Bracken Partners Ltd v Gutteridge & Ors

The Fourth Defendant, Eye Group Limited (“EGL”), was a private company incorporated in England and Wales, whose business was the exploitation of commercial rights for sports, principally what are referred to as secondary and tertiary sports, such as ice hockey and squash. EGL is now in liquidation, having been compulsorily wound up by the Court on the 27th November 2002.

The First Defendant, Mr Graham Martin Gutteridge (“Mr Gutteridge”), was the holder of 62% of the issued share capital of EGL, and at all material times was the Executive Chairman of EGL.

The Second Defendant, Ms Sariah Smalley (“Ms Smalley”), is Mr Gutteridge’s wife. She was neither an officer nor an employee of EGL.

The Third Defendant, GMG Management Limited (“GMG”), is a company incorporated in England and Wales of which Mr Gutteridge is the sole shareholder and director. Ms Smalley is the company secretary.

The Claimant, Bracken Partners Limited (“Bracken”), is a venture capital company. Bracken invested £250,000 (about 3% of the issued equity) in acquiring 500,000 ordinary shares of EGL in a private placing on the 26th September 2000. Bracken was one of a number of substantial private investors in EGL, and was responsible for bringing in a number of other investors, who subscribed an additional £1 million. The total raised in the private placing was about £2 million.

Non-League Media PLC (“NLM”) is a company whose principal business is the publication of a newspaper, magazine and internet website and directory relating to non-league football. NLM has been in an administration since the 25th June 2002. Until his removal by the directors of NLM, which took place after these proceedings had been commenced, Mr Gutteridge was Chairman of NLM.

There are 2 other companies with which Mr Gutteridge was associated which should be mentioned. Fablon Investments Limited (“Fablon”) is a company registered in Gibraltar and beneficially owned by Mr Gutteridge. Newcastle Jesters Limited (“Newcastle Jesters”), a subsidiary of Fablon, runs an ice hockey team of that name.

As originally constituted, the proceedings were derivative proceedings, brought by Bracken on behalf of all of the shareholders of EGL, apart from Mr Gutteridge, to recover EGL’s assets and monies which, it is alleged, had been lost as a result of breaches by Mr Gutteridge of his fiduciary and other duties to EGL (see Foss v. Harbottle (1843) 2 Hare 461).

At the commencement of the hearing, I gave permission for EGL to be joined as a Claimant in the proceedings, and to be removed as a Defendant. EGL had previously been a Defendant simply for the purpose of ensuring that it was bound by any judgment that was given in the derivative proceedings. The application to join EGL as a Claimant was supported by a Witness Statement by Mr Robert Campbell dated the 10th March 2003, to which the consent of EGL’s Liquidator was exhibited.

The application for permission to join EGL as a Claimant was not resisted by Mr Gutteridge or by Mr Philip Kremen, who appeared on behalf Ms Smalley. However, Mr Kremen took the point that EGL was not a party to the application for summary judgment, and that I should, therefore, not treat it as it were a party to the application. Instead, I should treat the application solely as an application by EGL in the derivative proceedings.

Mr Robert Miles QC, who appeared on behalf of Bracken, undertook to issue an amended Application Notice showing EGL as an applicant in the summary judgment application, as well as an amended Claim Form and an amended Particulars of Claim.

In my judgment, Mr Kremen’s objection to me dealing with the application as if EGL was a party to it, once I had given permission for EGL to be joined as a Claimant, was without merit. He did not suggest that Ms Smalley would suffer any prejudice if I dealt with the application on that basis. Accordingly, I will consider this application on the basis that it is both brought by Bracken in the derivative proceedings and by EGL in its own right.

The application before me is, principally, for summary judgment under CPR Part 24, alternatively, for an interim payment order under CPR Part 25.6in respect of part of the claim. In particular, the application is for (1) a declaration as to the beneficial ownership of 52, Chatsworth Gardens, London W3 9LW (“the property”), and an order for sale of the property and division of the proceeds of sale and (2) summary judgment, or an interim payment, in respect of certain payments made from EGL to Mr Gutteridge, Ms Smalley and GMG, which are said to have been made, or caused to be made, by Mr Gutteridge in breach of his fiduciary duty.

In relation to the application for summary judgment reliance is, in particular, placed on a transfer of £272,000 by EGL to GMG on the 25th August 2000, which was used as part of the purchase price of the property, which was then conveyed into Ms Smalley’s name. On this application a declaration is sought that Ms Smalley holds the property in trust for EGL and herself as to 39/40ths in favour of EGL, together with consequential orders.

It is also alleged that, in breach of fiduciary duty, Mr Gutteridge made or caused EGL to make payment of further substantial sums to GMG. Those further sums amounted to £654,789.01, of which at least £358,000 (which includes the sum of £272,000) is said to be immediately repayable by Mr Gutteridge. That sum of £654,789.01 ignores interest and any proprietary claims.

Accordingly, summary judgment is sought for the sum of £358,000, or, if a declaration and order for sale is made in relation to the property, in the sum of £62,342. The latter sum would be £23,658 greater, if credit were not given by the Claimants (which they give, for the purposes of this application only) for that sum, which it is contended by Mr Gutteridge was spent on refurbishment of the property.

As I understand it, neither Mr Gutteridge, Ms Smalley nor GMG dispute the fact that the payments were made for their own personal benefit rather than for any proper purpose of EGL. However, Mr Gutteridge contends that, at trial, there will be found to be sums owing to him or GMG by EGL, NLM,Fablon or Newcastle Jesters. Furthermore, although he does not deny that the monies ought to be repaid to EGL, Mr Gutteridge contends that a settlement agreement entered into after the hearing before Stanley Burton J. is binding and denies that the monies had been misappropriated or that he was in breach of his fiduciary duties to EGL. I shall refer to the settlement agreement below.

It is common ground that on the 25th August 2000 the sum of £272,000 was transferred from NLM to EGL and then to GMG, and that it was used as part of the purchase price of £499,500 for the property. The balance of the purchase price was paid with the assistance of a mortgage from the Woolwich of £220,000 and a contribution of £7,500, which, for the purpose of this application, it is accepted was contributed by Mr Gutteridge and Ms Smalley. That sum of £7,500 accounts for the fact that on this application the claim is limited to 39/40ths of Ms Smalley’s equity in the property. It is accepted that the Woolwich’s mortgage will be a first charge on the proceeds of sale of the property, when and if such an order is made.

It is also common ground that the sum of £272,000 is part of the total of £654,789.01,which it is said that Mr Gutteridge, in breach of fiduciary duty, made or caused EGL to make to GMG. No disclosure was made by Mr Gutteridge of his interest in the payments, contrary to section 317 of the Companies Act 1985 and of Article 8.1 of EGL’s Articles of Association, and Mr Gutteridge, as a fiduciary, is liable to account to EGL in respect of those payments.

Mr Gutteridge denies that the total amount paid over was £654,789.01.However, a firm of accountants, Crouch Chapman, instructed on behalf of Mr Gutteridge, Ms Smalley and GMG, conducted an investigation and arrived at a figure of “presumed personal [payments]” for Mr Gutteridge or GMG of £358,000. Mr Gutteridge admits, both on his own behalf and on behalf of GMG, that neither section 317 of the Companies Act 1985 nor EGL’s Articles of Association were complied with in respect of those payments.

Ms Smalley admits the fact of the payment of the sum of £272,000, and that she gave no consideration or value for that payment.

Ms Smalley’s Defence, which is contained in the same document as that of Mr Gutteridge and GMG, is the same as Mr Gutteridge’s in relation to the sum of £272,000. The Defence was verified by a Statement of Truth, signed by Mr Gutteridge, who stated that he was authorised by Ms Smalley and GMG to sign it on their behalf. There was no application to amend the Defence: instead, in his Skeleton Argument, Mr Kremen said:

“20.

In the presentation of D2’s (Ms Smalley’s) case on the summary judgment application, reliance will not be placed on what is said about the £272,000 (or the purchase of the Property) in the Defence or the w/s of Pamela Bryan.”

The reference in the Skeleton Argument to the Witness Statement of Pamela Bryan was a reference to the Affidavit made by Ms Bryan on the 23rd November 2001 in support of an application by Mr Gutteridge, Ms Smalley and GMG for the discharge of the Freezing Order granted by Mitting J. on the 2nd November 2001. That application was eventually heard by Stanley Burnton J., who gave judgment on the 17th December 2001 dismissing the application. I am happy to acknowledge the assistance that I have derived from Stanley Burnton J.’s judgment, which gives a valuable account of the history of this matter, and of the submissions of the parties.

Presumably, the attempt to disavow Ms Bryan’s evidence was made in an effort to soften the impact of some of the criticisms made by Stanley Burnton J about the case then being put forward by Mr Gutteridge and Ms Smalley about the purchase of the property, and the reason for the property being registered in Ms Smalley’s sole name. I have considered the evidence that was before Stanley Burnton J., together with the new evidence from Ms Smalley that was before me. The material part of Ms Smalley’s new evidence is to be found in Paragraph 35, which is in the following terms:

“It had been intended that the balance of the purchase price was to come from Graham’s sale of shares in independent Telecoms Group plc (“ITG”) and I was aware that he had had to use those shares to enable the floatation (sic) of NLM to take place. As far as I was aware Graham made alternative arrangements to complete the purchase of the Property, but I did not know what those arrangements were. I can only repeat that I did not know and had no reason to suspect that such arrangements were in any way tainted.”

In his judgment Stanley Burnton J. described the reason given for the property being held in Ms Smalley’s name, rather than in the joint names of Mr Gutteridge and Smalley as “unconvincing”. He also described the different accounts given in Ms Bryan’s Affidavit, and in the contemporaneous correspondence, as being neither “understandable” nor “forgiveable”, and said that there were “further aspects of this transaction that arouse concern”.

I have read Ms Bryan’s Affidavit and the contemporaneous correspondence, as well as Ms Smalley’s new evidence. I am bound to say that I respectfully agree with Stanley Burnton J.’s description of the evidence before him, and, in my judgment, Ms Smalley’s new evidence does not advance her case in relation to the application before me.

Although there was, as I have said, no application to amend Ms Smalley’s Defence, Mr Kremen submitted that I should ignore the Defence, and look at what he referred to as “the reality of the situation”. That “reality”, as I understood his submission, was that on the 25th August 2000 the money passed from NLM to EGL to GMG and then to solicitors acting for Ms Smalley. Thus, he submitted, the “reality” was that the money never was EGL’s, which was simply a conduit. In the alternative, he submitted that if the money ever was EGL’s it was impressed with a “Quistclose” trust: see Quistclose Investments Ltd v. Rolls Razor Ltd (in liquidation) [1970] AC 567.

Ms Smalley’s primary case can be stated very simply. She accepts that the money was misappropriated from NLM, and that if NLM were to make a claim against her she would have no defence to that claim. She accepts that, as a matter of law, she was a volunteer when she received the money. She accepts that the money was in EGL’s bank account, although she says that it remained there for only a very brief time (a “scintilla temporis” in Mr Kremen’s phrase). She accepts that the money was misappropriated from EGL’s account, and, thereafter, from GMG’s account, before it arrived in the Solicitors’ account for the purpose of the purchase of the property. She contends that the money remained NLM’s money throughout the various transactions: NLM was the only entity beneficially entitled to it, and EGL was never beneficially entitled to it. Thus, she submits, this claim, whether Bracken’s derivative claim or EGL’s direct claim, and this application, must fail.

It is fundamental to that submission that EGL never acquired any interest in the money, whether as against NLM or against GMG or Ms Smalley. I reject that submission. When the money was misappropriated from NLM’s account a trust arose in favour of NLM in respect of that money. When the money arrived in EGL’s account it became mixed with the monies in that account. We are not here considering a specific asset, such as a bag of coins, but a transfer of funds from one account into another account. Once mixed in EGL’s account, the money, as it is described, became an asset of EGL, no matter how short a time it spent in that account. EGL was under an obligation to account to NLM in respect of that money, as it had no right to it. EGL held the money on trust for NLM.

The same reasoning will apply to the subsequent transfers of the money until it was paid over to the vendor of the property. The vendor took without notice of the misappropriation, and so is under no obligation to account or as trustee. However, as between NLM, EGL, GMG and Ms Smalley, each prior recipient has a better title or claim to the money, and to an account for it, than the subsequent recipient, and each subsequent recipient is required to account to the prior recipient for it.

Mr Kremen submits that EGL is not entitled to trace into the property. The basis upon which that submission is founded is that there was no fiduciary relationship between Ms Smalley and EGL. He relies on certain passages from Snell’sEquity, 30th Edition, Paragraph 13-40, Goff and Jones, The Law of Restitution, 6th Edition, Paragraph 2-031 and Foskett v. McKeown [2001] 1 AC 102. I have already held that when the money was misappropriated from NLM’s account a trust arose in NLM’s favour, and that EGL held the money on trust for NLM while the money was in its account. Even if I were wrong in so concluding, it seems to me that all of the members of the Appellate Committee in Foskett v. McKeownagreed that there was no longer any necessity for there to be a pre-existing fiduciary relationship in order for tracing to be permitted. Lord Millett, with whom Lord Browne-Wilkinson and Lord Hoffmann agreed, said, at page 128G-H:

“Given its nature, there is nothing inherently legal or equitable about the tracing exercise. There is thus no sense in maintaining different rules for tracing at law and in equity. One set of tracing rules is enough … There is certainly no logical justification for allowing any distinction between them to produce capricious results in cases of mixed substitutions by insisting on the existence of a fiduciary relationship as a precondition for applying equity’s tracing rules. The existence of such a relationship may be relevant to the nature of the claim which the plaintiff can maintain, whether personal or proprietary, but that is a different matter.”

Although they dissented in the outcome of the appeal, as I understand their judgments, Lord Steyn and Lord Hope of Craighead did not suggest that it was necessary for there’ to be a fiduciary relationship before it is possible to trace. As Lord Millett says, at page 128D:

“Tracing is thus neither a claim or remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can probably be regarded as representing his property. Tracing is also distinct from claiming. It identifies the traceable proceeds of a claimant’s property. It enables the claimant to substitute the traceable proceeds for the original asset as the subject matter of his claim. But it does not affect or establish his claim. That will depend on a number of factors including the nature of his interest in the original asset. He will normally be able to maintain the same claim to the substituted asset as he could have maintained to the original asset. If he held only a security interest in the original asset, he cannot claim more than a security interest in his proceeds. But his claim may also be exposed to potential defences as a result of intervening transactions.”

There can be no doubt that NLM’s equity takes priority over that of BGL. However, if Ms Smalley has any interest in the property it is a later interest than that of EGL. Consequently, EGL’s interest takes priority over any interest that Ms Smalley may have. As between NLM and EGL, NLM has consented to EGL taking these proceedings in priority to it.

Initially, Mr Gutteridge’s position was that the £272,000 had been a “loan”: see the Defence, Paragraph 18.5. However, he does not suggest that the “loan” was disclosed to or approved by the Board of EGL. Instead, he asserts that a Mr Fiaz Ur Rehman (“Mr Rehman”), the Financial Director of both EGL and NLM, and another director of EGL, Mr Stephen Ireland, were aware of the “loan”. In a Witness Statement dated the 1st November 2001 Mr Rehman admits that he did know that Mr Gutteridge needed £272,000, and that he arranged for the transfers from NLM to EGL and from EGL to GMG. However, in an Affidavit sworn by Mr Jonathan Tickner on behalf of Bracken in December 2001, it is recorded that Mr Ireland denied knowledge of the loan at a NLM Board meeting on the 9th November 2001, and that he continued to deny any such knowledge. It is to be noted that Mr Gutteridge does not suggest that the other directors of EGL were aware of or approved the “loan”.

Furthermore, there is no suggestion that the “loan” was disclosed to the shareholders of EGL, and in the Private Placing Memorandum issued by EGL and dated the 25th September 2000, it is expressly stated that “no outstanding loans or guarantees have been granted or provided by the Company to or for the benefit of any of the Directors”. In fact, that Memorandum records that Mr Gutteridge had loaned £9,139 to EGL.

There are a number of other matters that must be mentioned in relation to the suggestion that the £272,000 was a “loan” to Mr Gutteridge. First, Mr Gutteridge admits that the arrangements were in breach of section 317 of the Companies Act 1985 (Defence, Paragraph 17), and that the “loan” was illegal under section 330 of that Act and is voidable so that he is liable to account to EGL for any gain which he had made directly or indirectly as a result of the “loan”. Secondly, the “loan” was not documented or recorded in writing; there was no security for it; and there was no agreement or arrangement as to the payment of any interest. In contrast, loans to EGL were carefully and formally documented. Thirdly, the contention that the money was a “loan” to Mr Gutteridge is inconsistent with his assertion that he has no beneficial interest in the property. Fourthly, Mr Gutteridge does not suggest that the “loan” was in EGL’s interests, or that there was any proper reason for EGL to make such a “loan” to Mr Gutteridge or Ms Smalley.

In these circumstances, there can, in my judgment, be no doubt that EGL is entitled to a declaration that Ms Smalley holds the property on trust for herself and EGL, and subject to EGL’s proprietary claim: see Re Diplock [1948] Ch 465.

The issue that must next be considered is what interest EGL has in the property. As I have stated above, the Woolwich has a first charge on the property in respect of the mortgage advance made by it to Ms Smalley. The only sum that it has been asserted was contributed by the defendants to the purchase price was £7,500.

However, the source of those funds is very unclear. In her Witness Statement dated the 19th February 2003 Ms Smalley says that she was aware that Mr Gutteridge had made alternative arrangements to provide the monies needed to complete the purchase of the property, but that she did not know what those arrangements were. She accepts that if the Court finds that EGL has a proprietary interest in the property, she cannot resist an order for sale. She asserts that her share of the equity is greater than the 1/40th for which the Claimants contend, although she does not attempt to identify what her share should be.

It would appear from Ms Smalley’s Witness Statement that she claims that expenditure has been incurred on building works at the property and that she has made mortgage repayments to the Woolwich out of her own resources of approximately £30,000.

If payments have been made in respect of the property, whether by way of expenditure on repairs or mortgage repayments, credit may be given for the sums expended, or a proportion of them. In such circumstances, however, it may be necessary to take into account the fact that the party incurring such expenditure has occupied the property, and a notional occupation rent may have to be debited to that party: see Snell’s Equity, 13th Edition, Paragraphs 44-10 and 44-13 and Bernard v. Josephs [1982] 1 Ch 391.

In her Witness Statement Ms Smalley states that when the proceedings were commenced the builder at the property had been paid in the region of £70,000, of which part had been paid in cash and part by cheque. No documentary evidence is adduced to support the fact of such payments, whether in the form of cancelled cheques, receipts or even bills.

Ms Smalley also states that she paid a further estimated £25,000 in respect of materials and fittings, professional fees and planning application fees. Again, no documentary evidence is adduced to support the fact of such payments.

The one document produced by Ms Smalley is a statement from GS Property Services addressed to “The Owner” of the property, requesting payment of the sum of £50,000, which is said to have been approved by a chartered surveyor on the 7th January 2002 more than a year before Ms Smalley made her Witness Statement, and was then, apparently, still unpaid.

In Exhibit GMG1 to his Affidavit sworn on the 9th November 2001 Mr Gutteridge admits that the sum of £23,658 was paid to him or GMG by EGL, and was spent on the property. In her Witness Statement Ms Smalley says that the monies that went to Mr Gutteridge and were used on building works “may well be” £19,858. She does not attempt to explain the difference between the two figures.

Finally, Ms Smalley produces no evidence of the mortgage repayments that she says have been made to the Woolwich.

In the absence of evidence from Ms Smalley which would enable a reasonably precise calculation to be made of any adjustments that may be necessary as a result of payments made in respect of the property, I have concluded that EGL is entitled to a declaration that it is beneficially entitled to 39/40ths of the property.

In the circumstances, I propose also to order the sale of the property pursuant to the provisions of section 14 of the Trusts of Land and Appointment of Trustees Act 1986. I will hear submissions as to whether I should give directions for the conduct of the sale, and if I should, what those directions should be.

I should mention that in Paragraph 57 of her Witness Statement Ms Smalley says that she seeks to set off against any payment that she may have to make to EGL out of the proceeds of sale of the property, amounts which she says that she has paid to or on behalf of EGL, and in respect of which EGL is indebted to her. She says that her set-off is “over £280,000”.

It will be remembered that EGL is in liquidation. Set-off of claims against an insolvent company is only permitted where there are mutual credits, mutual debits or other mutual dealings between the person asserting the set off and the company: Rule 4.90 of the Insolvency Rules 1986. However, set-off is only available where there is a debtor/creditor relationship each way, and not where one of the claims is in respect of property: see Wood on English and International Set-Off (1989), pages 464-466.

Thus, although Ms Smalley can prove in EGL’s liquidation for any sums that she says are due to her, she will have to do so alongside the other creditors of the company.

In light of the fact that there is to be an order for sale of the property, the Claimants do not seek a money judgment against Mr Gutteridge in the full amount of £358,000, but instead seek a judgment for £62,342. I now turn to consider that claim.

I have mentioned in Paragraphs 15 and 16 above the claim that is made against Mr Gutteridge. In Paragraphs 16-23 and Schedule 1 of the Particulars of Claim it is pleaded that, in breach of fiduciary duty, Mr Gutteridge made or caused EGL to make payments totalling £654,789.01 from funds belonging to EGL to GMG. The Particulars of Claim also pleads that, again in breach of fiduciary duty, Mr Gutteridge caused EGL to provide working capital to Fablon and Newcastle Jesters, which were companies beneficially owned by him to and that he caused EGL to borrow monies NLM in order to fund payments from EGL to himself and his companies, thereby exposing EGL to a liability in respect of interest payments. The claim for summary judgment against Mr Gutteridge is in respect of the payments amounting to £654,789.01.

Of the sum of £654,789.01 there is no dispute about the sum of £272,000, which I have considered above. I have also mentioned, in Paragraph 20 above, that Mr Gutteridge denies that the total sum paid over was £654,789.01, and that accountants instructed on behalf of Mr Gutteridge, Ms Smalley and GMG had arrived at a figure of “presumed personal [payments] for Mr Gutteridge or GMG of £358,000. It is apparent from the accountants’ schedule, and the evidence, that that figure includes payments for school fees, personal credit card bills and the property.

For the purposes of this application, credit is given for the £272,000 together with the further sum of £23,658, to which I have referred in Paragraph 43 above, making a sum to be credited against the £358,000 of £295,658.The outstanding balance of £62,342 is claimed against Mr Gutteridge.

Mr Gutteridge has not served any evidence disputing the claim, or asserting that he has a defence to it. In my judgment, it is clear that the payments were made or caused to be made by Mr Gutteridge in breach of his fiduciary duty to EGL. Even if they were to be treated as loans to Mr Gutteridge or GMG, they would be contrary to section 330 of Companies Act 1985.

I have referred to the mutual dealings provision of the Insolvency Rules 1986 in Paragraph 48 above. It is unlikely that set-off will be available to Mr Gutteridge because “misappropriation of assets is not a dealing”: see Manson v. Smith (liquidator of Thomas Christy Limited)[1997] 2 BCLC 161,at page 164c-d, per Millett LJ.

Compound interest, with yearly rests, on the sum of £62,342 since the 12th July 2001, which is the date of the last misappropriation referred to in the Crouch Chapman report, is sought by the Claimants. There is clearly jurisdiction to make such an order, but I think it would be right to hear submissions as to whether or not I should make such an order in the present case: see Wallersteiner v. Moir (No.2) [19751 QB 373.

Paragraph 9 of the Order made by Stanley Burnton J. required the Defendants to pay the Claimants’ costs of and occasioned by the hearing, which were summarily assessed in the amount of £18,000, but imposed a stay on the payment of such costs pending the hearing of the Claimants’ application for summary judgment. The Order further provided that the parties were then to be at liberty to apply to remove or renew the stay.

In the Claimants’ Skeleton Argument for the hearing of the summary judgment application, a request was made for the stay imposed by Stanley Burnton J. to be lifted. The Application Notice did not include such an application, nor did the draft Order annexed to the Application Notice refer to the removal of the stay.

In my judgment, as they have succeeded in their application for summary judgment, the Claimants are entitled to a removal of stay. However, as such an application was not made in the Application Notice, unless the Defendants consent, a pro-forma Application Notice should be issued for such relief.

As I have made plain earlier in this judgment, Bracken brought these proceedings on its own behalf and on behalf of all the other shareholders in EGL except Mr Gutteridge. The Application Notice also seeks permission for Bracken to continue the claim as a derivative action under CPR 19.9.

If I had not permitted EGL to be joined as a claimant, I would have given permission to Bracken to carry on the proceedings as a derivative action. It is probably unnecessary for me to make such an order now that EGL is a claimant. However, I shall hear submissions as to the proper order to make in these circumstances.

After the hearing before Stanley Burnton J. the parties entered into a Settlement Agreement by Deed dated the 11th April 2002. It was not contended by Mr Kremen, on behalf of Ms Smalley, that the Settlement Agreement was relevant to the issues that I have to decide. Indeed, in Paragraph 52 of her Witness Statement, Ms Smalley says that the Settlement Agreement “did not complete” so that in August 2002 she put the property on the market.

I mention the Settlement Agreement only because in his submissions to me Mr Gutteridge said that he thought the Settlement Agreement was still in force. I do not intend to lengthen this judgment by referring in detail to the Settlement Agreement. It is, I hope, sufficient to say that I have considered its provisions, and I am quite satisfied that the Agreement, which contemplated the sale of the property as a first step to a comprehensive settlement of the various disputes between EGL (or Bracken) and the Defendants, fell at the first hurdle, when the sale of the property did not take place. All of the other provisions were dependent upon that sale.

For the reasons set out in this judgment I propose to make orders in the terms of the draft Order annexed to the Application Notice. However, before doing so, I shall hear submissions from Counsel and Mr Gutteridge as to the precise form of the Order.