Walbrook Trustees (Jersey) Ltd & Ors v William Simon Fattal & Ors

This is the judgment of the court to which all members of the court have contributed.

The parties to this litigation, who are all directly or indirectly interested in a substantial property, have regrettably become involved in successive litigation about the management of that property and their rights in it.

Where a person brings successive actions in respect of the same subject matter, the court may strike out the later proceedings as an abuse of process if he seeks to raise in the later proceedings claims which he should have made in earlier proceedings. The House of Lords have recently considered this long-standing principle. It generally requires unjust harassment of the defendant. In essence, the court must make a “broad merits-based judgment” as to whether there is an abuse of process. It is not enough to show that the claim could have been brought in the earlier proceedings.

This principle was described and explained in the speech of Lord Bingham, with whom three other members of the House agreed, in Johnson v Gore Wood & Co [2002] 2 AC 1, 31 in the following passage:

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

In Johnson, a company brought a claim of negligence against its solicitors, and, after that claim was settled, the proprietor of the company, Mr Johnson, brought a separate claim in respect of the same subject-matter. The House of Lords held that this was not an abuse of process because there were good reasons why the separate claim had not been brought earlier, and the defendant solicitors had implicitly accepted that it was a separate claim in the course of the settlement negotiations. Lord Millett in a separate speech, agreeing with the result, also held that, where a defendant defends a claim on its merits, he should be taken to have acquiesced in the later claim being brought.

The court is not required, on an application for proceedings to be struck out as an abuse of process, to reach any view as to the merits of the later claim: Stuart v Goldberg Linde [2008] 1 WLR 823. If the case is suitable for summary judgment, the necessary application can be made for that purpose. The burden of establishing that abuse of process exists in any given case falls on the party seeking to rely on it. The abuse engages both the public interest, which is concerned with the finality of litigation and the efficient management of litigation, and the private interest of the claimant seeking access to the court (see Aldi Stores Ltd v WSP Group Ltd [2008] 1 WLR 748 at [24], [32] and 37]).

The facts are complex, but can be briefly described for the purposes of this appeal. There is a substantial block of flats and commercial premises in central London called Berkeley Court (“the Property”). Title is registered in the name of Berkeley Court Investments Ltd, which is (directly or indirectly) owned by a company called Baker Street Ltd (“BSL”), a company limited by guarantee. The membership rights in BSL belong to four families, including the Dangoor family, and they are now held through various trusts: (1) the Delta Trust; (2) the Sofaer Trust; (3) the Sharet Trust and (4) the Fattal trusts, comprising the W.S. Fattal Trust and the Elias Fattal Trust. The interests now held by the Sharet trust were formerly held by Interlands SA (“Interlands”) and before that by Mr Selim Dangoor (hereafter “Selim”): the dispute between the parties which has given rise to this appeal relates to the dealings in these interests following the death of Selim early in 1998. The appellants are Mr W. Fattal (“WF”), his brother Mr E. Fattal (“EF”) and Rysaffe Trustee Company (C.I) Limited (“Rysaffe”). WF and EF are life tenants of the Fattal trusts, and Rysaffe is one of the three trustees of those trusts. The respondents are the trustees and representative beneficiaries of the remaining trusts. The appeal is resisted by Robert Dangoor, the representative beneficiary of the Sharet trust. The other respondents have taken no part in this appeal.

The relationship between the parties is assumed by the parties for the purposes of this appeal to be governed by a joint venture agreement (“JVA”) dated 30 January 1989, as amended by a contemporaneous addendum. Clause 6 of the JVA provides that a member “wishing to sell” his “share” (effectively now his interest in the membership rights in BSL) must give notice in writing to the other members, specifying the price and the third party (if any) to whom he proposes to transfer his share. Thereupon, the other members have the right of pre-emption. Clause 12 of the JVA further restricts dispositions by a member of a share. A member cannot dispose of his interest in his share save with the prior approval of the other members. The addendum provides (so far as material) that consent is not required where a member transfers the whole of his share to a trustee for certain members of their immediate family, including a sister (hereafter a “permitted transferee”).

In 1998, Walbrook asked WF and EF, (“the Fattals”), to approve a transfer by Interlands to the Sharet trust of the share formerly owned by Selim. Although Walbrook did not describe this as a request for consent under clause 12 of the JVA, that is what it appears to have been, since the transaction appears to have been outside the terms of the addendum. The same request was made of the other families. We refer below to the transaction whereby the interest of Interlands was vested in the Sharet trust as “the 1998 transfer”.

WF sought more information about the transaction and according to his witness statement, dated 28 September 2007, he then spoke to Doreen Dangoor, Selim’s sister, who informed him that she and her husband, Albert, had purchased the interest of Interlands and wished to settle the share on the terms of the Sharet trust for the benefit of their children. Robert is one of their children.

WF therefore knew from Walbrook that the transaction was in favour of the Sharet trust, which was correct. He also knew from Doreen that the transaction was one of sale to Albert and herself, which was correct in so far as there had been a sale but incorrect (as it now turns out) as regards the identity of the purchaser. He was not given the price or the date of the sale. According to the judgment of Henderson J given in these proceedings on 29 November 2007, the purchaser was one Niazi Dangoor (hereafter “Niazi”), a cousin of Selim, and the sale to him had been agreed or finalised in May 1998. The purchaser was not a permitted transferee. The obligation to serve a sale notice under clause 6 of the JVA arose at the latest immediately prior to the sale to Niazi. Accordingly the Fattal trustees were not given the notice which should have been given to them at the latest in May 1998 pursuant to that clause.

On 10 July 1998, WF replied to Walbrook, apparently on behalf of the Fattal trustees, consenting, as he put it, to the transfer of the share held by Interlands to the Sharet trust. WF did not examine the terms of the JVA. He contends in these proceedings that, as far as he is concerned, there was a material difference between a sale to Doreen and Albert and a sale to Niazi. In his witness statement of 5 March 2008, he stated:

“The point is that, had I been told in June 1998 that it was [Niazi] an outsider who was the purchaser of the 25% share, not Albert and Doreen, I would have recovered my original file to review the terms of the JVA and I would have established that it was not a permitted transaction. I would have been alerted to the fact that the Fattal Trusts had pre-emption rights, and wanted those rights to be exercised by Walbrook. The fact that Niazi was the purchaser of a 25% share is certainly not an immaterial fact.”

That is disputed by Robert and so there is clearly an issue as to what WF would have done in 1998 if told about the sale to Niazi. WF says that he would have wanted the Fattal trustees to exercise their pre-emption right. That factual issue could not be resolved on the application to the judge. There was not even an application to him for cross-examination of WF.

Following the 1998 transfer, disputes about the management of the Property emerged between the Fattals and the other parties to the JVA. Since 2003, some or all of the parties have as a result been engaged in litigation concerning the Property. In 2003, WF and EF brought two sets of proceedings (“the 2003 proceedings”) against the trustees and others. In the first action, (“the 2003 Part 8 proceedings”) the claimants sought a variety of relief, including an order restraining the sale of the Property and information from the trustees. In these proceedings, and consistently with their consent to the 1998 transfer, WF and EF expressly pleaded that the assets of the Sharet trust included all the 25%  beneficial interest in the Property formerly belonging to Selim under the JVA and all 25% of the companies holding that interest. Walbrook took out a Part 20 claim in response to this claim, seeking directions with a view to the sale of the Property. In July 2003, Sir Andrew Morritt, Vice-Chancellor, heard an application to strike out parts of pleadings in the 2003 proceedings. He held that on the true interpretation of the JVA the holders of 75% of the voting rights could determine how the Property should be sold to the exclusion of the Fattal trusts, who were entitled to the remaining 25%. The remaining issues in these proceedings were settled in October 2003 on undertakings by Walbrook to produce certain information (not including documents about the 1998 transfer). In addition, on 3 October 2003 at a hearing at which the Fattals and Rysaffe were represented, Hart J made an order by consent whereby the Sharet trust was to be issued with the lease of two car parking spaces (in common with the other trusts). However, this was at a time when the concern of the Fattal trustees was to ensure that the purchaser of Selim’s interest became a party to the JVA and agreed to be bound by its terms.

Robert’s case on abuse of process is basically this: by reason of the failure of Fattals to raise any claim arising out of the 1998 transfer in the 2003 Part 8 proceedings, it is an abuse of process for them now to bring the New Claim (as defined below).

In the course of the disclosure which ensued after the settlement of 2003 Part 8 proceedings, WF discovered what he had thought had been a straight sale by Interlands to Doreen and Albert had in fact taken the form of two transactions, a sale by Interlands to Niazi, who then settled the share on the terms of the Sharet trust. Niazi had previously created this trust in favour of Doreen's family. WF did not make the discovery about the sale to Niazi until February 2006. In May 2006, the Fattals issued an application in the first action against Walbrook seeking disclosure of documents relating to the 1998 transfer.

2006 saw the launch by the Fattals of yet two more actions. The second of these is highly relevant to the abuse of process issue. We can omit reference to the first action. The next relevant event was that in July 2006, Walbrook started its own proceedings for directions from the court. In October 2006, the Fattals started a new action (“the 2006 Part 7 proceedings”), making a number of different claims. In February 2007 the Fattals amended their claim form by adding, among other claims, a claim against the Sharet Trust to enforce the right of pre-emption which they contended had arisen under clause 6 of the JVA by reason of the sale to Niazi. Two respondents, David Dangoor and Monopro Ltd, took the point in a skeleton argument in June 2007 that the Fattals should have made this claim in the 2003 proceedings but there was no application to strike out the 2006 Part 7 proceedings. In May 2007, they sought to bring these claims by way of a Part 20 claim in Walbrook's action started in 2006. However, the court dismissed this application, and stayed the 2006 Part 7 proceedings until after the court had considered the trustees’ application for directions; the Fattals unsuccessfully appealed against that stay to this court. However, the important point was that by starting and serving the 2006 Part 7 proceedings the Fattals and Rysaffe gave notice to the parties to the JVA that they claimed a right of pre-emption in respect of the 1998 transfer, and that point was placed on the record. None of the respondents suggested that those proceedings were an abuse of process.

At Walbrook’s request, Henderson J gave directions in Walbrook's proceedings for the determination of the question (“the Sharet sale issue”) whether there had been a sale between Interlands and Niazi. Robert did not assert that the Sharet sale issue constituted an abuse of process. Following a trial of this issue, Henderson J on 29 November 2007 found that on some date between 12 and 18 May 1998, and for an unknown price, Interlands had sold its beneficial interest in the membership rights of BSL to Niazi and made a declaration to that effect. The judge found that Niazi was probably put in funds for the purpose of this transaction, by Doreen and Albert.

Walbrook then sought further directions, and Henderson J directed that there should be a further preliminary issue (“the New Claim”) as to whether the Sharet trust had any interest in the membership rights of BSL and thus indirectly in the Property and the companies holding legal and beneficial title to the Property. This issue raised the question whether the sale to Niazi had given rise to a pre-emption right in favour of the Fattal trusts under clause 6 of the JVA; if it had, then the Fattal trustees contend that they can enforce that right against the Sharet trust on the footing that it is a volunteer. The respondents were representative beneficiaries of each of the other trusts and the trustees of those trusts. Defences were served. In his defence, Robert asserted that the New Claim was an abuse of process. He then launched his application to strike out the particulars of claim on the grounds of abuse of process, on which he succeeded before the judge. The Fattal trustees now appeal.

In Johnson, the claimant knew all along that he had a separate personal claim against the solicitors. In this case, however, it is said that at the time of the original proceedings the appellants did not know the material facts. The relevant knowledge was that there had been a transaction which, if the parties had considered their legal rights, they would have realised gave them a cause of action. They could have refused their consent and enforced their pre-emption right if they had considered their rights under the JVA and if (which appears not to have been the case) they had wanted to pursue it. But the true position was that the transaction had not taken place in the way that they had understood. The Fattals say that if they had had the true information they would have acted differently. It is not suggested that they could have discovered this new information at the time of the 2003 proceedings. This appeal is thus not concerned with the question of the enquiries that a person should make in order to discover whether or not he has a claim.

However, the New Claim raises the question whether there is any material distinction between the transaction which the Fattal trustees contend now gives them a cause of action and the transaction to which the Fattals consented in 1998. On abuse of process, the judge held that the point came down to one of the identity of the purchaser and that the involvement of Niazi was "a relatively unimportant fact and really none of his business, given that the Sharet trust was to be the ultimate transferee.” Robert seeks to uphold the judgment of the judge. He also contends that the Fattals waived their right to bring the New Claim by giving their consent in 1998.

As formulated by Robert in his respondent’s notice, the issue on waiver is whether the Fattals have waived by election any pre-emption right under clause 6 in respect of the sale to Niazi. This is another way of asking whether there can be any substance in WF’s point that the discovery of the sale to Niazi made some material difference to his case. As the Judge decided to strike out the claim on the grounds of abuse of process, he did not deal with the waiver issue. It is therefore appropriate to deal first with the appeal against his decision to strike out, and only then, if necessary, to turn to the waiver issue.

A decision by a trial judge that abuse of process did or did not exist is one of evaluation and balancing of the relevant factors. Accordingly, on an appeal this court will hold that the decision was in error only if some relevant consideration was left out of account, or some irrelevant consideration was taken into account, or if the decision was clearly wrong (see Stuart v Goldberg Linde).

In a careful judgment, the judge reasoned that the Fattals could have asserted their pre-emption rights in the 2003 Part 8 proceedings because they were aware that there had been a sale of Interlands’ share to the Sharet trust. They had also questioned the Sharet trust’s right to vote and sought relief that the Fattal trustees should in connection with the sale of the Property ensure that clauses 5 to 7 of the JVA should be enforced. The judge pointed out that the question of the entitlement of the Sharet trust was clearly crucial to the balance of power within the JVA. In his judgment, the decision of the Vice-Chancellor was a reason why any claim to enforce the pre-emption right should have been brought at that stage. He dismissed the argument that the New Claim had been pleaded in accordance with the directions of the court. It was reasonable for Robert to see how the claim was pleaded before making his application to strike out the New Claim. The judge rejected an argument that the conduct of Robert in concealing the truth about the sale of Interlands’ interest from the court ought to preclude his reliance on abuse of process. Robert had been sufficiently penalised already by an order for indemnity costs and in any event he represented the other beneficiaries of the Sharet Trust, including minor and unborn beneficiaries, who could not possibly be associated with his personal misconduct. The judge considered that it was reasonable for the respondents to wait until the New Claim had been formulated before applying to strike it out on the basis of abuse of process. Robert was not estopped from raising the question of abuse of process.

The judge also held that once WF had had his conversation with Doreen he had all the information that he needed in order to raise the question whether the pre-emption right under clause 6 of the JVA had been triggered. It was unnecessary for this purpose for him to know the identity of the purchaser. The judge rejected a technical argument that the pleading in the 2003 action was accurate because the Fattal trusts would only acquire a beneficial interest in the property of the Sharet trusts once they had exercised their pre-emption right. The judge held that the crucial point was that WF had known that the sale had taken place, a point to which he returned several times in his judgment. WF could not rely on his own ignorance of the terms of the JVA and the addendum. Accordingly by the time of the 2003 Part 8 proceedings if not earlier, he knew, or must be taken to have known, the circumstances that raised fairly and squarely the question of the Sharet trust’s entitlement to participate in the joint venture. The interposition of Niazi as purchaser and settlor of the Sharet trust was not something "which the Fattals could plausibly say made all the difference". The judge therefore concluded that there was an abuse of process and that the New Claim should be struck out. It was unfair to the Sharet Trust for the claim to continue. In his judgment, the case afforded a good example of the beneficent effect of the rule.

Mr David Chivers QC, for the appellants, submits that the New Claim could not have been brought in the 2003 Part 8 proceedings because that would have been a claim which the Fattal trustees did not know they had. The judge wrongly approved of the timing of Robert’s abuse application. Robert had only made that application after WF had revealed in his witness statement of September 2007 that he had been given incorrect information about the sale to the Sharet trust. The award of indemnity costs against Robert on the Sharet sale issue did not compensate the Fattals for the time and trouble of litigating the Sharet sale issue for no apparent purpose.

Mr Alan Steinfeld QC, for Robert, seeks to uphold the decision of the judge. He attacks the motive of the Fattals in this litigation: they are, he submits, motivated by a desire to thwart the sale of the Property. They ought to have challenged the 1998 transfer in 2003 as the effect of breach of the pre-emption right at that time was relevant to the question of entitlement to voting rights under the JVA, which was material to the issue heard by the Vice-Chancellor. There is no reason why the Fattals could not have begun their proceedings in 2003 since they knew that there had been a sale as long ago as 1998 and it did not matter who the sale was to.

While the power to strike out for abuse of process is an important and salutary power that the court should not hesitate to use in an appropriate case, in this case, in our judgment, the New Claim should not have been struck out. The Fattals say in effect: “we were prepared to consent to the 1998 transfer on the basis of the information given to us but now that we have fuller information we see that there was a materially different transaction.” As we have previously stated, this is not a case where prior to 2006 the Fattals either knew or could reasonably have found out the information which they contend was material to their decision to make a claim; on the contrary the judge found that the information which they contend was material, namely the interposition of Niazi, was concealed from them by Robert. The matter can be tested in this way: if they had brought proceedings based on the facts that they knew at the time of the 1998 transfer, the proceedings would have been struck out as disclosing no cause of action because they had consented to the 1998 transfer. As Mr Steinfeld submits, it would have been no answer for the Fattals to say that they overlooked their rights under clause 6 of the JVA. In our judgment, a party cannot be criticised for not pleading something that would have been struck out, and so it cannot be an abuse of process for a party not to enforce his rights until he has the information that will prevent his case from being struck out.

Accordingly, the New Claim should not have been struck out as an abuse of process on the basis that it should have been raised in the 2003 Part 8 proceedings. We recognise that, when WF’s evidence that the materiality of the information provided by Niazi is tested, the court may find that it was not material after all. It may find that the whole claim is opportunistically brought to prevent further steps being taken to effect the sale of the Property, to which the Fattal trusts are opposed (a motive which Mr Chivers disputes). However that conclusion would not have been open to a judge on an interim application without making findings of disputed fact and it would be wrong to turn an abuse of process application into the full trial of an issue as that would create the undesirable risk of costly satellite litigation.

Mrs Elspeth Talbot-Rice QC, following Mr Steinfeld, submitted (without citing further authority) that we could disregard WF’s evidence about the importance of the sale to Niazi on the grounds that materiality is to be assessed objectively. There is clearly an issue as to whether the Fattals gave a fully informed consent to the 1998 transfer, and materiality is relevant to that. Materiality, however, involves an assessment of what needed to be communicated to the Fattals for the purposes of this particular transaction in the light of all the relevant facts. It is clear that they were not informed about every aspect of the transaction: in particular, they were not told that the share had already been the subject of a sale to Niazi, which breached their right to receive notice under clause 6 of the JVA. That information must prima facie have been material since the parties had agreed in the JVA that they would give each other prior notice of an intention to carry out such a transaction. Furthermore, information about that sale was subsequently concealed from the Fattal trustees by Robert and others. In all the circumstances, we do not consider that the question whether the Fattals were given sufficient information can be resolved summarily on this application.

A golden thread running through the judge’s judgment is that the identity of the purchaser of Interlands’ share was not a material matter. For all the reasons given above, that approach was erroneous, at least at an interlocutory stage, before all the evidence relating to that issue had been given and considered. That means that the judge’s decision on this point cannot stand. This court must substitute its own conclusion on the abuse of process application.

Our conclusion that the New Claim should not be struck out as an abuse of process is supported by the following further matters:

For the reasons given above, we allow the appeal against the judge’s order striking out the New Claim.

In the light of the conclusions reached above, it is unnecessary to deal with the appellants’ submission that the New Claim cannot be an abuse of process because Rysaffe was not a party to the 2003 Part 8 proceedings. Likewise we need not deal with the submissions of Mr Chivers that WF did not represent the trusts or that Walbrook could not delegate its discretion as a trustee of the Fattal trusts to him.

As we have concluded that the judge ought not have struck out the New Claim, it is necessary to consider Robert’s alternative argument, namely that the Fattal trustees have waived any pre-emption rights they might have had under clause 6 of the JVA, arising out of the sale to Niazi. The waiver argument can be shortly dealt with, as the reasons that have caused us to reject Robert’s application to strike out the New Claim are, in essence, the same as those which lead us to conclude that Robert’s waiver argument must fail, at least at this interlocutory stage.

The basis for the waiver argument is that, by his letter of 10 July 1998, WF gave his “informed” consent under clause 12 of the JVA to the transfer of the share held by Interlands to the Sharet trust, and that, by giving such consent, WF, again on behalf of the Fattal trustees, waived the right to enforce the right of pre-emption they had under clause 6 of the JVA in respect of those shares as a result of Interlands wishing to sell.

As Lord Diplock said in Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] 1 AC 850, 852, “[w]aiver” is a word sometimes used loosely to describe a number of different legal grounds on which a person may be debarred from asserting a substantive right … or from raising a particular defence to a claim …”. Accordingly, it is important to start any analysis by explaining that Robert’s case rests on election, not on estoppel. As recently stated by Rix LJ in Kosmar Villa Holidays plc v Trustees of Syndicate 1243 [2008] EWCA Civ, at [38], “election is the exercise of a right to choose between inconsistent remedies” and “generally requires knowledge of all the facts giving rise to the choice on the part of the party electing”.

Without strictly deciding the point (as it is unnecessary to do so at this stage), it seems to us to be very hard to argue against the contention that, if they had given informed consent to a transfer of Interlands’ share to the Sharet trust under clause 12 of the JVA, the Fattal trustees would have waived their right of pre-emption which had arisen under clause 6 of the JVA as a result of Interlands’ desire to sell that share. Indeed, we did not understand Mr Chivers to argue the contrary.

However, the obstacle to the waiver argument, at least at an interlocutory stage, arises from the involvement of Niazi as already described. In that connection, there are two problems, or possibly two ways of characterising the problem, facing the contention that there has been an election. First, there is the judge’s finding, epitomised by the declaration he made on 29 November 2007, that there had been a sale of Interlands’ share to Niazi in May 1998. The existence of that sale was not known to WF at the time of his letter of 10 July 1998. Accordingly, after all the evidence is considered at a trial, it may transpire that there were two sales, the first by Interlands to Niazi, and the second by Niazi to the Sharet Trust, neither (or only one) of which was consented to by the 10 July 1998 letter. Thus, the letter of 7 July (to which the 10 July letter was a reply) did not seek consent to a sale to Niazi. Secondly, even if consideration of all the evidence leads to the conclusion that there was a single transaction, or that the arrangements should be treated as a single sale transaction for the purpose of clauses 6 and 12 of the JVA, any consent given by that letter might be held to be ineffective because WF was not given full enough information about the proposed sale at the time of the letter.

We should emphasise that we are not expressing any conclusions on the correctness of these arguments. At [55] of his judgment, the judge said that what Doreen told WF, namely that “there had been a sale by Interlands of its share [and] that she and Albert wanted to put it into a trust they had set up for their children, called the Sharet Trust”, was “all that [WF] needed to know in order to raise the question whether the rights in clause 6 of the JVA had been triggered”. That view could turn out to be right, after all the facts have been examined at a full trial; in that event, subject to the other argument which the Fattal trustees have raised, the waiver argument would appear to us, as at present advised, to be strong. However, in the light of the involvement of Niazi, we consider that it would be wrong, indeed impossible, to conclude, on a summary basis, that the waiver argument must succeed.

As implied in the preceding paragraph, a further reason was advanced as to why the waiver argument should not succeed. Mr Chivers contended that WF had no authority to give the consent, which he gave in the letter of 10 July 1998, on behalf of the Fattal trusts. We do not propose to deal with that argument at this stage, given that we have concluded that the waiver argument should go to trial. We did not understand Mr Chivers to suggest that the point was so clear that it should dispose of the waiver argument at this, interlocutory, stage. Had he done so, we would have rejected such a suggestion: the question of authority is one that should go to trial also.

The Fattals appeal against part of the costs order made by the judge on 21 December 2007 in relation to the Sharet sale issue.

The judge ordered the non-Fattal defendants to pay the Fattals’ costs of the issue on the indemnity basis, stating that they had attempted to conceal the true position from the court in the hope that the Fattals would not be successful in discharging the burden of proof: “that was an unreasonable way in which to conduct the litigation and this was an issue which should not have been contested” (judgment of 21 December 2007, para 15). He rejected a submission that a hostile costs order should be made against the Walbrook parties, stating that the Part 8 claim had been properly brought by them on behalf of all the trusts, it had been plainly appropriate for them to be represented at the hearing, and they had taken an entirely neutral position at the hearing. He held finally that the Walbrook parties were to bear 20% of their own costs personally, reflecting various criticisms of their conduct, but that they were entitled to recover the balance of 80% by way of indemnity from the four sets of trusts equally (i.e. 25% of the balance from each of the Sofaer, Delta and Sharet Trusts, and 12.5% from each of the two Fattal trusts). It is that final part of the order which is challenged on the appeal.

On that issue the judge took CPR 48.4 as his starting-point. The rule applies, by para (1), where a person is or has been a party to any proceedings in the capacity of trustee. Para (2) provides that “[t]he general rule is that he is entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate”. By para (3), where he is entitled to be paid any of those costs out of the fund or estate, the costs will be assessed on the indemnity basis. The judge then referred to the guidance in para 50A of the Part 48 Practice Direction and went on to consider the issues relevant to the disallowance of part of the Walbrook costs. He concluded, at para 33:

“Taking all of the matters into account, what I propose to do is to disallow 20 per cent of Walbrook’s costs with the result that they will only be entitled to an indemnity for 80 per cent of their costs. However, that 80 per cent, it seems to me, must now be regarded as having been properly and reasonably incurred by them and, as a matter of general principle, the burden of it should be borne by all of the relevant trusts pro rata. I cannot see any basis for putting the burden upon any one trust rather than any of the others.”

In a letter to the judge after delivery of his costs judgment but before the order was drawn up, counsel then acting for the Fattals drew attention to the submission (which had been made in the skeleton argument and orally at the hearing) that no part of the Walbrook costs should fall on the Fattals or their trusts, and suggested that no reasons had been given for rejecting that submission. In reply, the judge referred to para 33 of his judgment as showing that he did direct his mind to the question and that he saw no reason to place the ultimate burden of Walbrook’s allowable costs upon the non-Fattal trusts in exoneration of the Fattal trusts: he took the view that the trial of the preliminary issue had been properly brought before the court by Walbrook and that it was a matter which needed to be determined in the interests of all the trusts and all the beneficiaries, and that Walbrook’s proper costs should therefore be borne by all the trusts pro rata and not by the unsuccessful party.

The case advanced by Mr Chivers is that, despite what was said in the reply to counsel’s letter, the judge failed to ask himself whether it was appropriate for any part of the Walbrook costs to fall on the Fattal trusts. Had he done so, he could not reasonably have concluded that it was. The findings that led to the award of indemnity costs to the Fattals against the non-Fattal defendants ought to have been carried through in relation to the Walbrook costs, so that the recoverable part of those costs fell entirely on the non-Fattal defendants or their trusts. The Fattal trusts should not be required to bear any part of the costs.

Mr Chivers also relied on an alleged inconsistency in approach as between the December 2007 order and the costs order made by the judge on 28 July 2008 following the strike-out of the New Claim on the grounds of abuse of process. There is a separate application by the Fattals for permission to appeal against the July 2008 costs order, but that application falls away by reason of our decision on the substantive issues of abuse of process and waiver issues. It remains relevant only in so far as it forms part of the argument in respect of the December 2007 order. The effect of the July 2008 order, as regards costs incurred from 21 December 2007 when the New Claim was directed, was that (1) the Fattal parties were to pay the costs of the non-Fattal parties on the standard basis, (2) the Fattal parties were also to pay the costs of the Walbrook parties, again on the standard basis, and (3) any excess costs of the Walbrook parties (i.e. the difference between standard and indemnity costs) were to be paid by the Fattal trusts. Thus, so far as material, the entirety of the Walbrook costs was ordered to be paid by the unsuccessful Fattal parties or their trusts, and no part of those costs fell on the successful non-Fattal parties or their trusts. Mr Chivers submitted that this was the correct approach and that the judge acted inconsistently in relation to the December 2007 order by requiring the Fattal trusts to bear part of the Walbrook costs notwithstanding that the Fattals had been wholly successful on the relevant issue.

We are not attracted by the argument based on inconsistency between the two orders. As submitted by Mrs Talbot-Rice, there were material differences between the two situations, not least because in the Fattals’ particulars of claim in the later part of the proceedings the Walbrook parties faced hostile allegations (which, as the judge held, can only have been made against them in their capacity as trustees of the Fattal trusts), as a result of which they sought an inter partes costs order against the Fattal parties, whereas in the earlier proceedings they did not face hostile allegations and did not seek a costs order beyond an indemnity from the trusts. In any event, the December 2007 order should in our view be assessed by reference to the position at the time it was made, not by reference to later orders.

In the light of the judge’s reply to the letter from counsel, and the terms of para 33 of his judgment, it cannot be said that he failed to ask himself whether it was appropriate for any part of the Walbrook costs to fall on the Fattal trusts. He did consider the question but, as he put it in the judgment, could not see any basis for putting the burden upon any one trust rather than any of the others. On that particular aspect of his reasoning, however, we respectfully disagree with him. There was, as it seems to us, a cogent basis for putting the burden on the non-Fattal trusts alone. The considerations that led to the award of indemnity costs to the Fattals against the non-Fattal defendants told equally strongly in favour of an order that the recoverable Walbrook costs be paid by the non-Fattal trusts and not by the Fattal trusts (or an order with the equivalent effect of relieving the Fattal trusts of any of the burden). It is true that the Walbrook parties acted throughout as trustees of all the trusts, brought the Part 8 claim, adopted a neutral position on the Sharet sale issue, and did not themselves seek an inter partes costs order against the non-Fattal defendants in relation to that issue. But their participation in the hearing of the issue was plainly appropriate, as the judge found; and the reason why they had to incur the costs of participation was that the non-Fattal defendants conducted the litigation unreasonably and contested the issue when they should not have done so. In our opinion that would have justified an order that the non-Fattal defendants pay the recoverable costs of the Walbrook parties notwithstanding that this was not hostile litigation in relation to them. But in any event, in so far as the Walbrook parties were entitled to recover their costs from the trusts, it justified an order limiting the indemnity to the non-Fattal trusts to the exclusion of the Fattal trusts. Neither the Fattals nor their trusts ought to be required to bear any part of the costs occasioned by the conduct of the non-Fattal defendants in contesting the issue.

We have firmly in mind that the judge’s order was made in the exercise of a wide discretion and, as Mrs Talbot-Rice properly emphasised to us, costs orders are very rarely disturbed. For the reasons given, however, we have come to the conclusion that, in finding no basis for excluding the Fattal trusts from the burden of the Walbrook costs when there in fact existed a cogent basis for such a result, the judge left out of account a highly material consideration. In those circumstances we are entitled to reassess his order and to consider for ourselves how the discretion should be exercised.

Taking everything into account, we consider that the appropriate order would be one that entitled the Walbrook parties to recover the 80% balance of their costs by way of indemnity from the non-Fattal trusts equally (i.e. one-third of the balance from each of the Sofaer, Delta and Sharet Trusts, and none from the Fattal trusts). On that basis we will allow the Fattals’ costs appeal and will vary the judge’s order accordingly.

For the reasons given above we allow the abuse of process appeal against the judge’s order of 7 May 2008 and the costs appeal against the judge’s order of 21 December 2007, and dismiss the respondent’s notice and the application for permission to appeal the judge’s costs order of 28 July 2008.

The effect of our order is that the New Claim is extant and must be resolved, but no one looking at the complex web of litigation between the parties could avoid the conclusion that the parties have lost sight of the original objective of the JVA which was to manage their investment in the Property in a spirit of mutual trust and cooperation. We strongly urge the parties to focus on that objective and on resolving their differences, and not to open up the conflict between them in litigation on yet another front.