About this case

Case name

Robert Kidd v Lime Rock Management LLP and Others

Case reference number

CA163/19

Dates of hearing

• Tuesday 21 January 2025
• Wednesday 22 January 2025
• Thursday 23 January 2025
• Friday 24 January 2025

Time of hearing

10:30 to 13:00 then 14:00 until conclusion

Division

Extra Division

Judges

• Lord Malcolm
• Lord Doherty
• Lady Wise

Agents and Counsel

For Pursuer and Reclaimer

• Agents: Harper Macleod LLP

• Counsel: Smith KC, Anderson, Reid

For First through Fifth Respondents:-

• Agents: Gilson Gray LLP

• Counsel: McBrearty KC, McKenzie KC, Roxburgh

For Sixth through Eighth Respondents:

• Agents: CMS Cameron McKenna Nabarro Olswang LLP

• Counsel: Dean of Faculty (Dunlop KC), Paterson KC, Boffey

Case description

The pursuer, Mr Kidd, is a businessman.  In 2008, he was sole shareholder of a company, ITS Tubular Services (Holdings) Limited, dealing in oil and gas equipment.  ITS had a turnover of over $140 million.  Mr Kidd had built up ITS over many years. 

In 2007, Mr Kidd sought to realise his interest in ITS, both to provide him with money for his own retirement and the financial security of his family, but also to provide ITS with growth capital. 

The first through fifth defenders and respondents are corporate vehicles and employees who were, at the relevant time, part of a US-based private-equity investment business called Lime Rock.  On 26 September 2009, Lime Rock subscribed $45 million cash for a 34% shareholding in ITS, with a further $10 million paid to Mr Kidd.  Lime Rock appointed two directors to the ITS board.  During negotiations, Lime Rock were represented by Ledingham Chalmers LLP (the sixth respondent).  The seventh and eighth respondents were the fee earners at Ledingham Chalmers dealing with the transaction. 

After the transaction completed, however, ITS’s operational performance deteriorated and in 2013 the company entered administration; it was sold as a going concern to a competitor with the entirety of the purchase price going to pay bank debt – Mr Kidd and Lime Rock received nothing.

Mr Kidd argues that the defenders were parties to a fraudulent conspiracy to induce him to enter into the agreement on the false basis that it was a fairly conducted arm’s length transaction, when in fact the solicitors instructed to act on behalf of Mr Kidd and ITS were providing advice and information to Lime Rock. Mr Kidd states that as a consequence of this conspiracy he entered into a transaction, on terms unfavourable to him, which he would not have entered into at all had he known of the fraud. He seeks an award of damages of $150 million, this representing the value of Lime Rock at the date of the transaction, together with interest at the judicial rate of 8% a year from 26 September 2009 until payment.    

Mr Kidd was represented during negotiations by Paull & Williamsons LLP.  A partner in Paull & Williamsons, Ken Gordon, was Lime Rock’s UK solicitor.   With insufficient regard to the conflict of interest, Mr Gordon nevertheless sought to play a role on both sides of the transaction.  Mr Kidd’s position is that the ultimate effect of the deal was to render his shareholding in ITS worthless, or at least very substantially reduced in value. 

A separate action, raised against Paull & Williamsons in 2015, was settled by them in 2018, with their successor firm admitting breach of fiduciary duty.  The defenders and respondents in this action argued that the settlement agreement precludes Mr Kidd from seeking to recover “the same loss” from them; this was rejected by the Second Division in Kidd v Lime Rock Management LLP & Ors [2021] CSIH 62.  The respondents in this action deny being party to any such conspiracy. 

Following a lengthy proof before answer (trial), the commercial judge (Lord Tyre) decided against Mr Kidd, and assoilzied the defenders.  In particular, the commercial judge held:

1. Although Mr Gordon breached his fiduciary duty and departed from his professional duties, he did not act dishonestly.
2. Neither did Mr Gordon act with the intention of causing Mr Kidd economic harm, which is a pre-requisite for a successful unlawful means conspiracy claim.
3. None of the individual respondents in this action acted with such an intention.
4. Each of the named individual defenders gave an explanation as to why they did not consider at the time that Mr Gordon’s actions amounted to wrongdoing; the commercial judge considered these to be plausible and credible.
5. The terms of the transaction between ITS and Lime Rock were standard for a private-equity transaction of its kind.
6. The terms of the transaction, and Mr Gordon’s role, were not fraudulently concealed from Mr Kidd. The terms of the transaction which Mr Kidd avers were unacceptable to him were in fact explained to him. 
7. The decline in the value of ITS was connected to its significant capital expenditure commitments and indebtedness, rather than the deal entered into with Lime Rock. On that view, the transaction caused no loss to Mr Kidd in itself. 
8. Even if the transaction did cause a loss, it was not one which resulted in the evaporation of the entire value of the company; the actual loss suffered by Mr Kidd was less than the settlement he has already received in the action against Paull & Williamsons.

Mr Kidd now reclaims (appeals) against the commercial judge’s decision on the following eight grounds:

Ground of Appeal 1

The commercial judge erred in law in repelling a Note of Objections lodged by Mr Kidd which argued that evidence as to the objective fairness, or otherwise, of the transaction was irrelevant.  

Ground of Appeal 2

The commercial judge erred in his consideration of the alleged unlawful means conspiracy; he reached conclusions which were plainly wrong on the evidence led before him. 

Ground of Appeal 3

The commercial judge erred in concluding that Mr Kidd had failed to establish that there was no fraudulent concealment of the wrongdoing established. 

Ground of Appeal 4

The commercial judge erred by misapplying the common law of fraud.

Ground of Appeal 5

The commercial judge wrongly held that the fifth to eighth defenders could not incur accessory liability. 

Ground of Appeal 6

The commercial judge wrongly held that the appropriate “counter-factual” in assessing the cause and extent of Mr Kidd’s losses was a transaction which proceeded with Mr Gordon playing no role at all.

Ground of Appeal 7

The commercial judge erred by considering what happened after the date of the transaction with Lime Rock in assessing the value of ITS. 

Ground of Appeal 8

The commercial judge’s post-transaction valuation of Mr Kidd’s shares was wrong.  

The respondents resist the appeal on all grounds.  The reclaiming motion will be argued for four days before an Extra Division chaired by Lord Malcolm, sitting with Lord Doherty and Lady Wise.