BL-2021-002293 - [2025] EWHC 678 (Ch)

On the facts of this case, I consider it appropriate to consider the pleading relating to breach first (i.e. on the assumption that the breaches relate to an arguable duty owed by the defendant), and then to comment on the challenge to the pleaded duties.

Mr Cohen characterised the allegations of breach of duty at paragraph 35 of the particulars of claim as the ‘Competition Claim’. Separately from the argument that the court could be satisfied that the pleaded duties did not exist, he submitted that this aspect of the claim was hopeless. The principal reason for this is that the companies operated by Mr Flohr in Switzerland and Germany, acquired from Comdisco, were demonstrably not in competition with Comprendium UK. That company was intended to become the ‘leading provider of enterprise document management and storage solutions in Europe’, as described in the Business Plan created before the SSA was signed. The evidence, in the form of the companies’ SEC 10-K filings in the USA shortly before their acquisition by Mr Flohr, suggests that Comdisco Germany and Comdisco Switzerland were leasing subsidiaries. Comdisco’s website said in 2002 that it had (i.e. before its insolvency) ‘provided equipment leasing and technology services’ and ‘provided equipment leasing and other financing and services to venture capital backed companies’.

Mr Cohen also pointed out that it is averred in the particulars of claim that Mr Horlick assisted Mr Flohr in the acquisition of Comprendium Germany. He submitted that it cannot be open to the claimant to plead also that it was in unauthorised competition with Comprendium UK. He also said that the use of the Comprendium name itself could not, absent a claim for trade mark infringement (of which there was none), constitute a breach of duty which had resulted in any financial loss to the claimant.

There is much force in Mr Cohen’s argument that the claimant does not plead how Mr Flohr’s companies were actually in competition with Comprendium UK. On this point, it not satisfactory for Ms Vials to say that the claimant cannot particularise the nature of Comdisco’s former business, acquired by Mr Flohr, because of his alleged deliberate concealment. Comdisco’s public filings disclose the nature of the business acquired. But, the allegations of breach of duty pleaded by the claimant are not predicated only upon the German and Swiss companies competing with Comprendium UK’s business. There is a further allegation in paragraph 35 of the particulars of claim that the parallel structure of companies ‘exploited the resources of Comprendium UK and its subsidiaries’.

The particulars that follow begin by setting out the claimant’s case as to Mr Flohr’s acquisition of interests in Comdisco entities with what is said to be a lack of knowledge or informed consent on the part of the claimant, either as to the acquisitions or as to the true activities of Comprendium Investment SA. The pleading of particulars then goes on to allege that Mr Flohr exploited the manpower and assets of Comprendium UK and/or its subsidiaries and, once it was in considerable financial difficulty, exploited its vulnerability for the benefit of the parallel structure of companies. This is said to have been achieved through the use of Comprendium UK’s personnel and/or subsidiaries and through the acquisition by Mr Flohr of the trade marks of Comprendium UK. It may be said that further information about this allegation, in the form of further particulars, ought to be pleaded. But this does not seem to me be to an allegation in relation to which the particulars of claim disclose no reasonable grounds for bringing the claim, or where the pleading is susceptible to summary judgment independent of consideration of limitation issues. The allegations, certainly in relation to the claimed misuse of the company’s assets, do not depend upon the alleged parallel structure having competed directly with the intended business of Comprendium UK.

For this reason, I would not strike out the allegations in paragraph 35 of the particulars of claim on the ground put forward by the defendant, that the alleged parallel structure was not in competition with Comprendium UK.

The other complaint made by Mr Cohen concerns the “frustration” claim. As he pointed out, this is not an allegation by the claimant that the SSA was frustrated in the sense that its performance was rendered impossible as a result of an unforeseen event, but that the parallel structure and Mr Flohr’s failure to support Comprendium UK as allegedly agreed ‘frustrated [its] purpose’.

The pleading is not easy to follow. This bare assertion (of frustration of the purpose of Comprendium UK) is pleaded as one of the particulars of the alleged breach of the duty of good faith, fiduciary duty or of clause 10.1.1 of the SSA (which is a restrictive covenant). It is then further particularised at paragraphs 36 onwards in the particulars of claim. Paragraphs 37 and 38 then allege that:

After pleading that Mr Horlick complied with his obligations under this oral agreement, the particulars of claim continue:

The following paragraphs then plead the deterioration in Comprendium UK’s financial position rather than alleging further breaches of duty on the part of the defendant.

Mr Cohen was scathing in his description of this plea. He pointed to contradictions between the pleading and what Ms Vials says in paragraphs 82 and 83 of her second witness statement (which do not support the pleaded statement that, ‘the business to be acquired would need document management services’). He also submitted that the pleading on its face makes no sense: the alleged agreement was that Mr Flohr would cause business to be placed with Comprendium UK. On that footing, the profits of the German company are irrelevant – it is not pleaded that it was going to provide anything to Comprendium UK.

There is then the further issue that the plea at paragraph 38 is that Mr Horlick and Mr Flohr entered into an oral agreement according to which the consideration to be paid by Mr Flohr (the 20% Profit Agreement) was to be paid to Mr Horlick. In this context, I note that Mr Horlick as claimant did earlier issue a personal claim against Mr Flohr (in claim no. BL-2019-001627), which was discontinued on 24 May 2022. That was the day in which a hearing in that claim was listed, and the day after the application presently under consideration was issued. It is not pleaded that Mr Horlick entered into the alleged oral agreement with Mr Flohr on behalf of the claimant.

The other matter pleaded in paragraph 37 is that Mr Flohr represented that he would ensure that business would be placed with Comprendium UK. The particulars of claim do not seek to explain why the claimant has standing to sue under a contract to which it was not a party on which a benefit was to be conferred on a third party, Comprendium UK. The claimant acknowledges that the assurance as to future business is not pleaded to be a term of the contract made with Mr Horlick, but suggests that the particulars of claim could be amended to plead the representation pleaded at paragraph 37(ii) as a term of the oral contract made between Mr Horlick and Mr Flohr, on the footing either that Mr Flohr made an absolute promise as to the revenue that would pass to Comprendium, or that he would use his best endeavours to ensure that €10-20m of annual business would be placed with the company.

I do not consider that the pleading on this point can be saved in this way. The current plea is that there was a representation by Mr Flohr that he would ensure that €10-20m of annual business would be placed with Comprendium UK. The representation is not expressly pleaded as a ground for impugning the contract. Nor is it pleaded that the claimant relied to its detriment on the representation such that some form of estoppel arose in favour the claimant.

There is furthermore no plea that the oral contract between Mr Horlick and Mr Flohr was made for the benefit of the claimant. If the representation were pleaded by amendment as a term of that contract, it would be ostensibly for the benefit of Comprendium UK. That might give that company the right to apply to enforce the term, for the purposes of s.1(1) of the Contracts (Rights of Third Parties) Act 1999, if that Act were relied on (which it is not). It would not, however, explain without more how the claimant had the right to sue. Furthermore, and crucially, the particulars of claim do not rely on a breach of the alleged agreement between Mr Horlick and Mr Flohr. They rely on an alleged breach of what are pleaded to be Mr Flohr’s duty of good faith and non-competition, and fiduciary duties. It is not obviously apparent, and not pleaded, how any of those duties could give rise to an obligation either to ensure or to use best endeavours to ensure that €10-20m of revenue would accrue to Comprendium UK, whether or not Mr Flohr had represented or contractually bound himself as against Mr Horlick to do that. Such duties impose negative obligations by virtue of the relationship between the parties. The duty of good faith was described by Fraser J in Bates v Post Office Ltd [2019] EWHC 606 (QB) at [711] as requiring the parties to ‘refrain from conduct which in the relevant context would be commercially unacceptable to reasonable and honest people’. On the assumption the duty applied, it would be a far stretch from what is pleaded to argue that it imported a positive duty of the kind alleged to arise in relation to the alleged Horlick-Flohr contract. Likewise, I do not consider it arguable that a fiduciary duty, being an obligation of single-minded loyalty, could impose an obligation to cause business to be placed with Comprendium UK. The position might be different if it were alleged that business had been diverted away from the company, but that is not the allegation.

No explanation was provided by Sir Geoffrey as to how any of these difficulties might be overcome. Merely pleading that Mr Flohr agreed to ensure or use his best endeavours to ensure that €10-20m of revenue would accrue to Comprendium UK would not suffice to do so. The claimant has had an ample opportunity to put forward an amended pleading and has not done so. Furthermore, and apart from that, it seems to me that any amendment might well raise its own limitation issues. If a new cause of action were raised, it may well not arise out of the same or substantially the same facts as those already pleaded (see the discussion below on this point in relation to the claimant’s amendment application).

I would accordingly strike out the allegation of “frustration” of the business of Comprendium UK insofar as it relies on the alleged representation by Mr Flohr that he would ensure that €10-20m of revenue would accrue to Comprendium UK. I consider that it is probably only paragraphs 35(ix) and 43 which would fall to be struck out accordingly. It does not appear to me that there is any other way which the particulars of claim allege that the alleged parallel structure frustrated the purpose of Comprendium UK, which is the express allegation made at paragraph 35(ix).