SHEFFIELD businessman Stephen Hinchliffe could face paying millions of pounds in damages after losing a High Court case.
Judge Hazel Marshall QC ruled the tycoon and his wife Marjorie "conspired with intent" to take over umbrella firm Hoyland Fox when Mr Hinchliffe was supposed to be acting as agent for its owners, whom they "ousted".
She said the conduct of the couple, formerly of Dore but who now live in Hope, Derbyshire, and Mozaic, a company for which Mrs Hinchliffe was sole director, was "unlawful".
The judge, sitting in the Chancery Division of the High Court, heard the claimants – brothers Shaun and Alex Smith and their parents Keith and Elaine – were introduced to Mr Hinchliffe via a mutual friend.
After the case Shaun Smith, speaking on behalf of his family, said: "We are delighted with the judge's findings. We are seeking damages of several million pounds."
Lawyers now have to agree the level of damages Mr Hinchliffe and his wife should pay.
But Mr Hinchliffe – whose assets including his mansion, High Peak Hall, have been frozen pending the decision – said: "I was taken on as a partner not an agent. It's ridiculous they are claiming such a level of damages when they hardly paid anything to buy Hoyland Fox and it was they who put the company into administration.
"The judgment is unbelievable and we are reviewing our options to appeal."
The Smiths, who owned family firm Alexander Seven Marketing, recruited Mr Hinchliffe – who used to run the huge Facia retail group in the 1990s – despite him having served a prison sentence over bribes paid in exchange for millions of pounds of unsecured loans for his former retail empire, which collapsed owing 70m.
The court judgment said they were happy to work with him as a "reformed character" because of he had a "good business brain and a lot to offer".
Judge Marshall said Shaun Smith also had "stains on his character".
"Twenty years ago, he was convicted of supplying class A drugs and possibly on firearms charges and he, too, served a term of imprisonment," she said.
But she added he had since become a "decent and responsible citizen".
The judgment said the Smiths hired Mr Hinchliffe – who said he would not have worked with the Smiths had he known of Shaun's conviction – as an "adviser" to arrange purchase of Hoyland Fox, based at Goldthorpe.
He arranged for the firm to be purchased by Mozaic in June 2007 – the Smiths claiming they understood it was bought on their behalf, with ownership to be transferred to Shaun and Alex.
Mr Hinchliffe contested the business was to be owned "50/50" by his wife and the Smiths.
It was bought from its previous owner for 1.4m using 1m loaned to Mozaic by Hoyland Fox, in a procedure known as "whitewashing", by which a company funds its own takeover. The Smiths paid 50,000 and 350,000 of the money was to be deferred.
But relations between the Smiths and Hinchliffes turned sour just a few months later, with Mr Hinchliffe claiming Hoyland Fox and Mozaic were "in serious financial difficulty because of bad management".
He said the two businesses were being mingled when they should not have been and "unreasonable amounts of money were being drawn from Hoyland Fox for unjustified purposes".
Mr Hinchliffe alleged expenses were wrongly being charged to Hoyland Fox and that false invoices were used.
In court the Smiths denied impropriety. Shaun Smith said the transactions were documented and his explanations accepted at the time.
In early 2008, the Hinchliffes decided to "wrest control" of Hoyland Fox from the Smiths – claiming they were concerned about the way it was being run.
Three "close friends" were brought on to Mozaic's board by Mrs Hinchliffe, while Shaun Smith was on holiday, to outvote the Smiths.
The company then decided to remove Shaun and Alex Smith as directors of Hoyland Fox.
The Smiths discovered what was happening and withdrew money from Hoyland Fox into Alexander Seven Marketing, putting the umbrella firm into administration.
Although Judge Marshall said Shaun Smith was "unreliable" as a witness, she found his evidence was supported by his brother Alex, who she said was "both honest and reliable."
But she described Mr Hinchliffe as "manipulative, calculating, ruthless and utterly self-interested".
She said the Hinchliffes' actions were unlawful because the Smiths believed Mozaic owned the umbrella firm "on trust" for them.
Judge Marshall said Mr Hinchliffe planned to oust the Smiths in "revenge" for them delaying payment of his consultancy fees.
She rejected a claim by the Smiths that a property in Oldham was bought by Mr Hinchliffe on their behalf using 110,000 from the family – accepting Mr Hinchliffe's explanation he believed the money was a loan.
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