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

Many of the proposed amendments are objected to on the ground that they raise claims that are statute barred. Where such an objection is raised, two questions arise. The first is whether the court has jurisdiction to permit the amendment. The second, assuming that jurisdiction exists, is whether as a matter of discretion the court should permit the amendments to be made.

At the previous hearing I set out my approach to the question of amendment where a limitation defence is to be relied on. If I may quote what I said on that occasion:

“The question of limitation is dealt with by CPR 17.4, sub-rule 2 of which provides as follows: “The court may allow an amendment if its effect will be to add or substitute a new claim but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”.

What amounts to a new claim was discussed by the Court of Appeal in Aldi Stores Limited v Holmes Buildings plc [2003] EWCA Civ 1882. A new claim, in summary, is one which relies on a new factual situation as amounting to a cause of action even if the remedy claimed is the same. On the other hand, if there is no new duty and no new breach of duty alleged, there is no new claim merely because additional heads of loss are pleaded.

If there is a new claim I must consider whether it arises out of the same or substantially the same facts as those already alleged. In Goode v Martin [2001] 3 All ER 562 at 566, Mr Justice Colman said,

"Whether one factual basis is substantially the same as another factual basis obviously involves a value judgment but the relevant criteria must clearly have regard to the main purpose for which this qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after the expiration of the limitation period to investigate the facts and obtain evidence of matters which are completely outside the ambit of and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim."

In Welsh Development Agency v Redpath Dorman Long Limited [1994] 1 WLR 1409, the Court of Appeal held that the burden is on the claimant to show that the defendant does not have a reasonably arguable case on limitation. If the defendant has a reasonably arguable case that the claim is statute barred, the appropriate course is to require that claim to be raised in fresh proceedings in which the limitation point can be tried. That was also the conclusion of Mr Justice Colman in Goode v Martin to which I have referred. ”

In Paragon Finance v DB Thakerar [1999] 1 All ER 400 Millett LJ said:

“In my judgment, it is incontrovertible that an amendment to make a new allegation of intentional wrongdoing by pleading fraud, conspiracy to defraud, fraudulent breach of trust or intentional breach of fiduciary duty where previously no intentional wrongdoing has been alleged constitutes the introduction of a new cause of action.”

He added that:

“In the Thakerar case Chadwick J observed that it would be “contrary to common sense” to hold that a claim based on allegations of negligence and incompetence on the part of a solicitor involved substantially the same facts as a claim based on allegations of fraud and dishonesty. I respectfully agree. In all our jurisprudence there is no sharper dividing line than that which separates cases of fraud and dishonesty from cases of negligence and incompetence.”

It follows from this that the introduction of a claim based on dishonesty, where none existed before, is a new claim which does not arise out of the same facts as the previous claim or claims. As noted, CPR 17.4 refers to “the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings”. These words are the subject of authority. In Goode v Martin [2002] 1 WLR 1828 the Court of Appeal (on appeal from Coleman J) considered the meaning of these words. The case was a case of personal injury. The claimant alleged that she had been injured while on a boat; and that the injuries were caused by the fact that the boat was defective. The defence denied that; and gave a different version of how the accident occurred. The claimant (who was by now out of time) wished to amend to allege that even if the defendant was right, she was still entitled to succeed. The Court of Appeal allowed the amendments. Brooke LJ held that by applying the interpretative principle in the Human Rights Act 1998 it was possible to interpret CPR r. 17.4 (2) as if it read:

“the same facts or substantially the same facts as are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.”

What is not entirely clear from the judgment is whether the Court of Appeal were laying down a generally applicable interpretation of the rule or deciding the case on a fact-based application of the Human Rights Act. In the course of his judgment Brooke LJ said:

“I do not consider that the rule, as interpreted by the master and the judge, has any legitimate aim when applied to the facts of the present case. Whether the defendant put forward his version of events (which the claimant now wishes to adopt) before or after the expiry of the primary limitation period ought to make no difference to her ability to adopt it as part of her case and say that if that was indeed what had happened, he had nevertheless been negligent. If she delayed unreasonably in putting forward her amended pleading, the master could have blocked it on those grounds, but he made it clear that he would not have exercised his discretion against her if the rule had permitted him to allow the amendment. Even if the rule had any legitimate aim in the circumstances of this case, the means used by the rule-maker (if we have to interpret the rule in the way favoured by the court below) would not be reasonably proportionate to that aim.” (Emphasis added)

Mrs Talbot-Rice QC submitted that this was a decision applicable only to the particular facts in Goode. She pointed out that this is what Langley J held in Compagnie Noga D’Importation et D’Exportation SA v Australia & New Zealand Banking Group Ltd [2005] EWHC 225 (Comm) (§ 42); and that in Charles Church Developments Ltd v Stent Foundations Ltd [2007] 1 WLR 1203 the contrary view was an agreement between counsel (§ 34) rather than the judge’s decision.

However, the Court of Appeal seems to me to have taken a different view. In Hemmingway v Smith Roddam [2003] EWCA Civ 1342 Waller LJ, having referred to Goode, said:

“The test to be applied is thus, whether, even if a new claim is being made, the new claim arises out of “the same facts already in issue”. The question is whether the factual issues under the old pleading were going to be litigated between the parties; if they were, then the court should take the view that section 35 had it in mind that the parties should be able to rely on a cause of action which substantially arises from those facts.”

This, as it seems to me, is a decision on the interpretation of the rule rather than its application to a specific set of facts. It is couched in general terms, as indeed one would expect of a higher court deciding what a legislative provision means. Mrs Talbot-Rice is, however, entitled to point to the fact that the rule, even in its expanded form is still restricted to cases where the factual issues under the old pleading were going to be litigated between the parties. This is the point that was the principal question in Charles Church. Jackson J posed the question:

“Suppose that there are two defendants to an action. Let the claimant be called C and the two defendants be called D1 and D2. If one of the defendants pleads facts by way of defence to C’s claim, can C adopt those facts as the basis of a new claim against the other defendant after expiry of the limitation period?”

Jackson J answered that question in the affirmative. He gave a number of reasons for his decision; including:

“Section 35(5) of the 1980, CPR r 17.4(2) and the expanded rule merely give the court a discretionary power to allow the pleading of new claims after expiry of the limitation period, if the threshold condition is met. Whether the court will in fact allow such amendments after expiry of the limitation period must depend upon the circumstances of each case. The court can and will protect a defendant against injustice by refusing permission to amend.”

Accordingly, discussion of the ambit of CPR 17.4 in the authorities to which Mr Cran QC referred delimit the scope of the jurisdiction to permit amendments. Unless an amendment falls within the scope of CPR 17.4 the court has no power to permit it. But it does not follow that if an amendment does fall within CPR 17.4 the court must permit it. In my judgment the discretion to allow an amendment after the expiry of a limitation period should not lightly or routinely be exercised in a way that would deprive a defendant of a limitation defence. In Charles Church one of the important considerations that led Jackson J to his ultimate conclusion was that (using his terminology) D2 was on the point of issuing a Part 20 claim against D1 which was in time and would require D1 to investigate those facts pleaded as against him even if no amendment to the Particulars of Claim themselves had been permitted.

Mr Cran submitted that the approach of Jackson J should be widened still further. He said that if a fact had been put in issue in the Sharet Trust claim it counted as a fact in issue in this claim. I reject that approach. As I have said neither Walbrook nor David Dangoor are parties to the Sharet Trust claim. They do not have to investigate any fact pleaded in that claim. Even though the two claims have (now) been ordered to be heard together, they remain separate claims. Facts in issue in the Sharet Trust claim do not have to be litigated “between the parties” to this claim. But even if I am wrong about jurisdiction, the fact that the allegations are made in separate proceedings is a powerful discretionary consideration. Mr Cran also argued that Walbrook’s honesty was put in issue by the claimants’ Reply. I do not agree. The Reply is replete with assertions that the claimants “reserve their rights” to amend their pleading to allege dishonesty. But the reservation of a right to amend is, with respect, meaningless. The claimants had no right to amend their case except with the permission of the court. That is what they are now applying for. Moreover a statement that an allegation of dishonesty might be made in the future is obviously not the same as an allegation of dishonesty made now. In the old language of pleading it is “embarrassing”, because the defendant does not know what to do with such an allegation: Davy v Garrett (1877) 7 Ch D 473, 483. Should he investigate on the basis that an allegation of dishonesty might be made against him in the future? Or can he wait and see whether such an allegation is actually made? Must he give disclosure on that question, even though it is not formally in issue?

Finally, on this point there was no similar “reservation of rights” against David Dangoor or Monopro.

There is one further matter that I need to deal with under the heading of limitation. Although not foreshadowed in the evidence in support of the application to amend, or in Mr Cran’s skeleton argument, he submitted in the course of his reply that limitation difficulties could be overcome by recourse to section 32 of the Limitation Act 1980. That says that:

“(1)

Subject to subsections (3) and (4A) below, where in the case of any action for which a period of limitation is prescribed by this Act, either—

(a)

the action is based upon the fraud of the defendant; or

(b)

any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or

(c)

…;

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.

(2)

For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.”

Thus he said, where section 32 is relied on the limitation period will not have expired until six years after the claimant had discovered the fraud etc. or could with reasonable diligence have discovered it. I do not consider that this is a “get out of jail free” card on the facts of this case. The principle is that permission to amend should not be granted where the defendant has a reasonably arguable limitation defence. In a case in which it is obvious that section 32 will apply so as to postpone the running of time, then I accept that the court must have regard to that. But in a case in which the application of section 32 is itself disputed, in my judgment the right course is to refuse to allow the amendment and to let the question whether section 32 applies be determined in a fresh action. (In some cases section 32 might be ordered to be tried as a preliminary issue, but that was not suggested in this case. In any event there is no time between now and trial for a yet further preliminary issue to be tried.) Had the evidence supporting a claim that section 32 applied been deployed in support of the application, with the result that the defendants had had a chance to answer it, it might have been possible for the court to conclude that reliance on section 32 was unanswerable. But that is not this case. There was no evidence to back reliance on section 32. A belated attempt in the course of the claimants’ reply to produce a selection of documents which had not previously been relied on does nothing to make up this deficiency. Mr Cran also relied on observations made by the Court of Appeal in a judgment given on 8 April 2009. However, that was a judgment given on appeal from Henderson J in the Part 8 claim to which David Dangoor and Monopro are not parties. Moreover the observations of the Court of Appeal go no further than saying that Mr Fattal could not have discovered information which he says is material to his claim. The Court of Appeal said that the materiality of that information could not be decided summarily. If, therefore, I were to hold that section 32 is satisfied, I would be doing exactly what the Court of Appeal said should not be done, and deciding that the information was material.

Mr Cran referred to the much cited observations of Peter Gibson LJ in Cobbold v London Borough of Greenwich [1999] EWCA Civ 2074. He said:

“However, I own to being unhappy with the way the judge exercised his discretion, particularly in relation to the application to amend. It is, of course, important that trial dates, when they are fixed, should be adhered to, but I fear that he may have let that factor dictate his approach to the question of amendment. The overriding objective is that the court should deal with cases justly. That includes, so far as practicable, ensuring that each case is dealt with not only expeditiously but also fairly. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon provided that any prejudice to the other party or parties caused by the amendment can be compensated for in costs, and the public interest in the efficient administration of justice is not significantly harmed. I cannot agree with the judge when he said that there would be no prejudice to Greenwich in not being allowed to make the amendments which they are seeking. There is always prejudice when a party is not allowed to put forward his real case, provided that that is properly arguable.”

It is, however, important to note some of the facts in that case, upon which Peter Gibson LJ relied in reaching his conclusion:

I do not regard Cobbold as giving carte blanche for amendments, particularly late amendments. The editors of the White Book say (§ 17.3.5) that mis-statements of Peter Gibson LJ’s observations have had:

“… the unfortunate effect of lending weight to the erroneous argument that, where there is prejudice to a party seeking an amendment, it should be allowed, when the true position is that the existence and weight of such prejudice is just one [of] the factors to be taken into account.”

In Savings & Investment Bank Ltd v Fincken [2004] 1 WLR 667 Rix LJ commended the pre-CPR decision of the Court of Appeal in Worldwide Corporation Ltd v GPT Ltd (unreported 2 December 1998, 1998 WL 1120764). The constitution consisted of Lord Bingham of Cornhill LCJ and Peter Gibson and Waller LJJ. Waller LJ gave the judgment. Two passages are relevant to the present case. First:

“In the modern era it is more readily recognised that in truth the payment of the costs of an adjournment may well not adequately compensate someone who is desirous of being rid of a piece of litigation which has been hanging over his head for some time, and may not adequately compensate him for being totally (and we are afraid there are no better words for it) “mucked around” at the last moment.”

Second:

“Where a party has had many months to consider how he wants to put his case and where it is not by virtue of some new factor appearing from some disclosure only recently made, why, one asks rhetorically, should he be entitled to cause the trial to be delayed so far as his opponent is concerned and why should he be entitled to cause inconvenience to other litigants? The only answer which can be given and which, Mr Brodie has suggested, applies in the instant case is that without the amendment a serious injustice may be done because the new case is the only way the case can be argued, and it raises the true issue between the parties which justice requires should be decided.

We accept that at the end of the day a balance has to be struck. The court is concerned with doing justice, but justice to all litigants, and thus where a last minute amendment is sought with the consequences indicated, the onus will be a heavy one on the amending party to show the strength of the new case and why justice both to him, his opponent and other litigants, requires him to be able to pursue it.”

To much the same effect in Cook v News Group Newspapers Ltd [2002] EWHC 1070 (QB) Eady J said:

“Where late amendments are extensive and bound to result in costly diversions from the existing issues in the litigation, one is bound to scrutinise such applications with care to see whether they could and should have been made earlier, and whether they can be categorised as “more of the same” (merely adding an unnecessary and rather luxurious pair of braces to a perfectly adequate belt).

…

There can be no doubt that if I allow the amendments to the extent sought the claimants will suffer prejudice not only in the form of added expense but also through having their legal teams diverted to providing correspondingly detailed Replies, addressing further disclosure of documents, and significantly adding to the witness statements. This at a time when they could be expected to be preparing for what is already a heavy set of trials and addressing demands for, and possible contested applications in respect of, further disclosure on existing issues …”

In Fincken itself Rix LJ said (§ 75) that:

“a defendant should not be harassed shortly before trial with fresh allegations of fraud which, if they are to be derived from documentation in [the claimant’s] possession … could well have been put before.”

In the present case the re-amendments rely on no material that was unavailable when the draft Amended Particulars of Claim were placed before the court in January 2010 and served shortly afterwards. In the present case, therefore, all the allegations of dishonesty “could well have been put before”.

I was also referred to the decision of David Richards J in HMRC v Begum [2010] EWHC 1799 (Ch). He decided that the claims in that case were such as to give him jurisdiction to allow the amendments, even though some of the claims were statute barred, because they fell within CPR 17.4. Dealing with questions of discretion he formulated the following principles (§§ 115 to 122):

The fourth of these principles is not just that the claim must be fully pleaded: it is that the explanation of the case must be clear so that the defendants know the case they have to meet. Particulars of Claim which are overburdened with excessive detail and convoluted rolled-up pleas do not serve this fundamental purpose of a pleading.

It is common ground that an amendment should not be allowed unless the claim, as amended, has a real prospect of success. It would obviously be pointless to allow an amendment only to have the amended claim dismissed summarily on the ground that it has no real prospect of success. The notes to the White Book state at paragraph 17.3.6:

“Given the purpose of the statement of truth verifying an amendment, a party will not be permitted to raise by amendment an allegation which is not supported by any evidence and is therefore pure speculation or invention.”

The authority cited in support of that note is Clarke v. Marlborough Fine Art (London) Ltd [2002] EWHC 11. In fact, that particular decision did not concern amendments to pleadings at all. It concerned the admissibility of so-called expert evidence. However, an earlier decision in the same case reported at [2002] 1 WLR 1731 did concern amendments to pleadings, but it does not say precisely what is said in the notes to the White Book. Much of the discussion was taken up with the consideration of pleading inconsistent or alternative cases. Patten J. held that it would be wrong to permit an amendment to allow inconsistent cases to be pleaded unless they were clearly pleaded as alternatives. What Patten J. said about the evidential basis for an amendment was:

“It is therefore necessary for me to consider the defendant’s second main ground of opposition to this application which is that the amendment has no proper or sufficient evidential basis and should be refused on that ground. For these purposes Mr. Briggs and Mr. Lyndon-Stanford submit that I should apply the same test as if this were an application for summary judgment under CPR Part 24 or an application to strike out under CPR r.3.4. That seems to be right, but it requires me to be satisfied on the basis of the material before the court that the claim has no real prospect of success.”

Likewise in Walker v Stones [2001] QB 902, 946 Sir Christopher Slade approved the following statement by Stuart-Smith LJ in Taylor v Midland Bank Trust Co Ltd (unreported) 21 July 1999:

“it is not sufficient to look and see whether the pleading technically discloses a cause of action. Particularly in the light of the new Civil Procedure Rules 1998, the court should look to see what will happen at trial. If the case is so weak that it has no reasonable prospect of success, it should be stopped before great expense is incurred”

Accordingly, in considering whether to permit an amendment I am entitled and bound to consider whether the amendment is supported by any evidence, and that the relevant test is whether the amendment has a real prospect of success. However, the test of real prospect of success is a threshold test. Rix LJ said in Fincken:

“Ms Gloster submits that it is enough that these amendments have some prospect of success. That may be a suitable test where an amendment comes at a reasonably early stage of proceedings. After all, if any pleading whether by amendment or not, cannot meet the test of some real prospect of success, it is in danger of being struck out. In my judgment, however, the proper rule or guideline calls for a sliding scale: the later the amendment, the more it may require to commend it.”

In the present case the Fattals have adduced no (or minimal) evidence to support the allegations of dishonesty, apart from a statement of truth verifying the draft re-amended Particulars of Claim. Indeed a draft witness statement of Mr Buzzoni (the solicitor who acted for all parties) exhibited to Mr Rands’ own witness statement in some respects flatly contradicts the pleaded case.

The overriding objective to which Peter Gibson LJ referred in Cobbold includes, so far as practicable dealing with the case in ways that are proportionate to the nature of the case and allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases. In considering the proposed amendments I must also consider these factors: see Christofi v Barclays Bank plc [2000] 1 WLR 937.

In the Thakerar case Millett LJ said:

“An allegation that the defendant 'knew or ought to have known' is not a clear and unequivocal allegation of actual knowledge and will not support a finding of fraud even if the court is satisfied that there was actual knowledge. An allegation that the defendant had actual knowledge of the existence of a fraud perpetrated by others and failed to disclose the fact to the victim is consistent with an inadvertent failure to make disclosure and is not a charge of fraud. It will not support a finding of fraud even if the court is satisfied that the failure to disclose was deliberate and dishonest.”

Lord Millett returned to the theme in Three Rivers District Council v Governor and Company of the Bank of England [2001] 2 All ER 513, 578. Although this was a dissenting speech I do not consider that this part of his speech is invalidated on that account. He said:

“[185] It is important to appreciate that there are two principles in play. The first is a matter of pleading. The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him. If the pleader means dishonestly or fraudulently, it may not be enough to say wilfully or recklessly. Such language is equivocal.

[186] The second principle, which is quite distinct, is that an allegation of fraud or dishonesty must be sufficiently particularised, and that particulars of facts which are consistent with honesty are not sufficient. This is only partly a matter of pleading. It is also a matter of substance. As I have said, the defendant is entitled to know the case he has to meet. But since dishonesty is usually a matter of inference from primary facts, this involves knowing not only that he is alleged to have acted dishonestly, but also the primary facts which will be relied upon at trial to justify the inference. At trial the court will not normally allow proof of primary facts which have not been pleaded, and will not do so in a case of fraud. It is not open to the court to infer dishonesty from facts which have not been pleaded, or from facts which have been pleaded but are consistent with honesty. There must be some fact which tilts the balance and justifies an inference of dishonesty, and this fact must be both pleaded and proved.

…

[189] … If the particulars of dishonesty are insufficient, the defect cannot be cured by an unequivocal allegation of dishonesty.” (Emphasis added)

The points I have emphasised have particular relevance to the present case. The Amended Particulars of Claim pleaded the claims against both Walbrook and David Dangoor without alleging dishonesty. Thus the facts pleaded at that time were consistent with honesty. I must look for some new fact which tilts the balance and which, if proved, would justify an inference of dishonesty. The mere fact that the draft Re-Amended Particulars of Claim contain unequivocal allegations of dishonesty is not enough.

The relevant principles governing applications for summary judgment are as follows:

Since I must consider whether the proposed re-amendments would survive an application for summary judgment I also apply those principles to the proposed re-amendments.

The viability of the re-amended claims against Walbrook depend in part on the correct interpretation of the exoneration clause. The clause is in a standard form: it appears to owe its origin to Prideaux’ conveyancing precedents. So it is very unlikely that anything in the particular background facts of this case will have a bearing on its interpretation. For that reason all the parties agreed that this was a case in which, even in the context of an application for summary judgment, I should grasp the nettle and decide the questions of interpretation that arose.

The first dispute between the parties was how to parse the clause. Mr Cran said that it should be parsed as follows:

“In the execution of these trusts no trustee shall be liable

(1)

for loss to the Trust Fund arising by reason of any improper investment made in good faith;

(2)

for negligence or fraud of any agent employed by the trustee although the employment of such agent was not strictly necessary or expedient;

(3)

[for loss to the Trust Fund arising] by reason of any mistake or omission made in good faith; and

(4)

[for loss to the Trust Fund arising] by reason of any other matter or thing except wilful and individual fraud or dishonesty on the part of the trustee.”

Mr Taube QC, on the other hand, says that it should be parsed as follows:

“In the execution of these trusts no trustee shall be liable” -

(1)

for loss to the Trust Fund arising by reason of any improper investment made in good faith; or

(2)

for the negligence or fraud of an agent employed by a trustee ……, or

(3)

by reason of any mistake or omission by a trustee in good faith; or

(4)

by reason of any other matter or thing

except wilful and individual fraud or dishonesty on the part of the trustee who is sought to be made liable”

The difference between the two methods of presentation is that in Mr Cran’s version the exception for wilful fraud or dishonesty applies only to limb 4; whereas in Mr Taube’s version it applies to the whole clause. This (or an almost identical) clause has been considered in previous cases. In Bogg v Roper Millett LJ quoted the clause and then set it out for the purposes of analysis. His parsing of the clause was the same as Mr Cran’s (i.e. the exception for wilful fraud or dishonesty applied only to limb 4). In Wight v Olswang (1998-99) 1 ITELR 783 Peter Gibson LJ parsed a very similar clause in the same way.

The reason why this dispute is said to matter is that Mr Cran argues that limb (3) of the clause carries with it positive duties. The argument runs thus. One of the key features of a trust is the imposition of duties on trustees, such as a duty to manage the trust property and deal with it in the interests of the beneficiaries. This is a positive obligation, which connotes good faith. To exclude liability for mistakes or omissions made otherwise than in good faith runs counter to the purpose of the trust; and the relationship of trust and confidence that gives rise to the fiduciary relationship. It is contrary to the core positive obligation to deal with trust property in the interests of the beneficiaries. If trustees are able to exclude liability for mistakes or omissions committed other than in good faith the substance of the trust, and the positive obligation of the trustee is removed. The exoneration clause cannot be interpreted in such a way so as to remove liability for the irreducible core obligation to act in good faith. If a trustee cannot bring himself within the “good faith” limb of the clause, then he cannot escape liability.

In the end, I do not consider that this presentational dispute goes anywhere. The clause in the trust instrument is not divided up in the way that either side presented. As Mr Taube said, it must be read as a whole. I also agree with him that there is significance in the fact that the clause is drafted in the negative. It does not say that the trustee will be liable if his actions fall outside one of the first three limbs of the clause. It says he will not be liable if his action falls within one of them. Thus, reading the clause in its natural grammatical sense, one proceeds through each limb. If the trustee’s actions do not fall within limb one, the reader proceeds to limb two. If the trustee’s actions do not fall within the first three limbs, one proceeds to limb four: “any other” matter or thing. The words could hardly be wider. The trustee only falls outside limb four if he is guilty of wilful and individual fraud or dishonesty. That, to my mind, is the natural reading of the clause. Mr Cran said that if the clause were read in that way, then the first three limbs were superfluous; and that it was a poor interpretation which had the result that most of the clause might as well not have been there. There is some force in this point; although the argument from redundancy does not carry a great deal of weight in relation to the more traditionally drafted trust instruments. Moreover, it is relatively common to find in exclusion or force majeure clauses a list of illustrations of the principle, followed by general words to make sure that nothing within the conceptual target has been inadvertently omitted. That, in my judgment, is the technique that the draftsman of this clause has adopted. Mr Cran’s parsing also involves the writing in of qualifications which do not exist in the text. In addition Mr Taube’s interpretation is consistent with authority; and Mr Cran’s is not.

In Armitage v Nurse the clause exonerated a trustee from liability “from any cause whatsoever unless such loss or damage shall be caused by his own actual fraud”. This clause was taken from a precedent book. Millet LJ said that a “more prolix clause to the same effect” (emphasis added) was to be found in a different precedent book. The different precedent book to which he referred contained a clause which is indistinguishable from the clause in the present case. The point here is that Millett LJ regarded them as having the same effect; viz. that:

“No trustee can be made liable for loss or damage to the capital or income of the trust property caused otherwise than by his own actual fraud. “Actual fraud” means what it says. It does not mean “constructive fraud” or “equitable fraud.” The word “actual” is deliberately chosen to exclude them.”

He concluded:

“In my judgment clause 15 exempts the trustee from liability for loss or damage to the trust property no matter how indolent, imprudent, lacking in diligence, negligent or wilful he may have been, so long as he has not acted dishonestly.”

In Walker v Stones [2001] QB 902 the clause in question was indistinguishable from the clause in the present case. Sir Christopher Slade giving the judgment of the Court of Appeal said that a claim against a trustee could only succeed if dishonesty was proved.

In my ruling in January this year the construction of the exoneration clause was one of the points that was argued in relation to a claim that Walbrook should have resigned as trustee. I said:

“But even if I am wrong on that point, in my judgment Walbrook has an unanswerable defence to the claim as pleaded based on the exoneration or exclusion clause in the Fattal settlement. This protects Walbrook against liability except in the case of fraud or dishonesty. Mr Bompas QC argued that in context fraud in this clause simply means intentional wrongdoing since it is contrasted with dishonesty. But the usual meaning of fraud in legal parlance is that it is a form of dishonesty involving deception. In other words, it is a subcategory of dishonesty not a wider concept. There is no reason in the present case to give it any other meaning.”

Mr Taube says that this amounts to an issue estoppel on the meaning of the clause. Whether or not he is right about that, I have not changed my mind.

That leads on to the next question: what is the test for dishonesty in the case of a trustee exoneration clause such as this? I start with Armitage v Nurse. Millett LJ said that:

“By consciously acting beyond their powers (as, for example, by making an investment which they know to be unauthorised) the trustees may deliberately commit a breach of trust; but if they do so in good faith and in the honest belief that they are acting in the interest of the beneficiaries their conduct is not fraudulent. So a deliberate breach of trust is not necessarily fraudulent. … It is the duty of a trustee to manage the trust property and deal with it in the interests of the beneficiaries. If he acts in a way which he does not honestly believe is in their interests then he is acting dishonestly. It does not matter whether he stands or thinks he stands to gain personally from his actions. A trustee who acts with the intention of benefiting persons who are not the objects of the trust is not the less dishonest because he does not intend to benefit himself.”

I take this to mean that in order to establish dishonesty it is necessary to show that a trustee deliberately committed a breach of trust which he did not honestly believe was in the interests of the beneficiaries. In Walker v Stones Rattee J derived three propositions from the judgment of Millett LJ. First the deliberate commission of a breach of trust is not necessarily dishonest. Second, it is only dishonest if the trustee committing it does so “either knowing that it is contrary to the interests of the beneficiaries or being recklessly indifferent whether it is contrary to their interests or not”. In the quoted passage the word “it” must refer back to the deliberate breach of trust referred to in the first proposition. The Court of Appeal did not disagree with either of these propositions. From these two propositions Rattee J derived a third viz.:

“It seems to me impossible to call a trustee’s conduct “dishonest” in any ordinary sense of that word, even if he knew he was acting in breach of the terms of the trust, if he so acted in a genuine (even if misguided) belief that what he was doing was for the benefit of the beneficiaries.”

The Court of Appeal disagreed with the third proposition. Sir Christopher Slade said:

“With respect, however, I find myself unable to agree with the third proposition, if stated without qualification. At least in the case of a solicitor-trustee, a qualification must in my opinion be necessary to take account of the case where the trustee’s so-called “honest belief”, though actually held, is so unreasonable that, by any objective standard, no reasonable solicitor-trustee could have thought that what he did or agreed to do was for the benefit of the beneficiaries. I limit this proposition to the case of a solicitor-trustee, first, because on the facts before us we are concerned only with solicitor-trustees and, secondly, because I accept that the test of honesty may vary from case to case, depending on, among other things, the role and calling of the trustee…”

After all the twists and turns in the legal definition of dishonesty (see Twinsectra Ltd v Yardley [2002] AC 164; Barlow Clowes v Eurotrust International Ltd [2006] 1 WLR 1476 and Abou-Rahmah v Abacha [2006] EWCA Civ 1492), all parties accepted that the law about the interpretation of exoneration clauses was still to be found in Walker v Stones. Although Sir Christopher limited his observations to the case of a solicitor-trustee, I did not understand Mr Taube to argue that a different principle was applicable to a professional trustee. Based on this common ground, therefore, what is required to show dishonesty in the case of a professional trustee is:

At the end of the quoted passage Sir Christopher pointed out that the test of dishonesty may vary from case to case. Where the allegation of dishonesty is based on the trustee preferring his own interests to those of the beneficiaries in circumstances where there is a straight conflict between duty and interest dishonesty may be easier to establish than in a case in which the conflict is between duty and duty; and the trustee has discharged one duty in preference to another. Of course, the trustee will be in breach of trust if he prefers one duty at the expense of another, but it seems to me that it would be harder to characterise that as “dishonest”.

As mentioned the draft Re-Amended Particulars of Claim runs to 148 pages and 259 paragraphs of text. CPR 16.4 says that Particulars of Claim must contain “a concise statement of the facts on which the claimant relies”. For the length of the Particulars of Claim to increase by more than one hundred per cent at this late stage is not a good start. In addition, as the hearing progressed many of the allegations that appeared in that draft were abandoned or reformulated. Mr Tomson produced yet another version of the draft Re-Amended Particulars of Claim on the second day of his submissions in reply, to which Mr Taube and Mrs Talbot-Rice had very little time to respond. I have already said that the claimants filed no (or minimal) evidence in support of the new allegations for which they sought permission to re-amend. Mr Cran attempted to remedy this deficiency by producing for the first time, in the course of his reply, a lever arch file full of selected documents. Again the defendants had no real opportunity to respond to this material.

I will deal with the amendments in the order in which they appear in the draft Re-Amended Particulars of Claim. Some of my decisions on early parts of the draft depend on my decision on later parts. I will need to revisit in the light of this judgment whether early parts that survive independent objection can still legitimately be made if later parts of the draft do not survive objection; and in he light of my conclusions on the summary judgment application. Both Mr Taube and Mrs Talbot-Rice produced helpful tables summarising the various claims against their respective clients. They were invaluable guides to navigation. I reproduce the format of the tables in the Appendix to this judgment as a convenient summary of my conclusions.

Paragraph 6 of the draft Re-Amended Particulars of Claim plead Walbrook’s status as a licensed trust company in the Cayman Islands and paragraph 7 pleads its ultimate ownership. I cannot see the relevance of these allegations. They are embarrassing. I refuse to allow them. Paragraph 8 introduces the “Delta Two Trust”. As will be seen I refuse to allow the Delta Two Trust claim to be advanced, so I refuse to allow these amendments.

Paragraph 13 in the original draft pleads the appointment of directors of BCIL. Mr William Fattal was alleged to have been appointed “to represent the interests of the Fattals”. It alleges that Selim Dangoor transferred his beneficial interest to Interlands. In fact he did not; and even if he did the manner of that transfer is irrelevant to the remaining claims. With the deletion of that sentence, I allow the amendments.

Paragraphs 15, 16 and 17 plead the terms of the JVA and two further supplemental agreements in more detail. The amendments are unobjectionable; and I allow them.

The Re-Amended Particulars of Claim plead (§ 18) that it was the intention of the parties that the JVA should govern the relationship between the parties until Berkeley Court was sold to a third party. The particulars given under this head include a meeting that took place on 6 September 1988 attended by a number of individuals, none of whom included any representative of Walbrook. A pre-contractual meeting of this kind would be inadmissible even if it were a meeting between the parties to the contract. But in this case it was not, because Walbrook was not represented at the meeting. Moreover, the JVA contains an entire agreement clause. The allegation is therefore irrelevant and I refuse to allow it to be pleaded. The remaining particulars all refer to express terms of the JVA. Whether the JVA has the pleaded effect is a matter of legal argument.

The Re-Amended Particulars of Claim go on to allege (§ 19) that until 2003 the Fattals understood that it remained the intention of the parties to the JVA that it should remain in being until the building was sold. What the Fattals’ subjective understanding was is likewise irrelevant; all the more so since they ceased to be party to the JVA in 1989 when each of them assigned his interest to Walbrook. I refuse to allow this to be pleaded.

Paragraph 23 pleads the appointment of Rysaffe and Saffery as additional trustees. The amendments are unobjectionable; and I allow them.

Paragraph 23A was inserted, without announcement, in the version of the draft Re-Amended Particulars of Claim circulated on the last morning of Mr Tomson’s reply. It alleges that after the settlement of “the Fattals’ interests in the Joint Venture” Mr William Fattal remained as a director of BCIL “but instead of representing the Fattals’ interests … he thereafter in that role represented the interests of the beneficiaries of the Fattal Trusts”. How this change came about is not explained. There is no suggestion of any agreement to that effect between Mr William Fattal and his brother; let alone an agreement with Walbrook which, as trustee, might have been expected to be the guardian of the interests of the beneficiaries under the Fattal Trusts. This is a bare assertion made with no particulars. At this late stage in the proceedings, I refuse to allow the amendment.

The amendments to paragraph 24 introduce allegations about the Delta Two trust. As will be seen I refuse to allow the Delta Two Trust claim to be advanced, so I refuse to allow these amendments. Paragraph 25 pleads that the claimants “reserve their right to seek appropriate relief … in these or other proceedings.” A reservation of the so-called right is meaningless. If the claimants wish to re-re-amend they will have to seek permission in the usual way. Moreover, the reservation of a “right” to plead is not a “fact” on which the claimants rely. I refuse to allow the amendment.

Paragraph 26 introduces a claim relating to the apportionment of litigation costs. The underlying claim will be dealt with by the Master on the taking of an account rather than at the forthcoming trial. But otherwise the amendment is unobjectionable; and I allow it.

Paragraphs 27 to 35 of the draft Re-Amended Particulars of Claim introduce a number of allegations about Walbrook’s personnel.

In so far as these allegations are made in order to lay the foundations of a claim that individual officers and employees of Walbrook owed fiduciary duties to the Fattals, the allegations are misconceived. The individuals concerned owed fiduciary duties to Walbrook whose officers and employees they were, not to others: Bath v Standard Land Company Ltd [1911] 1 Ch 618. If the allegations are made for a different purpose that purpose is obscure. I refuse to allow them.

The joint venture was restructured in 1995. I have already described what happened. The Re-Amended Particulars of Claim introduce allegations dealing with the background to the proposed restructuring (§ 35). They are quite unnecessary for the purpose of explaining the nature of the claims made. It would perhaps be unduly harsh to refuse to allow the amendment on that ground alone, but the pleading of unnecessary material is, unfortunately, symptomatic of the amendments as a whole. They detract from an understanding of the nature of the case, rather than promoting it. The amendments to paragraphs 38 and 39 are unobjectionable, and I allow them.

Paragraph 40 alleged that Selim Dangoor’s interest in the joint venture was transferred to Interlands “for the purpose of avoiding inheritance tax”. The pleading alleged that Interlands was a company “connected with” Selim Dangoor. It is proposed to amend that to say that Interlands was Selim Dangoor’s “alter ego”. There is no evidential basis to support this amendment, which is inconsistent with the pleaded purpose of the transfer. The nearest that the claimants come is Henderson J’s observation that Interlands “was under family control and could be relied upon to do Selim Dangoor’s bidding during his lifetime”. (Emphasis added) That is not the same as an alter ego. Henderson J also found that Interlands did not hold its assets as mere nominee for Selim Dangoor, which is a finding that negates a mere alter ego. Moreover, the relevance of the amended allegation is nowhere explained. I refuse to allow the amendment.

Paragraphs 41 to 43 of the draft amplify the allegations about the 2000 restructuring. Mrs Talbot-Rice objected to the allegations that Walbrook took instructions from David Dangoor “as co-ordinator”. Whether these allegations can be proved is a matter of evidence. There is, in my judgment, some evidential foundation for the allegations. I allow these amendments.

The Fattals allege that the JVA survived the reorganisation in 1995. This is a necessary foundation for the claims that Walbrook dishonestly failed to invoke rights of pre-emption under clause 6 of the JVA in relation to the sale of the Interlands interest. The allegations under this head have four strands.

First, a draft of a written agreement (which the draft Re-Amended Particulars of Claim call an “Updated JVA”) was prepared and submitted to the board of BCIL in May 2000. This draft was never discussed and was overtaken by events (§ 48). It is not alleged that any of the parties to the original JVA ever agreed this draft. The only relevance of these allegations, as far as I can see, is as part of the foundation for agreement by conduct pleaded in paragraph 51 and the estoppel pleaded in paragraph 52.

Second, on the true construction of a number of documents; and having regard to the intention of the parties and the understanding of the Fattals, and in the absence of any indication that the parties wished to alter their agreement, the JVA continued to apply “mutatis mutandis” (§ 49). In so far as this plea relies on what was pleaded in paragraphs 18 and 19 of Re-Amended Particulars of Claim I have ruled that the pleas are irrelevant and should not be allowed. Clause 1 of the 1995 assignment is relied on heavily both here and elsewhere; so I should say something about that.

Clause 1 of the 1995 assignment says that it was “supplemental” to the JVA. The claimants argue that this amounts to an express continuation of the JVA. In my judgment this argument is misconceived. Section 58 of the Law of Property Act 1925 says that where a document is expressed to be supplemental to another, the supplemental document is read as if the previous document had been recited in it in full. As Knox J pointed out in Historic Houses Ltd v Cadogan Estates [1993] 2 EGLR 151 the statutory shorthand only creates a recital and not an operative provision. Given that clause 8 of the assignment contained a waiver of clauses in the JVA (which were not set out in full in the 1995 assignment itself) it clearly made sense for the drafter to recite the JVA; or, knowing that there was a statutory shorthand for doing that, to use the statutory shorthand instead. Moreover, plainly the JVA did continue up to the moment of the assignment. That was precisely the reason why the rights of pre-emption needed to be waived. The dispute between the parties is whether the JVA continued after the assignment; and clause 1 says nothing about that. In my judgment the contention that clause 1 of the assignment expressly provided for the continuation of the JVA is without foundation. Mr Cran said in the course of his reply that this was not his submission. I am bound to say that I thought that was how he opened the application; but whether I am right or wrong about that it is the contention that is pleaded (§ 49 (iv)) and for which permission to amend is sought. The pleaded contention is unarguable; and I refuse to allow the amendment.

The third strand is an estoppel (§ 50). It is alleged that the Defendants are estopped from denying that the JVA continued in force. The estoppel is said to arise as a result of:

I refuse to allow the amendment in paragraph 50 either in its original or its reformulated version.

The fourth strand is an allegation that “all the parties agreed” to conduct their affairs on the basis that pending the putting into place of an updated agreement, the JVA would continue to apply (§ 51). A version of this plea appeared in the Amended Particulars of Claim (§ 35). The species of agreement alleged is, I think, an agreement by conduct. 16 PD 7.5 requires the Particulars of Claim to “specify the conduct relied on and state by whom, when and where the acts constituting the conduct were done.” The proposed amendments to this plea seek to introduce a number of additional particulars, all of which could have been pleaded at the time of service of the Amended Particulars of Claim. That in itself is not a reason to refuse to permit the amendment. My conclusions on these proposed amendments are as follows:

Paragraph 52 pleads a further estoppel arising out of the conduct pleaded in paragraph 51. This, too, was reformulated in the course of the hearing and a new draft was circulated on the last morning of Mr Tomson’s reply. The reliance pleaded is that referred to in the reformulated paragraphs 50 (ii) and (iii). The reformulated paragraph 50 (ii) now says:

“(ii)

the reliance of the Claimants and/or the Walbrook Trustees as trustees of the Fattal Trusts at the relevant times) at all material times … that the JVA continued after the 1995 Restructuring which reliance caused [Mr William Fattal] and/or Walbrook as trustee of the Fattal Trusts not to take all reasonable steps to compel or persuade Walbrook as Trustee of the Non-Fattal Trusts and/or Interlands (until May 1998) and/or David Dangoor, and/or the directors of BCIL (in their representative capacities of those beneficially interested in the Joint Venture) to put in place an updated JVA.”

This rolled up plea needs unpacking. First, reliance by Mr William Fattal is irrelevant. It is not he who is said to have the benefit of the estoppel but the trustees. Second the trustee claimants were not on the scene until after the dispute arose. So the plea must be that Walbrook (as trustee of the Fattal Trusts) relied on the conduct; and that in consequence Walbrook (as trustee of the other trusts) is estopped from denying the continued existence of the JVA. In short it boils down to a plea that Walbrook is estopped against itself. This plea is, to say the least, novel. Third, as I have said nobody had the right to “compel” anyone to put an updated JVA in place. Hence the introduction of refraining to take all reasonable steps to “persuade” them to do so. I cannot see that it would be equitable to say that the loss of an opportunity to persuade leads to the conclusion that the person liable to be persuaded is precluded from saying that the persuasion would have failed to produce the desired result. In written submissions made immediately after the hearing (because there had been no previous opportunity to consider the reformulation) Mrs Talbot-Rice said that for this claim to work as a matter of law, the Fattal trustees’ claim would have to be:

I agree with these submissions; and I refuse to allow the amendments.

Paragraph 53 of the draft Re-Amended Particulars of Claim introduces the allegations that the JVA survived the 2000 restructuring. That paragraph pleads the circulation of a draft agreement but pleads expressly that it was never discussed or agreed. The allegation thus goes nowhere. I refuse to allow it. Paragraph 54 is a modified version of a plea that already features in the Amended Particulars of Claim. It seeks to add reliance on a letter of 4 December 2002. I allow this amendment. Paragraph 55 pleads an estoppel. It, too, was reformulated in the course of the hearing. It suffers from the same defects as the previous estoppel, and I refuse to allow the amendment.

The Re-Amended Particulars of Claim plead a plethora of fiduciary duties. An allegation of a fiduciary duty is not a magic wand that turns a bad claim into a good one. In Kelly v Cooper [1993] AC 205, 215 the Privy Council approved the following dictum of Mason J in the High Court of Australia:

“That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.”

Likewise in Solicitors Indemnity Fund v Paul (unreported 11 November 1999) Mummery LJ said:

“The express and implied terms of the agreement define the scope of the fiduciary duties arising from the joint venture created by it: Kelly v Cooper [1993] AC 205 at 213H–215D.”

In Henderson v Merrett Syndicates Ltd [1995] 2 AC 145, 206 Lord Browne-Wilkinson warned:

“The phrase “fiduciary duties” is a dangerous one, giving rise to a mistaken assumption that all fiduciaries owe the same duties in all circumstances. That is not the case. Although, so far as I am aware, every fiduciary is under a duty not to make a profit from his position (unless such profit is authorised), the fiduciary duties owed, for example, by an express trustee are not the same as those owed by an agent. Moreover, and more relevantly, the extent and nature of the fiduciary duties owed in any particular case fall to be determined by reference to any underlying contractual relationship between the parties. Thus, in the case of an agent employed under a contract, the scope of his fiduciary duties is determined by the terms of the underlying contract. Although an agent is, in the absence of contractual provision, in breach of his fiduciary duties if he acts for another who is in competition with his principal, if the contract under which he is acting authorises him so to do, the normal fiduciary duties are modified accordingly: see Kelly v. Cooper [1993] AC 205, and the cases there cited. The existence of a contract does not exclude the co-existence of concurrent fiduciary duties (indeed, the contract may well be their source); but the contract can and does modify the extent and nature of the general duty that would otherwise arise.”

I agree with Mrs Talbot-Rice that it is the wrong approach to label someone a fiduciary and then reach for a “one size fits all” package of supposed fiduciary duties. The contract is the starting point. Mr Cran relied heavily on the fact that the agreement was a joint venture agreement; and referred to authority that showed that fiduciary duties could exist between joint venturers. I do not doubt that they can; the question is whether they do in this case. As the High Court of Australia recently pointed out in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19 (§ 44)

“Describing the arrangements as a “joint venture” does not however have any particular legal consequences. The rights and obligations of the parties remain to be determined by examination of the detail of what they have agreed and done.”

Thus I do not accept Mr Cran’s submission that it is “of the essence of a joint venture that there should be fiduciary duties over and above the contractual duties”. In my judgment there might or there might not be: it all depends on the nature of the joint venture and the express or implied terms of the agreement. Mrs Talbot-Rice QC pointed out that the first thing to notice about the JVA is that under clause 3 save as expressly provided to the contrary all matters are to be decided by a three fourths majority. Thus each of the parties had a vote to cast; and that vote could be cast according to the private interests of the voter. The JVA recognised that there might be differences, or even conflicts, between the parties and provided a mechanism for dealing with them. Likewise clause 5 of the JVA gave each party the right to compel a sale of the whole of the property, even if the other parties objected. This, too, is a case in which the JVA recognises and makes provision for potential conflicts between the parties. The second thing to note about the JVA is the entire agreement clause. This makes it exceptionally difficult to imply terms into it. The third significant feature is the positive contractual obligation contained in clause 13. This imposes a contractual obligation on the parties to use all reasonable commercial endeavours to facilitate promote and carry forward the venture. This makes most of the pleaded fiduciary duties superfluous.

Paragraphs 56 and 57 of the draft Re-Amended Particulars of Claim plead a number of alleged fiduciary duties as between the parties to the JVA. Some of them are absurd: for example the alleged fiduciary duty to comply with their contractual obligations (§ 57 (ii)); and the alleged fiduciary duty to act consistently with the letter and the spirit of the JVA (§ 57 (iii)). Some are inconsistent with the structure of the JVA: for example the alleged duty to communicate to the other parties to the JVA any actual conflicts of interest in which they might find themselves (§ 57 (v)). Some are so vague as to be of no utility: for example the alleged duty to act loyally and in good faith (§ 57 (i)). Loyalty to whom? Some wrongly treat the joint venture as having legal personality: for example the alleged fiduciary duty to act in the best interests of “the Joint Venture” (§ 57 (vi)). Moreover this alleged duty either adds nothing to the contractual obligation in clause 13 of the JVA or seeks to impose additional duties to those created by the contract (in defiance of its entire agreement clause). Others may be real fiduciary duties (for example the duty not to exploit for their own benefit any opportunity acquired by virtue of their position as participants), but there is no allegation of breach. I refuse to allow this amendment.

The draft Re-Amended Particulars of Claim plead that David Dangoor and Monopro had a role as manager of the property separate from his role as co-ordinator (§§ 60, 61). However, they also say that these roles are pleaded “for clarification purposes only”; and that they are not sued in respect of those roles (§ 62). In those circumstances these paragraphs are irrelevant to the issues in the action. I refuse to allow this amendment.

Paragraph 63 pleads the role of the co-ordinator. This paragraph was modified in the course of the hearing. In my judgment there is no foundation for the allegation that David Dangoor owed any duty to keep the directors of BCIL as representatives of the participating parties informed of anything (§ 63 (i)). The reason for the allegation that Mr Dangoor owed this duty is to pave the way for the allegation that he should have informed Mr Fattal (in one capacity or another) that Walbrook was not fulfilling its duties. But I agree with Mrs Talbot-Rice that whatever duties Delta’s nominee had cannot be altered by the substitution of a trustee for an individual beneficial owner (as in the case of the substitution of Walbrook for the Fattals after the date of the JVA) or the substitution of a company (as arguably happened in the case of the substitution of Interlands for Selim Dangoor). Suppose that Mr William Fattal had not assigned his interest under the JVA to Walbrook as trustee of the Fattal Trusts. Could it then be alleged that Mr David Dangoor had a duty to keep Mr Fattal (as director of BCIL) informed? Plainly not. How, then can Mr Fattal’s personal decision to assign his interest to Walbrook unilaterally alter the scope of Mr Dangoor’s duties? Obviously it cannot. In addition in his capacity as director of BCIL what could Mr Fattal have done, even if he had been informed? As a director of BCIL he had no business interfering in the internal affairs of the Fattal trust. The allegation is simply a smokescreen for an allegation that Mr Dangoor should have told Mr Fattal personally. I ruled on and rejected that allegation in January. The allegation that his role included “ensuring that the terms of the JVA were being observed” (which would have effectively turned him into a guarantor of the joint venturers’ obligations) was rightly abandoned. It is now alleged (§ 63 (ii)) that Mr Dangoor was responsible for among other things “the implementation of initiatives”. Quite apart from the hopeless vagueness of this phrase it is impossible to see how a co-ordinator could have compelled the implementation of anything by his principals. It is also alleged (§ 63 (iii)) that Mr Dangoor was responsible for monitoring the operation of the joint venture and the JVA and the observance of the parties’ obligations under it. If this was to have been part of Mr Dangoor’s duties, it must have been an express or implied term of his retainer. No such term is alleged; and the draft Re-Amended Particulars of Claim gives no hint of the origin of this duty. If and in so far as it is said to arise out of the bare reference in the JVA to a “co-ordination fee” it is, in my judgment, an unsustainable contention. Likewise the allegation (§ 63 (iv)) that Mr Dangoor was responsible for the “implementation of … advice” is also unsustainable. Advice given to the principals is just that: advice. It is up to them whether or not to accept the advice. Subject to the deletion of those allegations I allow the amendment.

The draft Re-Amended Particulars of Claim plead extensive fiduciary duties owed by David Dangoor and Monopro to “the participating parties”. As Mrs Talbot-Rice said, as from 1995 the “participating parties” were Walbrook in its various capacities and (arguably) Interlands; and (after the transfer of the Interlands interest to Walbrook as trustee of the Sharet Trust and before the appointment of Rysaffe), Walbrook alone. The Fattals themselves were not participating parties after the assignment of their interests; and neither David Dangoor nor Monopro owed them any duties, fiduciary or otherwise. This must be firmly borne in mind when looking at the allegations of breach of duty. The whole edifice of fiduciary duties is based on the reference in clause 9 (2) of the JVA to the payment by BICIL of a “co-ordinating fee”. It is, in my judgment, a very slender foundation. The alleged fiduciary duties were also recast during the course of the hearing. In particular in my judgment the following pleaded duties are unsustainable:

These duties would have turned Mr Dangoor and/or Monopro into a policeman or enforcer. Moreover these duties are not by their nature fiduciary; rather they are contractual. I can see no foundation for supposing that any of these duties existed. The duty pleaded in paragraph 65 (vii) would also have the effect that Mr Dangoor owed a duty to Walbrook to inform the directors of BCIL of Walbrook’s conflict and the circumstances giving rise to it. As Mrs Talbot-Rice said, this amounts to a duty to Walbrook to blow the whistle on it. It would have the consequence that Walbrook could sue David Dangoor for having failed to expose its own wrongdoing. The proposition only has to be stated to be rejected.

So far as the remaining pleaded duties are concerned, they were owed to Walbrook. In the course of my ruling on the proposed amendments in January 2010 I said:

“It seems to me that unless Mr David Dangoor himself had knowledge of Section 28 of the Trustee Act 1925, which is not alleged, it is not arguable that he would have been in breach of duty if he failed to tell Walbrook something that they already knew.”

Whether or not this ruling gives rise to an issue estoppel, I remain of that view. Thus in the context of the claims of breach of duty made later in the Re-Amended Particulars of Claim I consider that it is unarguable that Mr David Dangoor and/or Monopro owed the duties pleaded in paragraphs 65 (iii) or 65 (vi).

There is one other point I should make at this stage. If (as I think) most of the duties alleged against David Dangoor and Monopro are contractual, then they are governed by a six year limitation period running from the date of the alleged breach. If, on the other hand they are equitable or fiduciary duties, the same six year limitation period will apply, because the court will apply it by analogy to a claim for a dishonest breach of fiduciary duty: Cia de Seguros Imperio v Heath (REBX) Ltd [2001] 1 WLR 112.

Plainly as trustee of the Fattal trusts Walbrook had fiduciary duties to the class of beneficiaries as a whole. Paragraph 71 of the draft Re-Amended Particulars of Claim alleges that:

“Walbrook’s duties as Trustee of the Fattal Trusts are further to be assessed in the light of Mr Cuttiford’s said positions of conflict and of the fact that those further conflicts were unknown to the Fattals.”

What this means, according to Mr Cran, is that the undisclosed conflict of interest imposed on Walbrook “a higher onus to perform his duties to the trust”. No authority was cited in support of this novel proposition. Mr Cran did not, as I understood him, suggest that the undisclosed conflict changed the content of the trustee’s duties. In my judgment either the trustee is performing his duty or he is not. I refuse to allow this amendment.

The Re-Amended Particulars of Claim allege (§ 73) that it was agreed at a meeting in about May 1989 that Walbrook would only make decisions or take action in consultation with the Fattals. Based on that agreement it is alleged that Walbrook had a fiduciary duty to consult the Fattals and a fiduciary duty to furnish them with documents and information. Similar duties are alleged to have arisen out of Walbrook’s position of conflict (since it was the trustee of more than one trust) (§ 76 (ii), (iv) (v)). It is not alleged that the meeting resulted in a collateral contract; and an agreement to consult the Fattals is not reflected in the terms of the trust instrument. In addition a failure to consult is not, of itself, dishonest.

There is a fundamental difficulty with the allegations based on Walbrook’s conflict of interest. Walbrook was an original party to the JVA in two capacities: as trustee of the Delta trust and also as trustee of the Sofaer trust. The Fattals were also parties to that agreement in their personal capacity. They must therefore have known that Walbrook was the trustee of (at least) two trusts. Knowing that to be the case, the Fattals selected Walbrook as trustee of their own trusts. Thus the relevant conflict of interest was not only known to the Fattals; it was created by them. In Bristol and West Building Society v Mothew [1998] Ch 1, 18 Millett LJ said:

“A fiduciary who acts for two principals with potentially conflicting interests without the informed consent of both is in breach of the obligation of undivided loyalty; he puts himself in a position where his duty to one principal may conflict with his duty to the other: see Clark Boyce v. Mouat [1994] 1 A.C. 428 and the cases there cited. This is sometimes described as “the double employment rule.” Breach of the rule automatically constitutes a breach of fiduciary duty. But this is not something of which the society can complain. It knew that the defendant was acting for the purchasers when it instructed him. Indeed, that was the very reason why it chose the defendant to act for it. The potential conflict was of the society’s own making.”

Millett LJ referred to Kelly v Cooper in which Lord Browne-Wilkinson said:

“In a case where a principal instructs as selling agent for his property or goods a person who to his knowledge acts and intends to act for other principals selling property or goods of the same description, the terms to be implied into such agency contract must differ from those to be implied where an agent is not carrying on such general agency business. In the case of estate agents, it is their business to act for numerous principals: where properties are of a similar description, there will be a conflict of interest between the principals each of whom will be concerned to attract potential purchasers to their property rather than that of another. Yet, despite this conflict of interest, estate agents must be free to act for several competing principals otherwise they will be unable to perform their function. Yet it is normally said that it is a breach of an agent's duty to act for competing principals. In the course of acting for each of their principals, estate agents will acquire information confidential to that principal. It cannot be sensibly suggested that an estate agent is contractually bound to disclose to any one of his principals information which is confidential to another of his principals. The position as to confidentiality is even clearer in the case of stockbrokers who cannot be contractually bound to disclose to their private clients inside information disclosed to the brokers in confidence by a company for which they also act. Accordingly in such cases there must be an implied term of the contract with such an agent that he is entitled to act for other principals selling competing properties and to keep confidential the information obtained from each of his principals.

Similar considerations apply to the fiduciary duties of agents.” (Emphasis added)

In my judgment this reasoning applies in the present case. It cannot have been part of Walbrook’s contractual or fiduciary duty to disclose to the Fattals confidential information which they acquired in the execution of different trusts known to the Fattals.

One of the claims in the present proceedings is that Walbrook was in breach of duty in failing to enforce rights of pre-emption in relation to the sale of the Interlands interest. Since the right of pre-emption only applies to sales, it was important to know whether a sale took place. This question was the subject of the preliminary issue decided by Henderson J in the Part 8 claim. He gave judgment on 29 November 2007 and decided that a sale had taken place. He concluded:

“In my judgment the likelihood is, on the balance of probabilities, that Interlands did agree to sell its share in Baker Street Limited, together with its share of the members' accounts, to Niazi, and that Niazi then directed Interlands to complete the sale by transferring the assets in question to the Sharet Trust. The agreement was probably made, or at least finalised, between 12 and 18 May 1998. I do not know what purchase price was agreed, but I am satisfied on the balance of probabilities that a price was agreed, and that it was paid by Niazi to Interlands. I doubt whether Niazi had either the resources or the motivation to make the purchase and settlement on his own initiative, and I find that he was probably put in funds for the purpose, most likely by Albert and Doreen.”

As mentioned, Mr William Fattal’s own evidence is that he was told by Doreen Dangoor in July 1998 that she and her husband had “bought” Selim Dangoor’s interest. Thus by the time he gave his and his brother’s consent to the transfer, he knew that there had been a sale.

In a letter dated 27 January 1999 Mr Taylor (of Walbrook) had written to Mr Buzzoni telling him that Niazi Dangoor had acquired Interlands’ interest in the joint venture and added it to the Sharet Trust, but that he did not know the details of the arrangements between Interlands and Niazi Dangoor to acquire the 25 per cent interest in BSL which he added to the Sharet Trust. This letter is pleaded in paragraph 134 (ii) of the draft Re-Amended Particulars of Claim. Paragraph 134 (iv) pleads that that letter “would have alerted [Mr William Fattal] to the acquisition by Niazi Dangoor of Interlands’ interest”. Paragraph 134 (v) alleges that Mr William Fattal first saw that letter on 20 October 2003.

Thus on the pleaded case:

The draft Re-Amended Particulars of Claim begin by alleging that Walbrook, in its capacity as trustee of the Fattal Trusts “should be deemed to have had [knowledge of the sale by Interlands to Niazi Dangoor]” (§ 82). This is directly contrary to the position that the Fattals have taken in the Sharet Trust claim. In that claim the Fattals plead specifically that Walbrook in its capacity as trustee of the Fattal Trusts did not have the requisite knowledge. This plea is in itself an amended plea. A previous allegation that they did have knowledge in that capacity was deleted in order to avoid an application for summary judgment on the ground that the Fattal trustees consented to the sale. Allegations in the Amended Particulars of Claim that Walbrook had this knowledge as trustees of the Sharet Trust have been deleted in the draft Re-Amended Particulars of Claim. Mrs Talbot-Rice described this, with some justification, as “ducking and weaving”. The draft Re-Amended Particulars of Claim go on to say (§ 84) that:

The allegations of breach are as follows (§ 88):

What turns these breaches into dishonest ones? I invited Mr Cran to explain what additional facts turned the former plea of (simple) breach of trust into a plea of dishonest breach of trust. He did not take up the invitation. The Re-Amended Particulars of Claim plead (§ 88 (vi)):

I cannot see that the second and third of these pleas can support a charge of dishonesty. A failure to apply one’s mind to something is a case of incompetence. The plea that Walbrook failed to apply its mind to the interests of the Fattal Trusts also colours the preceding plea that it deliberately chose to overlook the implications of the sale. Normally, if something is overlooked it is because whoever is doing the overlooking has not noticed whatever is overlooked. A case of deliberate overlooking, while perhaps not a contradiction in terms, is to say the least unusual. But in collocation with the plea that Walbrook failed to apply its mind to the interests of the Fattal Trusts it does not, in my judgment, amount to a charge of dishonesty. The third plea, namely that Walbrook allowed themselves to be influenced by David Dangoor is again consistent with honesty. That then leaves the last plea. This is simply an assertion rather than an allegation of a fact that would tip the balance. Moreover, if the plea were to follow the formulation in Walker v Stones it should have pleaded that no reasonable professional trustee could have held the belief that a failure to take action was in the best interest of the Fattal Trusts. In other words it is the trustee’s state of mind that is relevant not the mere fact of his inactivity.

In addition the information that Walbrook had was information that it acquired in its capacity as trustee of the Sharet Trust. This is not, therefore, a case of a conflict between duty and interest; but a conflict between duty and duty. The Fattals were aware of the existence of the Sharet Trust when they consented to the transfer, because it is referred to in Mr William Fattal’s letter of consent. It may be said that any conflict between Walbrook’s duty as trustee of the Fattal Trusts and Walbrook’s duty as trustee of the Sharet Trust was not one that the Fattals had expressly authorised; and it can certainly be said that that particular conflict did not exist at the time of the creation of the Fattal Trusts, so that the reasoning in Kelly v Cooper may not be directly applicable. However, in the course of his reply Mr Tomson showed me paragraphs 60.32 to 60.35 of Underhill and Hayton on Trusts and Trustees (17^th ed). Paragraph 60.32 points out that a trustee cannot use for his personal benefit information he acquired as trustee. The authors say that the position should be no different if instead he is a trustee for others, because the beneficiaries under that other trust can be in no better position than the trustee personally. On the other hand paragraph 60.34 draws attention to the proposition that, in the absence of a suitable clause in the trust instrument, a trustee who acquires knowledge while acting as trustee of trust A may be in breach of duty as trustee of trust B if he does not use that information for the benefit of trust B. The two paragraphs exhibit some tension between them. But they go to show that the view expressed in paragraph 60.32 is (to put it no higher) a tenable view. For trustees to act on the basis of that view is no evidence of dishonesty.

I add to these considerations that the Re-Amended Particulars of Claim nowhere say what it was that Walbrook should have done; or why Rysaffe (as trustee from July 2003) has not done anything either to enforce clause 6 rights. Rysaffe is, of course, itself a claimant. Mr Tomson said that the answer to this point was that as joint trustee with Walbrook Rysaffe could not act alone. I found this an unconvincing answer: Rysaffe could at the very least have asked the court for directions. I add to that that Mr William Fattal knew that there had been a sale of Selim Dangoor’s interest (although he thought that the sale had been a sale to Albert and Doreen Dangoor). A sale to anyone would have triggered clause 6 of the JVA and yet he did not raise with Walbrook the question of enforcing clause 6. On the contrary he consented to the transfer. In the face of those events, I do not consider that the claim that Walbrook committed a dishonest breach of trust has a real prospect of success.

In addition, the claim is a claim of dishonesty, where no claim of dishonesty existed before. It is therefore a new claim which does not arise out of the facts previously pleaded. The Re-Amended Particulars of Claim do not explain how a limitation defence can be overcome (whether by reliance on section 32 of the Limitation Act 1980 or otherwise). Mr Cran also disclaimed reliance on section 21 (1) (a) of the Limitation Act 1980 (fraudulent breach of trust). The claim therefore falls outside the scope of CPR 17.4, with the consequence that the re-amendment cannot be permitted. In consequence for that reason also I refuse permission to re-amend to bring this claim.

The essence of the claim against David Dangoor and Monopro (Re-Amended Particulars of Claim § 163) is that he failed to ensure that Interlands complied with their obligations under the JVA; and concealed the sale of the Interlands interest from Mr William Fattal. In the first place I do not consider that David Dangoor, in his role as co-ordinator, had any obligation to act as enforcer of the JVA. Second, I do not consider that David Dangoor had any duty to pass information to Mr William Fattal. The relations between Walbrook as trustee of the Fattal Trusts and the beneficiaries under that trust were no concern of his. His duty was to Walbrook; and I do not consider that he can be said to have been in breach of any duty in failing to tell Walbrook what it already knew. I decided precisely that point in my January ruling. There was no appeal, and consequently the point is, in any event, determined against the claimants by issue estoppel.

Even if there had been such a duty, the events alleged to amount to a breach of duty all took place in 1998. The Amended Particulars of Claim made no claim against Mr Dangoor or Monopro arising out of these events, and made no factual allegations about his conduct in relation to the sale of the Interlands interest. So the claim is clearly a new claim which does not arise out of the facts previously pleaded. On the face of it Mr Dangoor and Monopro have a good defence of limitation. The Re-Amended Particulars of Claim do not explain how that defence can be overcome (whether by reliance on section 32 of the Limitation Act 1980 or otherwise). In consequence I refuse permission to re-amend to bring this claim.

The Amended Particulars of Claim referred to the letter of 7 July 1998 (§§ 44 and 45) but, as far as I can see, claimed no remedy arising out of that letter. The Re-Amended Particulars of Claim plead (§ 89) that David Dangoor (wrongly) told Walbrook that it might be necessary to obtain the consent of the other joint venturers to the transfer to the Sharet Trust. (I pause to note that this allegation is hardly consistent with a dishonest plan of concealment). On 7 July Walbrook wrote to the Fattals. For convenience I quote the relevant parts of the letter again:

“Dear William and Elias

Transfer of Ownership in Baker Street

I am writing to seek your approval to transfer the 25% holding in Baker Street Limited previously held by Interlands SA to the Sharet Trust.”

The letter bore Mr Cuttiford’s reference but was signed by a trust officer.

The draft Re-Amended Particulars of Claim say (§§ 92, 94, 97) that the letter was written by Walbrook in its capacity as trustee of the Sharet Trust. The Fattals were not interested in the Sharet Trust. On the basis of what is alleged in the draft Re-Amended Particulars of Claim, therefore, a claim arising out of that letter cannot be a claim for breach of trust. The draft Re-Amended Particulars of Claim allege (§ 97):

“In the premises Walbrook as Sharet Trustee committed the tort of deceit in sending that letter, and have caused the Fattals loss and damage in consequence. Walbrook is sued in its own capacity as tortfeasor in respect of that deceit, notwithstanding that it was acting as Sharet Trustee as well.”

Thus the pleading makes it clear that the claim is a claim in tort; not a claim for breach of trust. It follows, therefore, that in principle it is governed by a six year limitation period.

The alleged deceit is that the letter falsely implied that the only transfer in issue was a transfer proposed to be made to the Sharet Trust (§ 95), whereas Interlands had already sold its share to Niazi Dangoor. So far as this allegation is concerned:

In my judgment, therefore, what the letter actually said was true.

The draft Re-Amended Particulars of Claim go on to plead Mr William Fattal’s telephone call with Doreen Dangoor (§ 98) and allege that what she told him was false. This allegation is followed by the allegation (§ 99) that “[it] is to be inferred” that Walbrook knew that Doreen Dangoor would telephone Mr Fattal and that they also knew that Doreen “would perpetuate the misleading information and non-disclosures for which they had already been responsible”. There is no evidential foundation for this inference which is pure wishful thinking. The inference is the basis for the allegation that “Walbrook shares responsibility for the misleading and incomplete information given to [Mr Fattal] by Doreen Dangoor”. In my judgment this is an embarrassing plea. It does not plead a common design (which might, if established, make Walbrook a joint tortfeasor); and it is inadequate as a fact supporting an inference of dishonesty because it merely alleges knowledge of a fraud by another coupled with a failure to disclose that fraud (see the quotation from Millett LJ in Thakerar in § 62 above).

If there was a tort, it was committed in 1998, with the result that the limitation period has long since expired. Since the Amended Particulars of Claim claimed no remedy arising out of the letter, the claim in deceit is therefore a new claim. Moreover, since it alleges dishonesty it does not arise out of the same facts as previously pleaded. By October 2003 Mr Fattal knew that Niazi Dangoor had been interposed in the transaction. In my judgment Walbrook therefore has at least an arguable defence of limitation; which provides another reason for refusing to allow this amendment.

Running alongside these pleas is a plea of non-disclosure. What is alleged to have been concealed from Mr Fattal was that Interlands had sold its share to Niazi Dangoor and that that sale had triggered rights under clause 6 of the JVA (§ 95). On Mr William Fattal’s own evidence he was told (by Doreen Dangoor) that there had been a sale. So that was not concealed from him. What he was not told was Niazi Dangoor’s role. At this point it is necessary to look at the underlying facts with a degree of realism. The object of the exercise was for Interlands’ interest to end up in the Sharet Trust, which was a trust for Albert and Doreen Dangoor’s family (as Mr Fattal had been told). The money which went to Interlands on the sale of its interest was provided, as Henderson J found, by Albert and Doreen Dangoor. Niazi Dangoor had neither the resources nor the inclination to make the purchase. His role was in tax planning. Although, technically speaking, the sale to Niazi Dangoor triggered clause 6, the underlying substance of the transaction was exactly what Mr Fattal had been told. Henderson J held in his judgment of 7 May 2008 (§ 55) 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.” This judgment was reversed by the Court of Appeal. But what is important for present purposes is that both Henderson J and the Court of Appeal were concentrating on Mr Fattal’s state of mind and what facts were (or might have been) material to him. In this claim, by contrast, it is Walbrook’s state of mind that matters.

Is it plausible that a failure by Walbrook to reveal the tax planning structure was dishonest? In my judgment it is not. I would reach that conclusion without reliance on Henderson J’s conclusion; but his view reinforces that conclusion. If a High Court judge took the view that the identity of Niazi was “none of [Mr Fattal’s] business” how can it plausibly be suggested that not to reveal that information to Mr Fattal was dishonest? In my judgment this claim against Walbrook has no real prospect of success.

The claim against David Dangoor is also a new claim. What is alleged is that he received a copy of the letter in draft (§ 167); knew that it was misleading and that Mr Fattal would be misled by it; knew that Walbrook was in breach of trust and that Walbrook had deceived Mr Fattal (§ 168). It is then alleged that Mr Dangoor knew the “details of the conversation … between [Mr Fattal] and Doreen Dangoor” (§ 169). These allegations are said to lead to the conclusion that Mr Dangoor was in breach of fiduciary duty (§ 170) and liable in the tort of deceit (§ 171).

Relations between Walbrook and Mr Fattal were nothing to do with David Dangoor’s role as co-ordinator under the JVA. His role was to co-ordinate between the parties to the JVA. There is no allegation that David Dangoor actually did anything. In addition, an allegation that David Dangoor knew that Walbrook committed (or were about to commit) a breach of duty and failed to tell the victim is not a charge of dishonesty (see the quotation from Millett LJ in Thakerar in § 62 above).

It must not be forgotten that the claim against David Dangoor is brought by the trustee (standing in the former shoes of Walbrook), not by Mr Fattal personally. Thus what the claim amounts to is an allegation that Mr Dangoor deceived Mr Fattal, as a result of which Walbrook suffered loss. There can be no question of Walbrook having been deceived, because Walbrook is alleged to have been the prime deceiver. So the necessary causal link between the deception and the loss is just smoke and mirrors.

In addition since the events in question took place in 1998 Mr Dangoor has a limitation defence. As I have said the claim is a new claim, and since it alleges dishonesty for the first time it does not arise out of the same facts as previously pleaded. So far as the claim in tort is concerned:

I refuse to allow the amendment.

The draft Re-Amended Particulars of Claim plead that from 1998 to 2007 Walbrook concealed the fact that there had been a sale to Niazi Dangoor (§ 109). Among the particulars given under this head is the allegation that instructions to counsel prepared by Mr Buzzoni saying that the Sharet Trust had been settled by Selim Dangoor were false to the knowledge of Mr Taylor and Mr Cuttiford; and that “[it] is to be inferred that one or both of them was the source of that statement”. This allegation is directly contradicted by Mr Buzzoni’s draft witness statement exhibited to Mr Rands’ own witness statement. It is extraordinary that in the face of that evidence the allegation is maintained. This episode demonstrates the claimants’ propensity to make wild and unsupported allegations of dishonesty. Like the thirteenth chime of the clock, it is not only wrong in itself; it casts doubt on the twelve preceding chimes. Moreover, the allegations of concealment lead to no financial consequence other than a claim for costs (§ 156 and § 185).

The draft Re-Amended Particulars of Claim return to this theme in paragraphs 179 to 185. The claim against David Dangoor is that “it is to be inferred” that he put pressure on Mr Taylor to influence him not to disclose documents (§ 183) and was thereby in breach of fiduciary duty (§ 183). This plea is based on the erroneous premise that Mr Dangoor owed fiduciary duties to Mr Fattal either personally or in his capacity as a director of BCIL. He did not. The allegation is unsustainable.

I refuse to allow these amendments.

Paragraphs 111 to 119 of the draft Re-Amended Particulars of Claim plead a voting agreement made between the trustees of the Delta Trust, the Sofaer Trust and the Sharet Trust to the effect that the latter two trusts would vote with the Delta Trust on all matters to do with Berkeley Court until June 2005. This is alleged to have been a breach of fiduciary duty; and it is further alleged that Walbrook concealed the existence of the voting agreement from the Fattals. Paragraphs 172 to 176 make similar allegations against David Dangoor and Monopro. Since each of the co-venturers had a vote which they could each use in their own interests, it is difficult to see how the voting agreement could have been a breach of fiduciary duty. Moreover, there is no allegation that any actual loss or detriment was caused to the Fattals by the existence of the voting agreement or its concealment. Nor is there any allegation that the voting agreement was ever put into effect; or that any relevant vote took place during the period that it covered.

No useful purpose would be served by allowing them to be pleaded and investigated at trial. It would also be a waste of court resources, contrary to the overriding objective. I refuse to allow the amendments.

Paragraphs 120 to 133 of the draft Re-Amended Particulars of Claim plead a scheme to remove the Fattals from the joint venture by means of a sham sale to a nominee of the other joint venturers. The Amended Particulars of Claim pleaded a similar claim in paragraphs 78 to 89. It is no longer pursued against Walbrook. The draft re-amended plea is as follows:

The Amended Particulars of Claim did not allege that any loss was caused by this scheme; but paragraph 89 “reserved the right” to plead further following disclosure “in relation to the losses they have suffered as a result”. Disclosure has now taken place. Paragraph 133 of the draft Re-Amended Particulars of Claim as originally served alleged that in consequence of the scheme the Fattals or the Fattal Trusts had suffered loss. But Mr Cran abandoned that plea in opening. There is therefore no pleaded loss arising out of the alleged scheme (which as the draft Re-Amended Particulars of Claim acknowledge was never put into effect).

Accordingly, the allegations under this head now have no financial or practical consequences. It follows, in my judgment, that no useful purpose would be served by allowing them to be pleaded and investigated at trial. It would also be a waste of court resources, contrary to the overriding objective. I refuse permission to re-amend.

The Amended Particulars of Claim allege (§ 103) that on several occasions Walbrook withheld from Mr Fattal documents that he was “entitled to see”. A number of instances were given. Further instances are given in the draft Re-Amended Particulars of Claim (§ 134). The draft Re-Amended Particulars of Claim plead that Walbrook’s failure to provide the documents was motivated by a desire to prevent the Fattals from learning the true circumstances surrounding the transfer by Interlands to the Sharet Trust (§ 136). It is further alleged that this was a breach of fiduciary duty (§ 137). It is alleged that the breaches amount to deliberate concealment; that in failing to disclose the documents Walbrook allowed itself to come under the influence of the Non-Fattals; and that no reasonable professional trustee could so have acted in good faith and/or honestly. Accordingly Walbrook acted dishonestly (§ 138). The loss which the Fattals say was caused by these events was the incurring of legal costs in the previous actions (§ 139).

The difficulties with this claim are as follows:

This claim was another claim that was reformulated in the course of the hearing. It is no longer alleged that the Fattals had a “right” to see documents. What is now alleged is that Walbrook had a duty to consider a request to see documents; and to exercise its discretion reasonably. This overcomes the first of the defects in the original formulation; but it does not overcome the others. In my judgment there is no real prospect of success in this claim.

The claim against David Dangoor and Monopro (§§ 179 to 185) is that David Dangoor applied pressure on Walbrook not to disclose documents. The claim against David Dangoor is brought by the trustee, not the Fattals personally. The current trustee cannot be in any better position than the previous trustee. Assuming it to be true that David Dangoor applied pressure on Walbrook (even though there is no evidential basis for the allegation), what the claim amounts to is a claim that the trustee can sue David Dangoor for loss arising out of its own breach of duty. Moreover, the loss alleged is loss caused to the Fattals rather than to the trustee (§ 185); and in addition consists only of legal costs, which are irrecoverable as damages or equitable compensation. To make matters worse, the legal costs incurred by the Fattals were costs incurred in suing the trustee. So what the claim amounts to is that the trustee can sue David Dangoor for loss suffered by someone else in suing it. In the draft Re-Amended Particulars of Claim as originally served there was also a claim for aggravated damages. But since the claim is a claim by the corporate trustee, aggravated damages cannot be awarded. The claim for aggravated damages was therefore rightly abandoned in the course of the hearing.

This claim has no real prospect of success. I refuse to allow the amendments.

The immediate background to the Deed of Confirmation is set out in a letter dated 17 April 2003 from Mr Ekins, a partner in Fladgate Fielder, to Walbrook. This was a letter written by a solicitor to his own client; so in the absence of compelling evidence to the contrary, one may take it as accurately representing both the instructions given to the solicitor and the advice given to the client. The background is explained as follows:

“Given the breakdown in relations between Messrs Fattal and David Dangoor and the current litigation we understand it to have become apparent to the Walbrook Trustees that any continuing joint venture, and the management and retention of the Property on that basis is likely to be bedevilled with strife; and that in the absence of any workable solution acceptable to the families concerned the Walbrook trustees consider it desirable that the Property should now be sold at the best possible price; and sold sooner rather than later.”

The letter continued by setting out the argument that the Fattals had been putting forward about clause 5 of the JVA. Mr Ekins pointed out that clause 5 might not facilitate a sale of the underlying companies holding the beneficial interest in the property, which might be the most tax efficient way of selling. He concluded:

“For all these reasons it would seem to be in the plainest interest of the beneficiaries as a whole for sale to take place free from any such procedures.”

He then set out a procedure which would enable the trustees to reach a decision, emphasising that the decision was for the trustees themselves. The legal advice, which he had set out earlier in the letter, was that it was more likely than not that the JVA had ceased to apply following the restructuring of both 1995 and 2000. This reflected the advice of leading counsel (Mr Robert Ham QC) given in consultation on 15 April 2003.

In a witness statement made on 4 February 2009 Mr Ekins said:

Consistently with the advice given, on 29 April 2003 each of the trustees resolved to enter into the Deed of Confirmation. Each resolution recorded that in the light of valuation evidence received and the short term prospects for the market there was a need for a sale to proceed without delay; and that the continuing existence of clause 5 was inimical to the implementation of a sale at the optimum price. Following the passing of those resolutions there was a further consultation with counsel on 1 May 2003. The first part of the consultation lasted for two hours. Thereafter Mr Dangoor and his legal team joined the meeting. Leading counsel for Walbrook summarised the state of play and the available options. Mr Dangoor explained what he believed to be the Fattals’ position on clause 5. Following discussion Mr Dangoor and his legal team agreed with the proposed course of action upon which, according to the documents, the trustees had already decided.

The Deed of Confirmation was made on 8 May 2003. On 30 May 2003 counsel provided a joint Opinion which confirmed the advice that had been given in consultation. In paragraph 9.3 of that Opinion they said:

“From the consultations carried out by the Trustees it appears to be the wish of all other adult beneficiaries that the property should be sold, and in view of the enduring breakdown of relations between David Dangoor and the Fattals the Trustees, having considered the matter from the perspective of each of the relevant trusts, have concluded that a sale is appropriate. If we may say so, this is a perfectly reasonable and proper conclusion for them to have reached.”

One of the purposes of preparing this Opinion was to place it before the court on a Beddoe application to authorise Walbrook to apply to discharge the injunction that Messrs Fattal had obtained. That application came before Evans-Lombe J on 30 June 2003. The Fattals were represented by counsel. The Opinion was in evidence before the judge. The Fattals opposed the relief sought. Their ground of opposition was that they were seeking to prevent the trustees from surrendering rights to which they were entitled under clause 5 of the JVA; and thus committing a breach of trust. Despite their opposition Evans-Lombe J granted the relief sought.

What is notable about this is that there was no suggestion that the rights of pre-emption contained in clause 6 of the JVA played any part in either Walbrook’s decision or in the Fattals’ opposition to the Beddoe relief.

The Amended Particulars of Claim plead in relation to the Deed of Confirmation as follows:

The conclusion drawn is that Walbrook entered into the Deed of Confirmation “in breach of trust” and it ought to be set aside (§ 115).

Mr Cran argued that this claim as pleaded in the Amended Particulars of Claim was a claim of dishonesty. He relied in particular on the allegation that Walbrook’s only purpose was defeating the Fattals’ claim to enforce clause 5 or to deprive the Fattal trusts of rights that they would otherwise enjoy as minority members under the JVA. He said that the allegation that Walbrook had an improper purpose amounted to an allegation of bad faith; and that was tantamount to dishonesty. He relied on observations in the judgment of Millett LJ in Bristol and West Building Society v Mothew [1998] Ch. 1, 20. Millett LJ said:

“Even if a fiduciary is properly acting for two principals with potentially conflicting interests he must act in good faith in the interests of each and must not act with the intention of furthering the interests of one principal to the prejudice of those of the other: see Finn, p. 48. I shall call this “the duty of good faith.” But it goes further than this. He must not allow the performance of his obligations to one principal to be influenced by his relationship with the other. He must serve each as faithfully and loyally as if he were his only principal.

Conduct which is in breach of this duty need not be dishonest but it must be intentional. An unconscious omission which happens to benefit one principal at the expense of the other does not constitute a breach of fiduciary duty, though it may constitute a breach of the duty of skill and care. This is because the principle which is in play is that the fiduciary must not be inhibited by the existence of his other employment from serving the interests of his principal as faithfully and effectively as if he were the only employer. I shall call this “the no inhibition principle.” Unless the fiduciary is inhibited or believes (whether rightly or wrongly) that he is inhibited in the performance of his duties to one principal by reason of his employment by the other his failure to act is not attributable to the double employment.” (Emphasis added)

However, Millett LJ makes the point that although the conduct must be intentional it need not be dishonest. It follows in my judgment that the plea in the Amended Particulars of Claim is not a plea of dishonesty. It is consistent with conduct falling short of dishonesty. Accordingly on the basis of the claim as pleaded in the Amended Particulars of Claim Walbrook are entitled to rely on the exoneration clause. The claim as pleaded in the Amended Particulars of Claim has no real prospect of success.

What is it that turns the original case into a case of a dishonest breach of trust? Again Mr Cran declined my invitation to identify the elements that made all the difference. The draft Re-Amended Particulars of Claim now plead:

Again it is necessary to have a sense of reality. The adult beneficiaries of three of the trusts wanted to sell Berkeley Court. That would have enabled each of them to receive a pro rata part of the proceeds of sale. The three year moratorium on sale imposed by the original JVA had long since passed. A sale of a beneficial interest within clause 6 would only have enabled the seller to receive 90 per cent of the value of his interest, as opposed to 100 per cent on a sale of the property as a whole. In those circumstances it is highly unlikely that a replication of clause 6 of the JVA would have been agreed.

Even if there were a pleaded fact that tipped the balance Mr Fattal knew about the Deed of Confirmation in the summer of 2003. He had also seen counsel’s opinion which had been placed before Evans-Lombe J on the Beddoe application. On the face of it therefore, Walbrook have a good limitation defence. That provides another reason for refusing to allow the amendments.

The first allegation (§ 186) is that David Dangoor “dishonestly unfairly and disloyally promoted the Resolutions and the Deed of Confirmation”. This is flatly contradicted by Mr Ekins’ witness statement, and the contemporaneous documents that have been disclosed. I have already commented on that. The essential point is that by the time David Dangoor was told of the trustees’ course of action on 1 May 2003 the resolutions had already been passed. In addition, since the three other trusts wanted to bring the JVA to an end (assuming it still existed) Mr Dangoor would have been loyal to them in promoting the Deed of Confirmation. The next allegation is that David Dangoor dishonestly procured that the proposal should be concealed by Walbrook from Mr William Fattal. This is contradicted by the attendance note of the consultation with counsel on 15 April 2003 (which Mr Dangoor did not attend). There is no evidential basis for supposing that is wrong. Indeed the draft Re-Amended Particulars of Claim themselves rely on the contents of that attendance note. In addition, Walbrook had no obligation to tell Mr Fattal in advance. The third allegation is that contrary to counsel’s advice Mr Dangoor failed to inform Mr William Fattal as representative director of BCIL. However, he had no duty to do so. Moreover, counsel’s advice was not that the directors of BCIL should be consulted. In context the advice was plainly directed towards discussion with the relevant directors of the trust companies (i.e. Walbrook).

This claim has no real prospect of success. In addition it is a new claim which does not arise out of the same facts as previously pleaded; with the result that David Dangoor and Monopro have an arguable limitation defence. I refuse to allow the amendment.

The draft Re-Amended Particulars of Claim allege (§ 154) that Walbrook failed to prevent David Dangoor from acting in breach of his duties to the Fattal Trusts. The first matter of complaint is the sale of the Interlands’ interest. But Walbrook knew all about this and indeed was the trustee of the Sharet Trust. It is quite impossible to see what the complaint is. The second matter of complaint is the voting agreement. But nothing flows from this. The third matter of complaint is the scheme to remove the Fattals from the joint venture. Nothing flows from this either. The fourth matter of complaint is the resolutions and the Deed of Confirmation. Since Walbrook voluntarily passed the resolutions and entered into the Deed, it is again impossible to see what the complaint is. The fifth matter of complaint is the Delta Two Trust. I will come back to that. The sixth matter of complaint is simply stated as “Flat 23”. This must refer to the apportionment of the purchase price between BCIL and Monopro. Quite what the complaint against Walbrook is I cannot say; nor is there any plea which would overcome the protection afforded to Walbrook by paragraph 18 of the schedule to the trust instrument. The seventh complaint is the car park leases. The underlying claim has been abandoned, so it must follow that this complaint must fail too. The eighth complaint is “the office/storage spaces”. Again there is no plea which would overcome the protection afforded to Walbrook by paragraph 18 of the schedule to the trust instrument. The final complaint is the overcharging of David Dangoor and Monopro. The overcharging claim alleges (§ 237) that Walbrook paid David Dangoor too much “in the mistaken belief induced by David Dangoor that [the] fee was indeed payable, and accordingly overpaid Monopro”. This is plainly not a charge of dishonesty. Walbrook are entitled to the protection of the exoneration clause.

This claim therefore has no real prospect of success.

These are pleaded in paragraphs 156 to 161 of the draft Re-Amended Particulars of Claim. Since I have held that none of the claims against Walbrook have a real prospect of success, in a sense the pleaded losses are irrelevant. However, many of the heads of loss claimed consist of costs of previous proceedings. These are irrecoverable.

As Jessel MR explained in Cockburn v Edwards (1881) LR 18 Ch D 449, 459:

“I am of opinion that it is not according to law to give to a party by way of damages the costs as between solicitor and client of the litigation in which the damages are recovered. The law gives a successful litigant his costs as between party and party, and he cannot be said to sustain damage by not getting them as between solicitor and client.”

In Ross v Caunters [1980] 1 Ch 297, 324 Megarry V-C said:

“… a successful plaintiff cannot obtain, in the guise of damages, any costs which, on a party and party taxation of costs, are disallowed by the taxing master. It is not enough for the plaintiff to claim that such costs were incurred by him as a result of the defendants' negligence. … I am saying nothing about damages which fall outside the particular form in which they are claimed in this case, namely, the legal expenses of investigating the plaintiff's claim up to the date of the issue of the writ. It seems to me that both on authority and on principle those legal expenses can be recovered by the plaintiff only as costs, and not in the form of damages. In so far as the plaintiff can persuade the taxing master that the items incurred should be allowed as costs on a party and party taxation, then the plaintiff can recover them; but so far as they are not allowed by the taxing master, then I think that they cannot be recovered in the shape of damages.”

Tucked away at the very end of the draft Re-Amended Particulars of Claim (§ 259) is the allegation that Rysaffe has agreed to repay the Fattals the costs that they have incurred. The pleading then asserts that Rysaffe is entitled to recover these sums as damages from Walbrook and David Dangoor. If, as I hold, the Fattals would not have been entitled to recover these costs as damages, I cannot see how the position is improved by Rysaffe having voluntarily agreed to reimburse them. At best, as it seems to me, Rysaffe would have been subrogated to the Fattals’ own claim.

In addition to costs, the losses alleged also include the fees that Rysaffe has charged as trustee. The allegation is that but for Walbrook’s breaches of trust Mr Fattal would not have appointed an additional trustee; and would not, therefore, have incurred double fees (§ 156 (iv)). Had the underlying claims gone forward to trial this would, in my judgment, have been a permissible head of loss at the suit of Mr Fattal himself, but not at the suit of Rysaffe. Had the underlying claims gone forward to trial, I would have allowed this amendment.

The draft Re-Amended Particulars of Claim also allege (§ 158) that “Walbrook’s breaches of the duty in failing to maintain the Fattal Trustees’ rights enshrined in the JVA” have caused loss, because they lost the opportunity to exercise clause 6 rights. I regard this plea as embarrassing because it does not make clear which alleged breach of trust has had this consequence. Is it the failure to exercise the clause 6 rights before the sale to Niazi Dangoor? Is it the failure to disclose documents to the Fattals? Is it the delay that has taken place since the sale? I would not have allowed the amendment in this form even if the underlying claims had gone forward to trial.

This claim (§§ 189 to 201) is a claim that the interest of the Delta Trust in the joint venture was sold to a different trust (called Delta Two) at some point before 6 April 1999, without giving notice under clause 6 of the JVA and without seeking consent under clause 12. Whether the Delta Two Trust exists or not as a separate trust is only relevant if the interest of the Delta Trust in Berkeley Court (or more accurately its interest in the membership rights in BSL) has been sold (clause 6) or transferred (clause 12) to Delta Two. Even if there had been a transfer (without a sale) the side memorandum would probably have permitted this anyway. So the real question is whether there has been a sale. The allegation that there is a separate Delta Two Trust has been raised in correspondence and denied. There is clear contemporaneous evidence that “Delta Two” was an internal designation used by Walbrook for administrative purposes; and the draft Re-Amended Particulars of Claim (§ 190) accept that this is so. Given this acceptance, the whole of this claim is inference piled on inference. It is entirely speculative. Mr Buzzoni has said no less than three times (twice in draft witness statements given to Mr Rands) that no sale took place. There is no evidential basis upon which to contradict him. In the course of his reply Mr Tomson valiantly tried to show me the grounds for Mr Fattal’s suspicion, based on the documents that had been belatedly assembled into a bundle. I could not see a straw, let alone a brick.

In addition since the events complained of took place in 1999 and the claim is a new claim which does not arise out of any facts previously pleaded both Walbrook and David Dangoor have arguable limitation defences. I refuse to allow the amendments.

This is also a new claim made in paragraphs 201A to 201R of the draft Re-Amended Particulars of Claim. Walbrook accept that accounts need to be examined to determine whether there has been any overpayment or excess loan as alleged. Without waiting for Walbrook’s explanation, the draft Re-Amended Particulars of Claim allege that Walbrook has been dishonest. This is irresponsible. To introduce this claim at this late stage in the proceedings will open up large areas of accounting going back (according to the draft Re-Amended Particulars of Claim) to 1996. Mr Tomson said in the course of his reply that this claim should be tried with the others because it was all part of a pattern showing that David Dangoor called the shots. But that is not a pleaded allegation.

Moreover, as Mrs Talbot-Rice pointed out the high point of the excessive loans or payments was, according to the draft Re-Amended Particulars of Claim (§ 201H), March 1998. Since then the balance has been diminishing, with the obvious inference that Delta has been underpaid since then. These figures are all taken from the accounts of BSL and BS2K. They were therefore available to the Fattals. On the face of it, therefore, both Walbrook and David Dangoor have an arguable limitation defence.

I refuse to allow these amendments.

This claim was pleaded against Mr David Dangoor and Monopro in the Amended Particulars of Claim. The re-amendments to that claim are of little consequence. I allow them. Mrs Talbot-Rice says that, if proved, this claim is worth about £250.

The Re-Amended Particulars of Claim (§§ 209-216) allege that:

In my judgment the defects in this claim against Walbrook are as follows:

In my judgment this claim has no real prospect of success.

This claim was pleaded against David Dangoor and Monopro in the Amended Particulars of Claim. They do not seek summary judgment. The re-amendments to the claim against them are inconsequential; and I allow them. Mrs Talbot-Rice says that, if proved, this claim is worth £13,250.

I expressed the view in January that I could not see what loss had been caused by the matters pleaded under this head. Mr Cran said in the course of the current hearing that these claims were no longer pursued. I need say no more about them. They will be struck out of the pleadings.

The Amended Particulars of Claim alleged (§ 118) that David Dangoor and/or Monopro “as co-ordinator” allowed certain spaces on the ground floor and in the basement of Berkeley Court to be used without any payment or at undervalues. This allegation is repeated in the draft Re-Amended Particulars of Claim (§ 229). The proposed re-amendments add additional spaces to those originally pleaded. Mrs Talbot-Rice submitted that the plea was ill founded because David Dangoor “as co-ordinator” had no duty to prevent BCIL (which granted the licences) from dealing with its own assets. There is force in this submission; but there is no application to strike out the original plea. On the footing that the original plea will go forward to trial these re-amendments are not objectionable (in so far as they make claims arising out of events which took place in or after October 2004). I allow them.

The Amended Particulars of Claim already contain a claim about overcharging in the years 2003, 2004 and 2005. The proposed re-amendment expands that claim to take in 2006 to 2009 (§ 239). The allegation is that Walbrook, in breach of its duty, agreed the level of fee proposed by David Dangoor and paid it to him or one of his companies.

The Amended Particulars of Claim alleged that Walbrook paid the fee “in the mistaken belief … that those fees were indeed payable”. This plea reappears in the draft Re-Amended Particulars of Claim (§ 236). The proposed re-amendment (§ 240) says that Walbrook did not act in good faith; and that no reasonable professional trustee would have failed to take steps to require Monopro to repay the overpayment. In my judgment this plea falls short of a plea of dishonesty, with the result that Walbrook is entitled to rely on the exoneration clause. Moreover, a plea of dishonesty is inconsistent with the plea of mistaken belief that the fees were due. Even if it were a plea of dishonesty, it would amount to a new claim, not arising out of the same facts as previously pleaded.

I refuse to allow the amendments, and give judgment for Walbrook on this claim which has no real prospect of success.

The claimants seek an order that David Dangoor repay the overpayment or pay damages (§ 241). This is an impossible plea. According to the Re-Amended Particulars of Claim themselves, David Dangoor agreed the fee with Walbrook. He was therefore contractually entitled to it. Walbrook may have made a bad bargain, but that gives no ground for requiring David Dangoor to repay. This claim has no real prospect of success.

I refuse to allow the amendment.

Under this heading I draw together some of the more general discretionary considerations:

Accordingly, save for the relatively few amendments that I have said I will allow, I dismiss the application for permission to re-amend; and I give summary judgment in favour of Walbrook on all claims except those where Walbrook accepts that an account must be taken. The taking of the account will be referred to a Master of the Chancery Division. But for the existence of the Sharet Trust claim (which will be tried in this court in the Hilary Term 2011) I would have given serious consideration for transferring the remaining claims against David Dangoor and Monopro (whose total value is less than £30,000) to the Central London County Court.

Walbrook apply to strike out one sentence in the defence to their counterclaim for fees. Mr Tomson accepted that the current plea is unsustainable. He produced a reformulated plea on the last morning of the hearing. It was agreed that consideration of that plea would await my decision on the re-amendments and Walbrook’s application for summary judgment. My provisional view is that in the light of my decision even the reformulated plea must be struck out.

The final matter is that there are two outstanding requests for further information of the claimants’ statements of case. Mr Tomson said that they would be answered within fourteen days of my decision. I so order.