Friends of Burbage School Ltd. v Woodhams [2012] EWHC 1511 (QB)

[2012] EWHC 1511 (QB)Case No HQ11X01698
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 31 st May 2012
Before
HIS HONOUR JUDGE McMULLEN QC(sitting as a Judge of the High Court)
Between
FRIENDS OF BURBAGE SCHOOL LIMITEDClaimantTONY JAMES WOODHAMSDefendant
Ms Gemma Witherington (instructed by A City Law Firm) for ClaimantMr Marc Glover (instructed by Rainer Hughes) for DefendantHearing Hearing dates: 10 th, 11 th, 14 th, 15 th and 16 th May 2012
Judgment
[1]This is a claim for an account arising out of breach of fiduciary duties and breach of contract. It is brought by a charity, Friends of Burbage School Ltd, a company limited by guarantee, against Mr Tony Woodhams who was, for about a year, one of its trustees. I will refer to the parties as FOBS, the claimant, and Mr Woodhams, the defendant. The claimant has throughout been represented by solicitors and by Miss Gemma Witherington of counsel. The defendant was represented at the last minute by solicitors and Mr Marc Glover of counsel. In pre-action disclosure proceedings and in the case management proceedings in this case, the defendant represented himself, although in the background he had the assistance of Mr Procter, a retired solicitor assisting him as a McKenzie friend.[2]In substance, the claim is for a shortfall in the takings at two charity events where funds were raised for the claimant and for which it is claimed the defendant has failed to give an account or is in breach of contract and should pay damages. The claim, or at least the amount claimed, is put in four different ways. That is not a criticism, but reflects the complexity of the evidence in this case.

The facts

[3]Burbage School is a junior and infants school in Hackney, East London. It has associated with it a charity. Quite separate from that is the claimant charity, which was set up in October 2006. I have not seen the deed of trust, but am told that the purpose of the trust was to raise money so that funds could be made available for the demolition of certain buildings and the erection of buildings for a nursery school. The project was to be about £500,000. A group of people came together who were closely involved with the school and they became the trustees.[4]On 11 December 2006, the first act of the charity was to put on a fundraising event at the Hilton Hotel, Park Lane, known as the “Ice Ball”. It was highly successful and raised £164,000, clearing after expenses £106,000. An event on the night was an auction for prizes donated by various supporters. Mr Woodhams was, through his company, Concierge, organising a party at which Mr David and Mrs Victoria Beckham would attend on 14 December 2006. Tickets for that event cost £250, and a pair was donated by Mr Woodhams. In open bidding conducted by an experienced auctioneer, the lot was knocked down to the defendant for £5,000. My reasoning for this finding will be explained shortly. It was never paid over to the charity. Mr Woodhams’ role at the Ice Ball was that, through Concierge, he had procured the ability to collect credit and debit card payments electronically. These are called merchant services and Concierge had the account, the software and the machinery. Processing of these payments was done on the night by Kirsty Pitman and others, who were employees of the defendant’s company, Concierge. All other management of the event was in the hands of Mr Mark Cann, whose company was paid for his services.[5]There are various records of the amount taken on the night, including the amount taken by auction. They do not tally. In particular, there is no itemised record of the amount paid by each bidder in the auction taken on his/her credit debit card. This is why there is a claim for an account. It is sufficient at this stage to note that during the early part of 2007 the defendant was acknowledging that there had not been a full return of the records.[6]Nevertheless, another of his companies, Blue Bespoke, was engaged by contract to provide services for the next event organised by FOBS. This was to take place at the Mango Tree restaurant on 9 July 2007. By the end of the oral evidence it was conceded by counsel for the claimant that the arrangement was made between the claimant and Bespoke for the payment of £2,350 for organising the event (including VAT). At that event, there was an auction and there were also pre-sold table bookings. An understanding was reached on the information provided to the charity’s accountant, Mr Bob Bye, by Mr Wayne Lochner, the charity’s chairman, that outstanding sums of over £21,000 were to be written off. Mr. Lochner had advised Mr. Bye (a) in respect of the year ending 31 October 2007 accounts, that a write of was required for an unfulfilled auction bid (or bids) of £17,000 at the Ice Ball and(b) in respect of the year ending 31 October 2008,that there should be a write off following the Mango Tree Event for unfulfilled charity bids from named bidders or money for tables taken by one of the companies with which the defendant was associated which was said to have gone into liquidation. They were dissolved, actually.[7]The accountant was anxious to complete the accounts of the charity for the years ending 31 October 2007 and 2008 respectively. There was pressure from the Charity Commission and from Companies House to complete these quickly, and penalties had been incurred and were about to recur. It was agreed that in order to reconcile the accounts some of the difficulties incurred in the Ice Ball event would be assisted and alleviated by attributing takings from the Mango Tree event and by a write-down of the matters directly relevant to the Mango Tree (as above). Mr Bye, quite properly, said he had to make the accounts work.[8]By 2 September 2009, Mr Lochner and another trustee, Mike Betesh, had met the Charity Commission, which was concerned about the report of the trustees about Mr Woodhams. It had advised the trustees to take professional advice. Thereafter, an application was made for pre-action disclosure on 23 July 2010, and the claim form was issued on 10 May 2011. It drew a defence from the defendant, representing himself, on 6 June 2011, and witness statements of 6 September 2011 and 23 March 2012. It is right to say that neither the claim nor the defence corresponded to the evidence at the end of the trial. For example, the claimant contends that the defendant bid £17,500 for two tickets, which he himself had donated, to meet David Beckham. The defence pleads that he “made no such bid”, and yet he contended at trial that he had always said he bid £6,000 but the trustees let him off. The defendant denied he was a trustee, but accepted at trial that he was and owed fiduciary duties to the claimant. The claimant accepted that the defendant acted through his company, Bespoke, in contracting with the claimant for the Mango Tree event, and not personally. The claimant effectively abandoned its claim for an account and damages in respect of personal liability by the defendant in respect of the Mango Tree event.

The issues

[9]By the close of the trial, the issues were:(1) Was the defendant in breach of fiduciary duty and/or of contract in accounting to the claimant for credit card processing at the Ice Ball?(2) Is the defendant liable to pay anything to the claimant in respect of his bid for the Beckham tickets?(3) Is the defendant liable to the claimant in respect of any matter arising out of the Mango Tree event?[10]The legal principles to be applied in determining those issues relate first to the liability to account: “Before a party can be ordered to account liability to account must be established. This liability arises immediately after the defendant’s receipt of property in an accountable capacity.” (Snell’s Equity 20/014)[11]In this case, the allegation that the trustees forgave the defendant gives rise to the defence to an action for an account that he has been released from his duty to account by settlement of it (ibid). It is contended by the defendant that the claimant is estopped by convention from asserting the claims for an account of the merchant services and the liability for the bid. This is on the basis that the parties have proceeded on a shared understanding or convention as to the basis of the transaction into which they have entered (see Snell, 12/007).[12]In respect of the Ice Ball account, but not apparently in respect of the bid, Mr Glover relies on the statement of principle given by Arden LJ in Collier v P & MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329: “1. A debtor offers to pay part only of the amount he owes. 2. The creditor voluntarily accepts that offer. 3. In reliance on the creditor’s acceptance, the debtor pays that part of the amount he owes in full. The creditor will, by virtue of the doctrine of promissory estoppel, be bound to accept that sum in full and final settlement of the whole debt”.[13]I do not see how that approach is apt for the bid, which it is contended was forgiven without any payment. However, in respect of the bid, and I take it also of the merchant services, the principles relating to rescission by abandonment are invoked. The consideration for the discharge of the contract is the abandonment by each party of his right to performance or his right to damages, as the case may be: see Chitty on Contracts 22/025. The rescission is by mutual agreement and it can be express or implied: ibid. A long period of inactivity by both sides can constitute abandonment of the contract: ibid at 22/027.[14]The capacity and the power of directors to bind a company is reflected in sections 39 and 40 of the Companies Act 2006. But section 42 imposes constitutional limitations on companies which are also charities. In relation to the bid, section 42 would not on its face provide for the act of forgiveness by the trustees, since it could not be said that the parties were unaware that the claimant was a charity or that full consideration had been given by the claimant.[15]Section 57(2) of the Sale of Goods Act 1979 provides that a sale by auction is completed when the auctioneer announces its completion by the fall of the hammer. In this case, the seller is the claimant, and the goods are the tickets for the Beckham event donated by the defendant, whose company, Concierge, was organising it.[16]There is in this case a contention that certain evidence should be excluded on the ground that it contains material uttered without prejudice. The rule applies to exclude all negotiations genuinely aimed at a settlement, whether oral or in writing, from being given in evidence. An admission made in order to achieve a compromise should not be held against the maker of the admission: see the notes accompanying CPR 31.3 in Civil Procedure. The exception to allow the admission of facts communicated between parties is not relied upon in this case: Oceanbulk Shipping and Transport SA v TMT Asia Ltd [2010] UKSC 44.[17]Legal professional privilege, taking the form either of legal advice privilege or litigation privilege, is claimed in this case by the claimant in respect of one matter, and gives rise to no dispute by the defendant as to its application.

The witnesses

[18]The principal witnesses in the case were the trustees. Wayne Lochner and Michael Betesh gave evidence for the claimant. Roger Mahoney gave a statement to both parties but was in fact called by the defendant, who of course gave evidence. The fifth trustee, Karen Glenister, was the head teacher, and she was not called. Daniel Batt was closely associated with organising the event and provided a witness statement but did not attend. Mr Glover invited me to disregard it since he has not been able to cross-examine the witness. I accept that submission. Ilana Adamson and Kirsty Pitman were called by the claimant. As I will explain, I find them to have been employees of the defendant. Included in their factual evidence are expressions of opinion about the defendant, but I form my own view of him without assistance from these two witnesses. Ed Miller, a solicitor for the claimant, gave evidence, and I will explain my approach to his evidence below. A solicitor in the same firm, Alex Monaco, gave evidence in the pre-action disclosure proceedings, and I pay attention to what he there says. I bear in mind that he was not called as a witness at the trial to be cross-examined, but no point was taken by Mr Glover on this.[19]For the defendant, Mr Marc Cann, who organised the Ice Ball, gave evidence relating to the events that night and to the general practice of charity auctions. Mr Bob Bye, the claimant’s accountant and auditor, gave evidence as to the practice of accounting and general dealings between trustees of a charity, and on the accounts for the relevant years of this charity. My approach to the evidence is very much affected by what Mr Cann and Mr Bye said. Since it came in a form which could easily be tested in court, and corresponds to what one might regard as common sense, their evidence set the scene, and I will make some brief comments on it.[20]Mr Bye described what Mr Lochner, Mr Woodhams and Mr Betesh all described as their own experience in dealing with charities. People come together to support a particular cause. They give their time and their money, both in this case, because they believe in the project. They are doing charitable work for the good of us all. A good deal of informality and flexibility goes with the adoption of roles by various actors, trustees and friends alike, and people engaged in this exercise cannot be subject to the same kind of regime as employees of a company. Those organising a charity event bring to the table their own particular skills and experience. Sometimes it is simply the latter, but in others it consists of tangible assistance. Some can provide help from their own resources, such as a car or a computer. A director or a senior employee of a company may procure for the use of the charity equipment or employees of the company.[21]Unless the contract is made between the charity and the company, the charity looks to the trustee who has offered the equipment or the staff to come good on his promise. It is usually a personal relationship between the trustee and the charity. If the equipment is not in place on the day, the charity would feel let down by the trustee and not by the company.[22]Where a company director in his capacity as trustee makes an offer of his own company’s equipment there is an internal accounting regime which requires gifts or gifts in kind to be declared within the company’s account but that is not a matter of interest to the charity. As Mr Bye said, quite often tying down every item of expenditure or income in a charity is difficult and one has to draw a line after reasonable steps have been taken so as to avoid penalties for late filing of accounts at Companies House and with the Charity Commission. It is frequently the case that certain leading members of a trust provide the instructions, for example to the accountant. This will often be the chairman.[23]Mr Cann is a professional events organiser. He organised the Ice Ball. He was particularly concerned to pay careful attention to the auction since in his experience these are excitable events, people drink a lot and sometimes make foolish decisions. He it was among all others who had to keep a clear head and stay sober. It sometimes happens that a successful bidder mistakes the bid price - an auctioneer says “I have five, I have five. Do I have six? Do I have six? Going to the man in the white shirt”. The man in the white shirt is the last person to have bid at five, yet mistakenly considers he has bid six. To Mr Cann that is not uncommon.[24]The remarkable thing about the evidence in this case is that the four trustees all gave evidence, upon which they were tested most rigorously, which was, in places, internally inconsistent and in others supported the other side’s case. Mr Betesh and Mr Mahoney each gave accounts from their recollections which differed in the details and in the principles.[25]The stakes were high. Mr Lochner in the witness box accusing Mr Woodhams of theft he, in turn, being accused of lying. Mr Woodhams, on being shown an apparent inconsistency in his account, frequently answered by making an accusation against Mr Lochner.[26]Mr Woodhams’ evidence was the most difficult. He denied he was a trustee notwithstanding the disclosure in the pre-action proceedings of his signature on the relevant document. He denied he had resigned as a trustee after a year, accepting it only in the witness box when shown it. His response to the contention that he had bid £17,500 was to deny making any such bid, whereas his case is that he did make a bid of £6,000 but was let off payment of it. He was shown reports he or his staff had made to the charity or his accountant yet was unable to explain the difference or even acknowledge it.[27]Mr Lochner, too, presented difficulties. He had given no credit for a payment made by the Defendant of £13,000, in addition to £20,000. He acknowledged a number of errors, for which he apologised in the witness box.[28]At the outset, counsel submitted that much depended on the credibility of Mr Lochner and Mr Woodhams. Of course that is true, but I consider it is simplistic in this case to identify a change of position in one of the parties and to condemn their case on that basis. The starting point for the assessment of the credibility of these two is to look at why they came together in the first place. They did so in order to give their time and, indeed, money to promoting the objects of the school. All the trustees put themselves out to try and make the Ice Ball and the Mango Tree event great successes. They knew each other well through business. They worked in concert to use their contacts and connections for the benefit of the charity. Mr Woodhams has a shadow over his business affairs as a result of his dealings as a director of Centaur Academy but that matter is not yet concluded and I will not make a finding on the contention that he misappropriated Centaur’s money. Mr Lochner at various stages in their relationship considered him to be worthy of Mr Lochner’s attention and mentorship and therefore an unlikely fraudster. Mr Bye, the accountant, has long known Mr Lochner personally and professionally as an accountant and regards him as being of the highest propriety.[29]Mr Woodhams has done himself no favours in his approach to this litigation. Formally he represented himself, but he did have some assistance from Mr Procter and from a period which cannot have been later than 14 April 2012 had access to Mr Glover of counsel. His response to the pleadings and the documents was not straightforward and was ill-judged – he could have put his case in a much clearer way.[30]At various stages during 2006 and 2007 he was hard-up. But I do not consider he took the charity’s money in order to assist himself. It was put by Miss Witherington that he is a person who does not accept an adverse position against himself until it is put squarely to him. That is only half true. Even when presented with the documents, he does not accept the simple facts. A natural conclusion is that he is dishonest and lying. But I do not come to that conclusion. He is a person who hopes to avoid the consequences of his misjudgement by not acknowledging the obvious. His response is surprising and obtuse, but not necessarily dishonest. His failure and subsequent inability to provide relevant records of the merchant services has led him to take steps in this litigation which were bound to be uncovered. This includes making baseless threats to Ms Pitman and Ms Adamson. Rather than admit the difficulty in his position, he fought back as is evident in these threats to his two former employees, and in his responses to questions in the witness box. When quite properly attacked, he lashed out against others without directly addressing the difficulty in his own case. He was an unsatisfactory witness and I do not accept what he says unless it is backed up by documentary or other oral evidence.[31]As for Mr Lochner, he is not dishonest either. He made a number of mistakes. He became convinced that Mr Woodhams owed the charity £17,000 or alternatively £20,000. He regarded it as his duty as the chairman of the trustees to try to obtain what he considered to be the monies owing to it by Mr Woodhams. In due course that position was reinforced by the advice he was given by the Charity Commission. Mr Lochner did business with the Defendant and the Defendant’s companies before and after the Ice Ball and before and after the Mango Tree event. He had concerns about the outstanding payments for the Ice Ball, but I accept his explanation for continuing to deal with the Defendant as being that he did not wish to deal with the matter formally and Mr Woodhams was taking steps to provide relevant material.

The documentary evidence

[32]The Friends of Burbage School Ltd was incorporated on 16 October 2006 and registered in the Central Register of Charities maintained by the Charity Commission on 11 December 2006, the date of the Ice Ball. Minutes of meetings relevant to the Ice Ball in 2006, the Mango Tree and the Ice Ball 2007 show the activity of the main actors in this case. On 20 September 2006 those who were to become trustees appointed Marc Cann as the event organiser. As one would expect in these and later minutes, there are detailed allocations of responsibilities and offers of help in various ways. Each is doing his or her bit to make the Ball a success. Significantly, from this early stage, Mr Woodhams is indicating his own enthusiasm for the project by speaking to potential donors and effecting relevant introductions. He provides a laptop for another purpose. Those are his commitments personally. In addition he is shown to be talking to a company providing commercially white boards for the school under the heading of its general fundraising. A price is given by this company. Later he is shown to be able to source champagne at cost price and offers to provide six Audis for celebrities to use. These minutes show how everyone around the table was able to use their influence to secure from commercial organisations the supply of goods at favourable rates, on the one hand, and straightforward donations on the other.[33]On 6 December 2006 Mr Cann’s detailed pre-Ball notes include the following:
“A fully operational credit card facility available on the night. Ideally with four terminals and four operators. Bluefish will organise – to hold and store cash on the evening period MC [Mark Cann] – staff at the silent auction to get contract signed and take money at the end. CU2 Limited/Bluefish. Staff for the loud auction to spot, get contract signed and take money. CU2 Limited/Bluefish.”
Bluefish is the name under which Mr Woodhams customarily trades and is one of a group of companies. There was a further meeting on 8 December of which there is no note. Staff for the loud auction to spot, get contract signed and take money. CU2 Limited/Bluefish.”[34]On 11 December 2006 the Ice Ball went ahead and was a huge success. Mr Bye gave his opinion that this was an extraordinary first fundraising event for a small charity.[35]CU2 Limited is Mr Cann’s company which organises events. It charged £5,000 for this. Writing from CU2 Limited on 19 December 2006 Mr Cann attached a summary of his costs which he said was “pretty accurate”. The figures showed a total income of £165,980 with a surplus of £105,846. Of particular relevance is receipts from the auction of £73,000 with a note “lot 6 no sale. £5k bid by TW [the Defendant]”. In the same letter he offered to explain the detail and give a full breakdown.[36]A highly polished brochure was produced for the purpose of the auction and the silent auction. As the hammer came down in the auction Mr Cann noted the sale price for lot 6 “Bluefish hosted party for David Beckham Academy”. Mr Woodhams’ company was providing the event and donated the tickets. There were only two; in accordance with the system Mr Cann wrote the bid price, it is crossed out, it has a question mark against it. It also has the words “cock up”. Mr Cann said he had written down £5,000. Miss Witherington contends that the figure is £18,000. Mr Cann produced his original brochure. I accept his evidence that the figure he wrote and then crossed out was £5,000. As a matter of fact, the aggregate of the lots noted on the brochure may be £71,500 but nothing turns on this.[37]On 5 January 2007 Mr Woodhams wrote to Mr Lochner saying he had paid £20,000 into the FOBS bank account and that the total taken on credit cards for the night was £24,000. He made reference to “wages for the two girls as agreed and card fees/bank charges”. There were still some outstanding credits to collect and he estimated a further £3,000 would be forthcoming. Mr Lochner requested a breakdown which was sent to him by Kirsty Pitman on 2 February 2007. This shows that the total taken was £43,080 less 2.5% card processing, staff and admin charges of £1,000 and £500 respectively, giving a total of £41,580. On 8 February 2007 Miss Pitman wrote again to Mr Lochner apologising for the delay in sending information. She said “I have all original auction sheets if anyone requires for their records. Please advise how to proceed”. Attached to this email was a summary of the auction lots which totalled £50,400. By this time Mr Woodhams had paid “from my account” a further £13,000, making a total credit to the charity of £33,000 in respect of the Ice Ball. On 16 March 2007 the trustees met and confirmed that £106,000 had been raised at the Ice Ball and “there are a number of payments missing which I am chasing through ….. WL”.[38]Flushed with the success of the Ice Ball, it was agreed to hold another Ball on 4 December 2007 although it never did take place. For this it is noted that Mr Woodhams “offered Bluefish services (price to be agreed)” to organise the Ball. It was also reported that Mango Tree restaurants had offered a charity evening to the value of £20,000 which did take place on 9 July 2007.[39]On 31 May 2007 Blue Bespoke sent an invoice for “event management co-ordination for FOBS event at the Mango Tree totalling 20 hours” of £2,350 including VAT. It is noted on the invoice that this is paid on the 20 June 2007.[40]At about this time Mr Woodhams was dealing with a group of accountants in India known as Finalytics and on 28 June 2007 he reported to Mr Lochner that he was still checking on credits to the Bluefish account in respect of the Ball and “we may have missing payments yet to be sent from clients on the evening. Sudershan [of Finalytics] will have finite position next week. Sorry this has taken so long. We have spent three to four months handing everything to Finalytics”.[41]At the Mango Tree on 9 July 2007 there was an auction as before. An account was rendered in the form of a draft financial report. It emanated from Blue Bespoke and showed a total revenue of £31,500 and a net profit of £21,946 on the evening.[42]Consistent with the earlier decision to repeat the Ice Ball, on 1 August 2007 Mr Woodhams for his company quoted to Mr Lochner a fee of £10,000.[43]In an exchange of email on 19 August 2007 it is plain that Mr Lochner had noted problems in the collection of credit card payments at the Mango Tree. He says this:- “The reasons for using Blue Bespoke for the Mango Tree was to ensure that we knew where the monies were coming from I currently understood from Blue that we had a number of credit cards to process … and yet here is a man who thinks he owes us a cheque. This is exactly what went wrong last time…. As a heads up for the Ice Ball 2007 Blue really need to be on top of this”[44]In a series of meetings, some of which were attended by Mr Woodhams and some by Ms Adamson, they had discussions of “a few outstanding issues” from the Mango Tree event, namely the reconciliation of the monies taken for auction prizes, and preparation for the Ice Ball 2007.[45]By July 2008 Ms Adamson and Ms Pittman had parted company from the blue companies and each was complaining of being owed money by Mr Woodhams. Mr Woodhams wrote to Ms Pitman on 6 September 2011 reporting to her that Mr Lochner:- “is falsely accusing the company me and YOU of taking the charity money donated at the auction on the night” This is a reference to the Mango Tree. He knew that Ms Pitman was working for someone else and threatened to draw this matter to the attention of her employer. At the relevant times she and Ms Adamson were employees of Concierge and or Bespoke as they were cited by Mr Woodhams as staff and he claimed for their wages.[46]Mr Bye’s firm Masons was in due course instructed to prepare accounts for the year ended 31 October 2007. He made a note at a meeting with Mr Lochner that:- “An O/S amount of £17, 000 is owed by Blue Fish for a bids [sic] on a charity auction but as the company in liquidation no hope of receiving it – now reflected.”[47]Internal accounts for 31 October 2007 recorded donations to the charity of over £200,000. On 5 October 2007 Mr Woodhams gave written notice of his resignation as a trustee. The account prepared by Mr Bye contains a reservation that the figures had been prepared but not all of the documentation seen. The figure of £17,000 which Mr Bye had noted in his attendance note as being reflected in the accounts appears there. For the succeeding year, 31 October 2008, Mr Bye recorded an attendance note made on 2 July 2009 that he could not tie up all the issues from the Mango Tree event and there were unfulfilled charity auction pledges. The accounts contained a note of unfulfilled charity auction pledges of £10,100 and unremitted funds collected by professional fund raisers now in liquidation of £11,000. Nevertheless at the end of that year the charity had £404,608.00. It is also noted that the charity incurred penalties for late filing.[48]On 13 August 2007 his accountant in India wrote to Mr Woodhams:
“FOBS A/c – As per the remarks sent by you, in the bank statement, the payment made towards FOBS is £33,000/- (5/1/07- £20000/-, 29/1/07- £13000/-), but the payment received is £18,450/- (20/1/07-£450/-, 23/1/07-£18000/-) and the amount billed also £18400/- (Inv. No. 110078,79&80 dt. 18/12/2006). So the difference between the amount paid and received towards FOBS a/c-£14,500/-, can we consider this as an expense towards charity? No we should have paid out exactly what we received £18000 cheque received (Kirsty has details) and merchant credits on dec 11th 12th 2006 should add up to 30-35k total? Please add the £18000 cheque received to the merchant credits relating to FOBS on dec 11th and 12th together this will give you total received through charity evening”.”
[49]The underlining above is Mr Woodhams’ answer to his accountant.

Without prejudice discussions

[50]Mr Ed Miller a former employee of A City Law Firm LLP then acting for FOBS, gave evidence about a discussion he had heard following a case management conference before Master Cook on 7 September 2011. He made an attendance note. Mr Glover objected at the time but did not dispute that the evidence could be given subject to further submissions. At this time Mr Woodhams was representing himself and Mr Lochner, on behalf of the trustees, was represented by Mr Miller. A discussion took place between the two parties within earshot of Mr Miller. His attendance note is this: TW admitted that he owes some money for merchant services and bid - £6000 for bid. His witness statement says:- “He owed the claimant some money and this was approximately £6000” The attendance note contained some redacted material relating to a discussion between Mr Lochner and Mr Miller in a café opposite court. This has not been disclosed, relying on litigation privilege. Mr Lochner also gave evidence of a telephone conversation in which Mr Woodhams is said to have accepted he owed the charity £20,000. By 27 April 2012 settlement talks were going on between Mr Lochner and Mr Woodhams by text message and telephone. Much of this is redacted but the tone is clear: these were settlement talks.[51]The objection is to the acceptance in evidence of an admission that Mr Woodhams owed £6000 at least. Applying the approach I set out above, it appears to me that in context this was a discussion for the purposes of seeking a settlement. In the April 2012 exchanges the desire of the parties to avoid court is plain. In the conversation after the hearing before Master Cook, Mr Woodhams was not to know the rule relating to without prejudice discussions. Technically he should have been dealing with Mr Miller. Having heard Mr Woodhams and Mr Lochner give evidence, and looking at the later attempts to reach settlement of the issues, it seems to me that the attendance note and the evidence of Mr Miller relating to 7 September 2011 is evidence of without prejudice discussions. To that end. I have not been addressed as to the exception to the rule set out in Oceanbulk. I therefore will not admit this evidence and I will pay no attention to it.[52]If I am wrong as a matter of law about that material, it seems to me that the substance of the conversation could be described as swings and roundabouts. Mr Woodhams admits he bid £6,000 but does not mention that the bid was forgiven. Mr Lochner does not in the same breath tell Mr Woodhams that it was not £6,000 but £17,000.

Mr Woodhams’ responsibility

[53]The first issue is whether the Defendant is personally responsible for the collection of merchant services accounts or whether this is the responsibility of Concierge, one of his companies. Mr Lochner is clear that he was dealing with Mr Woodhams; Mr Cann is clear that he is dealing with Bluefish, i.e. Concierge. Although I accept most of what Mr Cann says, I do not consider he is right on this. First, the way in which Mr Woodhams took responsibility for various matters in the run-up to the Ice Ball indicates that he was providing his time, services and money himself. I accept the depiction of the way in which people come to charitable work given by Mr Bye, Mr Lochner and Mr Betesh. Mr Woodhams was in a unique position. The charity needed the ability to take credit and debit card payments. His firm had a merchant services account. He could provide hand held PDQ equipment and he had software for use on the night. These were in fact owned by Concierge. The “two girls” were employed by Concierge.[54]There is evidence of agreement by Mr Lochner that there would be reimbursement to Mr Woodhams for Concierge of £1,000 for the deductions made in respect of merchant services and £500 for wages for the staff. That was not a contract made between Concierge and FOBS. Mr Woodhams was in a position to donate the time, services and hardware to enable credit and debit card payments to be made. Ultimately it would be a gift by Concierge to the charity. But Mr Lochner and the trustees were entitled to look to Mr Woodhams to account for the money received in this way into Concierge’s merchant services account. He held himself out as a person who could facilitate this system on the night. As he accepted finally in evidence he was a trustee and owed fiduciary duties to the trust. These monies came into the Concierge account and he impliedly undertook to account to the charity for those receipts. He did in fact do so in respect of £33,000. He was entitled to be reimbursed £1,500 for the actual costs of the service charge and the wages.[55]I am fortified in that conclusion by looking at what happened at the Mango Tree and the Ice Ball 2007. Here there is a direct contractual relationship between Bespoke and the charity by way of the invoice for £2,350 for the Mango Tree and £10,000 plus VAT for the Ice Ball 2007. As Mr Lochner, with some irritation, put it at the time, this was an arrangement which sought to avoid the problems of the Ice Ball 2006 payment collection system. In that respect, Bespoke in 2007 is in the same position as any other trader supplying goods of services to the charity. For the purpose of these events, it may or may not have been profitable, but at least it was a commercial transaction. For the Ice Ball 2006 Mr Woodhams was in no different position than he would have been if he had undertaken himself to stand at the door and collect entrance fees to the Ball or if he had paid someone on his behalf to do that. In either case he had a personal responsibility to account.[56]It follows from that analysis that he was not in such a position in relation to the Mango Tree. As Ms Witherington accepted in her closing argument, the correct defendant for this breach of contract claim is Bespoke.

The sums collected

[57]Although there was division of labour on the night, with Mr Cann having disowned any responsibility for credit and debit card payments, the evidence showed that cheques and cash were collected by both Mr Cann and the Defendant. Surprising as it may be, large sums of cash were available that night. Mr Cann’s summary shows £73,000 collected by way of the auction. It is possible that the figure was slightly lower doing the arithmetic from his notes on the brochure but I will operate on the basis that £73,000 was bid through the auction. Mr Woodhams was responsible for accounting for those sums and in addition for a cheque of £18,000 paid by Henry Smith for a cricket painting. The email traffic and the chasing notes all indicate an acknowledgment by Mr Woodhams that he did have a duty to account for the charity for the sums. That is in law the correct position.[58]The question is: how much of it came through merchant services operated on the Concierge account? Ms Pitman’s first summary of 2 February 2007 was followed by more careful checking and her final summary on 8 February 2007 of a total of £50,400. She had plainly compiled this summary from the auction sheets which she offered to anyone who wanted to see them. They have never been produced. It is common ground that Mr Woodhams paid over £33,000. Mr Lochner’s late acknowledgment of this total figure caused some understandable confusion. In my judgment, it became fixed in Mr Lochner’s mind that £17,000 - that is the difference between £33,000 paid in and £50,400 on Ms Pitman’s final summary - was due from Mr Woodhams.[59]In his oral evidence Mr Woodhams had no explanation for the discrepancy between £33,000 and Ms Pitman’s first summary £41,580. He did acknowledge, however, at some stage that there may have been a shortfall of £2,000 to 3,000. In my judgment, the answer he gave to his accountant’s question on 13 August 2007 reflects the true position. As a matter of construction, Ms Witherington submits that the total owed to the charity is £30,000-£35,000 plus £18,000 in a cheque. I bear in mind that I am not construing a statute but the meaning of these words is to add the total of the merchant services which is £30,000-£35,000 to the £18,000 cheque received. That yields a figure of either £53,000 or £48,000 leaving a shortfall after credit for the monies paid of either £20,000 or £15,000. As it happens, the deficit of £17,400 on Ms Pitman’s second summary is midway between Mr Woodhams’ £30,000-£35,000.[60]Mr Woodhams’ original estimate of £23,000 or £24,000 shortly after the Ice Ball was hopelessly inaccurate. I hold that Ms Pitman’s second summary represents the takings by way of merchant services on credit and debit card and cheque paid to Concierge on Mr Woodhams’ instructions and for which he was liable to account. He paid £33,000 and so on the material seen by his employee Ms Pitman and vouchsafed to Mr Lochner, he would be liable to hand over £17,400 to the charity.[61]However, Ms Pitman’s final summary does not show the credit of £1,500 for the service charge and wages, present on her first summary. Since this is a claim by the Defendant to be paid by the charity, it is in a different category from the £50,400. Miss Witherington did not press for an account of the Defendant’s entitlement to be paid for the wages. It seems the same reasoning applies to the £1,000. It is common ground that there is a service charge on the sums paid over to the charity for bids made on the merchant services account. Take away the £18,000 cheque and there is £32,400 going through the account on which 2.5% service charge was levied. This is near enough to £1000 and it is disproportionate to be more specific. He has accounted for this item of expenditure.[62]Mr Glover made much of the fact that the records were never sought by Mr Lochner. In reality, he did not need to. He saw that Mr Woodhams through Ms Pitman’s second summary had collected £50,400. He did not need to see the individual payments and seemed content with the additional £23,000 via Mr Cann which took the total to £73,000. On Mr Cann’s summary, if Mr Lochner were criticising Mr Woodhams for not accounting for more than £50,400 and wishing to see all of the receipts the matter would be different. But he seems to have accepted £50,400 was what the charity was due from Mr Woodhams and it was £17,400 short. That, in my view, is the explanation for this figure in Mr Lochner’s mind. He was at all times quite properly motivated by his duty to see the charity got what had been promised to it, as advised by the Charity Commission.[63]I have reflected on why Mr Woodhams should not have admitted this, given my finding that he was not dishonest. For some reason he did not disclose the merchant services receipts, but they did then exist. Ms Pitman had them. He would need to show the vouchers to Mr Lochner if the latter were alleging the takings were in excess of Ms Pitman’s final summary, which he was not. Mr Lochner was prepared to accept her summary and all he wanted was the difference between the figure Mr Woodhams did account for and the sum Ms Pitman found had been taken. His dire cash flow position in 2007 may well explain that failure. In the clear light of day, the absence of merchant services vouchers was not the problem but he probably thought it was.[64]I will consider Mr Glover’s arguments on delay at the same time as I consider the bid.

The auction bid

[65]There is conflicting evidence as to the value of the bid made by Mr Woodhams for two tickets for the Beckham event. Mr Mahoney thought there were six tickets. He is plainly wrong, but he totalled up the sum to £18,000. It may be that he had heard a figure in this region mentioned in a different context such as I have described above. He accepted his evidence about the Ice Ball is vague. £17,000 or £17,500 is what Mr Lochner and Mr Betesh thought was bid. This is a very high value, but it must be recalled that Mr Smith had bid £18,000 for the cricket painting. Ms Pitman regarded Mr Woodhams as frivolous in doing the bid which he did for his own donation.[66]It is common ground that Mr Woodhams was trying to drive up the price by bidding for it himself and then got stuck with it at a higher price than he wanted to pay and indeed he probably never wanted the tickets anyway. Paradoxically his evidence that he bid £6,000 conflicts with that of Mr Cann who is certain he bid £5,000. I accept Mr Cann. Mr Mahoney is a teetotaller, but Mr Cann said that everybody that night was having a good time and drinking, apart from himself. He has a clear recollection. He wrote down what I accept to be the figure of £5,000 on the brochure and within days he is reporting that figure to Mr Lochner with the “no sale” to Mr Woodhams of that item. I also accept Mr Cann’s explanation as to why the defendant is so certain it was £6,000 and the illustration given by Mr Cann and Mr Glover in his argument that Mr Woodhams plainly heard the offer which was being put by the auctioneer of the next higher bid. He did in fact bid £5,000.[67]The next question is whether it was forgiven. A number of people observed the bidding and that Mr Woodhams appeared not to want to be stuck with the tickets. Mr Cann said that he heard all of the trustees agree to let Mr Woodhams off the bid. As a matter of law, it was an enforceable contract as between Mr Woodhams and the charity pursuant to section 57 of the Sale of Goods Act. A decision to write off that figure by releasing Mr Woodhams from the obligation needed to be taken by the trustees. Miss Witherington contends that this could only be done at an AGM of all the trustees and a minute taken. This is a matter of form, not substance. The other four trustees were consulted about the situation and agreed on Mr Cann’s evidence to release him. That is Mr Woodhams’ evidence, too.[68]Had a meeting been convened at a later date and properly minuted, the decision would have been unanimous. There is no trace of this matter in any communication after that date. This is because all of the trustees knew full well what they were doing and made the decision very shortly after Mr Woodhams had been committed to the sale price. They took the decision because Mr Woodhams himself, through his company, was donating the two tickets to the event which his company was organising. That was a charity event. They felt it unnecessary to hold him to what was obviously a foolish gesture on the night.[69]Miss Witherington contends that any such decision was ultra vires. This is a deeply unattractive submission. The charity’s claim is for the discretionary remedy of an account for breach of trust. It would be inequitable for the trust to rely upon a technicality not permitted by section 42 of the Companies Act (above) to defeat Mr Woodhams’ contention that he was released from the debt. I am satisfied by Mr Cann’s evidence that Mr Woodhams’ problem was discussed by all of the trustees that night and they all gave their assent. This part of the claim is dismissed.

The Mango Tree event

[70]It is clear from the documents that an agreement was reached between the Claimant and Bespoke for the services of PDQ machines at the Mango Tree. Although the machines did not work, the service was carried out and takings were made and work was done by Bespoke. Monies which were collected on the night were paid over. The evidence is unsatisfactory as to any shortfall in the takings. In any event, this is a matter between Bespoke and the Claimant and Mr Woodhams is not responsible. It was weakly submitted by Miss Witherington that I should pierce the corporate veil since this is a small business employing two or three people, some of whom work at home. That falls woefully short of material necessary to go behind the corporation and to attack one of its directors.

Mr Bye’s evidence

[71]I accept in full the evidence of Mr Bye in his written statement, his oral evidence and in the attendance notes which he has produced. This, however, does not release the Defendant from his responsibility. Mr Bye said that the accounts for the two relevant accounting years reconciled. That is not an answer to this problem. It was necessary on the instructions of Mr Lochner for Mr Bye to give his advice that the accounts could be finalised. The charity was, after all, being penalised for its late filing. He conducted a pragmatic exercise in moving the receipts for the Ice Ball and the Mango Tree into the first year and identifying the written off matters in the second year. Those were professional decisions, but they were made on the basis of the material presented. The write-offs were the proper conclusion of Mr Bye on the material which he was given. The fact that the accounts reconciled for the reasons which he gave, does not absolve the Defendant of the responsibility to account for the payments I have identified above.

Delay

[72]If I had found for the Claimant in respect of the bid, I would certainly have held that it was unconscionable for the Claimant to take proceedings given the delay. There is no mention of this after the night of the Ball. Whether by recession, estoppel by convention, promissory estoppel or abandonment, the conclusion is the same.[73]As to the merchant services point, the evidence shows that Mr Lochner was pursuing the matter and never did leave it alone. He may have been incorrect in its attribution, but in his mind a figure of £17,000 was owed to the charity. He took advice from the Charity Commission and from Mr Bye and also sought access to the accounts in the bank of Concierge and others. If Mr Glover did submit that the above doctrines applied to the merchant services account, I would reject it. The evidence shows that Mr Lochner did not give up this matter or abandon his pursuit of it as he thought legitimately for the benefit of the charity.

Conclusion

[74]Mr Woodhams has failed to account to the charity for £15,900 received by way of merchant services after deduction of service charge and wages for the Ice Ball and I order that be paid to it. I dismiss the claims in respect of the auction bid and the Mango Tree event.

Cited in 1 later judgment