelock Marden in relation to the conduct of Wheelock Maritime's affairs in accordance with which directions and instructions the Wheelock Maritime board was accustomed to act.

(2) What ADS says were acts done and decisions made by Wheelock Marden in relation to the conduct of Wheelock Maritime's affairs which only a director of Wheelock Maritime could properly do and make.

Acts and decisions

38. I will deal with those two categories in reverse order. Plainly, if they went to anything, those acts and decisions would go to de facto directorship.

Directions and instructions

39. As far as the directions and instructions are concerned, ADS's case runs thus. Essentially, the directions and instructions concerned resolutions of Wheelock Maritime's board.

40. If the correct view at the end of the trial is that Wheelock Marden issued those directions and instructions from the outside, then it would have done so as a shadow director.

41. But if the correct view at the end of the trial is that Wheelock Marden issued those directions and instructions notionally from within the boardroom - and as if it were a director in a position of dominance - then it would have done so as a de facto director.

42. Both possibilities are real on the same basic facts. And running them in the alternative is permissible.

43. Running two such possibilities on the same facts is not, in my view, inherently objectionable. And I note that Balcombe LJ did not think so either when deciding Re Tasbian Ltd (No.3) (supra). At p.304 b-c, he said: "Mr Nixon decided which cheques drawn by the company could and which could not be submitted to the bank. This meant that he was concerned with which of the company's creditors were paid and in which order, and to that extent - I say no more than that - that he was able to control the company's affairs. This seems to me to raise at least an arguable case that he was either a shadow or a de facto director."

No embarrassment or other infringement

44. We have been taken to the detailed particulars relied upon. As I see it, they are capable of supporting the de facto directorship plea and doing so without embarrassment or any other infringement of the rules of pleading. If done with due regard to the rules of pleading, it is permissible to plead that a person was a de facto and/or "shadow" director of a company at the same time. In my judgment, Wheelock Marden's secondary point also fails.

Dismissed

45. I would dismiss Wheelock Marden's appeal (No.104) on de facto directorship.

THE FRAUDULENT PURPOSES PLEA: cross-appeals (Nos 24 & 25) by ADS

46. Turning to ADS's cross-appeals (Nos 24 & 25) against the striking out of paragraph 30 of the Consolidated Statement of Claim, which paragraph contains its fraudulent purposes plea, I begin by quoting that paragraph. It said:-

"Further and/or alternatively, to the extent that it was the case or can be inferred from all the aforesaid that the Defendants were acting contrary to the interests of the Plaintiff and/or the Creditors generally and/or were acting in their own interests and not those of WMI (whether to try and protect their position on a charge of fraudulent trading, or to protect their position financially or otherwise) such were fraudulent purposes within the Companies Ordinance (1975 and 1984)."

(The initials "WM1" denote Wheelock Maritime)

Three triggers

47. There are three things each of which triggers the court's power under section 275(1) of the Companies Ordinance, Cap.32. Each has to do with what appears in the course of the winding up of a company. The first is the carrying on of any business of the company "with intent to defraud creditors of the company." The second is the carrying on of any business of the company "with intent to defraud ... creditors of any other person." And the third is the carrying on or any business of the company "for any fraudulent purpose."

48. It is the third trigger which the pleader invoked by paragraph 30.

Requests and answers

49. That paragraph drew this request for particulars (being Request 279):-

"Of 'the Defendants were acting contrary to the interests of the Plaintiff and/or the Creditors generally and/or were acting in their own interests and not those of WMI'

(1) In relation to each Defendant, state each and every interest of the Plaintiff it is alleged the Defendant acted contrary to.

(2) In relation to each creditor, give full particulars mutatis mutandis as in Request (1) above.

(3) In relation to each Defendant, state each and every interest of the Defendant's own it is alleged the Defendant acted in and how the same conflicted with that of the Plaintiff.

(4) In relation to each Defendant, state each and every interest of WMI it is alleged the Defendant was not acting in."

50. ADS's initial answer failed to give the particulars requested; and another division of this Court ordered ADS to furnish those particulars.

51. Thus ordered, ADS gave this answer (being Answer 279:-

"(1) & (2) The financial interests of the Plaintiff and the other creditors of WMI as creditors.

(3) As to the First Defendant, its own financial interests. As to those Defendants who were shareholders in the First Defendant, their own and their families' financial interests and that of the First Defendant. As to the other personal interests of the Defendants, see the answer to Request 275.

(4) As to each Defendant, each and every interest."

52. As can be seen, that answer incorporates the answer to another request. So we have to look at: the paragraph to which that other request relates; that other request itself; and the answer thereto. They are: paragraph 28 of the Consolidated Statement of Claim; Request 275; and Answer 275.

53. Paragraph 28 reads:-

"Further and/or alternatively, for their own purposes or purposes unknown the Defendants in late 1983/early 1984 misrepresented the position of the Plaintiff thus inducing the said releases and deferments of interest installments at a time when they knew or ought to have known or were reckless as aforesaid."

PARTICULARS

(1) The Plaintiff repeats Paragraph 2.5 above and the particulars thereunder;

(2) The Plaintiff will also refer to and rely on all the facts and matters pleaded in paragraphs 3 to 11 and 13 to 22 above;

(3) It was the Fifth Defendant who negotiated the said releases and deferments and he expressly misrepresented the position and did not make plain the true state of WMI as particularised above."

54. Request 275 reads:-

"Of 'for their own purposes or purposes unknown the Defendants in late 1983 early 1984 misrepresented the position of the Plaintiff'

(1) State the nature of the Plaintiff's case as to the facts and matters referred to by the expression "their own purposes", identifying each such purpose relied upon.

(2) In relation to each Defendant, state all material facts and matters in respect of each such purpose identified as being relied upon in support of the allegation that such purpose was their own.

(3) Identify to whom the purposes were unknown and if and insofar as such purposes were known to any person or body, identify each such person or body.

(4) State the position of the Plaintiff which it is alleged the Defendants misrepresented.

(5) Give full particulars of the said position identifying all facts and matters upon which it is intended to rely."

55. And Answer 275 reads:-

"(1) and (2) The nature of the Plaintiff's case is that the Defendants did not act in the best interests of WMI and its creditors, but acted for purposes of their own. The Plaintiff avers that their own purposes were as follows:

(i) The Second to Seventh Defendants were seeking to protect their status and position as directors of a publicly owned conglomerate company, carrying on business in the shipping, real estate and trading sectors. The Second to Twelfth Defendants were seeking to protect their status and position as directors of a major Hong Kong publicly owned shipping company;

(ii) Those Defendants who were shareholders, or members whose family were shareholders of the First Defendant, were seeking to protect the value of those shareholdings. The best particulars that the Plaintiff can give are that the Second and Sixth Defendants had beneficial shareholdings in the First Defendant, as had the wives of the Sixth and Seventh Defendants.

(iii) the Defendants were seeking to prevent the First Defendant suffering financial loss.

As to (ii) and (iii), the possibility of cancelling the Dalian newbuildings was under active consideration (as particularised in the answer under Request 216). However, the Defendants were aware that the Dalian yard considered that it was dealing with the First Defendant itself, and in view of the possible adverse consequences to the First Defendant, the possibility of cancelling the Dalian newbuildings was abandoned even though this was necessary for the survival of WMI as advised by S&C at the Board

Meeting of WMI on 9th February 1993. In a Memorandum to Directors of the First Defendant from the Fifth Defendant dated 8th February 1983 the Fifth Defendant reported on meetings that had taken place between himself, the Fourth Defendant and officials of CSSC during the previous week concerning the Dalian newbuildings. The Fifth Defendant stated in the said Memorandum that failure to perform under the Dalian contracts would have far reaching consequences for the First Defendant as he had no doubt that it was with the First Defendant that CSSC considered they were dealing. At the Shipping Committee Meeting on 6th July 1983 the Fifth Defendant again advised that cancelling the Dalian newbuildings would have far reaching effects and the Twelfth Defendant said that the Chinese did not differentiate between WMI and the First Defendant. It was thereupon agreed that no more money should be spent on the Dalian newbuildings unless and until the Board of WMI gave their specific direction to the contrary. These are the best particulars the Plaintiff can give.

(3) These purposes were unknown to the Plaintiff and WMI's creditors. The purposes were known to the Defendants.

(4) "The Plaintiff" is an error for WMI.

(5) The true financial position of WMI is set out in items 1 to 257 in Schedule A and the Balance Sheets in Schedule B(3), (4), (6) and (7)."

(The initials "S & C" denote Schroders & Chartered Ltd, while the initials "CSSC" denote the China State Shipping Corp.)

Cutting through

56. To be understood, complex cases often require very detailed particulars. But then there is the danger of getting lost in the details. And sometimes you have to cut through them to get to the essentials.

57. That has to be done here. Doing it, I begin by deciding what questions ADS must answer in order to comply with Request 275. Then I decide what answers emerge from the particulars which ADS has in effect supplied when Answer 275 is looked at realistically in the context of the pleadings as a whole.

58. What I get from doing that are these questions and answers:-

(1) Q. What were the interests of ADS contrary to which each defendant had acted?

A. ADS's interest not to rely on guarantees from an insolvent company (Wheelock Maritime) or otherwise deal with it.

(2) Q. What were the interests of each creditor contrary to which each defendant had acted?

A. Each creditor's interest not to deal with an insolvent company (Wheelock Maritime).

(3) Q. What were the interests of its or his own in which each defendant had acted?

A. The interest which each of them had in an insolvent company (Wheelock Maritime) being given a chance, at the expense and risk of creditors, to become solvent again rather than go into liquidation. They had that interest in this way. Wheelock Marden, a shareholder in Wheelock Maritime, would lose its investment if the company went into liquidation. Those defendants who owned shares in Wheelock Marden would suffer loss to the extent that those shares would lose their value as a result of Wheelock Marden losing that investment. All the individual defendants were directors of Wheelock Maritime. To their detriment in the business community, they would lose their status as such directors if Wheelock Maritime went into liquidation. The 2nd to 7th defendants were also directors of Wheelock Marden. To their detriment in the business community, their status as such would diminish if Wheelock Maritime - a listed company of which Wheelock Marden was the general manager, secretary and parent - went into liquidation.

(5) Q. How did each of those interests conflict with ADS's interest.

A. The defendants' interests conflicted with ADS's interests in this way. For the reasons given in the preceding answer, it was in the defendants' interests that Wheelock Maritime be given the chance referred to in that answer. But that was contrary to ADS's interests because it was at the risk and expense of Wheelock Maritime's creditors, of which ADS was one.

Viable and adequately pleaded

59. In my judgment, the fraudulent purposes plea contained in paragraph 30 is a viable and adequately particularised one.

Judge's reason for striking out

60. The judge gave only one reason for striking out that paragraph. This is how he articulated that reason:-

" I make no apology for saying that the mind boggles at the attempts the Plaintiff has made to fix the Defendants with some form of ulterior personal motive. I have no hesitation in saying they are wholly untenable. On perhaps understandable suspicion, the Plaintiff has built speculation and supposition. The edifice, in my judgment, lacks any substance. No sufficient or satisfactory particulars have been provided. The plea must go."

61. I do not share that view of the judge's.

Other reasons urged for striking out

62. Whether one looks at the judge's reason on its own or along with all the reasons urged by Mr Bunting for Wheelock Marden and Mr Kotewall for the individual defendants, there is no justification for striking out paragraph 30.

Allowed

63. I would allow ADS's cross-appeals (Nos 24 & 25) against the striking out of paragraph 30 of the Consolidated Statement of Claim, setting aside the judge's order that it be struck out.

FURTHER & BETTER PARTICULARS: appeals out of time (Nos 36 & 37) by ADS

64. As to further and better particulars, I have seen in draft the judgment which my brother Mayo is about to read.

65. My brother Mayo takes the view that the judge's decision should be upheld save to a very limited extent. I agree.

66. In so far as we are upholding the judge's decision, I do not see any need to say more than this. There, the worst that can be said of the judge's decision is that it is in the "grey area". That is not enough to upset the decision of a judge in the discretionary area of a case for which he must have acquired a good "feel".

67. In so far as we are reversing the judge, all I wish to say is as follows. As to request 103 directed to Wheelock Marden and the identical request 99 directed to the individual defendants, the defendants concede that those requests must now be answered because the judge, misled by a clerical error in the defendants' pleadings, was wrong in thinking that they had already been answered.

68. And as to item (3) of request 90 directed to Wheelock Marden and the identical item (3) of request 86 directed to the individual defendants, it is plain that the defendants put forward gross figures when they should have put forward net figures. Gross sale prices will not suffice. Instead, the net sale prices, arrived at after deducting expenses and encumbrances, must be given. That is obvious.

DISCOVERY: appeal (No.24) by Wheelock Marden & appeal (No.25) by the individual defendants

69. As to discovery, the parties have come to terms, and they will submit a draft consent order.

Mayo, J.:

70. I have had the benefit of seeing in draft my Lord, Bokhary JA's judgment. I am in complete agreement with the views he has expressed and the conclusions which have been reached.

71. As to Civil Appeals 36 & 37 of 1994 I would state.

72. This is the Plaintiff's appeal against the order of Barnett J. of the 20th October 1993 when he declined to order that the Defendants should furnish various Further and Better particulars of their Defences. The requests were similar for the 1st Defendant and the other Defendants and the decisions made by Barnett J. in respect of the requests were the same. I will accordingly deal with the requests as they were raised by the 1st Defendant and our conclusions will be equally applicable to the other Defendants.

73. The 1st Request is request 33(5) and (6).

"Request

33. Please give full details of the liquidity problems experienced by WMI and, in particular, please state:

(1) what such problems were at each material time;

(2) from what such problems were apparent;

(3) what the impact of the problems was;

(4) when the impact of the problems was first felt;

(5) the extent to which WMI had insufficient cash to meet its outgoings and/or to pay its debts as they fell due;

(6) full details of the outgoings and debts that WMI was unable to meet or had difficulty in meeting, when it was unable to do so or experienced such difficulties and the steps it was forced to take to alleviate such problems."

74. The Defendants claimed that the Plaintiffs were not entitled to all these particulars. Barnett J. considered that 33(5) & (6) were requests for evidence.

75. Para. 5.1 of the Consolidated Statement of Claim is as follows:-

"5.1 The financial difficulties facing WMI during this period were much more than a temporary cash flow problem or liquidity crisis."

76. The Defence to this was set out at some length. It set out a positive case. It referred to WMI's trading situation and concluded with an assertion to the effect that the impact of liquidity problems became serious in January and February 1983.

77. In considering the approach to be adopted in deciding the extent to which it is necessary to provide particulars, it is desirable to take cognisance of the principals referred to on p.8 of this Court's judgment dated the 13th July 1994, when it was dealing with the first limb of these appeals.

" What those things are is to be gathered from the decided cases. That exercise has been performed by the learned editors of the 1993 Supreme Court Practice. And, as one sees from note 18/12/2 at pp 307-308 of volume 1 thereof, the things which properly particularised pleadings must do are to:

(1) inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) prevent the other side from being taken by surprise at the trial;

(3) enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) limit the generality of the pleadings, the claim and the evidence;

(5) limit and define the issues to be tried, and as to which discovery is required; and

(6) tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings)."

78. The first thing which must be said concerning this request is that the financial situation of WMI was a material fact and not simply an issue which would be dealt with in the evidence.

79. Mr. Cullen submitted that this is a matter of crucial importance and that Expert reports are being prepared and that it is contemplated that they will be exchanged in February 1995.

80. It would obviously be desirable that the Plaintiffs' expert should have these particulars when he is preparing his report. It is quite possible that the Experts might be able to agree their evidence in this connection, thus obviating the necessity for ventilating the issue at the trial.

81. Mr. Kotewall adopted the submissions made by Mr. Bunting and it is accordingly convenient to refer to the composite submissions as 'Defence Counsel's' submissions.

82. They submitted that as the orders came within the ambit of the Judge's discretion, we should be slow to interfere with his decision. Unless it could be clearly demonstrated that he was in error, the order should stand. I accept that this is right.

83. Defence Counsel contended that the requests in 33(5) and (6) went beyond the scope of what had been pleaded. However, more important than this they referred to the considerable difficulties which would be encountered if the Defendants were required to provide these particulars. They went so far as to argue that it would be oppressive to require this.

84. The main complaint was the nebulous nature of the requests. To what extent, would it be necessary for the Defendants to give particulars of the insufficiency of cash to meet its on going commitments. The period under consideration was the months of January and February 1983. Almost certainly the financial situation of WMI would vary from day to day or perhaps even from hour to hour. It would also be difficult to reconstruct the overall situation throughout this period.

85. 33(6) requires full details of the outgoings and debts that WMI was unable to meet during the period. This request would almost inevitably require a reconstruction of the affairs of WMI at that time, and it would involve questions of subjective judgments as to whether difficulties would be encountered in respect of particular debts.

86. Mr. Cullen's answer to this was that he was concerned with the positive case being put forward by the Defendants. The Directors must have specific information available to them, to enable them to conclude that liquidity problems were impacting on them seriously.

87. I consider that the question as to whether or not these requests should be complied with came within the scope of the judge's discretion. In particular I accept the validity of the submissions made by Defence Counsel concerning the difficulty in providing the particulars sought.

88. Although he only gave a brief reason for declining to order that the particulars should be given, I do not think that the judge's discretion should be interfered with. I would uphold his order on these requests.

89. The next requests are requests 89, 91, 93 and 94.

"Request

89. Please state the extent to which and when each step taken improved the financial position of WMI."

91, 93 and 94 were similar to 89.

The Plaintiffs' allegation was:-

"16.1 The financial difficulties facing WMI during this period were much more than a cash problem or liquidity crisis."

90. The period referred to was the period prior to 22nd March 1984.

91. The Defendants Counsel contended that the Plaintiff was not entitled to the particulars sought and Barnett J. upheld this view of the matter. He did so on the same basis as in request 33 (5) & (6) that the requests were for evidence.

92. Again, the Defendants pleaded a positive case and at paragraph 102 gave details of the measures which had been taken to ameliorate the position.

93. Mr. Cullen argued that the particulars requested were part of the factual matrix of this litigation. It was undoubtedly the case that the interests of justice would be best served if the Expert previously referred to had this information in sufficient time to enable him to embody it in the report which it was proposed should be exchanged. There was then a possibility that the evidence may be agreed.

94. There was a further dimension here. Para. 102(6) of the Defence refers to measures taken to alleviate the financial situation by reference to U.K. Taxation. It was obviously desirable that the Expert should have prior notice of the steps taken so as to enable him to comment meaningfully on the measures which were taken.

95. Defence Counsel raised similar objections to these requests as the previous ones.

96. It was very difficult for the defence to know how these requests should be dealt with. The cash flow situation would continually fluctuate. At what point of time should the situation be encapsulated.

97. I did not have before us details of what records had been kept or how much work would need to be done to obtain all the particulars which may be required.

98. This was a matter coming within the scope of the Judge's discretion and I do not consider that I would be justified in interfering with the manner in which he exercised it.

99. The next request is request 90.

"Request

90. Please state precisely what liquidity was generated by each of the transactions pleaded in the Particulars to the sub-paragraph and:-

(1) what form such liquidity took;

(2) when it was received;

(3) how large it was in monetary terms."

100. The particulars sought relate to para. 102 of the Defence. The Defendants did supply some particulars. However, complaint is made that the particulars given concerning the 14 vessels which were sold were deficient in that reference was made only to the "sale value". It was not readily apparent how this information would be of assistance as the vessels would probably have been subject to incumbrances. The actual alleviation of the financial position was not apparent.

101. I do not think that the Plaintiff's are entitled to detailed particulars concerning the extent to which the sales improved the liquidity of WMI for much the same reasons as I have given in respect of the other requests. However, having regard to the way in which the request has been framed, I do consider that the Defendants should give sufficient information to show what were the net proceeds of sale of each of these vessels. These particulars must be given.

Bokhary, J.A.:

RESULT

102. In the result:-

(1) Wheelock Marden's appeal (No.104) on de facto directorship is dismissed. Accordingly the de facto directorship plea remains.

(2) ADS's cross-appeals (Nos 24 & 25) against the striking out of paragraph 30 (fraudulent purposes plea) are allowed. Accordingly, the fraudulent purposes plea is reinstated.

(3) ADS's appeals out of time (Nos 36 & 37) on further and better particulars are allowed in part as indicated. Accordingly: (i) item (3) of request 90 directed to Wheelock Marden and the identical item (3) of request 86 directed to the individual defendants must be answered again, this time stating the net sale prices arrived at after deducting expenses and encumbrances; (ii) request 103 directed to Wheelock Marden and the identical request 99 directed to the individual defendants must be answered; and (iii) the remainder of the judge's refusal of further and better particulars stands.

(4) As to discovery, the parties will submit a draft consent order embodying the terms which they have agreed.

Representation:

Mr M. Bunting (instructed by Messrs Richards Butler) for Wheelock Marden (appellant)

Mr R. Kotewall QC and Mr G.H. Chua (instructed by Messrs Alsop Wilkinson) for the other defendants (appellants)

Mr T. Cullen QC and Mr Clifford Smith (instructed by Messrs Holman) Fenwick & Willan) for ADS (respondents)