De Crittenden v Estate of Bayliss (Deceased) & Anor

LORD JUSTICE JONATHAN PARKER: Before the court today are applications by Mr Robin de Crittenden for permission to appeal against two orders made by Her Honour Judge Kirkham in the Chancery Division, Birmingham District Registry, in an action in which the applicant is claimant. The first such order was made at the commencement of the trial on 22 November 2004; the second was made on 17 January 2005, following the conclusion of the trial. The action in question was originally brought against Mr Charles Bayliss and his daughter Lesley, but Mr Bayliss died in May 2004 and his estate was later joined as a defendant in his place.

By the first of the two orders in respect of which permission to appeal is sought, namely the order dated 22 November 2004, the judge refused permission for the applicant to re-amend his Particulars of Claim. By her second order, namely the order dated 17 January 2005, the judge dismissed the applicant's claim in the action.

The matter has a lengthy history, which I must briefly summarise.

The story starts in 1993, when Lloyds Bank brought claims again Mr Bayliss and a company owned by him known as Packers and Buyers Limited ("PBL"). The claims were eventually compromised in February 1997. Under the terms of compromise, the Bank was required to pay £75,000 at the direction of PBL (in the event that sum was paid to the solicitors acting for Mr Bayliss and his companies). Also affected by the compromise was an area of land at Leominster owned by Elston Limited, another of Mr Bayliss' companies, which by the terms of the compromise was released from charge to the Bank.

In April 1997 the applicant commenced an action against PBL and Elston ("the first action") claiming a share of the proceeds of the compromise of the Bank's claims, pursuant to an alleged agreement with Mr Bayliss that he, the applicant, would be entitled to half the value of any property recovered or preserved by the compromise.

In May 1997 a residential property at 25 Carlton Mews, Wells in Somerset was bought by Mr Bayliss and a Mrs Worrall jointly, as tenants in common in equal shares. The purchase price was £92,500, and it appears that all or part of the £75,000 paid by the Bank pursuant to the terms of compromise may have been applied in that purchase.

In February 1999 Mr Bayliss bought Mrs Worrall's half share in the Carlton Mews property for £50,000. In March 1999 it appears that Elston, an Isle of Man Company, was dissolved in the Isle of Man. It also appears that at some stage PBL, which was another Isle of Man company, was also dissolved.

In May 1999 Mr Bayliss transferred the Carlton Mews property to his daughter Lesley by way of gift, subject to a lease back by her to him, rent free, for 20 years.

In January 2000 the first action was amended to substitute Mr Bayliss for Elston and PBL (both of course by then dissolved).

The first action was tried in February 2001 before His Honour Judge Nicholl. Judge Nicholl found Mr Bayliss liable for breach of contract as alleged by the applicant, and he awarded the applicant damages in the sum of £37,000: that is to say, 50% of the £75,000 paid by Lloyds Bank at the direction of PBL, plus £15,000 representing half the value of the land at Leominster which had been released from charge.

In February 2002 the applicant applied for charging orders over the Carlton Mews property and over the Leominster land, by way of enforcement of the judgment in the first action. The judgment debt in the first action has now been paid in full, together with the applicant's costs in that action.

In November 2002 the applicant commenced the present action ("the second action"), in which he claims a tracing remedy and hence a proprietary interest in the Carlton Mews property by virtue of the application of all or some part of the £75,000 paid by Lloyds Bank towards the purchase of that property.

At some date thereafter the Carlton Mews property was sold for (I think) a sum in the region of £225,000, and £180,000 was paid into court to the credit of the second action.

As noted earlier, Mr Bayliss died in May 2004.

The trial of the second action commenced before Her Honour Judge Kirkham on 22 November 2004. At the commencement of the trial, the applicant, through his counsel Mr Simon Clegg, sought permission to re-amend his Particulars of Claim.

The amendments which the applicant sought to make covered two distinct matters. In the first place, he sought to amend paragraph 14 of the pleading, which (as it stood) alleged that Mr Bayliss applied "approximately £50,000 of the said £75,000 to fund the purchase of [his] half share of 25 Carlton Mews". By the proposed re-amendment, the applicant sought to include the words "£75,000 or in the alternative" immediately before the word "approximately".

The second matter raised by the proposed amendments concerned various items of plant alleged to be owned either by Mr Bayliss or PBL or Elston, which the applicant sought to include as part of the property recovered or preserved by the compromise of the Lloyds Bank claims (on the footing that the effect of the compromise was to release them from charge to the Bank). (In his oral submissions to me this morning, Mr Crittenden, who appears in person, has asserted that the plant in question was the property of Elston, rather than of Mr Bayliss or PBL.) On that basis, the applicant sought to include amendments raising a claim based on the agreement with Mr Bayliss in relation to these items of plant.

By her order dated 22 November 2004 the judge refused permission for all the proposed re-amendments. She concluded that the proposed re-amendment of paragraph 14 would place the defendants at a disadvantage, in that they would need to call evidence from their solicitors as to how the £75,000 had been applied, together with evidence from Mrs Worrall as to the subsequent purchase of her interest by Mr Bayliss. Mr Clegg, for the applicant, submitted that the defendants would need to call the solicitors and Mrs Worrall to give evidence in any event.

In paragraphs 19 to 21 of her judgment delivered on 22 November 2004, the judge said this:

The judge then turned to the proposed amendments relating to the plant owned by Elston. She concluded that even if the proposed re-amendments were allowed, the claim in relation to that plant had in any event no real prospect of success, since the items of plant in question had never been charged to the Bank, and therefore could not on any basis be regarded as property the subject of the applicant's agreement with Mr Bayliss. As she said in paragraph 28 of her judgment:

In paragraph 29 of her judgment the judge said this:

The trial of the action then proceeded. The defendants, through their counsel Mr Morgan, contended that the second action was an abuse of process, given that the applicant had previously elected to claim damages for breach of contract, without asserting any proprietary or tracing claim. They relied on the fact that judgment had not only been entered for the applicant in the first action, but that that judgment had been successfully enforced. Secondly, they contended that in any event there was no basis for any finding that Mr Bayliss or his companies owed fiduciary duties to the applicant, such as could found a proprietary claim.

In what was, if I may respectfully say so, an admirably detailed and lucid judgment, the judge concluded that (as the defendants had contended) the second action was indeed an abuse of process, on the basis that the applicant had elected to claim damages for breach of contract; and that in any event no fiduciary duties arose under the applicant's agreement with Mr Bayliss (it being common ground that the findings made by His Honour Judge Nicholl in the first action in relation to that agreement were binding on the parties in the second action).

The judge found the applicant to be a reliable witness, in contrast to Miss Bayliss. At a number of points in her judgment the judge repeated her finding that it was Mr Bayliss' intention to do all that he could to hide his assets from the applicant, and that Miss Bayliss had for her part done all she could to assist him in so doing (see, for example, paragraphs 13, 17 and 18 of the judgment). However, the judge also found that by May 2000 the applicant "was aware of the facts relevant to the question whether or not Mr Bayliss owed a fiduciary duty and to their relationship generally, whether an agreement or otherwise" (see paragraph 41).

The judge continued:

On the basis of those findings, and after considering Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514 (PC) and Johnson v Gore Wood [2002] 2 AC 1, the judge concluded that the second action was an abuse of process.

Turning to the issue as to the existence of fiduciary duties and after considering the well-known passage from the judgment of Millett LJ in Bristol and West Building Society v Mothew [1998] Ch 1, the judge expressed herself as not persuaded that the relationship between Mr Bayliss and the applicant was one of partnership.

After referring to a number of further authorities, the judge reached the conclusion that the applicant was adequately protected by the contract between him and Mr Bayliss as found by Judge Nicholl, and that there was "simply no need for the court to overlay, in this commercial context, the complex rules of equity in order to ascertain whether [the applicant] has any greater rights" (see paragraph 62 of the judgment).

The judge accordingly concluded that the relationship between the applicant and Mr Bayliss was a purely contractual relationship, as His Honour Judge Nicholl had found, and that the obligations thereby imposed on Mr Bayliss were not in the nature of fiduciary obligations. She accordingly concluded that no proprietary claim arose. In the result, therefore, she dismissed the second action.

Turning first to the judge's refusal of permission to make the proposed re-amendments to the Particulars of Claim, I can, despite what the applicant has said to me this morning in the course of his oral submissions, see no ground for challenging her conclusion that the proposed amendments relating to the items of plant raised no arguable claim, on the footing that the items in question were never charged to the Bank. Having reached that conclusion, the judge was plainly right in her discretion to refuse permission for those amendments.

The proposed re-amendment in relation to the £75,000 (that is to say, the re-amendment sought to paragraph 14 of the pleading) does, however, seem to me to be possibly in a different category. Given that, as I shall indicate in a moment, I shall be granting permission to appeal in relation to the order dated 17 January 2005, it seems to me that the appropriate course to take in relation to the applicant's application for permission to appeal against the refusal of this amendment is not to grant or refuse permission to appeal today, but rather to stand the application over to the hearing of the substantive appeal against the order dated 17 January 2005, with the appeal to follow in relation to that re-amendment if permission is granted.

I turn, then, to the order dismissing the second action (that is to say, the order dated 17 January 2005). Whilst, as I emphasised to the applicant in the course of his submissions this morning, I am very far from saying that the judge necessarily reached the wrong conclusion on the issues raised before her, nevertheless it does seem to me that the issues in question were by no means straightforward, and that there is at least room for argument as to whether the judge's conclusions were correct.

Although the judge's finding as to the state of the applicant's knowledge of relevant matters (a finding which I quoted earlier) will place a serious obstacle in the way of a successful appeal, the issue as to election/abuse of process is in my judgment one which merits consideration by a full Court of Appeal.

As to the existence of fiduciary duties, the applicant will, once again, be faced with a serious difficulty, this time in the form of the findings made by His Honour Judge Nicholl in his judgment in the first action as to the nature and terms of the contractual relationship between the applicant and Mr Bayliss. Once again, however, the issue as to the existence or otherwise of fiduciary duties does seem to me to be an arguable one.

So whilst I must not be taken as in any way encouraging the applicant to exercise his right of appeal, it does nevertheless seem to me that arguable issues are raised which do merit the grant of permission to appeal against the order dated 17 January 2005.

Accordingly, I will grant permission to appeal from that order; and I will adjourn the applicant's application for permission to appeal against the judge's refusal to allow him to make the proposed re-amendment to paragraph 14 of the Particulars of Claim to be heard at the same time as the substantive appeal, with the appeal on that issue to follow should permission be granted. Permission to appeal against the judge's refusal to allow the re-amendments relating to the items of plant is, however, refused for the reasons which I gave earlier.