ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(MR JUSTICE ETHERTON)
Royal Courts of Justice
Strand
London, WC2
B E F O R E:
LORD JUSTICE CHADWICK
LORD JUSTICE MOSES
SIR PETER GIBSON
KIRRIS ROYLE and Others
Claimants/Appellants
-v-
BURGER KING LTD and Others
Defendants/Respondents
(Computer-Aided Transcript of the Stenograph Notes of
Smith Bernal Wordwave Limited
190 Fleet Street, London EC4A 2AG
Tel No: 020 7404 1400 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
MR JOHN HAINES (instructed by Chadwick Lawrence) appeared on behalf of the Appellants
MR ANTHONY TRACE QC (instructed by Herbert Smith) appeared on behalf of the Respondents
J U D G M E N T
LORD JUSTICE CHADWICK: This is an appeal from an order made on 7 February 2005 by Mr Justice Etherton in proceedings brought by Mr Jacovus Kirris and three other members of his family against Burger King Corporation and others.
The claimants in the proceedings carried on in partnership the business of franchisees and operators of Burger King fast food outlets under the firm name J & H Kirris. They were also shareholders in a company J & H Kirris Ltd which carried on a similar business. There were 19 outlets in all: 13 operated by the partnership and six operated by the company. The outlets held under leases granted by Burger King were supplied, under a supply agreement, by the sole authorised distributor to franchised Burger King outlets, HM Group Ltd (formerly Holroyd Meek Ltd).
In November 1996 Burger King brought proceedings against the partnership for forfeiture of the leases on the ground of non-payment of rent and royalties. On 25 March 1997 Burger King obtained a freezing order against the partnership. On 28 April 1997 an administration order was made in respect of the partnership on the petition of its banker, Royal Bank of Scotland. Insolvency practitioners - two partners of Pannell Kerr Foster and a partner of Leighton Cresswell Davis - were appointed joint administrators. On 6 May 1997 administrative receivers - partners in Coopers & Lybrand - were appointed over the undertaking and assets of the company. The company went into creditors voluntary liquidation on 10 October 1997. On 30 January 1998 the administrators of the partnership sold the partnership business to Allied Leisure Plc for £3.4m; of which some £2.1m was paid to Burger King as creditor. The partnership was wound up on 11 October 2001.
The claimants allege that, as a result of the actions of Burger King and the bank, the value of the businesses formerly carried on by the partnership and the company have been lost to them. They put that loss at an amount in excess of £12 million.
These proceedings were commenced on 12 November 2002 by the issue of a claim to which Burger King Corporation, its English subsidiary Burger King Ltd, Royal Bank of Scotland, the administrators of the partnership and HM Group Ltd were defendants. The claims against all seven defendants include claims in conspiracy. There are also claims against some of the defendants for breach of contract, breach of statutory duty and breach of the duty of good faith.
The particulars of claim dated 28 February 2003 extend over 78 pages. The pleading sets out in some detail the history of the relationship between the claimants, the partnership, the company, Burger King, the bank and HM Group over the years to 1997, and the terms of the franchise agreements. Paragraph 20 contains allegations that Burger King (meaning the first and second defendants) were in breach of the franchise agreements; and that that led to the decision of Burger King in November 1996 to terminate leases of premises to which the franchise agreements applied. That decision, it is said, led to an agreement of 17 January 1997 under which the partnership was to be paid a reverse premium of some £600,000 on the surrender of a lease of premises in Sheffield. It was said that Burger King were in breach of that agreement in failing to pay the £600,000 to the partnership's bankers to reduce its liabilities.
Paragraph 24 of the particulars of claim is in these terms:
"As a result of the said breach, the partnership lost the support of its bankers and were unable to pay its debts. The first and second defendants then brought proceedings in the High Court for forfeiture and (inter alia) a Mareva injunction. These proceedings forced the partnership into administration and the partnership lost the ability to trade. Had it not been for the breach by the first and second defendants the partnership would have been able to trade out of its difficulties and would have returned to substantial profit. As it was it lost the value of the business together with the profits year on year."
The claim put that loss at a figure of between £9m and £15m.
Paragraphs 25 to 30 of the particulars of claim allege breaches by Burger King of what was then Art 86 of the European Community treaty. Paragraphs 31 to 46 set out claims against the bank for breach of contract. Paragraphs 47 to 49 allege conspiracy between Burger King and HM Group.
Paragraph 50 alleges a conspiracy between Burger King, HM Group, the bank and the partnership administrators. The allegation is in these terms:
"Further or in the alternative from a date unknown to the claimants the first and/or second defendants conspired with each other and with the third to seventh defendants to damage the interests of the partnership and the company by doing unlawful acts and/or with the intention of so damaging it. The acts relied on were unlawful in that they amounted to (a) breaches of the express and implied terms of the franchise agreements; (b) breaches of the third to fifth defendants' duty to act fairly and in good faith towards the partners of the partnership and with due regard to the interests of all the creditors of the business and to obtain a proper price for the assets of the partnership and to manage the business of the partnership with reasonable care and skill; (c) breaches of the sixth defendant's duty to act in good faith towards the partners of the partnership and to act in accordance with its fiduciary duty to them and in accordance with its duty of care; (d) entering into an agreement which was unlawful by virtue of the provisions of the Insolvency Act 1986."
In that context the third to fifth defendants are the partnership administrators and the sixth defendant is the bank.
There followed extensive particulars of overt acts in the conspiracy alleged - set out in 13 sub-paragraphs, numbered (i) to (xiii) with sub-particulars under some of those sub-paragraphs. The first 11 of those sub-paragraphs relate to matters which occurred before the administration order of 28 April 1997. Sub-paragraphs (xii) and (xiii) are in these terms:
"(xii) The partnership had good claims for damages against the first and/or second defendants for breach of contract, breach of statutory duty and for an account of profits and conspiracy with the seventh defendant, and breach of duty of utmost good faith in relation to the Mareva injunction, against the sixth defendant for damages for breach of duty of good faith and breach of its duty of care, and against the seventh defendant for conspiracy with the first and/or second defendants, as pleaded above. Notwithstanding that claim, the first and/or second defendants purported to enter into an agreement with the third to fifth defendants by which the third to fifth defendants agreed to abandon the partnership's claims against the first and second defendants. At no stage during the administration did the third to fifth defendants (a) consult the partnership or its lawyers about the merits of the claim (b) take legal advice about the merits of the claim (c) make any objective or careful scrutiny of the merits of the partnership's claims.
(xiii) The third to fifth defendants then sold the business of the partnership at a gross undervalue ..... "
The reference to "the Mareva injunction" in that context is to the freezing order obtained on 25 March 1997. The "agreement" is an agreement of August 1997 to which I shall need to return.
By an application notice issued on 13 June 2003, the seventh defendant, HM Group Ltd, applied to strike out the claim against it. Alternatively it sought an order that there be summary judgment against the claimants on that claim pursuant to CPR 24.2. The grounds were that -
"(1) The particulars of claim disclose no reasonable grounds for bringing a claim against the seventh defendant and/or the particulars of claim are an abuse of the court's process or are otherwise likely to obstruct the just disposal of the proceedings; and/or
(2) the claimants had no real prospect of succeeding on their claims against the seventh defendant."
The first and second defendants - Burger King - made a similar application by notice dated 15 July 2004. That application was supported by the witness statement of Mr Jonathan Slater, a solicitor employed by Herbert Smith (who act for Burger King). The exhibits to that witness statement included (1) an agreement (the Company Compromise Agreement) dated 2 July 1997 and made between the company J & H Kirris Ltd, Burger King and the administrative receivers of the company; and (2) an agreement (the Partnership Compromise Agreement), dated 19 August 1997, made between the partnership, acting by its administrators, Burger King and a company Montrass Ltd.
In his witness statement Mr Slater took the point that claims which the claimants now wish to pursue in these proceedings were claims which were released by the company and by the partnership (acting through, respectively, the administrative receivers and the administrators) under the terms of the two compromise agreements. At paragraphs 10 and 11 Mr Slater said this:
"10 In seeking now to pursue claims that would otherwise be vested in the partnership the claimants rely upon a deed of assignment dated 12 November 2002 and executed in their favour by the liquidator of the partnership, Mr Felix O'Hare. In seeking to pursue claims as shareholders of the company the claimants state that the 'liquidator does not have funds to bring proceedings for damages' (see paragraph 1 of the particulars of claim).
11 I respectfully ask the court to note that the Company Compromise Agreement was executed before the company went into liquidation and the Partnership Compromise Agreement was executed before the partnership went into liquidation. The joint administrative receivers of the company and the joint administrators of the partnership each had the power to enter into those compromises, the authority of the administrators being confirmed by the reported decision of Mr Justice Evans-Lombe made in the partnership administration proceedings (the reference is Re Kyrris (No 2 ) [1998] BPIR 111). The liquidator of the partnership and the liquidator of the company each therefore took office in circumstances where the terms of compromise were already binding upon the relevant estate. In these circumstances I believe that the particulars of claim in this action begin upon the entirely false premise that there were claims available to liquidators of the partnership and company respectively which the claimants are now able to pursue.
12 I respectfully refer the court to the wide terms of clause 1 of the Company Compromise Agreement and clause 9 of the Partnership Compromise Agreement. I believe those provisions are more than wide enough to cover each of the claims now sought to be made by the claimants."
Clause 1 of the Company Compromise Agreement is in these terms:
"The company will accept the terms of this agreement in full and final settlement of any disputes, actions, claims, counterclaims, demands or grievances of whatsoever nature, including, (without prejudice to the generality of the foregoing) any such claims alleging breaches of any agreement, negligence, the intention to injure or cause damage or breach of any duty imposed by law which they or any of them may have against all or any of BKL, BKC or any companies controlling them or within their control, or under common (including de facto) control with them, or the servants, officers, agents or employees of any of the above in respect of the franchise agreements or sub-leases described in the proceedings, including claims relating to matters preceding the grant of any franchise agreement or leases or any act or omission by BKL or BKC in any way relating to their businesses as franchisors or landlords or providers of services or any dealings, acts or omissions of whatsoever nature with any of the above, and will not now, or at any time in the future, take any action or seek to recover any damages or any other remedy or redress (whether through the courts or any administrative process) in respect of the said matters, whether or not the subject matters giving rise to such claims are now known to the parties."
In that context "the company" is the Kirris company and "BKL" and "BKC" are Burger King.
Clause 9 of the Partnership Compromise Agreement is to the same effect:
"The administrators accept the terms of this agreement in full and final settlement of any disputes, actions, claims, counterclaims, demands or grievances of whatsoever nature of the Partnership which existed or may have existed as at the date of their appointment or are or would be capable of being brought by the Partnership or by the members of the Partnership (as defined by the IPO) in their capacity as such including (without prejudice to the generality of the foregoing), any such claims alleging breaches of any agreement, negligence, the intention to injure or cause damage or breach of any duty imposed by law which they or any of them may have against BK or any companies controlling BK or which are within BK's control, or under common (including de facto) control with BK or the servants, officers, agents or employees of BK in respect of the franchise agreements or sub-leases (as if not forfeit) including claims relating to matters preceding the grant of any of the franchise agreements or sub-leases or any act or omission by BK in any way relating to their businesses as franchisors or landlords or providers of services or any dealings, acts or omissions of whatsoever nature with any of the above, and will not now, or at any time in the future, take any action or seek to recover any damages or any other remedy or redress (whether through the courts or any administrative process) in respect of the said matters, whether or not the subject matters giving rise to such claims are now known to the parties. For the avoidance of doubt this clause does not apply to any claims which the administrators do not have the power to compromise."
The seventh defendant, HM Group, is not party to either of the two compromise agreements; but it is accepted by counsel on behalf of the claimants that the claim against HM Group in conspiracy cannot be maintained if the true effect of the compromise agreements is that the alleged co-conspirators and joint tortfeasors - Burger King - have been released.
The two applications came before Mr Justice Etherton in February 2005. In a judgment delivered on 7 February 2005 - neutral citation [2005] EWHC 2003 (Ch) - the judge reminded himself of the principles to be applied on an application to strike out under CPR 3.4 and on an application for summary judgment under CPR 24.2 (a) (i) and (b). He said, at paragraph 24:
"The applications cannot succeed unless it is clear that the claims against the first, second and seventh defendants have no real prospect of success. That does not mean that the claimants must show that it is more likely than not that the claims will succeed; but the court must be satisfied that the prospects of success are not fanciful or imaginary. A case which is just arguable is not sufficient."
And at paragraph 25:
"The hearing of an application under Part 24 is not a summary trial. While the court does not have to accept every allegation of fact, however manifestly lacking in substance, it must not conduct a mini-trial evaluating conflicting evidence."
With those principles the judge first addressed the claims which the claimants sought to bring on behalf of the company, J & H Kirris Ltd. He pointed out - as was accepted by the claimants' counsel before him - that, so far as the company's claims were concerned, the proceedings would only be properly constituted if they could be seen as derivative proceedings for the benefit of the company itself. That condition was not satisfied. No permission had been sought or obtained under CPR 19.9. The judge said, at paragraph 32:
"Further, there is no evidence whatsoever before the court to indicate that the necessary basis for a derivative action applies in the present case. The company is under the control of the liquidators. It is not suggested anywhere that the liquidators are parties to any wrongdoing and have wrongly refused to bring proceedings in the name of the company. The only explanation that has been given for the claimants bringing the company claims is that liquidators do not have the funds to bring the proceedings in the name of the company. That is no ground for a derivative action. The remedy in such a case is for the claimants to fund the liquidators to bring the claims if the liquidators properly think that is in the interest of the creditors, or for the claimants to obtain an assignment of the claims. There is no evidence before the court that the claimants have sought to obtain any such assignment and, if they have, as to why it was not obtained or as to any intention to obtain an assignment in the future and the prospects of being able to do so."
The company's claims were struck out on that basis alone. But the judge then went on to consider the effect of clause 1 of the Company Compromise Agreement. He reminded himself of the observation of Lord Bingham of Cornhill in Bank of Commerce and Credit International SA v Ali [2001] UKHL 8, [2002] 1 AC 251. He concluded that the language of clause 1 of the Company Compromise Agreement was "certainly wide enough to catch claims against the first and second defendants for the tort of conspiracy". Reference to the factual background in which that agreement was made reinforced that conclusion. So the company's claims in the proceedings were struck out on that ground also.
The judge then turned to the claims on the part of the partnership. He reached the same conclusion as to the effect of clause 9 of the Partnership Compromise Agreement as a matter of construction as he had as to the effect of clause 1 of the Company Compromise Agreement. As he put it at paragraph 47:
"The terms of clause 9 are of the widest ambit and are clear and unambiguous. The partnership claims plainly fall within them, whether examined on their own or in the light of the factual background I have already mentioned."
The judge went on to say this at 48:
"That conclusion applies equally to the claim for damages on the ground that the Mareva injunction was obtained by wrongly concealing relevant information from the court and giving false information to the court. So far as concerns that particular head of claim, I would add that the proper course would have been for the partners or the administrators or the liquidator to apply to the court, in the proceedings in which the Mareva injunction was granted, to discharge the injunction, or at any event to apply to the court to enforce the cross-undertaking in damages. In fact, even though the Mareva injunction was granted in March 1997, no application has ever been made to discharge that order and no application has even been made to enforce the cross-undertaking in damages."
That was not the end of the matter. As the judge reminded himself it was alleged on behalf of the claimants at paragraph 53 of the particulars of claim that the Partnership Compromise Agreement was invalid and could not be relied upon. The paragraph is in these terms:
"If and in so far as the purported agreement between the first and second defendants and the third to fifth defendants by which the claims of the partnership were allegedly compromised or abandoned applied on its proper construction to any of the claims by the partnership pleaded in these particulars of claim, the claimants aver that the purported agreement was invalid (i) upon the basis that it was entered into as part of a conspiracy and on the basis that the agreement was unenforceable on public policy grounds (ii) on the basis that it purported to require payment of the proceeds of sale of the restaurants in a manner inconsistent with the provisions of the Insolvency Act 1986 and/or that should be set aside on the grounds of economic duress in the circumstances pleaded above."
The judge was prepared to approach that contention on the basis that the conspiracy to which the claimants intended to refer was that alleged in sub-paragraph (xii) of the particulars of overt acts under paragraph 50 of the particulars of claim. As he reminded himself it was there alleged that the administrators had entered into the Partnership Compromise Agreement without having consulted the partnership or its lawyers about the merits of the partnership claims against Burger King, without having taken legal advice about the merits of the claims and without having made any objective or careful scrutiny of the merits of those claims. As he said, that was the basis for the allegation that the administrators were party to the conspiracy.
The judge concluded that, on the undisputed evidence before him, there was no pleaded basis for that allegation of conspiracy which had any real prospect of success at trial. He explained what he regarded as undisputed facts, in that context, at paragraph 60 of his judgment:
"Those undisputed facts are as follows. First, the administrators were appointed by the court for the better realisation of the assets of the partnership than if the assets were being realised in pursuance of a partnership winding-up: Insolvency Act 1986 s.8 (3) (d). Second, a sale of the partnership business and assets as a going concern achieved that objective. A sale as a going concern was only achieved because the first and second defendants were prepared to allow the business to continue under franchise and did not forfeit the sub-leases by the first defendant to the partnership, but the first and second defendants were only prepared to do so on the terms of clause 9 of the Partnership Compromise Agreement. Third, the administrators requested the papers of the partnership relevant to the partnership claims, but they were not delivered and, according to what I was told by [counsel] on instructions, could not be delivered because the partners' former solicitors were claiming a lien on them for unpaid fees. Fourth, the administrators did not have sufficient assets within the administration to pursue the partnership claims. Fifth, at a meeting pursuant to s.23 of the Insolvency Act 1986 on 24 June 1997 the administrators asked whether any of the creditors were prepared to fund pursuit of the claims, but no creditor was prepared to do so. The administrators announced that they would seek the directions of the court on the matter of compromising the claims, and in particular the Article 86 claim. At the meeting, there was an overwhelming majority of votes in favour or the administrators' proposals to enter into an agreement with the first and second defendants to enable the partnership and assets to be sold as a going concern. The total votes, in value, were £3,824,257.05 in favour and £276,923.76 against, including proxies. Those creditors voting included many persons other than those alleged to be involved in the conspiracy against the partnership. The meeting was attended by the first and third claimants. Sixth, the administrators applied for directions with regard to the proposed compromise with the first and second defendants. That application came before Evans-Lombe J on 21 July 1997. His judgment is reported in Re Kyrris No 2 [1998] BPIR 111. It appears that the partners, the claimants in the present proceedings, were respondents to the application. The third claimant in these proceedings was represented by an adviser, Mr Nikolaides, who addressed the court on his behalf. The other partners did not appear and were not represented."
If, as the judge held, there was no prospect that the claimants would establish at trial that the partnership administrators entered into the Partnership Compromise Agreement as parties to a conspiracy, the intentions of Burger King in executing that agreement were irrelevant. The Partnership Compromise Agreement could not be set aside on the first of the grounds alleged in paragraph 53 of the particulars of claim. Nor could the agreement be set aside on the second or third of the grounds alleged in that paragraph. In particular, there was no prospect of showing that the administrators had entered into that agreement under economic duress: that is to say, that the administrators' decision to compromise was not a voluntary act of insolvency practitioners exercising a free and independent will.
Accordingly, the judge made the order sought on the
applications before him. He struck out, pursuant to CPR Part 3.4 -
" ..... all claims made ..... against the first, second and seventh defendants in respect of, or through or on behalf of, J & H Kyrris Limited or by reference to their shareholdings in that company ..... "
and he dismissed the claims made -
" ..... by the claimants against the first, second and seventh defendants in respect of, or through or on behalf of, J & H Kyrris (a partnership) ..... "
on the basis that there be summary judgment on those claims against the claimants in favour of those defendants pursuant to CPR Part 24.2.
The judge gave permission to appeal from his order. He did so for the reasons set out in a note dated 10 February 2005. After expressing the view that an appeal would have no real prospect of success, he said this:
"The circumstances of the applications to strike out/for summary judgment are, however, unusual. For the purpose of those applications the court has to assume that, at a trial, the claimants would succeed in their factual case that their business, built up over many years, and worth many millions of pounds, was, for strategic commercial reasons, deliberately and wrongly brought to financial ruin by [the first and second defendants], by persistent and repeated breaches by the first and second defendants of their express and implied legal obligations to the claimants.
My judgment in favour of the claimants rested, so far as concerns the claimants' partnership business, on the finding that each and every cause of action in respect of that persistent wrongdoing by [the first and second defendants] was compromised by administrators of the claimants' partnership, appointed, on the claimants' case, as a result of the insolvency caused by that same persistent wrongdoing of [the first and second defendants]. In relation to the business carried on by the claimants' company, in addition to other grounds for striking out the claims (not properly constituted as a derivative action), I held that each and every cause of action in respect of that persistent wrongdoing by [the first and second defendants] was compromised by administrative receivers appointed, on the claimants' case, as a result of the insolvency caused by that persistent wrongdoing of [the first and second defendants].
My dismissal of the claims against [the seventh defendant] was, at least in part, based on my finding that those compromise agreements by the administrators of the partnership and the administrative receivers of the company's assets were effective to release [the first and second defendants] as tortfeasors and thereby also releasing [the seventh defendant] as joint tortfeasor. The claimants having, on their case, lost everything in consequence of the wrongdoing of the defendants, including in particular [the first, second and seventh defendants], but being deprived of the opportunity to take the proceedings to trial because of compromise agreements executed in the circumstances I have mentioned, I consider there is a compelling case, in fairness to the claimants, that they should have the opportunity of having my decision reviewed by the Court of Appeal."
So it is that an appeal which, on the judge's view, had no real prospect of success - and for which permission was not sought or obtained from this court (because permission, notwithstanding that view, the judge himself had given) - comes before us.
The grounds of appeal included, at paragraphs (A) and (B), the following:
"(A) On its proper construction the compromise agreement cannot have applied to the conspiracy pleaded in paragraphs 47, 50 and 53 of the particulars of claim.
(B) Further the judge was wrong to dismiss the claim on the basis that there was no realistic prospect of establishing that the administrators were part of the conspiracy ..... "
Ground (C) is, I think, ancillary to ground (B) - that no allegation of conspiracy on the part of the partnership administrators was made when authority was sought from Mr Justice Evans-Lombe in July 1997. Ground (E) - economic duress - was not pursued in argument before us. It had no prospect of success. As I have said, it was accepted on the part of the claimants that the claim against the seventh defendant in conspiracy could not be pursued if the claims in conspiracy against the co-conspirators (the Burger King companies) had been released.
The first question, as it seems to me, is whether the judge was right to hold that there was no real prospect of success in the claim that the partnership administrators were party to the alleged conspiracy. That, as it appears from the judge's note of his reasons for giving permission, really lies at the core of the claimants' complaint. They have no complaint if the administrators were acting properly and independently in the execution of their functions. But if they could show that the administrators were themselves party to the conspiracy to injure which they allege then they should be able to bring their claims. A claim against the administrators could not, of course, be released by the Partnership Compromise Agreement; and if the claim were to be made good, the Partnership Compromise Agreement would not provide any defence to the first or second defendants or (by extension) to the seventh defendant.
As a matter of pleading, the claim in conspiracy against the administrators rests on the inference to be drawn from the matters alleged in sub-paragraphs (xii) and (xiii) of the particulars of overt acts pleaded under paragraph 50 of the particulars of claim. We were taken, also, to the allegation in paragraph (iii) of those particulars of overt acts: that in December 1996 the administrators - that is the third to fifth defendants - as administrators of Maxims - another Burger King franchisee, not associated in any way with the Kirris business - effected the sale of that franchise to Allied Leisure Plc despite receiving higher offers from the existing franchisee. But that allegation takes the matter no further. There is no allegation there that the sale of Maxims outlets was knowingly effected by these individuals as administrators at an undervalue; and nothing which would enable the court to infer that the administrators were not entitled in that case to reject a higher offer from existing franchisees. Whether or not a higher offer should have been accepted depends on the circumstances affecting that transaction (as to which nothing is said); including the question whether or not the offeror would have been able to provide the funds.
The inference which the court is asked to draw on the pleadings is that the administrators were party to a conspiracy with Burger King because they were prepared to enter into a Partnership Compromise Agreement without consulting the partnership or its lawyers about the merits of the claim; without taking legal advice about the merits of the claim; and without making "any objective or careful scrutiny of the merits of the partnership claims". The judge held that conspiracy was not to be inferred from those matters when viewed in the context of what he described as "undisputed facts" in the passage at paragraph 60 of his judgment, to which I have referred.
The appellants challenge the judge's view the facts set out in paragraph 60 of the judgment were, indeed, undisputed. But, as it seems to me, that challenge cannot be sustained. The first and second of the judge's six facts are self-evident. The third, fourth and fifth of those facts are taken from the report of a creditors' meeting held under Section 23 of the Insolvency Act 1986, at which members of the Kirris family were present. I need refer only to the following passages in that note of meeting:
"C Vlieland Boddy representing Marshals asked what documentation had been seen regarding the Article 86 claim. Michael Stubbs the administrator's solicitor (Dibb Lupton Alsop) replied and set out the following points:
1 That there had been no co-operation regarding the papers from the partners or the partnership's previous solicitors, Reid Minty, and therefore they had not been received. He would like to have had an opportunity to further consider the claim but had received no assistance from the partners.
2 Burger King's solicitors had provided detailed comments on the statement of claim.
3 Other enquiries had been made and limited information obtained.
Mr Stubbs went on to state that there was no money to fund a claim. He also understood that Mr Kyrris took the view that the claim was his to pursue, not the administrators. Mr Vlieland Boddy asked if there was an estimate as to the value of the claim. Mr Stubbs replied that he had seen unsubstantiated claims that the value was between £8 million and £45 million, but had not seen evidence to support these figures. Michael Oldham went on to inform the meeting that the matter had been discussed with Burger King and counsel representing the administrators who had stated that the documentation available did not allow the claim to be judged. He went on to confirm to the meeting that the administrators could realise from the sale of the business a significant amount that was certain whereas an uncertain claim was a poorer proposal.
Mr Stubbs went on to state that the only view he had been able to form was that it was a difficult and speculative claim. This was advice from a competition law specialist within his own firm. The claim would also be expensive to make. An estimate has been provided that at least £0.5 million would be required in order to fund such a claim if a provision was made for the possibility of having to meet the costs of the defendant."
A little later, at paragraph 6 of the report, there is this passage:
" ..... Mr Stubbs went on to outline to the meeting that the administrator could not fund an Article 86 action and asked whether or not creditors would be prepared to fund £500,000 to take action further. No creditor present made any commitment. Mr Stubbs informed the meeting, once again, that the administrators had made every attempt to consider the claim in further detail but had not received any co-operation from the partners or their advisers. It would have assisted the administrators greatly if the details of the claim had been forthcoming. However, as a consequence of the lack of information the administrators were now in a difficult position and one option or the other had to be taken."
It is important to keep in mind in the present context that the administrators then sought directions from the court whether they were entitled to compromise the proceedings. It was that application which came before Mr Justice Evans-Lombe in July 1997 in Re Kyrris (No 2), to which reference has already been made. The issue before Mr Justice Evans-Lombe is described in the headnote to the report at [1998] BPIR 111:
" ..... On 25 April 97 the partners commenced proceedings against Burger King claiming damages under various heads including damages alleged to be due as a result of abuse by Burger King Ltd of its dominant position in the European Community under Art 86 of the Treaty of Rome but also other claims in respect of overpaid or excess rent. On 28 April 1997 an administration order was made. The administrators were of the view that the business could be sold for at least £6m if its assets could be freed for sale and in order to effect such a sale it was necessary for Burger King to co-operate. Burger King Ltd would only agree to do this if there was an overall settlement arrived at in respect of all claims, including the claim for relief from forfeiture and the claims included in the writ issued on 25 April 1997. The proposed compromise with Burger King was put to a meeting of creditors on 24 June 1997 which approved the proposals by a substantial majority.
The administrators sought directions as follows:
(1) whether they were entitled to seek relief from forfeiture in respect of the leasehold properties referred to;
(2) whether they were entitled to take over the proceedings commenced by writ on 25 April 1997;
(3) whether they were entitled to compromise all those proceedings."
Mr Javocus Kirris was present with his McKenzie friend, Mr Nikolaides, at that hearing. The judge described the position at [1998] BPIR 111, 113 F-H:
"The combined effect, of course, of termination of the franchise agreements and a repossession of the sub-let premises would be to remove the total basis of the business which the administrators are now seeking to sell. For this purpose the administrators have made approaches to Burger King with a view to arriving at an agreed solution, whereby Burger King will not in fact terminate the franchise agreements, and will permit the premises sub-let to be assigned to a purchaser. However, I am told that they are unwilling to do this, save upon the basis that an overall settlement is arrived at of the claims between themselves and the Kyrris partnership, including not only the claims for rent and for unpaid royalties, etc, but also the cross-claims by the Kyrrises for relief from forfeiture and of the claim which they commenced by writ on 25 April 1997 claiming damages under various heads against Burger King, to which I have referred.
The proposal to compromise those claims on behalf of the partnership was put to a meeting of the creditors of the partnership held under the provisions of the Act on 24 June 1997, at which meeting the proposals were carried by a substantial majority."
If it were to be said that, in seeking approval for the compromise, the administrators were party to a conspiracy to injure the claimants - or that the report of the creditors' meeting, which was put before the judge, was not an accurate record of what took place at that meeting - then there was the opportunity, in July 1997, to take those points. They were not taken then; notwithstanding that Mr Kirris was present in court. And, as it seems to me, they can be given no weight when taken now, some eight-and-a-half years later. So that the undisputed facts on which the judge relied can, properly, be treated as undisputed. They are facts which would be made good if there were a trial of these proceedings. If those facts were made good - so that it was against that factual background that the administrators entered into this compromise agreement in August 1997 - there is no prospect that a claim that the administrators were parties to a conspiracy could succeed. The judge was right to reject the inference which it is sought to draw from these last two sentences in paragraph (xii) of the particulars of overt acts under paragraph 50 of the particulars of claim.
I turn therefore to the short question of construction; whether, if the Partnership Compromise Agreement is binding on the parties, it has the effect of releasing the partnership and the Burger King companies from the claims in this action. It is important to keep in mind the language of clause 9. The opening words are:
"The administrators [on behalf of the partnership] accept the terms of [the] agreement in full and final settlement of any disputes, actions, claims, counterclaims, demands or grievances of whatsoever nature of the partnership which existed or may have existed as at the date of their appointment or are or would be capable of being brought by the partnership or by the members of the partnership in their capacity as such ..... "
The clause then goes on to particularise "(without prejudice to the generality of ..... " the words I have just read, that those claims are to include:
" ..... claims alleging breaches of any agreement, negligence, the intention to injure or cause damage or breach of any duty imposed by law which they or any of them may have against [Burger King] ..... including claims relating to matters preceding the grant of any of the franchise agreements or ..... any act or omission by [Burger] King] in any way relating to their businesses as franchisors or landlords or providers of services or any dealings, acts or omissions of whatsoever nature with any of the above, and will not now, or at any time ..... take ..... action to recover ..... damages ..... "
Given the background of disputes against which that agreement was made - and the allegations that were being made against Burger King in relation to its conduct in respect of the franchises - those words plainly are wide enough to include claims in conspiracy. A claim in conspiracy is a claim based on the intention to injure or to cause damage.
As Lord Bingham pointed out in BCCI v Ali [2002] 1 AC 251, 259F, at [8], a compromise agreement of this nature has to be construed like any other agreement, by interpreting the language in the context of the circumstances in which the agreement was made. In BCCI v Ali the release was held not to bind an employee in relation to a claim which he wished to bring for a breakdown in the duty of trust said to be owed by his employer to him as employee. But that was in a case in which the existence of such a duty, as a matter of law, was unknown to the courts until the House of Lords had identified it in an earlier BCCI case - Mahmood v Bank of Credit and Commerce International [1998] AC 20. Indeed, the existence of such a duty had been expressly rejected by the Court of Appeal in the Mahmood case. So, as Lord Bingham pointed out, it was impossible to hold that the parties could have had in mind the claim which the employee wished to bring against BCCI; and so wrong to construe the release - wide as its terms were to cover that claim. But, in the present case, the claims which are made in this action are just the sort of claims that the parties must be taken to have had in mind in relation to the dealings which had taken place between them over the previous years. The language is well wide enough to cover those claims; and, in my view, the judge was right to hold that it had that result.
If that is the position in relation to the partnership claims, then the construction of the Company Compromise Agreement leads to the same result. I observe that the last line of paragraph 1 of the Company Compromise Agreement refers specifically to matters giving rise to claims not then known to the parties. Again, the compromise of claims under that paragraph is to include claims alleging breaches of any agreement, negligence, the intention to injure or cause damage or breach of any duty imposed by law.
The judge was right to reach the conclusion that the claims which are sought to be brought in these proceedings were claims which both the partnership and the company, through (in the one case) the administrators and (in the other case) the administrative receivers, had agreed to release in 1997.
That makes it unnecessary to address the Foss v Harbottle point which stands in the way of a claim on behalf of the company. We were told that there had been discussions between the claimants and the liquidator of the company and that there was some prospect that the liquidator may be prepared to assign those claims. It is clear from the correspondence that we have been shown - which is not complete - that those discussions have not reached the stage of an assignment. And, for my part, I find it difficult to accept that a liquidator could properly assign claims which had already been struck out by the court in the proceedings. Be that as it may, the claims cannot be pursued because of the existing compromise agreement of July 1997.
It was accepted by counsel that, if the claims cannot be pursued against Burger King, then they cannot be pursued in conspiracy against the alleged co-conspirator, the seventh defendant, HM Group Ltd.
For those reasons I would dismiss this appeal.
LORD JUSTICE MOSES: I agree.
SIR PETER GIBSON: I also agree.
Order: Appeal dismissed