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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Hague & Anor v Hague & Anor [2009] EWHC B6 (Ch) (03 April 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/B6.html Cite as: [2009] EWHC B6 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY

1. Introduction

This is a bitterly fought and unfortunate family dispute over the ownership of two of the three issued shares of Hague Plant Excavations Limited ("Excavations"). As will be seen from the title to the proceedings the case concerns four members of the Hague family. Throughout the case all of the members of the family have been referred to by their Christian names. Without intending any disrespect to any of those involved I propose to adopt the same course in this judgment.
David, Dianne and Martin are the three children of Douglas and Jean. Jean Angela is Martin's wife. David is the eldest of the three. He is 57; Martin is 51 and Dianne is 54.
It will be necessary to consider the history of the Hague family success in some detail later in this judgment. In summary, however, in 1957 Douglas moved to Prospect Farm, Bradfield near Sheffield with his family in order to farm. From relatively early days, Douglas and Jean each ran fairly modest sideline businesses from the farm to supplement their farming income, such as corn and general haulage (Jean) and plant hire and small contracting (Douglas). Douglas traded under his own name as "D Hague Contractor". David and Martin went to work for their parents as soon as they left school. Dianne initially worked for other employers but she also returned to work at the farm after a couple of years.
In 1975 Douglas set up Hague Plant Limited ("Plant") to take over the non-farming business. Initially, Douglas, Jean, David, Dianne and Martin each held 20% of the shares in Plant and they were each directors. In 1996, Douglas and Jean transferred most of their shares to David, Dianne and Martin equally and resigned as directors. Since then David, Dianne and Martin have each held 32% of Plant's shares and Jean now holds the remaining 4%.
Plant's business in fields such as excavation, site clearance and land reclamation grew substantially during the early 1980s. These activities generated large amounts of excavation and demolition waste. In May 1984 Plant obtained a licence to tip at a disused quarry near Prospect Farm known as Haigenfield, thereby expanding its waste disposal operation from tipping paper effluent on farmland to tipping demolition and excavation waste in landfill.
At about this time Martin became aware of an opportunity to obtain a licence to tip at Lightwood Lane, Norton, Sheffield ("Lightwood Lane"). Lightwood Lane was some distance from Prospect Farm and so more difficult to supervise than Haigenfield. Lightwood Lane would also receive waste from third parties, creating a potential risk of prosecution for receiving unlicensed or contaminated waste.
Excavations was incorporated on 12 June 1985. By 11 July 1985 Jean, Dianne, Jean Angela and Rosemary (David's wife) were the Directors. The shares were held equally between David, Dianne and Martin. On 14 August 1985 Excavations' name was changed from Hague Excavations to Hague Plant Excavations Limited.
In early 1986, Martin became aware of an opportunity to purchase a further landfill site at Carlisle Street near Sheffield City Centre ("Carlisle Street"). Carlisle Street was in due course the foundation of Excavations' considerable success. Carlisle Street was purchased in about September 1986 in the name of Excavations.
On 15^th November 1985, Dianne, Rosemary and Jean resigned as directors of Excavations and Dianne resigned as company secretary. On 19^th November 1985 Mr Midgley (the Hagues accountant) sent to Martin relevant share transfer forms to effect a transfer of David's and Dianne's shares in Excavations to Martin and Jean Angela respectively. The transfers were sent back to Mr Midgley duly signed under cover of a letter dated 1^st July 1986.
The fundamental issue in the case is whether, as David and Dianne contend, Martin and Jean Angela were given legal ownership and control of Excavations to protect the rest of the family and Plant from the risks of tipping operations, but on the basis that Excavations was owned beneficially by David, Dianne and Martin equally; or whether, as Martin and Jean Angela contend, David and Dianne accepted that in view of the risks of tipping at Lightwood Lane (and subsequently, Carlisle Street) that Martin (and Jean Angela) should take on the tipping business at those sites by becoming the sole beneficial owners of Excavations.
Martin effectively ran both Plant and Excavations until 2005. No-one disputes that he was highly successful and both companies were highly successful. Carlisle Street was the foundation of Excavations' considerable success, particularly after it was licensed as a transfer station which meant that it could engage in recycling which was even more profitable than tipping.
David was responsible for running a third jointly owned family Company – Hague Farming Limited – which was incorporated in 1988.
The dispute first emerged clearly at a family meeting on 21^st September 2005. David and Dianne say they felt impelled to make enquiries of Martin about Excavations when they became suspicious about his conduct in relation to the acquisition of a former hotel in Sheffield called Hallam Towers which they say he bought with Plant's money without consulting them. At the meeting Martin made clear that he considered that they had no interest in Excavations. David and Dianne say that until that meeting they had had no reason to believe that Martin did not intend to honour the original terms on which they transferred their shares in Excavations. Martin and Jean Angela equally say that until then they had no reason to believe that David and Dianne considered they had any interest in Excavations.
It is common ground that Excavations is a valuable company with net assets of at least £7.4 million at 30 November 2006. Thus the value of the shares claimed by David and Dianne is at least £5 million at 20 November 2006 values.
There is little dispute as to the relevant law. Both sides agree that the issue turns on the intention of the parties at the time of the transfers. Ultimately this turns on the resolution of the conflicting evidence of the parties.
A large amount of evidence has been called as to the history and trading of the Hague family, Plant, Excavations and other companies within their empire both before and after 1986 and as to the views of employees and others as to the ownership of Excavations. It will be necessary to summarise this evidence in this judgment.
Martin and Jean Angela's case is supported by (amongst others) Douglas, Jean and Mr Midgley. David and Dianne's case is supported by (amongst others) Ian Sivell –the best man at Martin's wedding who worked for the Hague companies for over 23 years as Martin's right hand man, but who now cohabits with Dianne and who has set up a company in competition with Plant.
Neither side can point to any document that clearly evidences the parties' intentions as to the beneficial ownership of Excavations. The parties can and do rely on evidence of documents and conduct before, at the time of and subsequent to the formation of Excavations in support of their respective positions. The relevant conduct extends over at least 20 years as both sides point to events between 1986 and 2005 that they say are consistent with the other side's having or not having the belief that Martin and Jean Angela held two thirds of the shares in Excavations beneficially for David and Dianne.
In addition a considerable amount of evidence has been called as to credit. Each side has attacked the credibility of the other. Some of the allegations made by Martin going solely to credit have been met by rebuttal evidence from witnesses called by David and Dianne. An important aspect of this area of the dispute relates to allegations of fraudulent tax evasion by the Hague companies. It is accepted by Martin, Douglas and Jean that there were at least two areas of such evasion – cross-invoicing and undeclared cash receipts.
At or near the end of the tax year a Hague Company would submit to another Hague Company a fraudulent or inflated invoice so as to reduce the profits of the first company for tax. Counter invoices would be submitted by the second company at the beginning of the next tax year. This had the effect of transferring a profit into the later tax year and thus deferring the tax payable. It is said that all three Hague Companies – that is to say Plant, Excavations and Farming were involved in this practice. Martin and Jean Angela say that David and Dianne were fully aware of this practice and were willing participants. David and Dianne deny this.
The nature of Plant and Excavations' trading was that there was scope for cash payments by their clients. Martin, Douglas and Jean accept that cash payments were made and that the cash payments were often not declared in the accounts. In the result Jean had amounts of cash which she personally distributed to members of the family including David and Dianne. She supports this by reference to entries in her diaries. David and Dianne deny receipt of such monies. In effect David and Dianne assert that the admissions of dishonesty by Martin, Douglas and Jean mean that their evidence should not be accepted unless corroborated by reliable untainted evidence. The allegations now being made against them are an attempt by Martin and Jean Angela to level the playing field.
Another controversial area which, in the end is relevant only to credit relates to the acquisition by Martin in 2004 of Hallam Towers Hotel for £7 million using money belonging to Plant. David and Dianne contend that there was a conspiracy involving Martin, Mr Midgley and possibly Mr Hewitt (the family solicitor) to defraud them of a possible secret profit of a further £7 million when Hallam Towers Hotel was re-sold. In the event they discovered about the acquisition before Hallam Towers Hotel was re-sold. Indeed it has still not been re-sold. Martin denies any conspiracy. Both he and Mr Midgley contend that it had always been his intention that David and Dianne would be shareholders of the Company that acquired Hallam Towers Hotel and that they would have shared in any profit made on its re-sale.

2. Representation

David and Dianne were represented by Michael Lazarus instructed by DLA Piper UK ("DLA") of 1 St Paul's Place Sheffield S1 2JX. Martin and Jean Angela were represented by Gregory Pipe instructed by Shulmans of 120 Wellington Street, Leeds LS1 4LT.
When this case started there were a total of 19 witness statements filed by David and Dianne, and 29 on behalf of Martin. In addition there were over 60 lever arch files containing documents. Fortunately, with some judicial encouragement, not all of the witnesses were called and, as is common in this sort of case, the majority of the documents were not considered. Even so the evidence took 11 days. I was helpfully and very promptly provided with daily transcripts.
I am grateful to all concerned for the very considerable assistance afforded to me throughout the lengthy trial. Inevitably the clear presentation of the evidence by both Counsel and the solicitors involved greatly assisted my task.

3. The Facts

3.1. Early Days

Douglas was born in June 1928. He is thus now 80 years old. He married Jean in October 1950. Jean was born in August 1929 and is thus 79 years old. As already noted there are three children – David (born in August 1951), Dianne (born in July 1954) and Martin (born in October 1957)
Douglas, his elder brother and their father were farmers in and around the Bradfield area. There was no real wealth within the family. Douglas's father was thus not able to leave him much in the way of assets and he had to work very hard for what he had.
In about 1955, Douglas moved the family to Lea Bank Farm where the family lived with his father. In August 1957 Douglas purchased a nearby property known as Prospect Farm which at that time had approximately 85 acres of land.
In addition to the farming undertaken at Prospect Farm, Douglas then also owned a small number of agricultural vehicles and pieces of machinery. When these were not required for farming activities, he would hire out what he could to people in the locality. His customers included the local authority and a company called Northern Strip Mining Ltd ("NSM"). This work was carried out under Douglas' trading name – "D Hague Contractor". Douglas continued to use that name until the incorporation of Plant in 1975.
In his witness statement David describes this activity as:

… a useful sideline for the family and meant that we would be kept busy during those periods when there was less activity required on the farm. It was a departure from the family's traditional farming operations, but brought in some extra money. It was typical of my father's approach as he would turn his hand to practically anything if there was money in it and was always on the lookout for the next opportunity.

Jean also had her own small haulage operation that she ran with a business partner, Norman Rowett. The business was called H&R Transport and was essentially a corn distribution operation for local farms. H&R Transport finally ceased operation in the early to mid-1970s.
Whilst they were at school all three children worked on the farm at week-ends and at nights and helped out with the contracting business. Both David and Martin went straight from school to work in the family business. When she left school Dianne went to work initially for a haulage company and then took a job in a typing pool. However she did not really enjoy it and by 1972 she returned to work at Prospect Farm.

3.2. Loxley House Farm

Douglas was always on the look-out to buy additional land especially if it could be added on to his existing holding. Sometime in the early 1970's he discovered that a nearby farm, Loxley House Farm was on the market. The farm was about 80 acres of heavy wheat growing land with a house, cottage and farm buildings. Some 12 months later he agreed to purchase it for £18,000. However the bank manager refused to lend him the purchase price as he had an overdraft of £3,000. After some negotiation the bank manager agreed to lend the money to David. Accordingly Loxley House Farm was sold to David and placed in his name. David still lives at Loxley House Farm. His son William now lives in a house on the farm.
According to Douglas he gave David considerable help with the mortgage repayments. He also helped with improvements to the farmhouse, buildings and the installation of drainage. David did not accept this. He said that there was a deposit of about £4,000 which was provided out of his funds. Some £5,000 was left outstanding with the vendor. This he repaid with interest after 3 or 5 years. The balance was raised by way of an ordinary overdraft facility at the bank. In his evidence he said he was sure his father did not help and that he paid for the farm himself.

3.3. British Tissues

In or about 1973 or 1974 the family got what David describes as "its big break". A local business, British Tissues Limited ("British Tissues"), asked Douglas to help dispose of paper effluent which was a by-product of its paper manufacturing process. British Tissues operated a factory not far from Prospect Farm. This job started in about 1973 or 1974 and provided a steady source of increasing revenue and profits for the best part of the next 30 years.
In his witness statement David describes the operation of the contract in considerable detail. It is not necessary to go into that evidence which is, in any event, controversial. According to David he discovered that it was possible to recycle the pulp back into the land. Unexpectedly the pulp had a significant beneficial effect on the quality of the soil once ploughed in. The effluent also had a natural lime content which reduced the need to purchase lime. Whilst Douglas accepts that David did the experimentation he contends that he directed the experiments.
Thus the family was paid for removing the pulp from the factory, but the pulp also acted as a soil conditioning agent, which improved the quality of the farming land.
As British Tissues increased its productivity over the years, so the family benefited from disposing of the pulp. What had started as a sideline became a significant business in its own right. As a consequence the Hague family went from being a farming family which needed a sideline in plant hire operations to help make ends meet to being relatively prosperous in a short period of time.
David suggests that it was the British Tissues job that funded the acquisition of plant machinery and land on a large scale and led to the family's subsequent success. Douglas makes the point that the plant hire was, itself doing well.

3.4. Incorporation of Plant

Such was the success of the plant business that Douglas decided, after taking advice that he would put the plant business into a limited company with the whole family as shareholders.
Plant was incorporated on 12^th August 1975. By 4 September 1975 David, Dianne, Martin, Douglas and Jean were equal shareholders and directors. According to David the purpose of setting up Plant was to ensure that everyone would be working for the good of each other and would share equally in the success of the business.
Once Plant was set up Douglas transferred all the plant, equipment and lorries and the benefit of the British Tissues contract into Plant. According to Douglas he told David that he should put Loxley House Farm into Plant so that all three of David, Dianne and Martin would be on an even keel. However David refused to put Loxley House Farm into Plant because he said it was personal to him. David was adamant so Douglas did not push it.
At about this time, the family realised that it would also be advantageous to buy further land around Prospect Farm as and when it became available. They needed more land on which to spread the paper pulp and so they purchased a large proportion of the farmland in surrounding areas whenever it came on the market.

3.5. Family History

David met Rosemary in 1971 and married her in 1973. They have 2 children – William born in 1974 and James, born in 1976. Rosemary had trained to be a nurse and had no involvement with the Hague family before 1971. According to her witness statement she helped on the farm when she visited before she got married. After the marriage she became more and more involved in work at Prospect Farm. Initially this was farm work such as lambing and feeding livestock. However she later helped out with the paper work although she describes it as being on a small scale.
At that time most of the books were being kept by Jean. Rosemary had guidance from Jean on the paperwork and she started to look after David's books.
When Dianne came home in 1972 the main business was farming. She describes her work as mainly manual labour but she did help her mother with the books and with cleaning the farmhouse on a Friday. Dianne met and married her husband Michael Rogers in 1972. Their first child Alison was born in March 1973. When they married Michael Rogers was a fitter employed at British Steel. However in about 1974 he started to work full time for the family.
Initially Douglas employed a manager – Stan Grubb – to manage the plant business. This was the area in which Martin worked. In his witness statement David suggested that Martin's aggressive style may have driven Stan Grubb away. In cross-examination however David substantially retracted this piece of evidence. In any event Stan Grubb left in about 1976 and was replaced by Austin Saxby. Austin Saxby remained as Manager till 1978. In his witness statement David suggested that Martin pushed Austin Saxby too hard and that he retired on grounds of ill-health. However in cross-examination it was clear that David did not have a clear recollection of the events surrounding the departure of Austin Saxby. In the end he did not seriously dispute the suggestion that he left because he was offered a better job with a construction firm known as Gleesons.
In any event after the departure of Austin Saxby Martin assumed more responsibility for the plant side of the business. Douglas was still mainly responsible for both the farm and the plant business. Jean was involved in a lot of the office work. Most of the decisions were made by the men.
The day to day operations were conducted in an old-fashioned farm setting where the men came into the farmhouse for breakfast and lunch which Jean cooked for them. All sorts of discussions took place on those occasions such as what was happening on the farm and what was happening in Plant and what was happening within the family.
The administrative work was carried out in offices next door to Douglas and Jean's house. Dianne helped out with various administrative tasks – mainly typing – for Plant and for the farming operation. Rosemary also helped out in the office. Both had young children and fitted the office work around looking after their children. Dianne was paid the minimum wage; Rosemary was not paid at all.
Martin started to go out with Jean Angela some time in about 1974. At that time she was working for Sheffield City Council. In about 1977 or 1978 she gave up her job with Sheffield City Council and started to work full time for the family. She was paid a salary. Martin married Jean Angela in August 1981.

3.6. The Family Rift

In 1979 David and Rosemary stopped working for the Hague family for a period of about 18 months between 1979 and 1981. There are differing accounts as to the circumstances in which they left and they returned. It is not – in the end necessary for me to resolve the differences.
In summary David, Rosemary and Dianne put the rift down to the way Jean Angela and Jean treated Rosemary and to a remark made by Jean Angela whilst they were both at work. Martin and Jean Angela do not accept this. They suggest that Rosemary was oversensitive to the fact that Jean was checking the work she did.
During the period he was away David farmed at Loxley House Farm with Rosemary. In order to earn more money he started working at nights driving a wagon on contract hire. In the summer of 1979 he formed a construction company called "Loxley House Construction Ltd" with a local builder David Pannett.
There is a conflict as to the extent to which David visited Prospect Farm during this period. Martin says that David returned regularly to Prospect Farm in order to borrow and use his father's machinery. According to Martin he presented something of a ludicrous spectacle to the other members of the family. David denied this. He said he did not see or speak to his father until his father came to Loxley House to beg him to return to Prospect Farm. He had not used his father's machinery at all.
Whilst David was away Martin took on more work with the result that he became stressed to the extent that there were concerns over his health.
It is common ground that David returned to work with the Hague family after about 18 months after a conversation with his father. There are small disputes as to where the conversation took place and precisely what was said. David says that his father begged him to come back to take the strain off Martin and that if he did not return he (Douglas) would have to sell the farm. He suggests that Douglas was concerned that Plant would lose the British Tissues contract. Douglas accepts that he asked David to come back to take the strain off Martin. He however says that he was not concerned about losing the British Tissues contract. He did however say that if David did not return he would sell up. Whatever was actually said David returned sometime during the harvest in 1981 and Rosemary returned slightly later – this time on a full salary.
After David returned it is common ground that he concentrated on running the day to day farming activities whereas Martin concentrated on running the day to day activities of Plant. It is common ground that both worked hard; it is common ground that Martin was successful in finding contracts.
There are disputes as to the extent that David was involved with Plant. In his witness statement (paragraph 74) he describes himself as a trouble shooter for Plant who regularly helped Martin out when Plant's jobs were going off track. He also said (paragraph 78) that Martin would seek his views on matters of strategic importance such as the purchase of plant. It was suggested in cross-examination that in reality there were only about 3 occasions when he got involved on behalf of Plant and that decisions on the purchase of machinery were taken by Martin and Douglas without any significant input from David.

3.7. Tipping

Haigenfield

Haigenfield was purchased on 30^th October 1980. It comprised Haigenfield House, an 8 acre field at the front and a quarry at the back. It was relatively close to Prospect Farm and part of the reason for the purchase was the strategic decision to acquire farms in the vicinity. In his witness statement David said that the decision to purchase was made by his father. When he gave evidence he insisted that he was involved in the strategic decision to purchase Haigenfield. He maintained this position even when shown his witness statement and when it was pointed out to him that he was absent from Prospect Farm throughout 1980.
In May 1984 Plant obtained a licence to tip demolition and excavation waste at Haigenfield. In his witness statement David describes this as

the start of us having our own tipping operation. We had had some previous experience of waste disposal operations on the British Tissues job, but this was limited to Prospect Farm and the surrounding farm land. Haigenfield was the first licensed tip owned by the family and this represented significant further expansion for the family businesses.

He made the point that Plant did not allow third parties to tip there (at least in any significant amount). The site was very close to Prospect Farm and so there was little risk of fly tipping. Thus the risk of contaminating the land was low.

Lightwood Lane

Sometime in abut August 1984 Martin discovered the possibility of another tipping site at Lightwood Lane, Norton, Sheffield. This was about 5 times the size of the tip at Haigenfield and was substantially further from Prospect Farm. There are disputes as to the extent that David was involved in the decision for Plant to get involved in tipping at Lightwood Lane.
Lightwood Lane was owned by Mr Page and had the benefit of a waste disposal licence. Nevertheless there were significant problems with the site. These included the fact that there would be tipping by third parties and thus there was a risk of poisoning the land from material tipped by third parties. The access was very narrow for heavy goods vehicles to travel down. There was a drain from a roadside ditch that went across the site. Those involved in enforcement were taking a much greater interest in tipping activities than in earlier years and there was a risk of prosecutions. Finally and importantly there was the possibility of a substantial claim for the repair of the road.
According to David he visited the site with his father and brother. These risks were discussed. It was not clear from his answers in cross-examination the extent to which he considered himself party to the decision to proceed with tipping at Lightwood Lane.
According to Martin he was the driving force behind the decision to tip at Lightwood Lane. As well as appreciating the risks of the site he also recognised that there was a large capacity and thus the potential for it to be very profitable.
The negotiations were protracted. These included negotiations with Mr Page and with the Council. On 11^th March 1985 Martin wrote a letter to Derbyshire County Council in which he said with reference to Lightwood Lane

"should we or an associate company enter into an agreement with the landowner or agent we would expect operations to commence as soon as the Waste Disposal Licence had been transferred.".

According to paragraph 127 of Martin's witness statement:

I envisaged at this point that the risks associated with the site might well make it appropriate for it to be put into another company so that if problems arose HPL would be unaffected. I was also keen at this point to have my own business and I was interested in taking on Lightwood Lane myself.

However when he gave evidence Martin acknowledged that he had in mind the possibility of an associate company running the tip. He was not however able to say whether at that stage the associate company was to be jointly owned by the Hague family or owned by him with Jean Angela. He was asked this a number of times but was unable to answer the question.
Shortly after this there was a site meeting in early April between Martin and an officer of the Council at which there were negotiations over the levels.
By May 1985 steps were in hand to form Excavations. Martin suggests however that these steps had nothing to do with Lightwood Lane.
The negotiations did not conclude until 1986. The licence to tip at Lightwood Lane was not in fact transferred till 10^th June 1986 over a year later. It was then revoked. According to Ian Sivell there was no substantial tipping at Lightwood Lane until late 1987 or early 1988 when Plant carried out drainage work.
It was David's case that the decision to incorporate Excavations was a direct result of the risks including the risk of prosecution for pollution at Lightwood Lane. The tipping activities at Lightwood Lane would be carried on by a different newly formed company – Excavations.
Dianne corroborated David but did not add much. In her witness statement and in cross-examination she made it clear that she did not have a managerial role in Plant. Her role was administrative. All the big decisions were made by the men. Her information was gleaned from what her mother told her or what she overheard in discussions at the office or in the kitchen. In paragraphs 31 and 32 of her witness statements she remembers discussions about the risks of tipping. She believed that one of the reasons that Excavations was set up was because of the risks of tipping at Lightwood Lane. In cross-examination she was not sure whether the setting up of Excavations or the acquisition of Lightwood Lane came first. She agreed that she was not involved in the decision to set up Excavations
Martin does not accept that at that stage Lightwood Lane was going to be pursued through Excavations as a vehicle for managing the risk. He says that Excavations was set up to take on contracts that Plant would normally take but were considered risky because of the risks involved in the contract or the danger of non-payment and bad debts. He makes the point that Plant had suffered a number of bad debts and the incorporation of Excavations came about in order to try to protect HPL from such business.

3.8. Incorporation of Excavations

Mr Midgley was instructed to effect the incorporation of Excavations. By 6^th May 1985 Mr Midgley had instructed formation agents – Stanley Davis (Company Services) Limited to effect the incorporation. The PUC1 was lodged with the Registrar of Companies on 28^th May 1985. As already noted Excavations was incorporated on 12^th June 1985. The initial director was Jean; the initial Secretary was Dianne. Martin and Dianne were each allotted one share. On 11^th July 1985 one further share was allotted to David ; Dianne, Rosemary and Jean Angela were appointed as additional directors.
According to David the appointment of the wives as directors was as a result of advice from Mr Midgley. David did not speak to Mr Midgley himself but was told by both Martin and Douglas that Mr Midgley had advised that it was necessary for the directors to be different from the directors of Plant so that the two companies could be seen to be under different control.

3.9. Carlisle Street

In early 1986 Martin became aware of another opportunity in relation to a tipping site at Carlisle Street Sheffield which had previously been operated by a company which had gone into receivership and was for sale. The site was about 13 acres sandwiched between Carlisle Street and Petre Street with a large embankment in it leading down to a lower yard. Martin's view was that the site had potential but that there were risks involved. The site had the appearance of abandonment with some redundant buildings and an old office block. The lower yard was concreted but the majority of the site was wasteland. Martin was aware that a lot of material had been tipped there recently which should not have been there and therefore taking on the site would be risky especially as he knew that the regulating authority, (now the Environment Agency) had had problems with the site.
According to Martin he had already agreed with Douglas that he would be running his own tipping business. He told Douglas that he wanted to take on Carlisle Street within the business because it fell within his sphere of activity. Douglas agreed and was happy to support Excavations with a loan from Plant.
The negotiations for the acquisition of Carlisle Street were fairly protracted. The previous owner (the Boulding Group) had entered into insolvency and negotiations took place with the Receivers or their agents. The asking price for Carlisle Street was £120,000. On 4^th July 1986 Martin made, what he described as a final offer of £86,000. The offer was said to be a reduction on earlier offers because of the amount of tipping that had already taken place. In any event the offer was not a final offer. Martin eventually increased the offer to £115,000 which was accepted.
Completion of the sale probably took place on 12^th September 1986. Title to Carlisle Street was vested in Excavations. The whole of the purchase price of £115,000 was provided by Plant. The provision of the purchase price was treated as a loan by Plant to Excavations. The loan was never repaid. It was written off on 31^st December 1986. On that date Excavations submitted to Plant an almost wholly fictitious invoice for £165,000 for "tipping services supplied". Martin admits the invoice to be fictitious at least as to £130,000 and probably more.
There is a conflict of evidence as to the extent to which David was involved in the negotiations for the purchase of Carlisle Street. It is relevant because David contends that if he had no interest in Excavations he would not have taken any interest in the purchase. Martin says that that is the position. David was not involved at all.
David says that he was part of the initial decision to put in an offer for Carlisle Street. He says that he visited the site with both Martin and his father. Everyone agreed that Carlisle Street represented a great opportunity and that Martin should buy it. David then says that in the course of the protracted negotiations Martin got frustrated with the sellers' attitude. He says his father came to see him some time after 4^th July 1986 and asked him to have another look at the site. After looking at the site David says he told his father that "Carlisle Street was too good to miss and we just had to buy it". Douglas agreed and said he would get back to Martin and tell him to go ahead and purchase the site. David says that if it had not been for his intervention Carlisle Street would not have been bought.

3.10. Transfer of shares in Excavation.

According to documents filed at Companies House Dianne, Rosemary and Jean resigned as directors of Excavations on 15^th November 1985. On 19^th November 1985 Mr Midgley sent to Martin relevant share transfer forms to be executed by David and Dianne in relation to their share in Excavations. The letter referred to the resignation of the directors and included the relevant Form 288's. It also identified Martin as the transferee of David's share and Jean Angela as the transferee of Dianne's share. It pointed out that Martin would hold two shares and Jean Angela would hold one. Mr Lazarus attaches considerable importance to the final paragraph which reads:

"Should we now be giving attention to the formation of another Company which would be under Dianne's control."

The share transfer forms were signed by David and Dianne and returned to Mr Midgley for registration under cover of a letter dated 1^st July 1986. There is nothing on Mr Midgley's file to suggest that he chased the return of transfer forms.
There is a dispute as to whether when Dianne signed the form it named Jean Angela as transferee. Dianne believes the name of the transferee was blank. Martin believes it was not. The transfers were duly registered in the books of Excavations on 18^th August 1986.
There is acute controversy as to the reason that David and Dianne executed the share transfer forms. That controversy is at the heart of this case and it is thus important that I consider the rival versions in some detail.

David's version of events

According to David the transfer was necessary as a result of further advice from Mr Midgley given to Douglas to the effect that Excavations needed to be structured in such a way that it looked to the outside world that it was not controlled and owned by the same individuals as Plant. In order to achieve this it would be best if only one shareholder in Plant held all the shares in Excavations. David regarded this as so important that he rang Mr Midgley to discuss it. He sought an assurance from Mr Midgley if there was a major problem with tipping no one would be able to claim money from Plant or the family generally. Mr Midgley confirmed that there was no other way of doing this to give the protection the family wanted.
David reported the conversation to his father and Martin. It was agreed that Martin would be the main shareholder and that David and Dianne would transfer their shares to Martin. Martin was managing a lot of Plant's contracts and it was sensible for him to manage Excavations and work out which contract should go through which company. Everyone knew that Excavations was a family company like Plant and Douglas confirmed to David that he and Dianne would not lose out by transferring their shares to Martin.
David does not think that Martin passed the transfer form to him for signature in November 1985. He does, however, accept that he delayed a few weeks before signing the form. According to David he signed the form following a conversation with his father at a time when the purchase of Carlisle Street was definitely going to happen. In paragraphs 124 to 127 of his witness statement David says:

124. As for the conversation with my father, we had been discussing something to do with the harvest and when we had finished that, he said something along the lines of "while I've got you, I want to discuss the Excavations' situation". The gist of what he was saying was that the transfer needed to be done and it needed to be done now. I remember him being insistent it was becoming urgent because we had now acquired the licence to allow us to start tipping at Lightwood Lane and we were about to commit on the Carlisle Street deal and whilst Plant was providing the money, it could not be bought in Plant's name. It had to be bought in the name of Excavations and that meant we needed to sort the shares out if we were to get this right.

125. My father said Martin was pressing to get this sorted. I commented that we were talking about an awful lot of money and we were putting a lot of trust in Martin, even though Joe had told us this was the only way we could go about it. At this point my father said:

"What's the matter? He's your brother. Don't you trust him?"

126. It was a fair point and I said of course I did.

127. He reminded me that this was how it had to be. The fact that the shares were going to Martin did not mean that he owned it all. He said that nothing would change in that the three of us would be treated the same and would carry on sharing everything equally.

In cross-examination David was asked about the date of this conversation with his father. He was vague about dates and could not remember if it was before or after the site visit to Carlisle Street with his father. Eventually he concluded that it was after the conversation with his father about Carlisle Street.
He confirmed that he could remember the words set out in paragraph 125. He was asked about his doubts. After some prevarication he said that he was concerned that Martin might run off with the money but he decided to trust him.
When cross-examined about paragraph 127 he said that both his father and Mr Midgley told him on separate occasions. When pressed about the conversation with Mr Midgley he said that there had only been one conversation with Mr Midgley (already referred to). In that conversation Mr Midgley said that nothing would change in reality. He inferred that he would remain an owner. He refuted the suggestion that the conversations with his father and Mr Midgley did not take place.
He said that there was never any suggestion that either his share or Dianne's share should be transferred to Jean Angela. He would never have agreed to such a suggestion. This was a family company and the shares were to remain within the family fold.
It will be recalled that David's share was transferred to Martin and Dianne's share was transferred to Jean Angela. Photocopies exist of the share transfer form signed by David and Dianne both before and after it was sent by Mr Midgley to the Registrar of Companies. The form signed by David has Martin typed in as transferee; the form signed by Dianne has Jean Angela typed in as transferee. In each case the type face appears to be the same as the typing of the transferor on the form. At least one alteration was made by Mr Midgley before the form was submitted to the Registrar of Companies in that he added a date. The date was added in manuscript.
At one time it had been David's case that when he signed the transfer form the name of the transferee was blank. However in cross-examination he said that he could not now recall whether Martin's name was typed in as transferee when he signed the form. He maintained, however, that the form signed by Dianne did not contain Jean Angela as the transferee. He accepted he had not seen it but maintained that if Jean Angela's name had been on the transfer form there would have been a discussion about it.

Dianne's version of events

It will be recalled that Dianne did not have a managerial role within the Hague enterprises. She was not involved in making the business decisions. Most of her information was gleaned from what she picked up in informal conversations with her mother or from the office.
Her account of the signing of the share transfer forms is contained in paragraphs 37 to 39 of her witness statement:

37. I don't know precisely when I was presented with the form to transfer my share in Excavations but I do know it was after we had started looking at Carlisle Street. I remember that it was Plant that put up the money to buy the site but I also remember my mother telling me, although I cannot remember precisely when, that although I was transferring my share in Excavations it didn't mean to say I was really losing my interest in it or Carlisle Street. In fact she still assures me to this day that I have an equal share with David and Martin in Excavations and Carlisle Street. She has tended to see Excavations and Carlisle Street as one and the same thing.

38. I have no recollection of seeing Jean Angela's name on the transfer form that I signed but, as I say, I tended to sign these kinds of papers if I was asked to do so by my father or one of my brothers. Although I would not have questioned why I was signing these sorts of papers, I am sure that if I had seen Jean Angela's name on the form I would have asked why I was transferring shares to her rather than Martin. No such conversation ever took place.

39. There was never any mention in any of the discussions with me about transferring my share in Excavations that I would really be giving anything up at all. My understanding was that, within the family at least, nothing was changing after the share transfer. In the same way, at no time in the 20 years after Excavations was set up had either Martin or Jean Angela ever given the slightest indication that they considered Excavations belonged to them and them alone. This only happened in September 2005.

In cross-examination she said that she believed she had probably signed the transfer form just before Carlisle Street was purchased. She repeated that the conversation set out in paragraph 37 took place. She went on to say that her mother told her that she would still be a part of Excavations and still have a part in Carlisle Street. Nothing would change. When pressed as to timing she said she thought that the purchase of Carlisle Street had not been finalised and that it was still being negotiated. She was asked about the share transfer form and repeated that she had no recollection of seeing Jean Angela's name when she signed. She went so far as to say it definitely was not there. She did not discover that Jean Angela was a shareholder until after the meeting in September 2005. She was not sure, on reflection for how long the share transfer form was in her possession. At one time she said she thought that it was only in her possession for as long as it took her to read it and sign it. On further cross-examination she was not sure how long the form was in her possession. She denied that she had any conversation with her father when he explained to her that she would have no interest in Excavations.

Martin's version of events

It will be recalled that according to Martin the formation of Excavations originally had nothing to do with tipping at Lightwood Lane. It was formed to carry out the same sort of work as was being carried out by Plant but in respect of risky contracts and/or risky customers. However there was a change of plan which is dealt with in paragraphs 135 to 137 of Martin's witness statement:

135. In summary, the potential costs associated with possible repairs to the road and/or remediating the site meant it was far too risky for HPL to run Lightwood Lane. Additionally, and just as importantly, the nature of the site, including the existing stream and watercourse, and the fact that the site was always going to be owned by a third party who could legitimately inspect and complain to the local authority about our tipping operations meant that the risk of prosecution was such that I did not think that either David or Dianne would be happy to take on the risk of involvement.

136. My father was aware of all these issues and we decided that the best way forward if Lightwood Lane was to go ahead would be for me to have my own company, which I wanted anyway, and to do the tipping work in that company. He thought it was best if David and Dianne had no interest in this business and no involvement in it. That way I would take the risk, and the benefit of doing that but it would not affect HPL and the benefit which everybody else in the family got from HPL. Doing things this way meant that I could remain in position working for the family as well as doing something for myself.

137. By this time HPEL had not been used and so it was suggested, I believe by my father, that I could take over that company for myself to run the risky tipping work which I wanted to undertake. My father told me that he would speak to David and Dianne about this.

According to Martin, Douglas, at that time played a commanding role in the family and everyone looked up to him. Douglas spoke to David and Dianne and told Martin to go ahead. Martin thereupon contacted Mr Midgley who duly sent the relevant forms on 19^th November 1985.
Martin believes that he passed the share transfer forms to David and Dianne immediately and that Dianne may well have signed hers immediately. He remembers however that there was a delay in David returning his form. As a result in about June 1986 he remembers a conversation in the farmhouse kitchen when he remembers reminding David that he had not signed the form. According to Martin:

I told him that tipping had started at Lightwood Lane I am not sure but I may also have mentioned that Carlisle Street was progressing towards acquisition as well. By this stage I had already asked my father on a number of occasions to chase David up on signing the form. David signed the form there and then. I do not recall the words he said but they were very brief. I think that David had been chased by my father because David confirmed as much in a meeting after the dispute between us arose in my and my mother's presence in my mother's kitchen. I took the document back in the office and asked Dianne to send the transfers off to Joe Midgley.

As might be expected Martin was cross-examined in detail about much of this evidence. He was cross-examined about the reason that Excavations was set up. It was suggested that the timing meant that it was set up to carry out tipping at Lightwood Lane. Martin did not accept this. He was cross-examined as to the date when there was the change of plan for the use to which Excavations was to be put. It became clear that Mr Midgley was sending documents consistent with Excavations being a family owned company to various authorities up till the end of October 1985. Martin pointed out that if it had been intended to use Excavations for tipping there would have been no need for a sub-contractor certificate from the Inland Revenue. Martin agreed that the decision to use Excavations as his company must have been taken about then.
He was questioned about the decision to use Excavations as a Company for his tipping venture. He made the point that it was his father's decision, not his. It was pointed out to him that the insolvency of Wellerman brothers took place before Excavations was incorporated and thus cannot have been the reason for the change of plan. He made the point that some 11 companies became insolvent at that time. The accounts revealed that some £39,410 was written off for bad debts in 1985.
He was asked about the types of contract it was originally intended to put in Excavations. In addition to contracts where the contractor was risky he included contracts involving the removal of material, earthworks (not including tipping) where there were significant potential liabilities such as penalty clauses attached to them. It was pointed out that nothing changed in relation to these contracts between May and November 1985 and they could still have been put into Excavations. Martin said that it was his father's decision.

Douglas's version of events

Douglas discusses Lightwood Lane in paragraph 77 of his witness statement. He was aware that tipping at Lightwood Lane could be very profitable but there were also significant risks. Added to those risks was the fact that Mr Page lived next door to the tip and wanted some £30,000. He also had in mind a contract with Shepherds a few years earlier which had proved extremely costly both in time and money. In his view if anything went wrong with Lightwood Lane the potential liability was large.
Martin had already told him that he wanted his own business. Martin had referred to David having his own farm which he was farming separately and that he had Loxley House Construction Limited which he ran separately. Martin said that he wanted to have his own business which involved landfill and tipping including receiving wastes from third parties; and Plant could also use these facilities. Martin said he also wanted to do his best for Plant but this is something he could do within the same time and from his existing position, just like David.
Douglas thought about it and decided that if Martin wanted to go ahead he should not stand in his way. If he had his company which hopefully was profitable for him and assisted Plant then that would be better than if he left Plant to be managed by someone else. Douglas believed that Martin's skills at Plant were invaluable and none of the others had those skills.
Martin told him that if he could progress tipping with suitable sites through his own business he could offer Plant cheap tipping. Douglas knew Martin was very much like him and reflected that in his early years. He had taken risks that had paid off. He thought that Martin and Jean Angela had the same ability.
Excavations had been set up to do financially risky work but had not traded. Accordingly he decided that Excavations

could be used as the way of dealing with risky tipping business, that Lightwood Lane should be put into it and that the company should be Martin's because if anybody got nicked and sent to prison, Martin could probably stand it. I thought the rewards would justify the risk.

It was Douglas' idea for Martin to have Excavations transferred into his name. As it had not traded Douglas thought he might as well use it rather than incur the unnecessary expense of forming a new Company. However Dianne and David would need to transfer their shares in Excavations.
According to Douglas he spoke to both Dianne and David about this. He sets out his account of the two conversations in paragraphs 91 to 95 of his witness statement:

91. I told her that I had looked at the Lightwood Lane site which Martin wanted to operate as a tip. I told her that I had my doubts about it. I told her that it was fantastic and deep and ideal as a tip and so close to the centre of Sheffield that made it unbelievable - fuel wise, time wise and in respect of journey times. It was absolutely brilliant but there were drawbacks in terms of the stream and the road. The site could hold a lot of stuff but there could be serious problems with it. I told Dianne that I could see hazards and complications in operating the site and if we were not very careful we could be in serious trouble. I told her that we could not own the site, as it belonged to a local farmer, and I reminded Dianne about the complications we had had with Shepherds' tip and that we did not want to go through all that again. I told Dianne that I had had a bit of a brainwave. I reminded Dianne that Hague Plant Excavations Limited had been formed for business with any companies which were a bit dodgy but it had laid there dormant and I thought that what we should do was to put Hague Plant Excavations Limited solely into Martin's name. So I said to Dianne that she should give up her share in the company and David should give up his share in the company so that the company would just be Martin's so that if there were any problems Martin would take them on his shoulders and there would be no come back on her or David. I told Dianne that Martin had mentioned wanting his own company and that this would be his opportunity and that she and David should let him have Hague Plant Excavations Limited and that company would operate the Lightwood Lane tip and Hague Plant Limited would lend the company the money for it. That way the risks of that company's business would not involve Dianne, her brother, David, or their mother and if anyone had any problems Martin would stand it. I also explained to Dianne that if Martin had Hague Plant Excavations Limited and ran the Lightwood Lane tip in that company he would be able to let Hague Plant Limited tip there cheaply whilst Hague Plant Limited could charge their customers at top rates and Hague Plant Excavations Limited could charge top rates to customers to tip at Lightwood Lane.

92. I cannot remember what Dianne said to me but it was clear to me that she agreed to do what I suggested and that she understood what I had said to her and that once she had given up her share in Hague Plant Excavations Limited she would have nothing more to do with that company, have no interest in it and take no direct benefit from it.

93. Sometime shortly afterwards, I spoke to David, I am pretty sure that we were in the kitchen at Prospect Farm. I spoke to him in a similar way to the way that I had spoken with Dianne.

94. When I spoke to David I told him about Martin wanting a business of his own but I am not sure if I told him Martin's comments about David's farming business and Loxley House Construction Limited as I did not want to wind him up or upset him. I spoke about the real risks with the tipping, particularly on other people's land. I reminded him about the tipping we had done and how risky that was. I said I didn't want to risk Hague Plant Limited or any of us, bearing in mind what we had, and the farming business. After visiting the site and seeing the road leading to it which was a very narrow country lane even though it was close to Sheffield town, I could see the problems that could arise from that tip but it was a big site which could take a lot of fill. The tip itself was ideal for getting rid of waste. On the other hand I could see all the problems with the site such as the drain discharging off the road onto the site and the stream at the bottom of the site in the woodland. I told David that Martin was adamant about going ahead with the tip and if Martin was prepared to take the risk then it would be down to him. I said to David that he and Dianne should give up their shares and any ties to Hague Plant Excavations Limited and then it was solely down to Martin. If the company failed then he had had a go. If it came good Martin would get the reward but if anybody was going to prison then it would be Martin. I told David that Martin was already at work day and night and he will always try his best. He could run Hague Plant Excavations Limited while he was running Hague Plant Limited. In effect I was protecting the family and the existing business. If Martin crossed the line then he would have to take full responsibility. I said that way the company would be his, good or bad.

95. David, as is his character, did not say much in response, but I knew that he had fully understood everything I had said.

Douglas did not expect either David or Dianne to disagree with his request for them to give up their shares. They respected his judgment and in those days everyone tended to agree with what he said and it was very rare that he was ever pulled up. Douglas is satisfied that both David and Dianne understood that by transferring their shares they would be avoiding the risks associated with Excavations' activities and that Martin would get any benefits that arose.
When Douglas was cross-examined he started by saying that Excavations was formed because there were all sorts of people going "dodgy bust". So he thought he would form the Company for any dodgy dealings. He said that they were waiting for someone they really knew was dodgy but it never happened.
When asked to elaborate he referred to contracts that involved giving bribes. He indicated that he envisaged that one of the directors (that is to say one of the wives) would actually hand over the bribe although they were not told this. It was his view that the purpose of the procedure was to protect Plant which, he said, had a very respectable name of which he was proud.
He said that Martin kept dropping hints that he wanted his own business and that he was loathe to discuss the hints because he did not want him to leave Plant. In his view there was no one else capable of running Plant.
He then gave a long answer as to how the idea of the transfer came to him.

No, he did not say he wanted it [this was a reference to Lightwood Lane] for himself, he wanted it for Plant. He took me to look at it. If I can describe it to you, it was a country lane, with water coming out of the ditch and flowing down through this valley, if that is what you would call it. It was too steep to work. It was not agricultural land, it was scrubland, a bit of gorse on the banks and things like that. It was running through. When he took me to look at it, he said: "Look at this for a tip." He said, "And there is a tipping licence with it that Frank Phillips had and he has never used it." My answer to that "I am not surprised. There is a stream running down the bottom under them trees." There was a wood across the bottom, a few trees up there and a few trees up that side. I said: "Who the hell would dare tip in here with a stream running across bottom, all draining out of tip, and this water running down here? …

but I was scared. I was scared. I remember getting home and saying, I do not know to who, "That young bugger is going to drop us in trouble before he is done." Early days David used to say to me: "Don't let him go to an auction. He never knows when to stop." Different to David who would go to an auction with an empty cattle wagon and always come home with it empty…

Anyway, I saw problems and I was really scared if we tipped in there we would be in trouble. I did not sleep a lot that night. When I say I did not sleep a lot, I probably was wake two hours, which was a lot to me. I sleep like a log.

It is suddenly came to me, there is Hague Plant Excavations laid there doing nothing. Martin is wanting his own business so why doesn't he take to that job with Hague Plant Excavations, and Dianne and David give the shares up. I thought that was brilliant. They have no need to buy another company, use that one, it is doing no good. That is what happened.

He then gave details of his conversation with Dianne in the kitchen. Again he gave a long answer in the course of which he told her that Martin wanted the tip, that he was frightened about it and that the best thing for her to do would be for them both to give up their shares and let Martin have it on his own "sink or swim". He pointed out that if Martin went bust that was his problem but if it was profitable it was his good luck. He said that Dianne was in agreement with him.
He was cross-examined as to the detail that he went into with Dianne. He insisted that he did explain to her about the risks on the site. He said he had a similar conversation with David during which he told him exactly the same as he had told Dianne.
At my request Douglas was specifically asked to comment on paragraph 127 of David's witness statement^[1]. He rejected it forcefully:

No. What was the point in them giving the shares up if they were still going have the same. What was the same? If they are giving the shares up they are giving the shares up. They have finished with that company. Martin is taking the risks. If he had got caught and it had cost a fortune and it had gone bust, which I really thought he might do it was so risky, he would have to go prison and get receivers in. Would they put their hands in their pockets and bail him out, would they?

Jean's version of events

Jean deals with the transfer in her first witness statement. She believes that Excavations was set up to deal with doubtful customers but was never used for that purpose. She says that it was later decided that Excavations would be Martin's company for the purpose of tipping. She says she discussed this with Douglas and that she was agreed with the decision. She overheard the conversation between David and Douglas when Douglas asked David to sign over his share. In paragraph 19 of her witness statement she describes what she heard:

19. I remember sometime in 1985, before Joe Midgley sent out the share transfer forms, Doug and David were talking in our kitchen about Excavations and tipping, particularly Lightwood Lane, I remember Doug saying to David that the tipping at Lightwood would be risky. Doug said Martin wanted a company of his own and we could let him do the tipping with his company. He said Excavations hadn't been used so sign that company over to him and then it would only be him and if it went down the swanny or came good then Martin would be responsible. That way, Doug said, you will have no involvement and no responsibility of that company whether it makes money or loses money. David understood what Doug was saying and I am certain he was of the same opinion. This is what led him to sign over his share.

She did not overhear any conversation between Douglas and Dianne. However Douglas told her at the time that he had spoken to Dianne to the same effect. In cross examination, however, she was considerably vaguer over the precise nature of the conversations that she had heard. She could not remember why the wives were the original directors of Excavations but agreed that it might have been based on Mr Midgley's advice. She said that Excavations was never used for its original purpose because they could not differentiate between risky and non risky customers. She repeated that she overheard a conversation between David and Douglas when Douglas referred to the risks of Lightwood Lane. She could remember Douglas saying that he considered that Martin was the one to deal with Lightwood Lane and that David would not want to. She could not remember anything else. She had very limited recollection of what Douglas told her about his conversation with Dianne. She could remember that Douglas told her that he had explained the situation to Dianne and that she was in agreement but she could not remember any more.
There have been a number of occasions when Jean is said to have made statements inconsistent with Martin's case and supportive of David and Dianne's case. It is not necessary for me to set out all the occasions when this is said to have happened. According to David and Dianne it happened before the meeting on 21^st September 2005 when the dispute came to light and on a number of occasions afterwards. These occasions are referred to in the manuscript notes taken by Dianne.
Perhaps the most important of these inconsistent statements was at a meeting on 1^st September 2008 at Prospect Farm with Stephen Sly the Solicitor instructed by David and Dianne. The meeting lasted for over 2 hours. Mr Sly made a detailed attendance note the following morning. It includes the following

Then went on to discuss the formation of Excavations and why that was considered necessary. She said that they were getting involved in riskier business such as tipping. She also recalled that not only was there fairly regular bother from the council, but they were also talking about more and more people being taken to court with prosecutions. It was Doug that decided they needed to form a new company to handle the riskier jobs and as a way of protecting the rest of the family assets and business. She said that explained why initially it was the women (herself, Dianne, Rosemary and Jean Angela) who were to be the directors. The intention was that the company would be owned equally by Martin, Dianne and David. Later, it was decided (but she did not say by whom, although said that Doug was the one organising it all) that in order to achieve the protection they were after, that they had to change the share structure which left Martin as the shareholder of Excavations. She said that although it might sound hard, that was because if anything happened, Martin would be left "carrying the can", and that was because, at that time, Martin had the least to lose if the worst happened. However, if the worst happened, they knew that the family would rally around Martin, although she now reflects on the personal aspects of that - bearing in mind the way that Martin, Dianne and David have fallen out, she now wonders what would have happened within the family if Martin had been forced to "carry the can" in this way.

… She said that they (and certainly Doug) would not have agreed simply to let Martin have a new company as his own, separate from the family, with a "Hague" or "Hague Plant" name. They were unhappy enough with any of the children being involved in non-family companies.

… SS asked whether, given what she had said, she thought it right that Martin should be claiming ownership of Excavations to the exclusion of David and Dianne. She said that was not right, it should be for the three of them but it would equally not be right that David and Dianne could "bully" Martin and kick him out.

During the course of the meeting Jean had asked Mr Sly not to make notes. She had also told him that she did not want to take sides in the dispute. In cross-examination Jean accepted that the majority of Mr Sly's note was accurate but maintained that crucial areas were not. In particular she did not accept she ever said anything that suggested that Excavations did not belong to Martin.

Jean Angela's version of events.

Jean Angela substantially corroborates Martin's version of events. In paragraph 30 of her witness statement she deals with the setting up of Excavations. In effect she says that it was set up for doubtful or risky customers. She said that it was never used for the purpose originally envisaged. In paragraph 37 she says that it was decided between Martin and his father that Martin would use Excavations for his proposed tipping business and that David and Dianne were to transfer their shares to Martin and her. She accordingly knew that she was going to have her own company with Martin. She makes the point that there was no suggestion for some 20 years that she was holding her share on trust for Dianne.
In cross-examination she said that her source of information was general discussion. She said that Excavations was originally for contracts they were worried about. She knew she was an original director of Excavations but could not remember if she was told why. She knew that the other wives were directors. She said she was happy to be involved with a new risky tipping business with Martin. She repeated that she was certain that Excavations was for herself and Martin.
She also confirmed evidence in her witness statement that, at the time of Dianne's divorce settlement from Michael Rogers in 2004 she had a conversation with Dianne in which Dianne had said that she had no interest in Excavations.

3.11. Activities at Carlisle Street

It is common ground that in its early days Carlisle Street was used for tipping. There is some dispute as to David's involvement. According to Martin, David had little to do with Carlisle Street. He was involved with the farming side of the business. According to David he was involved with securing the site (using Plant's equipment). In cross-examination he said that he was there over a 3 week period but not every day.

Broomhall Flats and recycling

In February 1988 Plant obtained a large contract for the demolition of Boomhall Flats. One of the tasks involved was the removal of concrete which was initially deposited at Carlisle Street. In his witness statement (paragraph 134) David suggests that it was his idea to crush the concrete and that he made arrangements for the acquisition of a mobile crusher. Plant's accounts show that the crusher was acquired in 1987 well before the Broomhall contract started.
In any event it is common ground that on 6^th March 1988 a representative of the manufacturer visited Prospect Farm and demonstrated both to David and to Leonard Shepherd the correct way to use the crusher.
It is also common ground that at some time – possibly August 1988 – the crusher was taken to Carlisle Street and that the concrete from the Broomhall flats which had been stored or deposited as waste was crushed. It is accepted that in the initial stages David was on site at Carlisle Street training Plant's employees in the use of the crusher. David says he was on site for about a month. Martin says it was only for a few days. David accepted that after this initial period he was an infrequent visitor to Carlisle Street. In cross-examination it was suggested that he had not visited Carlisle Street more than 5 or 6 times between the initial period and 2005 when this dispute emerged. David did not disagree with that suggestion.
From about this time Carlisle Street changed from being a land fill site to being a recycling site. Indeed in September 1991 (after some pressure from the local authority) planning permission was obtained to use Carlisle Street as a waste transfer station.
The arrangement was beneficial for both Plant and Excavations. Materials would be brought to site by either Plant or third parties. Excavations would charge a tipping fee, which, in Plant's case was less than the commercial rate. Plant employees would recycle the materials either by crushing, or screening as appropriate and Plant would sell the recycled product or materials. In so far as any of the original material was waste or not recyclable Excavations would pay for its transport to a tip. The arrangement proved profitable for both Plant and Excavations.
Martin ran Excavations and Plant alongside each other and their activities complemented each other. In his witness statement Martin gives a number of examples of this:

1. Plant had the equipment, the men and the plant and would do work on site removing material and would make a charge to customers for that work. had the benefit of low cost disposal with Excavations, coupled with the advantageous geographical location of Excavations' premises which were very close to central Sheffield and Rotherham.

2. The work at Carlisle Street was undertaken by Excavations using Plant as a subcontractor. At one stage, Martin considered developing Carlisle Street as a business park. This was under the name of "Prospect Business Park". The application was to gain planning consent to infill the site creating a business park for future industrial use. However as land filling throughout Yorkshire became increasingly difficult through planning legislation, Martin decided to use the site in the expanding recycling market. Carlisle Street has, therefore, for several years, operated as a waste transfer and recycling station.

3. Because Carlisle Street was so conveniently located in the centre of Sheffield Martin decided to allow Plant to use the site to store its vehicles and to operate a skip hire business. Plant's equipment would be present during days, nights and weekends.

As Martin was running both Plant and Excavations he made decisions about inter-company charges. Thus in paragraph 182 he discusses an offset of costs intended to be paid by Excavations against what he describes as excessive costs incurred by Excavations in relation to a large Plant contract. In paragraph 184 he discusses a decision that Plant should contribute to the cost of a retaining wall. In cross-examination Martin agreed that he did not consult either David or Dianne before making any of these decisions.
The administration for both Plant and Excavations was carried out at Prospect Farm in the same building. According to David they shared a phone number and all calls are directed to Prospect Farm. The administration was, in general, carried out by Plant employees. Until July 1995 Excavations did not pay for this administration. However after 1995 Excavations has paid Plant for administration services. The amount has varied though it has often been of the order of £30,000 plus VAT per year. Martin has decided the amount payable without consulting either David or Dianne.
According to Martin both David and Dianne were perfectly content to leave the running of Plant and Excavations to him. Both companies were making good profits and they did not interfere. Indeed he says they took no interest in Excavations at all. At not time before 2005 did they ask to see Excavations' accounts.

Knowledge that Excavations belonged to Martin and Jean Angela

There is conflicting evidence as to whether David, Dianne, Mr Sivell and the employees knew that Excavations belonged to Martin and Jean Angela or was a family owned company like Plant. I shall not lengthen this judgment by setting it out in detail. I have already mentioned a conversation alleged by Jean Angela at the time of Dianne's divorce. There was also a conflict between Mr Sivell and his ex wife as to Mr Sivell's knowledge.

3.12. 1986 meeting with Mr Hewitt

Whilst going through documents for disclosure Martin came across a hand written 5 page document prepared by the family solicitor – Mr Hewitt. The document is undated but from the information on it appears to have been made between July 1986 and February 1987. Having seen the document Mr Hewitt believes it was made following and as a result of a meeting at Prospect Farm attended by David, Martin, Douglas and possibly Jean. Martin recollected the meeting and that both David and his father were there. When Douglas gave evidence he thought that Dianne had been present as well as Martin and David. When it was pointed out that Dianne was not present he conceded that his memory was at fault. When David gave evidence he said that he did not attend the meeting and that he had never seen the document before it was disclosed in these proceedings.
Page 1 of the document sets out the members of the Hague family and their children. It comments that Dianne has matrimonial problems. Page 2 sets out the properties owned by Douglas and by Jean. In cross-examination David accepted that it was accurate. Page 3 sets out the properties owned by Plant, David, Dianne and Martin. In cross-examination David accepted that the details for himself and Dianne were accurate. The details for Martin included:

OWNS JOINTLY WITH WIFE A COMPANY HAGUE PLANT (EXCAVATIONS) LIMITED

Pages 4 and 5 set out a suggested distribution of the properties amongst the members of the Hague family together with some notes. It is not necessary to refer to the notes or the distribution in any detail. Douglas and Jean were said to be happy with any distribution if the children agreed and that they were allowed to live at Prospect Farm for the rest of their lives. Martin was said to want to run Plant for himself. David was said to concentrate on his farming activities and said not to interfere with Plant. It was said that he may be very reluctant to give up what was obviously a good source of income.
This is plainly an important document. It was created within a short time of the transfer of the Excavations shares to Martin and Jean Angela. It is wholly consistent with Martin's case that the shares were owned by himself and Jean Angela. Even if David was not present at the meeting (and the wording of the document suggests that he might not have been) it shows Martin and Douglas being present at a meeting where the family solicitor was being told that Martin and Jean Angela owned Excavations. If there had been any question of a trust in favour of David and Dianne one would have expected it to be mentioned.

3.13. Farming

On 13^th May 1988 Hague Farming Limited ("Farming") was incorporated. According to David the reason for the incorporation was to enable Douglas to pass on some of his wealth and avoid tax. It was incorporated on the advice of Mr Midgley. The scheme involved the transfer of properties first into the names of the three children and then into a newly formed Company. David, Dianne and Martin were the shareholders. David was the director. Just as Martin concentrated on running Plant and Excavations, David concentrated on running Farming. David was not a man for paperwork and most of the paperwork for Farming was dealt with Rosemary who was also looking after the paperwork for David's own farming enterprise at Loxley House Farm.
One of the issues in the case is the extent to which David was aware of and/or involved in the practice of "year end invoicing". It is Martin's case that not only was David aware of it but Farming was actively involved in it. Jean Angela has prepared a spread-sheet showing year end invoicing, taking place at various times between 1996 and 2003, between Plant and Farming.
The summary shows that between 1996 and 2001 invoices totalling £140,465 were sent from Plant to Farming and counter invoices totalling £140,459 from Farming to Plant. Other figures are provided for 2002 and 2003. The invoices are couched in vague terms so that – in general – it is impossible to identify the work involved or services supplied. Jean Angela says that none of the invoices are genuine. She says that they are part of the year end invoicing arrangement and that both Rosemary and David knew this. Both Rosemary and David assert that the invoices are genuine and deny that Farming was party to any such scheme.

3.14. Hallam Towers - the conspiracy theory

Martin's acquisition of the Hallam Towers Hotel is not directly relevant to any of the issues relating to the ownership of the shares in Excavations. A significant amount of time was spent during the trial over the acquisition because it was said to be relevant to the issue of credibility. In particular it was said to evidence disreputable conduct by Martin to use £7 million of Plant's cash to acquire Hallam Towers Hotel, to resell Hallam Grange Ltd for £14 million and to keep the £7 million profit for himself (or for himself and Jean Angela) without disclosing anything to his brother or sister and without sharing any part of the profit with them. As will appear below the allegation can only succeed if there was a conspiracy or collusion between Martin, Mr Midgley and (probably) Mr Hewitt, the solicitor acting for Martin.

The acquisition

On 9^th February 2004 Martin caused Plant to pay £1.65 million as a non refundable deposit for the purchase of Hallam Towers Hotel. Contracts were exchanged on or about 1^st March 2004. The transaction was completed on or about 29^th April 2004. The purchase price was £6.65 million plus VAT. It is common ground that the whole of the purchase price was provided by Plant. It is common ground that Martin did not discuss the purchase with David or Dianne before committing to the purchase. It is common ground that this was the largest property transaction ever undertaken by Martin. However Martin made the point that he had undertaken some 60 other property transactions on behalf of the family. It was his normal practice to act without prior approval from David and Dianne. They were content for him to act in this way. He had been successful in the past.
It is also common ground that Hallam Towers Hotel was transferred into the name of Hallam Grange Ltd.

Hallam Grange Ltd

Hallam Grange Ltd was incorporated on 20^th February 2004. As set up there were 6 ordinary shares all issued to Martin. According to Martin the original idea was that Hallam Towers Hotel would be vested in Plant. However he was advised that there were tax advantages in placing it in a new single purpose company. He instructed Mr Midgley to set one up with 3 shareholders – David, Dianne and Martin.
Mr Midgley confirms this evidence. He says that after Martin disclosed to him his plans for a possible quick re-sale to Mr Boulding of Merlin Estates he suggested that it would be advantageous for tax purposes to use a single venture company. Martin instructed him to form such a company. Martin instructed him that the shareholders were to be himself, Dianne and David. He was to be the sole Director and Jean Angela was to be the Secretary. Mr Midgley suggested that there be 6 shares so as to give greater flexibility and to allow David and Martin (if they wished) to transfer one of their shares to their spouses.
Notwithstanding these instructions Mr Midgley instructed the company formation agents to allocate all 6 shares to Martin. Mr Midgley explains this in detail in paragraphs 62 to 67 of his witness statement. In summary he did not have the necessary personal information for David and Dianne at the Rotherham office of his firm. He knew that it was easy to transfer shares from Martin to David and Dianne and he therefore thought that this was the most efficient way of dealing with the situation.
On 27 February 2004 Martin signed the stock transfer forms to transfer two shares in Hallam Grange Limited to David and two shares to Dianne. Martin and Mr Midgley discussed whether it was still appropriate to make the transfer to Dianne in view of the position in her divorce proceedings but it was not felt that there was any particular advantage to Dianne in holding back the share transfer so Martin signed the transfer forms in favour of both Dianne and David.
On 1^st March 2004 Mr Midgley arranged for a formal minute of a meeting of Hallam Grange Ltd acknowledging the transfer of the shares. The minute was duly signed by Martin. In fact, however, due to inefficiencies in Mr Midgley's office the new share certificates were not issued to David and Dianne until very much later – after the pension meeting in September 2005.
This evidence is, of course, wholly inconsistent with any conspiracy or dishonourable conduct by Martin. It is thus a necessary feature of the conspiracy theory that both Martin and Mr Midgley are lying. No motive has been suggested as to why Mr Midgley should be lying.

Discussion with Members of the Family

There is a major conflict of evidence as to when Martin informed his brother and sister of the purchase. Martin says he told David about the purchase either at the end of February 2004 or at the beginning of March 2004. He says that he asked David to come to the office where he explained about the purchase. He explained that it had cost £7 million and had been placed in the name of Hallam Grange Ltd. In order for David to understand about Hallam Grange Ltd and why it had been set up he telephoned Mr Midgley in David's presence and relayed the information supplied by Mr Midgley to David.
Dianne was in the throes of negotiation of a financial settlement following her divorce from Michael Rogers. Martin was involved in assisting Dianne. He was not anxious to disclose that Plant had assets of £7 million available as that might upset the settlement. He however thought that Dianne might well have learned about the acquisition because her desk is very close to the fax machine in the office.
David, however, says he did not discover about the purchase of Hallam Towers Hotel until July 2004. He says that one evening in July 2004 he went out for an evening with friends. During the evening there was some conversation about the Hagues moving into the hotel business. Shortly afterwards he had a conversation in the yard with his father who had been involved in a conversation about it in the pub. David suggests that he then confronted Martin who was not completely frank about the purchase.
Douglas confirmed that he had learned about the purchase from pub talk. However he said that this happened in February or March. Rosemary corroborated David's evidence by reference to her diary which suggested that they had been out with their friends on either 20^th or 28^th July 2004. One of the entries in her diary was inaccurate because it referred to the meeting being a.m rather than p.m. Rosemary said that the conversation with Douglas was "some time" after the night out with friends. It is also to be noted that on 18^th June 2004 Plant sent an invoice to Hallam Grange Ltd for security services provided.
According to David he had two conversations with Martin about Hallam Towers Hotel. In the first which took place shortly after the conversation with his father he describes Martin as evasive but that Martin did confirm that the family had bought Hallam Towers Hotel for about £7 million. The second conversation was in the autumn of 2004. In that conversation Martin is described as being uncomfortable. However he explained that Hallam Towers Hotel had been bought in the name of a new company - Hallam Grange Ltd – and that David and Dianne had been shareholders from the start. David rang up Mr Midgley who gave him the comfort of telling him that the Company had been set up as Martin had described. He, however, went on to allege that Mr Midgley told him that Martin told him not to release the share certificates to him or Dianne or to tell him anything about it.

The negotiations with Mr Boulding

It is common ground that there was a meeting on 28^th June 2004 to discuss the possibility of selling Hallam Towers Hotel to Mr Boulding or one of his companies ("Merlin") for £15 million. The meeting was lengthy lasting of the order of 2½ hours. It was attended by Martin, Mr Hewitt his solicitor and representatives of Merlin. Mr Hewitt made a handwritten note of the meeting. David and Dianne place considerable weight on that note as evidence that at that time Martin was seeking to treat Hallam Grange Ltd as his own company. Part of the discussions involved the granting of an option by the shareholders of Hallam Grange Ltd to Merlin to enable it to acquire the shares. In the notes as to the parties to the proposed contract Mr Hewitt has written "Hague personally". This, it is suggested, shows that Martin told Mr Hewitt that he was the owner of Hallam Grange Ltd.
On 2^nd July 2004 Mr Boulding's solicitors wrote to Mr Hewitt following a further meeting between the parties' solicitors. Amongst other questions he asked Mr Hewitt to confirm the identity of the shareholders in Hallam Grange Ltd. On 14^th July 2004 Mr Hewitt sent by fax to Martin for approval the draft of an "amended copy letter" to be sent to Mr Boulding's solicitors in reply to their letter. The amended draft contained the information that the shareholders of Hallam Grange Ltd were "Mr and Mrs Hague" – that is to say Martin and Jean Angela. Martin's explanation for this was that Mr Hewitt had got it wrong.
It is, however, plain that Martin phoned Mr Hewitt on receipt of the letter. Mr Hewitt has a file note dated 20^th July recording a conversation in which he was told that the shareholders were David, Dianne and Martin but that the letter should be left in its current form so as to avoid confusion. Mr Hewitt made a note on his copy of the letter that the identity of the shareholders may change.
When he gave evidence Mr Hewitt was asked to explain the note of the meeting of 28^th June. He said that the words "Hague personally" were to be interpreted as meaning "whoever of the Hague family were holding the shares in their personal capacity". He was asked a series of questions as to why he had included Martin and Jean Angela as shareholders in the draft letter.

Q. You would have believed that it as consistent with your instructions from Martin Hague.

A. No, because I had -- I would not have necessarily known exactly who the shareholders were at that point.

Q. Why are you putting in Mr. and Mrs. Hague without instructions?

A. It is just to -- it is the structure of the agreement that was of more concern, how to try to make this agreement structured, so that it would not -- that it would create the correct tax benefits and, at the same time, would not expose the shareholders.

Q. Why would you not just say shareholders of HGL? Why Mr. and Mrs. Hague?

A. Because it was to keep the matter simply because it fell in line with what the buyers were perceiving matters ----

The allegation

In cross-examination it was suggested to Martin:

1. That Martin's original plan was to keep Hallam Grange Ltd and any profit for himself and Jean Angela.

2. That he originally instructed Mr Hewitt that the shareholders of Hallam Grange Ltd were himself and Jean Angela.

3. That when gossip started leaking out in July 2004 there was a change of plan and Martin informed Mr Hewitt that David and Dianne were shareholders of Hallam Grange Ltd.

4. That the share transfers executed on 27^th February 2004 and the Minutes signed by Martin on about 1^st March 2004 were signed to give him cover to enable Martin to show that David and Dianne were owners of Hallam Grange Ltd from the start.

Martin denied all of these allegations. In order for me to give credence to this allegation it is necessary for me to find that Martin, Mr Midgley and Mr Hewitt were all lying. It is necessary for me to reject the evidence of Douglas that he found out about the purchase in February or March. It is necessary for me to accept David's evidence as to the time when he found out and to find that Martin had sufficient cunning to incorporate Hallam Grange Ltd with 6 shares, and to execute the share transfers in February with considerable foresight.

3.15. Dianne's divorce

Divorce proceedings between Dianne and Michael Rogers commenced in 2002. The financial settlement was concluded in a Consent order made about September 2004. As a result of the settlement Dianne paid Michael Rogers £500,000.
Martin assisted Dianne in the negotiations. Indeed much of the correspondence relating to the divorce was dealt with by Martin on Dianne's behalf. Equally Dianne instructed Mr Hewitt – the family solicitor – to act on her behalf.
It was necessary for Dianne to sign a Form D81 setting out a summary of her means. She signed this on 1^st September 2004 though there are earlier unsigned drafts in the court documents. It may well be that Mr Hewitt, Martin or even Mr Midgley had an input in the information contained in the document. Under the heading "Capital Resources" Dianne discloses that she has shares in Plant and Farming. She does not however mention any interest she has in Excavations. Equally, as Mr Lazarus points out, she does not mention her interest in Hallam Grange Ltd.

3.16. The September Pensions meeting

It is common ground that in 2005 David asked Mr Midgley if he could see copies of the last few years of Excavations' accounts. There are disputes between David and Mr Midgley as to whether the request was made in April 2005 or July 2005 and as to how the request was actually made. It is common ground that Mr Midgley did not provide the accounts and told David that he would have to ask Martin for them. There are disputes as to the precise words used by Mr Midgley in refusing the request.
According to David he became concerned at the implications of Mr Midgley's refusal to show him Excavations' accounts. He consulted Dianne and they agreed to discuss the matter with their mother. David says that he spoke to their mother and that she agreed with him that, in effect, Excavations belonged to the three children. Jean now denies that she said anything of the sort to David.
The annual meeting with the family's pension advisors took place on 21^st September 2005. The meeting was attended by Martin, David, Dianne, Jean, Jean Angela, Rosemary and Mr Midgley. David decided that he would take the opportunity of raising the question of the ownership of Excavations after the meeting.
David first raised the question of his shares in Hallam Grange Ltd. There is a difference in recollection as to precisely what Mr Midgley said. David remembers him as having said there was a hold up but that the share certificates would be sent out shortly. Mr Midgley recollects being asked to explain the full background to the acquisition of Hallam Grange Ltd .
At that point David raised the question of the ownership of Excavations. According to David and Dianne after some prevarication Martin said that Excavations belonged to him. According to Dianne David challenged this and the meeting became heated. At one point David asked Jean whether she thought Excavations belonged to the three children. According to David Jean was very uncomfortable and did not want to say anything. According to Dianne she answered "yes". Both David and Dianne deny that there was any mention of Jean Angela's shareholding at the meeting.
Mr Midgley and Martin give a different account of what was said at the meeting. They both suggest that Jean Angela's shareholding was mentioned. Jean denies that she ever agreed with David. It is common ground that it was an emotional and heated meeting and that matters were unresolved at the end of it.

3.17. Subsequent events

There have been a number of occasions when attempts have been made to meet and resolve the dispute. There is no doubt that it has split the Hague family. Equally there is no doubt that, on occasions, strong words have been used - not least an accusation made by Dianne to Jean Angela in November 2005 which clearly caused considerable hurt and upset.
There have been attempts at professional mediation. Douglas told his children to sort the matter out and not to wash their dirty linen in public. Jean described herself as devastated by the dispute. Douglas described himself as being very sad – especially for his wife.
In my view it would not be profitable to go through all of the attempts at compromise. During the course of the dispute Dianne kept manuscript notes to which reference was made during the trial.
Reliance was placed on those parts of the notes that suggested that Jean backed up what David and Dianne were saying. Whilst it is true that there are notes that suggest that at some times Jean supported David and Dianne, there are other notes where she appeared to be taking a contrary view. Thus, at a meeting on 17^th November 2005 after Martin had asserted that David and Dianne were not owners of Excavations there is a note to the effect "Mother never spoke up". There is also a note following a meeting on 30^th March 2006 which suggests that mother knows the truth but is protecting Martin.

3.18. Evidence of Mr Midgley

It is not my intention to lengthen this judgment by setting out – or even summarising all of the evidence I have heard. However the evidence of Mr Midgley is important both in relation to the setting up of Excavations, the transfer of the shares in Excavations and in relation to Hallam Towers Hotel. Furthermore he was subjected to serious allegations both in cross-examination and in Mr Lazarus's closing argument. It is therefore necessary to set out his evidence in a little detail.
Mr Midgley qualified as an accountant in 1971. He has worked at Haywood and Co since 1966; he became an equity partner in 1984. His firm has acted for the Hague family since 1951. Mr Midgley personally has been dealing with some of their work since the 1970s. Jack Haywood retired in 1984 and Mr Midgley has been in charge of Hague work since then.
According to Mr Midgley the work comprised the production of and auditing the annual accounts for the various Hague Companies and the individual tax returns for the members of the family. He said that there was very little advisory work. He did, however agree that there was a time when purchased plant attracted 100% first year allowance. He would form a rough estimate of the likely profit of Plant so as to advise them of amount of plant that could be bought and attract full relief. He also agreed that from time to time he gave tax advice on individual matters that might be raised by members of the family.
Mr Midgley agreed that he was responsible for the work involved in the incorporation of Excavations in May 1985, and the transfer of the shares to Martin and Jean Angela in November 1985 and the summer of 1986.
It is plain from Mr Midgley's file that he had received instructions to incorporate Excavations by 6^th May 1985. He cannot now remember the reason it was set up. He believes his instruction came from Douglas. Midgley inferred from the forms that were completed that he must have been told that the Company was to be involved in demolition and excavation work. He did not recall the reason that the wives were appointed as directors of Excavations but his answer implied that it was as a result of instructions from the client. He could not recall any discussions to the effect that there was an attempt to distance the men of the family from the activities of Excavations. Equally he could not recall advising that it would be a good idea.
He was asked about the information that was supplied by his firm to the Inland Revenue in October 1985. In two documents submitted to a sub-contractor's tax certificate the main type of work had been described as "Excavation Contracts" and "Demolition and Excavation Contracting". Mr Midgley said that that information would have been taken from the file most probably from the main objects clause in the Memorandum and Articles.
He was asked about the letter of 19^th November 1985 in which he sent the share transfer forms to Martin. His answers are central and thus I reproduce them

Q. Do you think you were asked to give any advice, in relation to the steps you refer to in that letter?

A. No, it was purely as a request from the Martin.

Q. You can remember that?

A. No. I cannot remember it but the fact is that it refers to a recent conversation. I can certainly recall not giving any advice as to why they should do it like that.

Q. You think you would have asked why they wanted to change the structure of Hague Plant Excavations in that way.

A. Not really, no. With these things, with all these things, you can how people ring me up to say, "we want to the do so-and-so". I just went along and filled the forms in and sent them out.

Q. It would be a natural thing to do, would it not, to find out why in case what they were doing was mistaken or not in their best interest?

A. At this time, this was a dormant company. If they wanted to change the name of it or the officials, you know, there was no tax consequences or anything like that. I mean if it had been a company that was up and running and they wanted to move shares around, I would have said well, we have to give consideration to the value of the company or the value of the shares. In this particular case, the company was totally dormant. If they wanted to switch directors or shareholders, it had no tax consequences.

Q. Did you know what the company was planning to do?

A. No.

Q. Are you sure about that or you just do not recall?

A. I am pretty sure I did not know what the company was intending to do at that time, no.

Mr Midgley made the point both in his witness statement and in evidence that he did not follow up the letter of 19^th November 2005. If he had felt that there was a reason why the transfer needed to be done he would certainly have followed it up.
Mr Midgley said that there was no phone call from David to discuss the reasons why the transfer was necessary. He was asked how he could remember. He replied he thought he would have remembered such a phone call. He agreed he could not be 100% sure but said he was as sure as he could be.
He was asked about the final sentence in the letter and was not able to give a reason why he put it in. It was put to Mr Midgley that the natural inference was that part of the business was to be separated off and controlled by Dianne. He said that that was certainly not the reason for that sentence and adhered to that view when pressed.
Mr Midgley said he knew nothing of the practice of cross-invoicing until it was drawn to his attention by Mr Sly in 2008. He did not follow it up Martin until shortly before he gave evidence.
Mr Midgley was asked a number of detailed questions about the Plant accounts for 1984 with particular reference to a number of invoices between Plant and Prospect Construction that were said by Jean Angela to be part of the cross invoicing practice. The relevant invoices were found on Mr Midgley's file. One of the invoices had had its date altered. Furthermore the type face in which the date of the invoice had been altered appeared to show that the alteration was carried out in Mr Midgley's office. It was therefore suggested to Mr Midgley that he knew more abut the cross invoicing than he was admitting. Mr Midgley repeated that he knew nothing about the cross invoicing or deferring profits from one year to the next.
It was suggested to Mr Midgley that from time to time David had asked him about Excavations as well as the occasional query about Plant. Mr Midgley adhered the evidence in his witness statement. He said that David did occasionally ask for meetings about Plant's accounts but he never expressed any interest in Excavations until he asked to see the accounts in April 2005.
He was cross-examined about Hallam Towers but I have dealt with that evidence earlier in this judgment.
Finally Mr Midgley was asked about the share transfer form signed by Dianne. He confirmed the form was drawn up in his office. He said it went out for signature with [Jean Angela] Hague's name and address already filled in. He made the point that he had already been told to whom the shares were to be transferred and this was included in the letter of 19^th November 1985. Thus he could be sure that it would have been typed with the name of the transferee already filled in.

4. Credibility

Much of the trial was taken up with allegations and cross allegations of dishonesty between various members of the Hague family even though many of the allegations had little or no relevance to the actual issues in the case. However as credibility is a central issue in the case and the crucial events took place over 20 years ago it is necessary to look at the allegations in some detail.

4.1. Martin

In cross-examination Martin admitted that he told lies to business people, to local authorities, and to the Revenue for the purpose of evading tax. Numerous examples were given and accepted by Martin in the course of his cross-examination. However in order to understand the extent of Martin's admitted dishonesty it is necessary to put some flesh on the admissions:

Tax Evasion

False Invoicing

Martin admitted that for a period of the order of 20 years he has knowingly been involved in a practice referred to in evidence as cross invoicing. This practice certainly took place between Plant and Excavations. Martin suggested that Farming was also involved. The effect of the practice was to defer rather than to avoid taxation. It would have evaded tax if (which never happened) one of the family companies had had a bad year.
Jean Angela has prepared a spread-sheet showing the extent of the practice. That spreadsheet showed that in November 1999 Plant submitted £290,000 worth of false invoices to Excavations. Martin accepted that the practice extended to hundreds of thousands of pounds per annum. He accepted that in so far as it reduced or delayed the amount of tax properly payable it amounted to tax evasion.

Cash Takings

Martin also admitted that substantial sums of cash were received by Plant and Excavations which were not entered into the books and which were not declared for tax purposes.
He indicated that the majority of the cash was received by Plant in respect of materials supplied and skip hire but there was some cash received from Excavations. There was an elaborate procedure – "Cash No Ticket" – designed to ensure that there was no reference to any such contracts in the books – including the Grey Books where all work was recorded. He did not dissent from the suggestion that the total amount of cash undeclared over the years could be as much as £1 million.
This cash was passed on to Jean. According to Jean substantial amounts of this cash was paid out to each of her children and is recorded in her code in her diary. Martin accepts he received these cash sums. David, Dianne, (and Ian Sivell) deny that they have received more than presents for birthdays and the like.

Individual Invoice

As already noted the price paid for Carlisle Street in September 1986 - £115,000 – was provided by Plant even though it is owned by Excavations. The £115,000 is described as a loan from Plant to Excavations. It has never been repaid. Instead on 31^st December 1986 Excavations submitted to Plant an invoice for £165,000 in respect of "tipping services provided". Martin admits that this invoice was false at least to the extent of £130,000.

Dishonesty in relation to the local authority

In his cross-examination Martin admitted to acts of blatant dishonesty towards the local authority.

Waste Disposal

In the course of his evidence Martin accepted that the tonnage of waste passing through his tips including Carlisle Street exceeded the tonnage permitted on his waste disposal licence by a substantial amount. In his witness statement he used the word "grossly". He further admitted that over a number of years he had submitted returns to the appropriate authority containing information that he knew to be wrong.
According to Martin Dianne would collate the actual figures from the relevant tip and submit them to him. He would adjust the figures to fall in lined with the licence. He would pass the adjusted figures to Dianne who would submit them to the appropriate authority.

Mr Sivell's undated letter

In 1986 Lightwood Lane had a tipping licence. However there was a change in the planning legislation which came into effect on 1^st March 1986. In order avoid the new rules it had to be shown that work had started on site before the relevant date. No such work had been commenced at Lightwood Lane. Accordingly the new rules applied.
However in order to persuade the local authority that work had commenced before 1^st March 1986 Martin suggested to Mr Sivell that he wrote a letter in which he (Mr Sivell) stated he had carried out work on the tip in November 1985. Both Martin and Mr Sivell knew that the letter was untrue and that it would be submitted to the local authority.

Prospect Farm

Prospect Farm is within a green belt. It was thus very difficult to get planning permission for new houses. One possible exception was permission for houses for agricultural workers.
In 1986 such an application was made for a house adjacent to Prospect Farm. It was supported by a letter signed by Douglas. However Martin accepted that he had a large input into the letter. The letter contained a number of blatant lies about Martin. It suggested that he spent a minimum of 14 hours a day on the farm and that he was regularly called in the night for lambing and calving."
As Martin was, in fact, devoting his time to Plant those statements were untrue.

Fraudulent Grant Application

On 30^th September 1996 Plant applied to Sheffield Development Corporation for a grant to assist in the improvement of Carlisle Street. The application form asserted wrongly that Plant was the tenant of Excavations paying a substantial rent and that no other businesses trade from Carlisle Street. Martin accepted that the purpose of the false information was to obtain the grant.
The grant application was for 50% of the total costs of the improvements said to be £27,130. Martin stated that he was required to produce invoices justifying the expenditure. In order to do so selected subcontractors were approached to put false information on the invoices.
In the result Martin accepted that the grant he had received was received as a result of fraud.

Other Businesses

Another example of Martin's dubious business methods followed the insolvency of Wellermans. Plant had in its possession a crane belonging to Wellermans. The Receiver sought the return of the crane. Martin sought to resist the return by alleging that Wellermans had agreed to grant the crane as security for the moneys owed to Plant. In order to do so Martin sought to make use of a letter which he knew had never been sent to Wellermans. It was not particularly effective in that the litigation resulted in a very unfavourable compromise for Plant. However Martin had sought to make use of a letter that he knew had not been sent to Wellermans. He knew perfectly well that the claim to security was groundless.

4.2. Jean

Jean admitted that she had been involved in the "year end invoicing practice" for over 30 years. She further admitted that substantial sums of money had been received in cash receipts that had not gone through the books. She knew this was tax evasion and that it was illegal. She acted as banker in respect of the cash receipts. She kept a diary in which she recorded (using her own code) the moneys she received from Carlisle Street and, according to her the sums she paid out. According to her substantial sums were paid out to each of her children (recorded for example as "1GTE" meaning, according to Jean as "1 Grand (or £1,000) to Each".
An analysis of the diary entries^[2] shows that she gave the following sums to her children:

2002	£20,000 (namely a total of £60,000between the three of them)
2003	£24,000 (a total of £72,000);
2004	£22,000 (a total of £66,000);
2005	£16,000 (a total of £48,000);
2006	£17,000 (a total of £51,000);
2007	£7,000 (a total of £21,000).

In so far as David and Dianne deny receipt of the cash payments they are lying. In addition Jean stated that the pool of cash was used to pay bribes to get employment from companies. She estimated that the bribes would be in the range of £5,000. She also estimated that at any one time she would have between £10,000 and £100,000 cash belonging to one or other of the Hague companies.
There are entries in Jean's diaries which she alleges corroborate some of the allegations against David and Dianne. For example on 2^nd October 2004 there is an entry "NH4" which Jean says corroborates a payment of £40,000 in respect of Nether House.
For the week ending 3^rd August 2008 there is an entry "40 TO AC EX DWH". Jean interprets this as "DWH took £40000 to give to Andrew Charlesworth re Nether House Farm". Jean says that she had distributed £10,000 to each of the children shortly before this but had to recall it to make this payment. However, there is no record of the earlier payments of £10,000 in her diary.
On 20^th June 2004 there is an entry "plus 5 EX Tony H.". According to Jean this means £5000 received from Tony Hemsley (actually Anthony Emsley).This is said to be a bribe from Tony Emsley as a result of assistance by David in relation to the assistance said to be given to him by David in September 2003 in bidding for a piece of land near Leeds Bradford airport.

4.3. David

Martin devotes 27 paragraphs^[3] of his witness statement to attacking the credibility of his brother David. He says that he got on all right with him till David married Rosemary in 1973. He says that there was less communication after the marriage. In general he says that they kept out of each other's way to avoid conflict. He allowed David to run Farming whilst he ran Plant and Excavations. He was unimpressed with David's ability to make money.
He makes the point that things got worse during the period when David left the family between 1979 and 1981. He describes David's behaviour as farcical in that he still came to Prospect Farm to take feed for cattle and machinery. He thinks David was jealous of his success at Plant and Excavations.
He describes David as being the sort of man who likes to be seen to be important.. He describes him as extremely arrogant. He is critical of the way he treats people. He treats neighbours as a class below him.
He makes a number of allegations of dishonesty against David. These include an allegation^[4] that he mutilated a dead cow with a view to making a false insurance claim, an allegation^[5] that he lied in 2008 at a board meeting over the monies paid to an employee of Farming – a Mr Lister, an allegation^[6] that he persuaded Martin to make an inflated (but not genuine) offer for land that a Mr Emsley was intending to sell so as to inflate the price, and an allegation that the purchase price of Nether House Farm, which was purchased by Farming in 2008 for £900,000 was the subject of a Stamp Duty Fraud in that there was in addition paid to the vendor a cash sum of £40,000.
All of these allegations (together with allegations as to receipts of cash and being involved with false accounting) were put to David in cross-examination and denied by him. It is, however, necessary to consider the allegations and his evidence in a little detail.

Cash

David admitted that he had received small payments of cash on his birthday, wedding anniversary, Christmas and the like but denied that he had received any substantial payments of cash from his mother. He estimated those payments as being less than £1,000 per annum. He could not understand his mother's evidence or the entries in her diary. He could not understand why she should lie to the Court.
David made it clear that, like his father, he did not get involved in the book-keeping side of the business. He, however, knew nothing of undeclared cash receipts from Carlisle Street or otherwise.

Accounting

In his witness statement David categorically states that he did not know of the practice of "cross-invoicing" between companies or of any other illegal method of tax avoidance and that he did not knowingly participate in such practice. He maintained this position in cross-examination. In the course of his evidence he did not accept that he was never charged for labour and materials used at Loxley House Farm. He did not accept that invoices sent from Plant to David in respect of such items as "storage facilities and tool hire" were false invoices designed to deflate Loxley House Farm's profits. It was pointed out in cross-examination that the terms of the invoice were vague and that his father Douglas said that they were not genuine. There was further cross-examination on an invoice for £3,000 for fertiliser which it was suggested was so high as not to be genuine. It was also suggested that there was no record to distinguish between what was used at Loxley House Farm and on land owned by Farming. David said that the figures would be derived from his own estimates.

Nether House Farm

It was alleged that when David caused Farming to purchase Nether House Farm for £900,000 a side payment of £40,000 was paid to the vendor – Mr Andrew Charlesworth. The only corroboration for the allegation is the note in Jean's diary for 3^rd August 2008 that I have already referred to.
When he gave evidence David denied any knowledge of this side payment. He could not explain his mother's diary entry. Andrew Charlesworth made a witness statement setting out the details of the negotiations for Nether House Farm in some detail. He categorically denied that any side payment of £40,000 was made and confirmed that the purchase price was £900,000. He stuck to this evidence in cross-examination.
It is plain that Martin does not get within a measurable distance of establishing that David made this side payment of £40,000.

Tony Emsley

This allegation concerns a piece of land near the Leeds/Bradford airport which Mr Emsley wanted to sell. He took the view that it had development potential and was anxious to increase the price. According to Martin he was asked to make contact with Mr Emsley to arrange to send a letter on behalf of Plant making an offer which was higher than the value of the land. Martin duly made an offer. As a result £5,000 was paid to Plant.
Although David agreed that he had discussions with Mr Emsley in 2003 during which Mr Emsley tried to persuade David to bid for the land, David told Mr Emsley that he did not have the money to lay out in a speculative venture. He did however pass the information on to Martin in case he might be interested and had sufficient money within Plant. According to David that as the end of his involvement and no money was received from Mr Emsley.
Documents disclosed either before or during the course of the trial revealed:

1. According to the agents there was a telephone/fax auction of the land on 11^th and 12^th September 2003. By 12^th September there were only 3 bidders left. Martin's final bid was made at 11 a.m on 12^th September. The auction proceeded with the other 2 bidders and concluded in favour of Bradford Council at 5 p.m on 12^th September 2003.

2. Contrary to David's evidence a bid dated 11^th September 2003, apparently signed by David on Farming's writing paper – faxed from Farming's fax machine for £375,000 was received by the agents. David said that the signature on the letter was not his but accepted that it appeared to have been sent by Farming.

3. At 10.56 a.m on 12^th September 2003 Martin faxed an offer for £425,000 on Plant note-paper expressly headed "subject to contract".

When Martin gave evidence he confirmed that his bids were not genuine. He said he was unaware of the fact that David had made a bid the previous day. At one stage he said that he had seen the money that Mr Emsley allegedly paid in June 2004 (some 9 months after the auction). However he corrected this to say that he had seen a bag with money in it and that his mother told him it had come from Mr Emsley. As already noted Jean has a diary entry which she interprets as relating to the receipt of £5,000 from Mr Emsley.
There is a witness statement from Mr Emsley in which he sets out an account of the auction. He denies any impropriety. As far as he is concerned all bids were genuine. He expressly denies that he made any cash payment to David or anyone else in respect of the sale.

Ken Lister

There is no doubt that Mr Lister carried out some farming work for Farming in the summer and autumn of 2007. There is equally no doubt that David told Martin that Farming had not paid Mr Lister for this work.
Martin asserts that David lied when he said this as Mr Lister was in fact paid £2,000 for this work. There is a diary entry from Jean for the week ending 13th October 2007, "2K TO KEN LISTER" Jean's interpretation of this note was £2000 TO DWH TO GIVE FOR KEN LISTER FOR WORK DONE FOR HAGUE FARMING."
David maintained his position that the work was unpaid and could not account for his mother's diary entry. Mr Lister supported David and asserted that he had in fact not been paid.

Barnfield and the Dead Cow

Two other short allegations were made by Martin. He alleges that in late 2005 he attended an auction with a view to buying Barnfield Rest Home in the name of Hague Plant. At the auction he agreed to pay £10,000 to someone in exchange for them not bidding against him. Martin's case was that David was present when £10,000 in cash was handed to this person. The money came from cash held by Jean and David helped to count it out. Jean corroborates this account but there is no mention of the £10,000 in her diary. David denies that it happened.
Martin also alleges that there was an incident where David mutilated a dead cow with an oxyacetylene torch in order to make a fraudulent insurance claim. David denied this. When he gave evidence it became apparent that Martin only had very limited knowledge of the incident. He did not even know if an insurance claim was made.

4.4. Dianne

Dianne was cross-examined for a day. A significant part of the cross-examination was devoted to issues related to her credibility. Throughout the cross-examination Dianne denied that she had knowingly been involved in any wrong doing.

Cash Payments

Dianne admitted receiving what she described as "small amounts" of money from her mother over the years for Christmas presents and the like. In cross-examination she accepted that this could mean as much as £500 for her birthday and up to £2,000 over the course of a year. She expressly denied that she had received the monies identified by Jean and referred to in her diaries.
Dianne also denied that her mother stored substantial sums in cash for her as recorded in her mother's diary. There are a number in the summer of 2004 and early 2005 that relate to this. Thus there are entries for August 28^th – DI2 – and November 24^th – DIANNE 7 – which are said to indicate £2,000 and £7,000 kept at her mother's house. The highest figure said to be kept was £12,000 in March 2005
Equally an allegation that was put to her in cross-examination as having been made by her ex husband that there was £24,000 of her money in the safe was said to be untrue.
She was cross-examined about the collection of cash when no tickets were issued. Dianne agreed that she was in charge of the paper-work in relation to skip hire. She agreed that the procedure set out in Mr Travis's witness statement was accurate. It is plain from this statement that part of the money that was collected by Mr Travis was in cash. Some of it was collected without any ticket or other paperwork being produced. Thus when the cash was handed in to the office some of it was for jobs for which no tickets were produced.. According to Dianne all of the cash, including the cash for "no ticket" jobs was paid into the bank. According to Dianne the cash "no ticket items" were few and far between and were accounted for by being entered into the miscellaneous account.
Much of this evidence was disputed by Jean, Douglas, Martin and Jean Angela. In her second statement Jean Angela says that wherever possible cash jobs without paperwork were left out of the records. If they were entered they would be deleted at a later date. The entry would, if necessary be tippexed out. She said this was done by Dianne, Martin or her. She says that Dianne was fully aware of the arrangements. She says that it was Dianne who normally dealt with the cash in the office. It was Dianne who passed on the cash generated from jobs without paperwork to her mother.

Cross Invoicing

Dianne denied knowing anything about the practice of cross-invoicing. This is disputed by amongst others her mother. However at the beginning of the 6^th day of the trial Dianne was shown a document which was a calculation to support a false invoice dated 30/06/99 from Plant to Excavations for £292,398. The document (which is mainly in Jean Angela's writing) shows that the invoice was genuine as £88,328 but that the balance was a return of £204,000 falsely invoiced by Excavations to Plant. Some of the figures entered by Jean Angela have been corrected including the final total of the invoice. Jean Angela says that corrections are in Dianne's handwriting so that it is clear that Dianne must have known about the practice. When asked about this document Dianne said she did not recognise it and was unable to say whether the corrections were her handwriting or not.

Nether House

She denied that her mother had given her £40,000 to give to Martin to enable him to buy Nether House for her. There is an entry in Jean's diary for 2^nd October 2004 which reads "NH4". Jean has interpreted it as relating to Nether House but there could be a number of other possible explanations.

Fraudulent Grant Application

As already noted on 30^th September 1996 Plant submitted an application to Sheffield Corporation for a grant to improve Carlisle Street containing false information. The grant application was required to be signed by 2 directors who each had to certify that the information was true to the best of their knowledge and belief. Both Martin and Dianne signed the application.

Waste Returns

As noted above Martin admitted that grossly inaccurate returns about the quantities of material tipped were submitted to the local authority so as not to disclose breaches of the relevant licences. It was Martin's case that Dianne was involved in this practice because she supplied the correct figures to him and then sent the returns to the local authority after he had massaged the figures. In cross-examination it was suggested to Martin that Dianne did this because he was her brother and she trusted him.
In evidence, however, Dianne accepted that she was responsible for collating the returns and sending them to the local authority. She also accepted that she gave the figures to Martin. Initially she said that she did not remember him altering the figures. Then she said that he did alter the figures but she could not remember how often. She agreed that the figures would be put on a form and that she would sign it.

4.5. Jean Angela

Jean Angela agreed that she was the person who knew most about the practice of year end invoicing. She agreed that she and Martin produced the actual invoices as between Plant and Excavations. She agreed that the amounts involved were often between £200,000 and £300,000 and that the total sums involved might get into millions of pounds. She agreed that the figures in the accounts were wrong but made the point that the money was transferred back.
She was well aware of large amounts of cash that were received from Carlisle Street, not recorded and handed to Jean for distribution. She confirmed that Jean gave her cash for Martin. She was aware that it was dishonest.
She was aware of the cash no ticket transactions and repeated that Dianne was involved. Although Martin arranged the majority of them some were arranged by Dianne.

4.6. Douglas

Douglas admitted that he had done some "dodgy things" in business. He agreed that he had paid bribes or backhanders. He agreed that cash had been generated outside the books although he said that he had not received any of it personally. He was aware of the system of year end invoicing. Indeed he said that he was responsible for it being set up. He knew perfectly well that the practice was not honest. He said that all of the office staff knew about it and that he left them to get on with it whenever it was needed. He was perfectly happy for it to continue. He did not want to stop it. He felt no guilt or remorse about tax evasion. He felt he had paid enough tax.

5. Discussion and Conclusions

This is a case where the crucial events took place over 20 years ago. It is also a case where a large number of the witnesses have admitted acts of dishonesty and fraud. In those circumstances I agree with Mr Lazarus that it is important to pay close attention to the contemporaneous documents. He referred me to the following words of Robert Goff L.J. in Armagas Ltd. v. Mundogas S.A. (The "Ocean Frost") [1985] 1 Ll.R. 1, 57:

"Speaking from my own experience, I have found it essential in cases of fraud, when considering the credibility of witnesses, always to test their veracity by reference to the objective facts proved independently of their testimony, in particular by reference to the documents in the case, and also to pay particular regard to their motives and to the overall probabilities. It is frequently very difficult to tell whether a witness is telling the truth or not; and, where there is a conflict of evidence such as there is in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities can be of very great assistance to a Judge in ascertaining the truth."

However both sides accept that the documents are not conclusive and it is thus necessary to form a view of the oral evidence in the case.
Mr Lazarus submitted that the starting point in this case was that as there was no consideration for the transfer of David and Dianne's shares there was prima facie a resulting trust in favour of them. It was accordingly for Martin and Jean Angela to prove that there was a different intention. Mr Pipe agreed with the analysis and it is thus with some trepidation that I venture to disagree. It has to be remembered that at the time of the transfer Excavations was dormant, not trading and had no assets. Mr Lazarus submitted that despite having no assets it had the hope value of profits from Lightwood Lane. Whilst I accept that Martin was at the relevant time in the process of negotiating the contract with Lightwood Lane I do not see why the "hope value" should be regarded as belonging to Excavations. However, I agree with both Counsel that this is something of an academic question as it is undesirable for this case to be decided on the basis of the burden of proof. As will appear below it is not in fact necessary for me to do so.

5.1. The witnesses

The Family

I agree with Mr Lazarus that I must treat the evidence of Martin, Jean Angela, Douglas and Jean with considerable caution. All four have admitted to being involved in dishonest tax evasion involving very large sums of money. Martin, Jean and Douglas have admitted paying bribes. Martin has admitted obtaining property by deception, and other disreputable conduct. Douglas has admitted being involved in other "dodgy" transactions. Mr Lazarus submitted that I should look for independent corroboration before accepting any of their evidence.
One of the consequences of these admissions is that it is inevitable that I must refer all of the papers in this case both to the Inland Revenue Investigations Department and the other appropriate authorities so that the under payments of tax and other disclosed offences can be properly investigated and appropriate action taken.
Dianne denied allegations of tax evasion. However Dianne was intimately involved in the administration at Prospect Farm. Furthermore she admitted that she submitted false waste returns to the local authority. She signed a blatantly false grant application in order to obtain the grant by deception. It is not, in my view an answer to these allegations to say that she trusted her brother Martin. They were acts of dishonesty and she was involved.
An important question on the question of credibility relates to the question of cash payments. I agree with Mr Lazarus that the only evidence of such payments is the evidence of Jean, Douglas, Martin, Jean Angela and the diaries of Jean. I also agree with Mr Lazarus that the analysis of the diaries depends on Jean's interpretation of her code. Furthermore not all the entries show a consistent use of the code. For example NH4 was said to mean £40,000 in respect of Nether House whereas 1GTE meant 1 Grand to Each or £1,000 given to each. Thus, there is no independent evidence that the payments were made. Notwithstanding the lack of independent evidence I have come to the clear conclusion that the cash payments were made to Dianne substantially as alleged by Jean. I cannot believe that Jean, Douglas, Jean Angela and Martin would all admit the receipt of large amounts of undisclosed cash unless it actually was received. Equally, having seen and heard Jean, I do not think that she fabricated her diary for the purpose of tailoring her evidence. It may be that some of her interpretations of her code are wrong but in substance I accept them as genuine. If, these cash payments were received it is overwhelmingly likely that Dianne knew about them. She was after all working in the office. Furthermore I cannot accept that distributions of cash were made to Martin and not to Jean's other two children. It follows, in my view, that Dianne was lying over the cash payments.
I agree with Mr Pipe that the question of whether Dianne knew about the cross-invoicing is something of a side issue. However it seems to me likely that Jean Angela was correct in identifying Dianne's hand-writing on the working paper. If so it shows that Dianne knew about the cross-invoicing as well.
David made no admissions of any dishonest or dishonourable conduct in the course of his evidence. Furthermore a number of the allegations made against him, such as the allegation over the dead cow and the question of payment to Mr Lister were plainly not proved. However there were at least three areas where his evidence was demonstrably wrong. He wrongly asserted that he was involved in the negotiations for the Haigenfield tip when the negotiations took place during the time when he was estranged from the family business. He wrongly asserted that it was his idea to purchase the crusher to turn Carlisle Street from a tipping site into a recycling unit. It was plainly demonstrated that the crusher was obtained by Plant in the year before the Broomhall flats were demolished. He was plainly wrong in asserting that he made no offer for the land near Leeds Bradford airport. There was plainly an offer emanating from Farming apparently signed by David. To my mind it is improbable that all three of these errors were accidental. Furthermore for reasons that I have stated I am satisfied on balance of probabilities that David was in receipt of substantial cash payments from his mother like the rest of his siblings.
It may well be that David and Dianne were not as involved as Martin, Jean Angela, Douglas and Jean in the dishonest practices being carried out but I am satisfied they were involved and knew about them. It follows that I must also treat the evidence of both David and Dianne with considerable caution.

5.2. Other witnesses

Mr Sly

Mr Sly was plainly an honest witness. He made a lengthy and detailed file note within 24 hours of a 2 hour meeting in September 2008. There is no reason to believe that it is not substantially accurate. No-one has suggested that the evidence was not admissible even though the meeting was originally set up to attempt to promote a settlement, Jean specifically asked Mr Sly not to make notes during the course of the meeting and Mr Sly did not warn Jean of the use he intended to make of the conversation. At that time Jean was not willing to take sides and give evidence. It is not for me to comment on the ethics of Mr Sly's conduct.
However, it does not follow that what Jean told Mr Sly was any more accurate than what she told the Court. Jean has plainly been very affected by this dispute. She described herself as devastated by it. This evidence was corroborated by Douglas. Although David and Dianne are both keen to establish that she has corroborated their version of events Dianne's manuscript notes show that from time to time she has sided with Martin.
Jean is plainly very torn in this dispute between her children. It may well be that in an effort to obtain a settlement she has said different things at different times to different people. It seems to me therefore that I would have to be particularly careful before finding facts relating to the incorporation of and transfer of shares in Excavations based on the evidence of Jean.

Mr Midgley

Both sides accepted that Mr Midgley's evidence was very important. Mr Midgley was a professional accountant who has acted for all members of the Hague family in a personal capacity and has prepared and audited the accounts for Farming, Plant and Excavations for many years. He was involved in setting up of Excavations in 1985 and in the transfer of the shares to Martin and Jean Angela in 1985 and 1986. He was involved in the setting up of Hallam Grange Ltd in 2004.
David and Dianne chose to make a serious attack on Mr Midgley's honesty. They invite me to reject Mr Midgley's evidence on crucial issues. In doing so they invite me to hold that Mr Midgley was aware of the practice of cross-invoicing (of which they were allegedly unaware) and that he was complicit for many years in submitting accounts for Plant and Excavations (though presumably not Farming) that he knew were false. They chose to allege that Mr Midgley was involved with Martin in what amounted to a conspiracy to defraud David and Dianne, who were of course also his clients, in relation to Hallam Towers Hotel.
Mr Lazarus develops his submissions in paragraphs 66 – 76 of his closing submissions which, at my invitation he developed in the course of his closing submissions. He relies on two matters to justify the allegation that Mr Midgley knew of the practice of cross-invoicing. According to Mr Midgley he first discovered about the practice of cross-invoicing when interviewed by Mr Sly in the spring of 2008. Yet he did not follow this up with Martin until some two weeks before he gave evidence. Mr Lazarus submits that no honest accountant would not have followed up the allegations with his client. Furthermore the evidence given by Martin on the same point was extremely vague and unhelpful. Second Mr Lazarus relies on the detailed cross-examination of the false invoicing between Plant and Prospect Construction Ltd (another company under the control or partial control of Martin) in 1983/1984. He submits that Mr Midgley's answers to his questions about those accounts were unsatisfactory and showed that he must have known about the practice in 1984 and thus later.
He submitted that Mr Midgley's evidence over Hallam Grange Ltd was incredible. No honest accountant would have disobeyed his client's instructions as to the original share holding of Hallam Grange Ltd. It follows that the original instructions were to put the shares in Martin's name. The decision to execute the share transfer, sign the board minute and to have 6 shares were all part of an elaborate and dishonest scheme to cover up Martin's true intent in case (as in fact happened) the other members of the family found out.
I unhesitatingly reject the allegations of dishonesty against Mr Midgley. In my view they are little more than fanciful. No motive has been suggested as to why Mr Midgley should conspire with one of his clients so as to defraud two of his other clients. Presumably I am to infer that if the plan had succeeded Martin would have rewarded Mr Midgley financially. Any allegation of dishonesty is serious. An allegation of dishonesty against a professional man is particularly serious. It is inherently unlikely that a professional accountant would act dishonestly.
The allegation of dishonesty in relation to Hallam Towers Hotel is necessary to explain the share transfer forms dated 27^th February in favour of David and Dianne. Mr Midgley has given a perfectly straightforward explanation of why he originally vested 6 shares in Martin's name and organised an immediate transfer in favour of David and Dianne. Why should I reject that explanation in favour of the complex conspiracy theory? Mr Lazarus says that no accountant would disobey his client's instructions in the way suggested by Mr Midgley. I cannot accept this. Mr Midgley was instructed that the shares were be divided equally between David, Dianne and Martin. He achieved this by registering them first in the name of Martin and then transferring 4 shares to David and Dianne. He has thus achieved precisely what he was instructed to do. It may be that the reason for the method adopted by Mr Midgley was not particularly good in that the necessary information was readily available. It does not however begin to persuade me Mr Midgley was acting dishonestly or party to any conspiracy to defraud. One of the most telling features is the existence of 6 shares rather than 3. This was done on Mr Midgley's advice to save CGT for Martin and David. It would require remarkable foresight if this was all part of the conspiracy.
It was, in my view wholly unrealistic to expect Mr Midgley to have been able to give any detailed evidence about Plant's 1984 accounts. He was taken to various entries in his working papers and to documents on his file. He had no notice of the questions. He did his best to draw inferences from those documents in the witness box. To my mind they fell far short of establishing that Mr Midgley knew of, let alone participated in the practice of cross-invoicing. No reason has been suggested as to why Mr Midgley should for 18 years have risked his career by submitting accounts he knew to be false. It may be, and I put it no higher, that the auditing of the accounts was not carried out with all proper care. However that is a far cry from establishing that Mr Midgley knew of the practice and participated in it.

Mr Sivell

I do not consider that it is necessary or appropriate to give detailed assessment of all of the other witnesses who gave evidence. It is, however appropriate to mention Mr Sivell. In my view he was an unimpressive witness. Mr Sivell was Martin's best man and was involved with the Hague businesses for over 20 years. On his own admission he had no qualms in writing a letter to the local authority about the date when work was carried out at Lightwood Lane which he knew was untrue.
According to Jean quite substantial cash payments of between £2,500 and £3,500 were made annually to Mr Sivell between 2001 and 2005. These payments are recorded in her diary. When he gave evidence Mr Sivell accepted that he had received sums of between £100 and £1,000 paid in cash in brown envelopes by Jean but denied that he had received more. Mr Sivell had been involved in an acrimonious divorce. In the ancillary relief proceedings his wife had suggested that he was in receipt of substantial cash payments. In a Reply to a Request for Further Information signed by his solicitors – Hewitt & Co Mr Sivell had admitted receiving only £25 per year at Christmas and birthdays from Jean.
In so far as it is appropriate to assess the demeanour of the witnesses in a case involving fraud, I formed the view that Mr Sivell was an evasive witness who sought to avoid answering inconvenient questions. I have no difficulty in preferring the evidence of his wife to that of Mr Sivell. It follows that I do accept that he pointed out Carlisle Street as belonging to Martin and [Jean Angela's] company Excavations.

5.3. The incorporation of Excavations

There are very few relevant documents relating to the incorporation of Excavations. Mr Lazarus contends I should accept David and Dianne's version of the reason for its incorporation – that is to say for the purpose of tipping at Lightwood Lane. Mr Pipe submits I should accept Martin's version – that is to say for excavation and demolition contracts for dodgy customers, or risky contracts.
Mr Lazarus relies on the letter of 13^th March 1985, the meeting with the local authority in April 1985 and the fact that instructions were given for the incorporation of Excavations shortly before 6^th May 1985. It is not, he submits, a coincidence that these instructions were given so shortly after the meeting with the local authority. He submits that the appointment of the wives as directors is consistent with the risks involved in tipping. He relies on the fact that the original reason given by Martin – the Wellerman contract – does not fit chronologically. He says that Martin and his father and mother have tailored their evidence when the problems over the Wellerman chronology emerged. Thus he invites me to reject Martin's version.
Mr Pipe points to the Name, the Memorandum and Articles, and the replies given by Mr Midgley to the Inland Revenue in October 1985. If the main reason for Excavations was risky tipping contracts one would have expected that to have been mentioned either in its name or in its main objects or in the answers given to the Inland Revenue. He points out that there is no written evidence that Mr Midgley in fact gave any advice as to the appointment of the wives as directors and invites me to accept Mr Midgley's evidence on the point. He makes the point that Douglas has no reason to lie and asks me to accept his evidence.
Although Mr Lazarus has built up a powerful argument on the question of timing it does not, in my view, stand up to close scrutiny. In particular it has to be borne in mind that the negotiations for tipping at Lightwood Lane were protracted and that the tipping licence was not granted until June 1986. No substantial tipping took place till 1987. Thus whilst it is no doubt true that in March and April 1985 Martin was interested in and negotiating for tipping at Lightwood Lane there is no suggestion that the tipping was imminent. Although no doubt there was a meeting in April and that some progress was made as to the levels to which tipping would take place it cannot be said that meeting substantially affected the position. Thus the fact that the incorporation took place in May 1985 is not to my mind as significant as Mr Lazarus suggests.
If one leaves out the timing one is left with two rival contradictory versions of the reasons for the incorporation. There is, to my mind, some force in Mr Pipe's point over the names and replies to the Inland Revenue. Neither version is without its difficulties. David and Dianne's version depends on advice that Mr Midgley says he never gave. Furthermore advising a client to make his wife a director so that she could be prosecuted if anything went wrong is not the sort of advice one would expect an accountant to give. Martin's version has its difficulties because it is difficult to see what changed between May 1985 and November 1985 causing the original idea to be abandoned.
In the end, and not by a large margin I prefer Martin's version of the reasons for the setting up of Excavations. I simply do not think Mr Midgley would have given the advice he is said to have given. Equally I think if Excavations had been set up for tipping at Lightwood Lane that would have been apparent either in its name, main objects or the applications to the Inland Revenue.

5.4. Transfer of Shares

There are rather more relevant documents relating to the transfer of the shares. These include the letter of 19^th November 1985, the share transfer forms, the letter of 1^st July 1986, the 1986/7 Note made by Mr Hewitt and (although this is a matter of significantly less weight) the document signed by Dianne in September 2004 as apart of her divorce settlement.
I am quite satisfied that the share transfer forms sent out by Mr Midgley with the letter of 19^th November 1985 contained the name and address of the transferee at that time. As Mr Midgley pointed out it is clear from the letter of 19^th November 1985 that he knew the names of the transferees and there would have been no reason to send them out in blank. It follows that Dianne is wrong when she says that Jean Angela's name was not on the share transfer form she signed. This is, of course important, because on her case she would have no reason to transfer her share to Jean Angela to be held on trust for her. One explanation might be that Dianne signed the form without reading it but she was adamant that she read it before signing. It is also important because it is part of David's case that he never would have agreed to a transfer to Jean Angela outside the family fold.
Mr Lazarus places great stress on the last paragraph of the letter of 19^th November 1985. For convenience I repeat it

"Should we now be giving attention to the formation of another Company which would be under Diane's control."

He submits in paragraphs 33 to 35 of his closing submissions that it shows that Mr Midgley was advising the family generally and that it can only have one meaning:

namely that notwithstanding the changes referred to in the letter, Excavations was understood to be a family company which would be operating some part of the family business and that what was proposed was the separation of a further part of the family business to be under Dianne's 'control'

I do not accept this submission. First I find it wholly unsurprising that Mr Midgley cannot now remember why it was inserted. There is no document in his file that has any bearing on the matter. Second, I cannot for my part read into that paragraph any indication as to the beneficial ownership of Excavations. It is not to my mind a proper inference that because a company was to be set up under Dianne's control Excavations was a family company where the beneficial ownership was equal. In any event the suggestion was never followed up.
David and Dianne say that the transfer was made as a result of further advice from Mr Midgley. David goes so far as to say that he spoke to Mr Midgley who confirmed advice to the effect that his original advice was wrong and that Excavations needed to be structured in such a way that it looked to the outside world that it was not controlled and owned by the same individuals as Plant. In order to achieve this it would be best if only one shareholder in Plant held all the shares in Excavations. A number of points can be made about this advice. First it is extremely odd advice for an accountant to give. Excavations was not trading and had no assets. There was no tax or other reason for Mr Midgley to give this advice. Second the advice, if given was wrong. At that time it was necessary for there to be at least 2 shareholders. Third the shares were not in fact all transferred to Martin. They were transferred to Martin and Jean Angela.
Both sides agree that by 19^th November 1985 Excavations was going to be used for tipping and that tipping was a high risk business with potential for both substantial liabilities and gains. If, as everyone agrees, the purpose of the transfer was to expose Martin to the risks associated with the tipping business, the more natural consequence would also be that Martin would enjoy the gains. Thus the ordinary inference I would draw from the transfer itself is that Martin would be responsible for the risks but enjoy the gains.
Mr Hewitt's note following the meeting at Prospect Farm is an important document. It is important because it contains a clear statement in late 1986 or early 1987 that Excavations is Martin and Jean Angela's company. If David was present it is a plainly very important document. If he was not present (and I agree that from the wording of the document he may not have been present) it is still important because it evidences a meeting in 1986 where Martin was asserting ownership of Excavations.
Dianne's divorce statement is, of course, made nearly 20 years after 1985. Furthermore Martin was advising her and was anxious to give Michael Rogers as little information as possible. It was, however, still a document signed by Dianne in which she failed to mention her interest in Excavations.
In deference to Mr Lazarus' submission I have attempted to analyse the documentary evidence without reference to the oral evidence. To my mind that evidence supports Martin's case rather than David and Dianne's.
I also prefer the oral evidence in support of Martin's case. To my mind the two most important witnesses were Mr Midgley and Douglas. Douglas has really no reason to prefer Martin to David and Dianne. The long answer (set out above) as to why the transfer took place plainly supports Martin's case. I saw Douglas give that answer and I did not form the impression that he was making it up or that he was rehearsing a well practiced lie. Similarly Douglas' reaction to paragraph 127 of David's witness statement seemed to me to be genuine. It has to be remembered that Douglas (and indeed all of Martin's witnesses) were prepared to be frank about their dishonesty. It may well be that some of the details given by Douglas were wrong. The events took place over 20 years ago and he is now 80. It may be that the conversations with David and Dianne did not follow quite the course that Douglas described. However I am satisfied that he did speak to each of them and explained why they should transfer their shares. I am satisfied he made it clear that Excavations would thereafter be Martin's company.
I have already held that Mr Midgley was an honest witness. I have set out his evidence as to the events leading to the sending of the letter of 19^th November 1985. He is satisfied that it was not written as a result of advice he gave. He is satisfied he gave no advice and that there was no telephone conversation with David. There was no reason to give such advice in relation to this dormant company. Furthermore if he had thought it necessary to make the changes he would have followed the matter up and not left it till July 1986. He was accordingly satisfied that the letter of 19^th November 1985 was written as a result of instructions from Martin rather than advice given by him to Martin. In my view this was also reliable evidence and I accept it.

5.5. Subsequent Events

In paragraph 36 of his closing submissions Mr Lazarus makes the point that much of the evidence of subsequent conduct adds little to either side's case and generates further disputes of fact. He draws my attention to five matters – the writing off of the loan of £130,000 by Plant without consultation; second the limited involvement of David with both Plant and Excavations, third the administrative work done by Dianne for both Plant and Excavations, fourth the inter company trading between Plant and Excavations which was entirely resolved by Martin without reference to David or Dianne and fifth the substantial dividends paid by Excavations to both Martin and Jean Angela after 2004.
In some companies these facts might be important or even decisive. However I agree with Mr Lazarus that they do not really assist in determining the core issues in this case. Martin and to a lesser extent his father were both astute (if dishonest) business men. David was a farmer. Dianne was involved only with administration. Plant was extremely successful and both David and Dianne were content to leave the running of Plant to Martin. That included making decisions on inter-company trading as between Plant and Excavations. The decision to write off the £130,000 loan appears to have been made by Douglas. It says little or nothing about the ownership of Excavations. The dividends paid by Excavations tend to show that Martin believed that Excavations belonged to himself and Jean Angela.
In any event there are a number of subsequent matters which support Martin's case. These include the evidence of Mrs Sivell (which I have accepted), the statement by Dianne in her divorce settlement and the apparent complete lack of any interest by either David and Dianne in the activities of Excavations.

6. Conclusion

For all of the above reasons I am satisfied that the transfers executed by David and Dianne of their share in Excavations shortly before 1^st July 1986 were and were intended to be transfers of both their legal and beneficial interest in Excavations. It follows that that after the transfers were registered David and Dianne had no further legal or beneficial interest in Excavations. Martin and Jean Angela became the sole owners both in law and in equity.
It follows that this claim fails and falls to be dismissed.

JOHN BEHRENS

Note 1   Set out in paragraph 90 above    [Back]

Note 2   The analysis was carried out by Mr Pipe and is slightly different from the figures in her witness statement.    [Back]

Note 3   Paragraphs 254 - 281    [Back]

Note 4   Paragraph 274    [Back]

Note 5   Paragraph 273    [Back]

Note 6   Paragraph 275    [Back]