Courtwood Holdings S.A. v Woodley Properties Ltd & Ors

The first day of the hearing in this matter was the return date of the application of the Claimant, Courtwood Holdings SA, a company registered in and incorporated under the laws of Panama (“Courtwood”) for a proprietary injunction and disclosure of information against the First Respondent/Defendant, Woodley Properties Limited, a company registered in and incorporated under the laws of Jersey (“WPL”). An interim injunction which was applied for without notice albeit on notice was first granted by Hildyard J on 31 July 2015. On 6 August 2015 Mann J accepted an undertaking by WPL over to the return date.

There are also a number of other applications before the Court: by two applications both dated 6 October 2015, WPL and the Fourth Defendant, the Right Honourable David Mellor, (“Mr Mellor”) respectively apply to strike out the Particulars of Claim pursuant to CPR 3.4(2)(a) and/or (b) on the basis that they do not disclose a cause of action or an abuse of process or alternatively seek summary judgment pursuant to CPR 24 on the basis that Courtwood has no real prospect of succeeding on the claim and there is no other reason why the case should be disposed of at trial; the same relief is sought by the Eighth Defendant, Tamadot Capital SA, (“Tamadot”), the Eleventh Defendant, Charlestown Management Limited (“Charlestown”) and the Twelfth Defendant, Chateau Management Limited (“Chateau”) all three of which are companies registered and incorporated under the laws of Nevis and each of which issued applications dated 18 December 2015; once again the same relief is also sought by the Fifth and Tenth Defendants respectively being Svea Balfour (“Mrs Balfour”) and Woodcock Limited, (“Woodcock”); lastly, by an application dated 1 March 2016, Courtwood seeks permission to amend the Particulars of Claim to rely on a further assignment of causes of action.

WPL, Mr Mellor, Tamadot, Charlestown and Chateau are referred to together as “the CMS or the Mellor Defendants” and it is alleged that Tamadot, Charlestown and Chateau are Mr Mellor’s corporate vehicles which have received monies from the development of Sandford Farm, Woodley, Reading, Berkshire (“Sandford Farm”). The CMS/Mellor Defendants were represented before the court by Ms Stevens- Hoare QC. Mrs Balfour and Woodcock are referred to together as “the IG Defendants”. Woodcock is alleged to be the corporate vehicle of Mrs and/or Mr Balfour, Mr Balfour being the Honourable Charles Balfour, the Third Defendant. The IG Defendants were represented before the Court by Mr Robinson. The IG Defendants are content to hold over their strike out/summary judgment applications pending the outcome of Courtwood’s amendment application. The CMS/Mellor Defendants however, do not take the same view. They actively oppose the amendment application.

Neither the Second Defendant, Douglas Maggs, (“Mr Maggs”) nor Mr Balfour appeared or were represented before the court. The same is true of the Sixth Defendant, Wharf Land Investments Limited (“Wharf”) which was co-owned by Mr Maggs and Mr Mellor and of the Seventh Defendant, Night Rhythm Limited, a company incorporated under the laws of Gibraltar (“Night Rhythm”) which is alleged to be Mr Maggs’ corporate vehicle. The same is true of the Ninth Defendant, Kingfisher Holdings Limited, (“Kingfisher”) a company incorporated and registered under the laws of Nevis which is alleged to be the corporate vehicle of Mr and/or Mrs Balfour. It has been confirmed in correspondence that Kingfisher has no objection to the amendments proposed in Courtwood’s application for permission to amend the Particulars of Claim and that Night Rhythm neither opposes nor consents to the application.

This dispute concerns the development of land at Sandford Farm. It was purchased in 2005 by Bound Oak Properties Limited, a company with which Mr Maggs and Mr Balfour were involved, for £9m odd and was immediately sold on to Sandford Farm Properties Limited (“SFPL”) a company incorporated under the laws of Jersey, the directors of which were provided by another Jersey company for £12.25m. From the profits of the sale various payments were made including a consultancy fee to Mr Mellor trading as DM Consultancy. The balance of profits from the sale was divided between corporate vehicles in the control of Mr Maggs and Mr Mellor and Mrs Balfour’s trust fund amongst others.

Thereafter, in 2005 SFPL was promoted by Mr Maggs and Mr Balfour as an investment vehicle for a property investment at Sandford Farm. It was intended to acquire planning permission and sell or refinance the land, repaying investors with a profit. Courtwood, the ultimate beneficial owner of which is Mr Giovanni Capodilista, invested in the project. Wharf which was co-owned by Mr Maggs and Mr Mellor, provided services to SFPL in relation to the development of Sandford Farm under an agreement dated 8 November 2005 (the “Property Advisory Agreement”).

By early 2009 planning permission had not been granted and SFPL had run out of money. It was also in arrears of repayments to its secured lender, Abbey National Treasury Plc (“ANTS”). The holders of the majority of shares in SFPL having indicated that they had lost confidence in the board of SFPL, on 2 June 2009, SFPL’s professional Jersey-based directors resigned. On 11 June 2009, Mr Maggs having written to the solicitor for some of the shareholders stating that SFPL had been “hijacked” and expressing concern that certain shareholders sought to “deprive Wharf of some or all of its interest in a successful outcome of [this] project”, Wharf presented a winding up petition against SFPL. Thereafter, on 15 June 2009 ANTS appointed Law of Property Act Receivers (“LPARs”) over Sandford Farm. Although no allegation is made against the LPARs, it is alleged that the winding up petition was presented with the ulterior motive of causing ANTS to appoint the LPARs.

On 19 June 2009, Mr Maggs acting on behalf of Wharf wrote to the LPARs stating amongst other things that the value of Sandford Farm would be diminished substantially should the planning appeal in relation to it which was due to commence on 23 June 2009 be withdrawn. He went on to state that it was Wharf’s view that the LPARs should “engage with a credible purchaser” before the appeal, who in turn would come to terms with Wharf and enable the appeal to proceed. He went on to add that WDL had full ownership of the planning application and invited the LPARs to contact him. In this regard, it is alleged that Mr Maggs on behalf of Wharf misrepresented WDL’s entitlement in relation to the planning application to the LPARs and thereby implied that the value of Sandford Farm and ANTS’ security would be jeopardised unless the property was sold to an entity with which WDL was associated and that Wharf did so in its own interests and to procure a disposal of Sandford Farm to WDL.

Thereafter, on 29 June 2009, WDL, which was ultimately owned by Mr Maggs, Mr Mellor and Mr and/or Mrs Balfour, contracted to purchase Sandford Farm from the LPARs for £15 million using a facility granted to WPL by ANTS and secured by a joint personal guarantee provided by Mr Maggs, Mr Mellor and Mrs Balfour in the amount of £2.5 million. The completion date for the purchase was 30 November 2009.

On 3 November 2009 the Secretary of State recommended that residential planning permission be granted in respect of Sandford Farm. Thereafter, WPL sold part of Sandford Farm in August 2010 to Taylor Wimpey for £27 million and distributed the £12 million profit to its ultimate owners. According to evidence given by Mr Maggs during his examination under section 236 Insolvency Act 1986, the monies were divided between corporate vehicles in the control of Mr Maggs, Mr Mellor and Mr Balfour respectively. In addition, the contract between WPL and Taylor Wimpey entitled WPL to overage based on a proportion of the sale proceeds of various units built at Sandford Farm and/or all development that is permitted by an outline planning consent dated 4 March 2010 or any other planning permission which “at such time” has been implemented. Courtwood estimates the value of the overage to be in the region of £18.25 million.

It is alleged that Wharf owed fiduciary obligations to SFPL arising from the Property Advisory Agreement. Courtwood contends that in breach of its fiduciary obligations, Wharf procured the transfer of Sandford Farm to WPL and in doing so, it is said that the principals behind Wharf being Mr Maggs, Mr Balfour and Mr Mellor moved Sandford Farm from one of their corporate vehicles to another, leaving the investors in SFPL behind. It is alleged therefore, that the transfer was in breach of Wharf’s fiduciary duties under the Property Advisory Agreement to act in SFPL’s interests to the exclusion of all others including itself, it placed itself in a position in which its interests conflicted with those of SFPL and that WPL being Wharf’s vehicle for the purchase of Sandford Farm, acquired it with knowledge of Wharf’s breach of fiduciary duty. As a result, it is alleged that WPL holds Sandford Farm on constructive trust for SFPL and is liable to account as a constructive trustee for the benefit received being Sandford Farm and/or its proceeds of sale including any overage.

By reason of the inter-connection of the various individual and corporate defendants, the evidence of Mr Maggs given pursuant to section 236 Insolvency Act 1986 and the personal guarantee given for WPL’s borrowing in relation to the purchase of Sandford Farm it is alleged that it should be inferred that WPL, Night Rhythm, Tamadot, Kingfisher, Woodcock, Charleston, Chateau, Mr Maggs, Mr Mellor, Mr Balfour and/or Mrs Balfour have received and/or are entitled to receive the proceeds of sale of Sandford Farm and/or the overage. Further, it is alleged that knowledge of the breach of fiduciary duty should be imputed to each of the individuals and corporate entities to which I have referred as a result amongst other things of: Mr Maggs’, Mr Balfour’s and Mr Mellor’s directorship of Wharf from prior to 2005, April 2006 and July 2007 respectively; Mr Maggs’ and Mr Mellor’s equal shareholding in Wharf; the fact that Mr Maggs, Mr Mellor, Mr and Mrs Balfour had benefitted personally on the sale of Sandford Farm by Bound Oak to SFPL; the personal guarantees provided by Mr Maggs, Mr Mellor and Mr Balfour for the purposes of WPL’s borrowing in 2009; £535,000 from the re-financing provided by ANTS having been paid to a company known as Ultramarine Ltd in which Mr Maggs, Mr Mellor and Mr Balfour were allegedly interested; the evidence of Mr Maggs as to the involvement of Mr Mellor and Mr Balfour in the course of events, given in his s 236 examination; Mr Mellor’s introduction of ANTS in 2007; and the discussion between Mr Mellor, Mr Maggs and Mr Balfour of the remedies available to Wharf in June 2009.

The nature of Mr Maggs’ evidence given in his s 236 examination upon which Courtwood relies forms the basis for paragraph 63 of the Particulars of Claim and is pleaded in the following way:

“63.7

According to Mr Maggs’ evidence given in his s 236 examination:

63.7.1

Mr Mellor was not a “silent partner” in WLIL and Mr Balfour was the finance person in regular contact with investors;

63.7.2

the directors of WLIL (Mr Maggs, Mr Balfour and Mr Mellor) generally had two round table meetings a week;

63.7.3

Mr Mellor kept abreast of everything concerning WLIL;

63.7.4

WDL, which submitted the planning application in respect of Sandford Farm, was owned equally by Mr Maggs, Mr Balfour and Mr Mellor;

63.7.5

Mr Mellor introduced ANTS in 2007 as the refinancer of SFPL’s facility and Mr Balfour probably assisted in formalising the refinancing with ANTS;

63.7.6

Mr Mellor and Mr Balfour were probably involved in attempts to refinance the project in 2009;

63.7.7

Mr Balfour, Mr Mellor and Mr Maggs discussed what remedies would be available to WLIL in 2009. The Claimant infers that all three gentlemen were party to the decision to issue and present a winding up petition against SFPL.

63.7.8

Mr Mellor was actively involved in taking WPL forwards and obtaining funding for it.”

Courtwood was an investor in SFPL but its claim is based on being the assignee from an assignee of claims which the liquidator of SFPL may have had in relation to Sandford Farm. The precise extent of Courtwood’s rights as an assignee are in dispute. In any event, it seeks amongst other things, declarations that WPL received Sandford Farm knowing that it had been transferred in breach of fiduciary duty and that the proceeds of sale and overage deriving from it are held on constructive trust for SFPL and therefore, for Courtwood but have been or will be distributed to the Defendants other than Wharf. An account and an order for payment is sought.

In a judgment dated 19 July 2012, Ms Vivien Rose sitting as a Deputy High Court Judge (as she then was) held that Dr Shadrin and Eco3 Capital Limited fraudulently misrepresented the nature of a transaction in which the claimant, Ludsin Overseas Limited invested £2m and that Dr Shadrin and Eco3 Capital Limited had acted as agents for Wharf, Mr Maggs and Mr Balfour who were also defendants. The transaction in question was the original purchase of Sandford Farm by Bound Oak Properties Limited and its subsequent sale to SFPL in 2005. Ms Rose’s judgment that all five defendants acted dishonestly was upheld in the Court of Appeal in 23 April 2013, the judgment of the court being given by Jackson LJ. It was accepted for the purposes of the judgment that Mr Maggs was a director of Wharf and that Mr Maggs and Mr Mellor each owned 50% of the shares in that company. I shall refer to the judgment at first instance and in the Court of Appeal together as “the Ludsin Proceedings.”

The application for a proprietary injunction over until trial or further order and the strike out/summary judgment applications not only relate to the same facts but are the subject of closely linked principles. First, it is not in dispute that the Court should approach the grant of an interim injunction to restrain dealings in property alleged to be the subject of a proprietary claim on the basis of American Cyanamid: see Polly Peck Intl plc v Nadir (No 2) [1993] BCLC 187 per Lord Donaldson MR at 214e-g. It is necessary therefore, to determine whether Courtwood has an arguable case, whether damages are an adequate remedy and if not, to apply the balance of convenience. If the scale appears very evenly balanced it is then legitimate to take into account the strength or weakness of Courtwood’s case.

The applications to strike out are governed by CPR 3.4(2). The relevant paragraphs in this case are: (a) that the statement of case discloses no reasonable grounds for bringing or defending the claim; and (b) that the statement of case is an abuse of the court’s process is otherwise likely to obstruct the just disposal of the proceedings. The Rule is supplemented by PD3A. The touchstone for the exercise of case management powers is the overriding objective and that the Court must deal with cases justly and at a proportionate cost. Furthermore, for the purposes of CPR 3.4(2)(a), strike out should not be granted in a developing area of the law unless the court is certain that the claim is bound to fail: Hughes v Colin Richards & Co [2004] EWCA Civ 266; [2004] PNLR 35. Cases which are suitable for strike out include those which raise an unwinnable case or do not raise a valid claim as a matter of law: White Book Commentary to the Civil Procedure Rules at paragraph 3.4.2 and Price Meats Ltd v Barclays Bank plc [2000] 2 All ER 346. It is also accepted that if the court considers that the defect in question might be cured by amendment, the claim should not be struck out without first giving the party concerned an opportunity to amend: Soo Kim v Youg [2011] EWHC 1781 (QB). For the purposes of CPR 3.4(2)(b) the term “abuse of the court’s process” was explained by the then Lord Chief Justice, Lord Bingham, in Attorney General v Barker [2000] 1 FLR 759 in another context as “using that process for a purpose or in a way significantly different from its ordinary and proper use.”

The well known test for summary judgment is found in CPR 24. Can it be said that Courtwood has no real prospect of succeeding on the claim and there is no other compelling reason why the case should be disposed of at trial? In this regard, I was referred to Mentmore International Ltd & Ors v Abbey Healthcare (Festival) Ltd & Anr [2010] EWCA Civ 761 at paragraphs [20] and [21] of the judgment of Carnwath LJ as he then was. They are as follows:

“The principles

20.

It is important to keep in mind the principles to be applied in deciding whether a case is suitable for disposal on a summary basis. The most authoritative up-to-date statement is that of Lord Hope in Three Rivers DC v Bank of England (No 3) [2001] 2 All ER 513:

“In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents, without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, [2001] 1 All ER 91, at p. 95 that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”

21.

Another frequently cited passage on the same theme is the judgment of Colman J in De Molestina v Ponton [2002] 1 Lloyd’s Rep 271, 280 para 3.5, speaking of the difficulty of basing summary judgment on inferences of fact in a complex case:

“…, as Three Rivers District Council shows, where the application in such complex cases relies on inferences of fact, the overriding objective may well require the claim to go to trial in the interest of a fair trial. That is because the relevant inference could not be safely drawn without further discovery and oral evidence at the trial. It is thus necessary, where such inferences are relevant, to guard against the temptation of drawing them as a matter of probability, because the achievement of the over-riding object requires a much higher degree of certitude. Where in a complex case, as may often be the situation, the frontier between what is merely improbable and what is clearly fanciful is blurred, the case or issue should be left to trial.””

Lastly, when determining whether to grant permission to amend, the court should have regard to all of the circumstances summed up by the overriding objective and is also concerned with whether the proposed amendments are sufficiently arguable to go to trial in the sense that they have a real prospect of success: see Swain–Mason v Mills & Reeve LLP (Practice Note) [2011] EWCA Civ 14; [2011] 1 WLR 2735 and White Book Commentary to the Civil Procedure Rules paragraph 17.3.6. Further, it should be borne in mind that the “basic purpose of pleadings is to enable the opposing party to know what case is being made in sufficient detail to enable that party properly to prepare to answer it”: British Airways Pension Trustees Ltd v Sir Robert McAlpine & Sons Ltd 45 Con LR per Saville LJ.

Before turning to the five essential elements which are said to be absent from Courtwood’s case with the consequence that it is alleged that there is no serious issue to be tried but should be struck out or the subject of reverse summary judgment, I should mention that Mr Cunningham draws attention to the way in which the allegations contained in the Particulars of Claim have been dealt with in the evidence filed for the purposes of the applications before the court. At least six witness statements have been filed on behalf of the CMS/Mellor Defendants all of which were sworn by a solicitor. The first and last of those statements were made on behalf of WPL alone, the second was also on behalf of Mr Mellor and the fourth was also on behalf of Tamadot, Chateau and Charlestown. In this regard, Mr Cunningham makes a number of submissions: first, he points out that they contain no denial of the truth of Mr Maggs’ evidence given pursuant to section 236 Insolvency Act 1986, no denial of what he terms “the scheme” or of the “manoeuvring” to which I shall refer, or of receipt of the proceeds of sale of Sandford Farm and no explanation of the giving of personal guarantees; secondly, he says that the contents of the statements are intentionally opaque and although there are passages about inference, there is no denial of knowledge of receipt in breach of fiduciary duty on the part of the CMS/Mellor Defendants; thirdly, he submits that both the fourth witness statement sworn on behalf of WPL, Tamadot, Charlestown and Chateau as well as Mr Mellor, together with their joint representation indicates that they are all connected; and lastly, he says that it is notable that when a series of matters, from which it was alleged that Mr Mellor’s knowledge (and that of the associated companies) of breach of fiduciary duty should be inferred, were set out in a witness statement sworn on behalf of SFPL by its solicitor, the witness statement in response was sworn on behalf of WPL only and did not address the allegations.

Mr Cunningham submits that no substantive defence has been put forward on behalf of the CMS/Mellor Defendants. He says therefore, that based upon the facts and matters which I have already set out, there is quite clearly an arguable case which is not suitable for strike out or summary judgment and is sufficient for the purposes of the continuation of the injunction over until trial or further order.

Ms Stevens-Hoare submits that the question for the court is whether the test for strike out or summary judgment is met on the basis of Courtwood’s case and that it is not the time for the CMS/Mellor Defendants to engage with the factual case. It is sufficient, she says, for them to focus upon the five essential elements of Courtwood’s case which she says cannot be made out and/or are fanciful. They are: whether Wharf owed fiduciary obligations to SFPL arising from the terms of the Property Advisory Agreement at all; whether anything belonging to SFPL was received by WPL in the sense that it could be followed or traced into WPL’s hands; whether the CMS/Mellor Defendants can be shown to have had knowledge of the alleged breach of fiduciary duty; whether the action is an abuse of process; and whether the assignment to Courtwood is sufficiently broad to include the claims as pleaded and as a result whether it has standing to bring the claim in any event.

It seems to me obvious that it is open to applicants seeking to strike out a claim and/or to contend that it has no real prospect of success, to concentrate upon the elements of the respondent’s claim which they say are not good in law or cannot be made out. However, when the court is considering the question of whether the claim has no real prospect of success, other than on a pure point of law, despite the fact that it will not engage in a mini-trial, the factual background will be relevant. Therefore, although the focus of the applications in this matter is upon the necessary building blocks of the cause of action upon which the claim is based, the factual background as a whole is of some relevance, when determining whether the claims are fanciful. With that I will turn to the five building blocks which Ms Stevens-Hoare submits are missing from the claim which as a result should be struck out/has no real prospect of success and in relation to which she submits that there is no serious issue to be tried for the purposes of the proprietary injunction and consider them in the light of the relevant test for each respective application.

Fiduciary duty?

The CMS/Mellor Defendants contend that there is no proper basis upon which the Property Advisory Agreement can be construed as giving rise to fiduciary duties as pleaded. In this regard, Mr Cunningham relies upon paragraphs 48, 49 and 51 of the pleading in which Wharf is referred to as “WLIL”. They are in the following form:

“48

On 8 November 2005 SFPL and WLIL entered into the PAA in respect of Sandford Farm. Under the terms of the PAA:

48.1

SFPL appointed WLIL to provide property advisory and supervisory services more particularly set out in Schedule 1 to the PAA for the term of the PAA, and WLIL accepted such appointment (clause 1). The services included making recommendations to appoint agents; applying for planning permission, assisting SFPL in a disposition or refinancing of Sandford Farm or part thereof and advising as to investment trends and market research which might affect SFPL’s objectives and policies from time to time.

48.2

WLIL agreed that it would:

48.2.1

“provide the Services with due skill and care in accordance with the principles of good estate management, so as to promote [SFPL’s] best interests and maximise the returns to [SFPL]” (clause 3.4(a)(i));

48.2.2

“use all reasonable endeavours to protect the interest of [SFPL] in relation to [Sandford Farm] within the context of the Services that [WLIL] is contracted to provide; (clause 3.4(b));

48.2.3

“act in good faith towards [SFPL] and take all reasonable steps to avoid conflicts of interest” (clause 3.4(d)).

48.3

SFPL was to pay WLIL a fee consisting of:

48.3.1

the amount payable to shareholders in SFPL by way of fees dividend or otherwise out of Phase 1 Profits sufficient to provide repayment to the shareholders in SFPL of all loans and capital invested by them in SFPL with an internal rate of return of 24%; and

48.3.2

50% of Phase 1 Profits after payment of the sum calculated under paragraph 48.3.1 above (clause 8.3).

48.4

Phase 1 Profits were defined as the gross amounts sum received by SFPL upon any disposition, refinancing or equivalent of the part of Sandford Farm that was subject to a planning application provided for in an appraisal agreed between SFPL and WLIL every six months, less:

48.4.1

amounts payable to a bank or lender in respect of a loan or finance to purchase of Sandford Farm including principal interest fees and costs;

48.4.2

costs of acquisition and disposal of Sandford Farm; and

48.4.3

SFPL’s Operating Costs (as defined in the PAA); all of 48.4.1 to 48.4.3 excluding WLIL’s fee under the PAA (clause 8.3).

The Claimant will refer to the PAA at trial herein for its full terms, meaning and effect.

49

On its true construction, and in particular by reason of:

49.1

its express obligation to act in good faith towards SFPL;

49.2

its express obligation to promote SFPL’s bests interests;

49.3

its express obligation to maximise the returns to SFPL;

49.4

its express obligation to use all reasonable endeavours to protect the interests of SFPL in relation to Sandford Farm;

49.5

its express obligation to take all reasonable steps to avoid conflicts of interest;

49.6

its role in providing services to SFPL which fell within WLIL’s specialist areas of expertise, and in particular planning permission upon which the investment hinged, in circumstances where SFPL had professional directors situated in Jersey with no knowledge of Sandford Farm or the planning considerations associated with it;

49.7

its express obligations to assist SFPL in a disposition or refinancing of Sandford Farm;

49.8

its role in dealing directly with SFPL’s bankers; and

49.9

its express right to a fee in, and only in the circumstances prescribed in the PAA (i.e. upon disposition or refinancing of Sandford Farm),

WLIL was subject to an obligation to SFPL of loyalty, properly characterised as a fiduciary obligation to SFPL to act in SFPL’s interest to the exclusion of all others, including itself, in relation to WLIL’s provision of services and the refinancing and disposition of Sandford Farm.

...

51

WLIL was accordingly under a duty to SFPL not to:

51.1

make an unauthorized profit from its position; or

51.2

place itself in a position where its interests conflicted with its duties to SFPL.”

Mr Cunningham draws attention to Wharf’s role in providing the Services set out in Schedule 1 to the Property Advisory Agreement which were within its specialist area of planning and property development but were outside those of SFPL and dealing with SFPL’s bankers which are referred to respectively at paragraphs 49.6 and 49.8 of the Particulars of Claim. In addition, the Services included assisting in procuring the realisation of Sandford Farm once planning permission had been obtained and Wharf was obliged to assist SFPL in a refinancing of Sandford Farm and had a prescribed and defined right to a fee upon disposition or refinancing.

He also draws particular attention to the requirements in the Property Advisory Agreement: to use due skill and care to protect and promote SFPL’s best interests and maximise its returns (clause 3.4(a)(i)); to use all reasonable endeavours to protect SFPL’s interests in relation to Sandford Farm within the context of the Services it was contracted to provide (clause 3.4(b)); and to act in good faith towards SFPL and take all reasonable steps to avoid conflicts of interest (clause 3.4(d)). Mr Cunningham submits that these express contractual duties all point towards Wharf having had an obligation towards SFPL that was intended by the parties to have been one of undivided loyalty and good faith and, in particular, to protect SFPL’s interests in relation to a disposition and that there be no conflicts of interest. He submits that it is a corollary of clauses 3.4(a)(i) and 3.4(b) that Wharf should not itself benefit from the relationship and he places particular emphasis on the words “protect”, “promote” and “maximise” in clause 3.4(a)(i).

He says that this is synonymous with the characteristics of a fiduciary described by Millett LJ as he then was in Bristol v West BS v Mothew [1998] Ch 1, and referred in particular to 16C-G and 17F – 18C and that the use of the phrase “due skill and care” and the contract itself does not strip the fiduciary duties of their very nature. The relevant passages are as follows:

“Breach of fiduciary duty

Despite the warning given by Fletcher Moulton L.J. in In re Coomber; Coomber v. Coomber [1911] 1 Ch. 723, 728, this branch of the law has been bedevilled by unthinking resort to verbal formulae. It is therefore necessary to begin by defining one’s terms. The expression “fiduciary duty” is properly confined to those duties which are peculiar to fiduciaries and the breach of which attracts legal consequences differing from those consequent upon the breach of other duties. Unless the expression is so limited it is lacking in practical utility. In this sense it is obvious that not every breach of duty by a fiduciary is a breach of fiduciary duty. I would endorse the observations of Southin J. in Girardet v. Crease & Co. (1987) 11 B.C.L.R. (2d) 361, 362:

“The word ‘fiduciary’ is flung around now as if it applied to all breaches of duty by solicitors, directors of companies and so forth … That a lawyer can commit a breach of the special duty [of a fiduciary] … by entering into a contract with the client without full disclosure … and so forth is clear. But to say that simple carelessness in giving advice is such a breach is a perversion of words.”

These remarks were approved by La Forest J. in LAC Minerals Ltd. v. International Corona Resources Ltd. (1989) 61 D.L.R. (4th) 14, 28 where he said: “not every legal claim arising out of a relationship with fiduciary incidents will give rise to a claim for breach of fiduciary duty.”

It is similarly inappropriate to apply the expression to the obligation of a trustee or other fiduciary to use proper skill and care in the discharge of his duties. If it is confined to cases where the fiduciary nature of the duty has special legal consequences, then the fact that the source of the duty is to be found in equity rather than the common law does not make it a fiduciary duty.

...

In my judgment this is not just a question of semantics. It goes to the very heart of the concept of breach of fiduciary duty and the availability of equitable remedies.

Although the remedy which equity makes available for breach of the equitable duty of skill and care is equitable compensation rather than damages, this is merely the product of history and in this context is in my opinion a distinction without a difference. Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss. There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. It should not be confused with equitable compensation for breach of fiduciary duty, which may be awarded in lieu of rescission or specific restitution.

This leaves those duties which are special to fiduciaries and which attract those remedies which are peculiar to the equitable jurisdiction and are primarily restitutionary or restorative rather than compensatory. A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal. This is not intended to be an exhaustive list, but it is sufficient to indicate the nature of fiduciary obligations. They are the defining characteristics of the fiduciary. As Dr. Finn pointed out in his classic work Fiduciary Obligations (1977), p. 2, he is not subject to fiduciary obligations because he is a fiduciary; it is because he is subject to them that he is a fiduciary.”

Ms Stevens-Hoare on the other hand, submits that Courtwood has no real prospect of successfully arguing that the Property Advisory Agreement properly construed created fiduciary obligations and that furthermore, there are no reasonable grounds for bringing the claim on such a basis. She points out that Millett LJ explained at 16C that not every breach of duty by a fiduciary is a breach of fiduciary duty and submits that the duties contained in the Property Advisory Agreement are not absolute. In this regard she also referred me to Jackson & Powell on Professional Liability 7^th ed at 2-138 and 2.139 where it is stated that the duty to exercise skill and care may be owed by a fiduciary but is not a fiduciary duty and that a professional man’s contractual and tortious duties do not become fiduciary in nature because he is a fiduciary.

She also referred me to a passage in the judgment of Deane J in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, a decision of the High Court of Australia at [59]. The learned judge stated that a best efforts or a best endeavours clause in a contract does not impose a duty on the distributor in that case to disregard his own interests and went on to quote Mason J in Transfield Pty Ltd v Arlo International Ltd (1980) 54 ALJR 323 at 329 in which he stated that a “best endeavours” clause in a licence agreement went no further than to prescribe a standard measured by what was reasonable in the circumstances. In addition, she took me to Kelly v Cooper [1993] AC 205 in which the Privy Council considered whether estate agents with whom the claimant had contracted to market his house were in breach of duty in failing to disclose to him material information about another sale and in placing themselves in a position where their duties and interests conflicted. In particular, my attention was drawn to the passage in the judgment of Lord Browne Wilkinson who delivered the judgment of the court at 213H – 215D:

“In the view of the Board the resolution of this case depends upon two fundamental propositions: first, agency is a contract made between principal and agent; second, like every other contract, the rights and duties of the principal and agent are dependent upon the terms of the contract between them, whether express or implied. It is not possible to say that all agents owe the same duties to their principals: it is always necessary to have regard to the express or implied terms of the contract. This fact is fully recognised in the introduction to chapter 5 of Bowstead on Agency, pp. 137-138: the rest of the chapter, including the proposition on which the judge relied, is dealing with the duties which will arise from the terms normally found in a contract of agency.

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. The existence and scope of these duties depends upon the terms on which they are acting. In New Zealand Netherlands Society “Oranie” Inc. v. Kuys [1973] 1 WL.R. 1126 , 1129-1130, Lord Wilberforce, in giving the judgment of this Board, said:

“The obligation not to profit from a position of trust, or, as it is sometimes relevant to put it, not to allow a conflict to arise between duty and interest, is one of strictness. The strength, and indeed the severity, of the rule has recently been emphasised by the House of Lords: Phipps v. Boardman [1967] 2 A.C. 46. It retains its vigour in all jurisdictions where the principles of equity are applied. Naturally it has different applications in different contexts. It applies, in principle, whether the case is one of a trust, express or implied, of partnership, of directorship of a limited company, of principal and agent, or master and servant, but the precise scope of it must be moulded according to the nature of the relationship. As Lord Upjohn said in Phipps v. Boardman, at p. 123: ‘Rules of equity have to be applied to such a great diversity of circumstances that *215 they can be stated only in the most general terms and applied with particular attention to the exact circumstances of each case.”

In Hospital Products Ltd. v. United States Surgical Corporation (1984) 156 C.L.R. 41, 97, Mason J. in the High Court of Australia said:

“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.”

Thus, in the present case, the scope of the fiduciary duties owed by the defendants to the plaintiff (and in particular the alleged duty not to put themselves in a position where their duty and their interest conflicted) are to be defined by the terms of the contract of agency.”

Applying those considerations to the present case, their Lordships are of the view that since the plaintiff was well aware that the defendants would be acting also for other vendors of comparable properties and in so doing would receive confidential information from those other vendors, the agency contract between the plaintiff and the defendants cannot have included either (a) a term requiring the defendants to disclose such confidential information to the plaintiff or (b) a term precluding the defendants acting for rival vendors or (c) a term precluding the defendants from seeking to earn commission on the sale of the property of a rival vendor.”

Ms Stevens-Hoare submits therefore, that fiduciary duties cannot exist which are in excess of the express terms of the contract or which are contrary to those terms. She points out that under clause 8 of the Property Advisory Agreement, Wharf was not only entitled to a fee but also a percentage of what were described as Phase 1 Profits and therefore, SFPL and Wharf had a common interest in the success of the project. By clause 14, SFPL was liable for “Operating Expenses” incurred by Wharf and that the Property Advisory Agreement contained an entire agreement clause at clause 15.1. She also submits that the phrase “with due skill and care” qualifies the provision of the Services in accordance with clause 3.4(a)(i) as does “reasonable endeavours” in clause 3.4(b) and that accordingly, neither contains an absolute obligation. She says the same of the provision in relation to conflicts in clause 3.4(d) and whilst she accepts that the obligation of good faith in that clause is unqualified, she says that that is not a necessary indicator of the existence of a fiduciary duty. In any event, she submits that the duties and breaches of duties are not pleaded in terms of good faith.

It is not in dispute that the court’s task when construing a contract is to determine what the reasonable person with the background knowledge of the parties would have understood the document to mean: ICS Ltd v West Bromwich BS [1998] 1 WLR 896, BCCI v Ali [2002] 1 AC 251, Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Arnold v Britton [2015] AC 1619. The court will take into account the relevant factual matrix. In this regard, Mr Cunningham referred me to the dicta of Lord Hoffmann in the ICS v West Bromwich case at 913, para (2) where he stated that the factual matrix:

“includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.”

Mr Cunningham in fact, is content that evidence as to the relevant factual matrix is before the court, placing it in a position to determine this issue. He went on to submit, however, that if the court were concerned about the absence of disclosure or any substantive evidence from the individuals involved as to the circumstances in which the Property Advisory Agreement was executed, it may conclude that it is not in a position to decide and that the question of whether fiduciary duties have arisen should be determined at trial.

In my judgment, it is not possible at this stage and on the basis of the evidence before the court which for the most part is directed at technical legal issues, to determine whether fiduciary obligations in the true sense exist or existed between Wharf and SFPL. Neither is it possible to determine therefore, that it is unarguable that the relationship between Wharf and SFPL gave rise generally to fiduciary duties or that there is no real prospect of succeeding in such a claim. It seems to me that the issue is particularly fact sensitive and is not suitable for consideration in this way and at this stage of the proceedings. In any event, it seems to me that it cannot be said with certainty that the terms of the Property Advisory Agreement and the relationship between the parties is such that there are no reasonable grounds for bringing a case based upon fiduciary duty, that such a case is inevitably unwinnable or that there is no serious issue to be tried.

Although not all duties of a fiduciary are also fiduciary duties, the relationship between parties is derived primarily from the relevant contractual terms properly construed and, in general, fiduciary duties are absolute in nature, it seems to me that it is neither fanciful nor unarguable that once the relationship between SFPL and Wharf is considered in full and the Property Advisory Agreement is construed as a whole that such duties may be held to have arisen. Further, in my judgment, the inclusion of an entire agreement clause in the Property Advisory Agreement cannot of itself render the claim on the basis of fiduciary duties unarguable or fanciful. It seems to me, for example, that it is arguable that in the relevant circumstances such duties arose from the roles which Wharf performed which are referred to in paragraphs 49.6 and 49.8 of the Particulars of Claim and from the duty of good faith which is expressed in absolute terms at clause 3.4(d) of the Property Advisory Agreement and is pleaded at paragraph 49.1 of the Particulars of Claim. My choice of those examples should not lead however, to the conclusion that the remainder of the pleading in relation to fiduciary duty should be struck out. As I have already said, the scope of the fiduciary duties, if any, can only properly be determined against the full factual matrix.

Receipt of SFPL’s property

Next, Ms Stevens-Hoare submits that even if a breach of a fiduciary duty was committed, property belonging to SFPL was not received by Wharf nor is there a factual basis for the allegation that WPL was Wharf’s vehicle. It is also alleged that the Particulars of Claim are insufficiently particularised and fail to identify the proprietary interest or estate which is said to have passed from SFPL to WPL.

In this regard, Ms Stevens-Hoare first emphasised the factual background to the appointment of the LPARs and the ultimate sale of Sandford Farm to WPL by the LPARs. She took me to the minutes of a meeting of the directors of SFPL dated 17 March 2009 in which it is recorded that the planning application in relation to Sandford Farm had been rejected and would have to be addressed on appeal, funds were insufficient to take SFPL through to the conclusion of such an appeal, that amounts were outstanding to ANTS, that SFPL was unable to meet its financial obligations; that it appeared inevitable that ANTS would take radical action unless funds were received immediately; and that Wharf had had conversations with ANTS to roll forward the debt facility to June 2010 and that the discussions looked positive provided the debt was serviced. In April 2009, ANTS wrote to SFPL pointing out that it was in breach of its loan agreement and setting out its terms for an extension of the facility to 31 August 2009 which included interest being “kept current” and a possible further extension until the end of 2009 which included amongst other things a cash lodgement equivalent to 9 months interest. On 4 June 2009, ANTS wrote to Wallace LLP, the solicitors acting for Ludsin, a shareholder of SFPL pointing out that SFPL had been in breach of the facility agreement since September 2008 and inviting the board of directors and the shareholders to put forward proposals in relation to the breaches in the light of the forthcoming planning appeal with regard to Sandford Farm. In reply in a letter dated 8 June 2009, Wallace LLP outlined the concerns of shareholders that they and SFPL had not been kept informed by Wharf, that there was a lack of transparency, that Wharf was under investigation and that it had a special relationship with ANTS which it might be exploiting to the detriment of SFPL. Two days later on 10 June 2009, ANTS sent what has been termed by the Claimants the “soft notice” by which it reiterated SFPL’s default under the loan facility and reserved its rights. Wharf’s winding up petition against SFPL was issued the next day by Jeffery Green Russell on its behalf. The following Monday, 15 June 2009, ANTS sent to SFPL what has been termed by the Claimants the “hard notice” of default by which the facility was cancelled, the loan was declared payable on demand and payment was demanded immediately.

In the meantime, on Friday 12 June 2009, Jeffery Green Russell had written to ANTS on behalf of Wharf. The letter was headed “Without prejudice save as to contract”. It referred to the “soft notice” and to the winding up petition in relation to which it stated that notice of intention to support from other creditors had been received and pointed out that:

“… (whether as a consequence of the default notice or of our client’s Petition) you have indicated to our client [Wharf] that you will be appointing an Administrator of the Company [SFPL]. As you know, our client, [Wharf] who has been responsible for conducting the dialogue with your bank for some years now welcomes that move and indeed, at the beginning of last week, met with you requesting you to appoint an Administrator. However, following a recent Shareholders dispute and Board Room shake up of the Company, [SFPL] . . . you felt you were unable to continue to deal with our client direct, as you felt our client [Wharf] now lacked locus standi.

Our client has certain serious and sensible proposals that it would wish to make to you or your Administrator (as appropriate) with the intention of procuring that you are paid in full…

…

My clients would hope to develop their proposals with you and/or your Administrator, part of such proposal being that they would have control of the site.

…it would be in your best interests to meet with our client at the earliest possible opportunity…”

It is this sequence of events including the letter of 12 June 2009 which Mr Cunningham describes as evidence of improper manoeuvring in breach of fiduciary duty which led to the sale of Sandford Farm albeit that he does not allege any wrongdoing or impropriety on the part of the LPARs themselves. Miss Stevens-Hoare characterises the turn of events in a completely different way. She points to the fact that the only proposal made on behalf of the shareholders by letter dated 24 June 2009, was rejected and says that SFPL and the loan facility was only ever going in one direction. In this regard she refers to the witness statement of Mr Stephen Hamilton who was Head of Restructuring at ANTS at the time. Amongst other things, he points out that SFPL was in default, states that Wharf’s solicitor’s letter of 12 June 2009 did not influence ANTS’ subsequent decision to enforce its rights but that in the light of the events of default being the payment default and the winding up petition ANTS exercised its right to cancel the loan facility and make demand of SFPL. He also points out that once the LPARs were appointed they acted independently. In the light of all this Miss Stevens-Hoare submits that SFPL’s case as to manoeuvring is fanciful.

Furthermore, she says that there was no receipt of SFPL’s property as a result of the sale of Sandford Farm by the LPARs and therefore, not only is a fundamental building block of the claim missing And so there can be no tracing or following of SFPL’s property which is also the basis for the proprietary injunction it is sought to have continued until trial or further order. She says that ANTS’ interest passed and the equity of redemption to which SFPL was entitled was extinguished. In addition, she says that as a result of the default under the loan, there was a negative equity in Sandford Farm and therefore, nothing of value belonging to SFPL was transferred.

In this regard, Ms Stevens-Hoare referred to the transcript of the hearing before Hildyard J when the interim injunction was first granted. On that occasion Mr Cunningham’s junior Mr Banner on behalf of SFPL stated that it was the equity of redemption upon which the company relied. In submissions in reply before me, Mr Cunningham said that that may have been the case then but now it is said that it was the entire title together with the potential for planning permission which passed, something to which I shall return.

As I have already mentioned, Ms Stevens-Hoare points out that for the purposes of the claim it is necessary for Courtwood to be able either to trace or to follow property into the hands of WPL. She referred me to the passage in the judgment in Foskett v McKeown & Ors [2001] AC 102 in which Lord Millett explores the principles of tracing and following at 127A to 128G. He explained that “following” is the process of following the same asset as it moves from hand to hand, that “tracing” is the process of identifying a new asset as the substitute for the old and that tracing is part of the law of property, is dependant upon the claimant’s title and is neither discretionary nor does it depend upon fairness. Furthermore, he pointed out that the claimant claims the new asset because it was acquired in whole or in part with the original asset and what he traces is the value inherent in the original. He went on at 128D-E:

“… Tracing is also distinct from claiming. It identifies the traceable proceeds of the claimant’s property. It enables the claimant to substitute the traceable proceeds for the original asset as the subject matter of his claim. But it does not affect or establish his claim. That will depend on a number of factors including the nature of his interest in the original asset. He will normally be able to maintain the same claim to the substituted asset as he could have maintained to the original asset. …”

It is not in dispute that the freehold title to Sandford Farm which was registered in the name of SFPL was subject to a legal charge in favour of ANTS under which there was a statutory power of sale. Ms Stevens-Hoare submits that there was no value inherent in SFPL’s interest in Sandford Farm, that the equity of redemption to which it was entitled was extinguished by reason of the sale by the LPARs, that WPL paid the bank what it was owed and that which was sold was a creature of statute only. In this regard, I was referred to section 88, 101 and 104 of the Law of Property Act 1925 which provide as follows:

“88

Realisation of freehold mortgages.

(1)

Where an estate in fee simple has been mortgaged by the creation of a term of years absolute limited thereout or by a charge by way of legal mortgage and the mortgagee sells under his statutory or express power of sale –

(a)

the conveyance by him shall operate to vest in the purchaser the fee simple in the land conveyed subject to any legal mortgage having priority to the mortgage in right of which the sale is made and to any money thereby secured, and thereupon;

(b)

the mortgage term or the charge by way of legal mortgage and any subsequent mortgage term or charges shall merge or be extinguished as respects the land conveyed;

and such conveyance may, as respects the fee simple, be made in the name of the estate owner in whom it is vested.”

…

101

Powers incident to estate or interest of mortgagee.

(1)

A mortgagee, where the mortgage is made by deed, shall, by virtue of this Act, have the following powers, to the like extent as if they had been in terms conferred by the mortgage deed, but not further (namely):

(i)

A power, when the mortgage money has become due, to sell, or to concur with any other person in selling, the mortgaged property or any part thereof, either subject to prior charges or not, and either together or in lots, by public auction or by private contract, subject to such conditions respecting title, or evidence of title, or other matter, as the mortgagee thinks fit, with power to vary any contract for sale, and to buy in at an auction, or to rescind any contract for sale, and to re-sell, without being answerable for any loss occasioned thereby: ...”

…

104

Conveyance on sale.

(1)

A mortgagee exercising the power of sale conferred by this Act shall have power, by deed, to convey the property sold, for such estate and interest therein as he is by this Act authorised to sell or convey or may be the subject of the mortgage, freed from all estates, interests, and rights to which the mortgage has priority but subject to all estates, interests, and rights which have priority to the mortgage.

(2)

Where a conveyance is made in exercise of the power of sale conferred by this Act, or any enactment replaced by this Act, the title of the purchaser shall not be impeachable on the ground -

(a)

that no case had arisen to authorise the sale; or

(b)

that due notice was not given; or

(c)

where the mortgage is made after the commencement of this Act, that leave of the court, when so required, was not obtained; or

(d)

whether the mortgage was made before or after such commencement, that the power was otherwise improperly or irregularly exercised;

and a purchaser is not, either before or on conveyance, concerned to see or inquire whether a case has arisen to authorise the sale, or due notice has been given, or the power is otherwise properly and regularly exercised; but any person damnified by an unauthorised, or improper, or irregular exercise of the power shall have his remedy in damages against the person exercising the power. …”

Mr Cunningham referred to a passage in Megarry & Wade “Law of Real Property” 8^th ed at 25-016 at which it is stated that if the purchaser becomes aware of any impropriety in the sale, then notwithstanding the statutory provisions which provide that the purchaser’s title is not to be impeached, he does not receive good title and to hold otherwise would be to use the statute as an instrument of fraud. Mr Cunningham relied on Griffith v Owen [1907] 1 Ch 195 in this regard. Unfortunately, I found this of little assistance as it pre-dates the statutory provisions in question and is also concerned with the conduct of an express trustee. He also took me to Corbett & Anr v Halifax Building Society & Ors [2003] 1 WLR 964 per Pumfrey J at [25] - [27]. It was a case in which a property was sold pursuant to a mortgagee’s statutory power of sale at an undervalue where the ultimate purchaser had also deceived the mortgagee. The appeal against an order setting aside the sale was allowed. Pumfrey J with whom Scott Baker and Schiemann LJJ agreed held that a completed sale by a mortgagee is not liable to be set aside because it was at an undervalue or as result of the deceit practised on the mortgagee by the ultimate purchaser. In particular, my attention was drawn to a passage from the judgment of Crossman J in Lord Waring v London and Manchester Assurance Co Ltd [1935] Ch 310, at 318-319 (which was subsequently approved by the Court of Appeal in Property and Bloodstock Ltd v Emerton [1968] Ch 94) which was focussed on the position between contract and completion in relation to a sale pursuant to section 104 Law of Property Act 1925 and was set out at [25] of Pumfrey J’s judgment. It was as follows:

“25

The only effect of the conveyance is to put the legal estate entirely in the purchaser: that follows from section 104, subsection (1), of the Law of Property Act 1925, which provides that a mortgagee shall have power to convey the legal estate; and the whole legal estate can be conveyed free from all estates, interests, and rights to which the mortgage has priority. Section 104, subsection (2), upon which also counsel for the plaintiff relied, does not seem to me to affect the question at all. Its purpose is simply to protect the purchaser and to make it unnecessary for him, pending completion and during investigation of title, to ascertain whether the power of sale has become exercisable. Of course, if the purchaser becomes aware, during that period, of any facts showing that the power of sale is not exercisable, or that there is some impropriety in the sale, then, in my judgment, he gets no good title on taking the conveyance. The result in the present case is, in my judgment, that the sale effected by the contract, assuming, for the moment, that there is no objection to it on any other ground, binds the plaintiff, and that it is too late after the sale for him to tender the mortgage money and become entitled to have the property reconveyed to him.”

I was also referred to [26] and [27] of Pumfrey J’s judgment:

26

It would seem to follow from this that a completed sale by a mortgagee is not liable to be set aside merely because it takes place at an undervalue. Impropriety is a prerequisite, and section 104(2) makes it clear that the purchaser is not protected if he has actual knowledge of the impropriety. But if the purchaser has no notice of the impropriety, then on the face of it he takes free. Thus, the completed sale by a mortgagee pursuant to his statutory power is vulnerable only if the purchaser has knowledge of, or participates in, an impropriety in the exercise of the power.

27

In Property and Bloodstock Ltd v Emerton [1968] Ch 94, 114 Danckwerts LJ summarised the position as follows:

“The actual decision of Crossman J in Lord Waring’s case was: (1) that a mortgagee’s exercise of his power under section 101(1)(i) of the 1925 Act to sell the mortgaged property by public auction or private contract is binding on the mortgagor before completion unless it is proved that he exercised it in bad faith; and (2) that the fact that a contract for sale was entered into at an undervalue is not by itself enough to prove bad faith.””

Mr Cunningham draws attention to the passage in Crossman J’s judgment where he states that a purchaser who is aware of some impropriety in the sale from a mortgagee gets no good title and the passages at [26] at which Pumfrey J states that a purchaser with actual knowledge of the impropriety is not protected by section 104(2) Law of Property Act 1925. He submits that: Wharf through its human actors and, as result, WPL had knowledge of the improper manoeuvring in breach of fiduciary duty which had brought the sale about; as a result, it could not obtain good title; and SFPL retained a proprietary interest in Sandford Farm and its proceeds of sale, together with the overage rights.

Ms Stevens-Hoare on the other hand submits that it is clear from the Corbett case that in order to impeach the sale the wrongdoing must be that of the mortgagee itself and no allegations are made against ANTS or the LPARs. Furthermore, she submits that as a result of section 101 Law of Property Act 1925 either the original legal estate is extinguished and re-created in the hands of the purchaser from the mortgagee or it is transferred, the equity of redemption is extinguished and the mortgagee’s interest is transferred to the purchaser. Under section 104 she says that there is no question but that the equity of redemption is extinguished. Furthermore, she points out that even if the opportunity to gain planning permission were embedded in the title itself, it too would be extinguished. She says that section 105 Law of Property Act 1925 which creates a trust of the proceeds of sale, is consistent with all the value in the equity of redemption having been extinguished. In this case, there was no value in the equity of redemption and so as a practical matter, in any event, nothing can have passed. She says therefore, there can be neither tracing nor following in this case.

First, in my judgment, it is neither unarguable nor fanciful to contend as Mr Cunningham now does, that it was the full legal title to the freehold which was registered in the name of SFPL which was transferred to WPL. In fact, it seems to me that that is clearly the effect of sections 88, 101 and 104 Law of Property Act 1925. There is no question of another title being transferred, itself being a purely statutory creation, the first having been extinguished, as Ms Stevens-Hoare submitted at one stage. It is no longer alleged that it was the equity of redemption which was transferred and were it still alleged, in the light of section 104(1) Law of Property Act 1925, I would have decided that such a contention was unarguable. As a result of section 104, the property is conveyed “freed from all estates, interest, and rights to which the mortgage has priority”. It seems to me therefore, that it is not possible in principle to say that there is nothing for SFPL to follow or trace.

The second and third questions must be taken together. The second is whether the sale by LPARs on behalf of ANTS pursuant to the statutory power of sale, the conduct of which is not impeached, breaks the chain and renders it unarguable that anything can be followed or traced from SFPL into the hands of WPL. The third which must be considered together with the second is a composite: (a) are the allegations of manoeuvring in breach of fiduciary duty fanciful; and (b) if they are not, is it arguable and not merely fanciful that the manoeuvring can affect WPL’s position and cause it to become a constructive trustee of the property received or its traceable proceeds?

To begin with the essential element in the Claimant’s analysis, in my judgment, it is neither unarguable nor can it be said that there is no prospect of succeeding in establishing “manoeuvring”. It is essentially a matter of fact but for the purposes of these applications, it seems clear to me, for example, from the combination of events set out at paragraphs 36 and 37 above including the presentation of the winding up petition, followed immediately by the letter of 12 June 2009, that it cannot be said that such an allegation is fanciful or unarguable. In my judgment, neither can it be said that the effect of the transfer of Sandford Farm as a result of an exercise of a statutory power of sale renders SFPL’s claim unarguable or one which has no real prospect of succeeding. It is true that section 104 Law of Property Act 1925 provides protection for a purchaser from a mortgagee exercising the statutory power of sale in the circumstances set out in section 104(2). However, it seems to me that it is not unarguable that nevertheless, if impropriety is proved, of which the purchaser was aware, that the purchaser holds the property transferred or its traceable proceeds as constructive trustee. As stated in Megarry & Wade, to conclude otherwise would be to allow the statute to be used as an instrument of fraud. The Corbett case was dealing with a different situation. There the focus was on whether the conveyance or transfer pursuant to the statutory power of sale could be impeached because it was at an undervalue or as a result of the deception practised by the ultimate purchaser on the mortgagee. It seems to me that it was for that reason also that the question was whether any impropriety was that of the mortgagee itself. The Court of Appeal did not consider whether the effect of section 104 was to render it unarguable that a purchaser from a mortgagee may become a constructive trustee of the property or its proceeds where the purchaser is aware of or complicit in impropriety which brought the sale about.

In my judgment, therefore, for the purposes of Defendants’ applications, I do not consider that it is unarguable, that there is no real prospect in succeeding in arguing or that it is fanciful that Sandford Farm and/or its proceeds were received by WPL and could be followed or traced into its hands. I should add, however, that I consider Ms Stevens-Hoare to be correct that the pleading is vague about what was allegedly transferred. It seems to me that the Claimant should be given the opportunity to amend the pleading in this regard: Soo Kim v Youg (supra).

Knowledge for the purpose of knowing receipt

It is not in dispute that the elements of a knowing receipt claim are set out in El Ajou v Dollar Land Holdings plc [1993] BCC 143, 154h per Hoffmann LJ. It is necessary to show that there has been: a disposal of the claimant’s assets in breach of a fiduciary duty; beneficial receipt by the defendant of assets which are traceable as representing the assets of the claimant; and knowledge on the part of the defendant that the assets received are traceable to a breach of fiduciary duty.

Courtwood’s case is that Sandford Farm was received by WPL and that the knowledge of Mr Maggs, Mr Mellor and Mr/Mrs Balfour can and should be imputed to it. SFPL is entitled to claim that Sandford Farm was held by WPL on trust for it, and that following its sale to Taylor Wimpey in 2010 for £27 million, the benefits flowing from the contract of sale are traceable assets likewise held on trust for it.

Mr Cunningham submits that strikingly none of the Defendants contest receipt or dispute Mr Maggs’ s 236 evidence that the profits from the sale of Sandford Farm were distributed between Mr Maggs, Mr Mellor and Mr Balfour. Further, WPL does not contest knowledge and Mr Mellor, Tamadot, Chateau and Charlestown do not deny knowledge but contend that Courtwood is not entitled to rely on inference. Mr Cunningham submits that this is neither a proper basis to strike out nor for summary determination, all the less so when Mr Mellor has very obviously avoided making any disclosure to the court of any positive case, or any information about the extent of his involvement.

Ms Stevens-Hoare accepts for the purposes of these applications that there is at least an arguable case that Mr Maggs’ knowledge should be imputed to WPL for the purposes of this element of the knowing receipt claim. She says however, that the same is not true for Mr Mellor and her corporate clients who are said to derive their knowledge from Mr Mellor although she accepts that it is a high hurdle to satisfy the test whether for strike out or summary judgment. She submits that an inference of knowledge from receipt is not good enough and that it is necessary to know that what was received is traceable to the breach of fiduciary duty: El Ajou (supra) and BCCI (Overseas) Ltd v Akindele [2001] Ch 437 per Nourse LJ at 450 D-F and 455 D-G. She submits that knowledge must be considered separately from receipt and that the points relied upon by Mr Cunningham confuse receipt with knowledge and are not all connected with Mr Mellor or a fortiori to the other CMS/Mellor Defendants.

First, Ms Stevens-Hoare says that the receipt of £500,000 by Mr Mellor as a result of the sale by Bound Oak Ltd to SFPL in 2005 is irrelevant. Although Ms Rose (as she then was) in the Ludsin Proceedings found that there had been deceit in relation to that transaction, Mr Mellor was not a party and the dishonesty was that of Mr Maggs, Mr Balfour and others. Secondly, she submits that knowledge cannot be inferred merely from the fact that Mr Mellor was a director of Wharf during part of the relevant period. She says that there is nothing in his status which points to knowledge of the alleged impropriety. Thirdly, Ms Stevens-Hoare says that nothing can be inferred from the short space of time between the winding up petition, the appointment of the LPARs and the sale of the property to WPL which Mr Cunningham characterises as manoeuvring. She submits that there was time pressure as a result of the imminent planning appeal and SFPL’s default on its loan. Fourthly, she says that the fact that Mr Mellor was willing to give a personal guarantee for the loan granted by ANTS to WPL in order to purchase Sandford Farm is not referable to knowledge. As she pointed out Wharf had an interest in the successful development of Sandford Farm under the terms of the Property Advisory Agreement and therefore, it was natural that Mr Mellor should be willing to give the guarantee. Fifthly, she says that the sale of Sandford Farm at a profit is irrelevant to knowledge because it occurred after the alleged receipt of SFPL property by WPL. Sixthly, she says that the assertion that it should be inferred from the giving of the personal guarantees that the guarantors would be recipients is both repetitive and goes to receipt rather than knowledge. Seventhly, as to Courtwood’s reliance upon Mr Maggs’ s 236 evidence, Ms Stevens-Hoare submits that he was found to be dishonest in the Ludsin Proceedings, the evidence itself is vague and does not address breach of fiduciary duty. Eighthly, she says that nothing can be inferred from the absence of a denial. Lastly, she submits that there is nothing about the alleged manoeuvres which points to knowledge on the part of Mr Mellor. There is no evidence that the invoice raised by Wharf which was the basis for the winding up petition, was sent to Mr Mellor. Further, she says that the winding up petition itself is not indicative of knowledge of the alleged scheme and breach of fiduciary duty, on the part of Mr Mellor. It is consistent merely with Wharf having a desire to recover its money having been aware that SFPL was insolvent. She also says that there is no evidence of Mr Mellor having been aware of the letter written by Mr Maggs on Wharf’s behalf dated 12 June 2009. She says therefore, that each of the steps is consistent with legitimate commercial pressure and ANTS having sought proposals.

In my judgment it is not possible to decide at this stage that the case put forward in relation to knowledge both of Mr Mellor and his associated companies is either unarguable for the purposes of the strike out applications or that it is fanciful. I come to this conclusion having resisted the temptation to conduct a mini-trial on the very limited facts which are available to the court. The question of knowledge on the part of the CMS/Mellor Defendants and Mr Mellor in particular is extremely fact sensitive. Although it may appear as a matter of bare analysis that the sale of Sandford Farm at a profit or the giving of personal guarantees in order to enable WPL to obtain the finance in order to buy the farm are not in themselves indicative of knowledge of breach of fiduciary duty, they may be part of a concerted effort, something which it is not appropriate to determine at this stage. This is all the more so in relation to Mr Maggs’ evidence. It seems to me that the matters pleaded at paragraph 63.7 of the Particulars of Claim which are supported by the transcript of the s 236 examination itself are sufficient to raise an arguable case as to the inference of knowledge by Mr Mellor and through him the other CMS/Mellor Defendants. Given Mr Mellor’s position as a director of Wharf and Mr Maggs’ s236 evidence as to the level of Mr Mellor’s involvement in Wharf and the Sandford Farm project, in my judgment, it is impossible to conclude that Courtwood’s case as to knowledge is unarguable or has no real prospect of success. Although Mr Maggs was found to be dishonest in the Ludsin Proceedings in relation to the 2005 transaction, his evidence is not denied for the purposes of the applications before this court and there is no means by which its veracity can properly be tested. Questions as to whether his evidence is reliable will have to be determined in the future. In my judgment, such doubts cannot go so far as to render the evidence and the inferences which can be drawn from it valueless at this stage and as a result render Courtwood’s case in this regard unarguable or for that matter, fanciful.

Abuse of Process

Ms Stevens-Hoare also submits that there is Henderson v Henderson style abuse of process here. She says that all of these matters could have been raised in the Ludsin Proceedings. She accepts that the position differs from the norm because the CMS/Mellor Defendants were not parties to those proceedings but she says that they are almost in a worse position as a result. Reliance is placed upon the outcome and the findings in the Ludsin Proceedings to which the CMS/Mellor Defendants were not parties and in which no evidence was given on their behalf. She submits that it may have been a tactical decision and that it is possible that there might be double recovery. She referred me to Stuart v Goldberg Linde (a firm) & Ors [2008] 1 WLR 823 and in particular to [71] of the judgment of Lloyd LJ, [77] in the judgment of Sedley LJ and [86], [88] and [89] of Sir Anthony Clarke MR:

“71

In my judgment to hold that this fact makes the bringing of the 2005 action an abuse of process would be a substantial and unjustified extension of the law in this respect. It is not right, in my view, to say, as a general proposition of law, that where the claimant in existing proceedings comes to know, in the course of those proceedings, from information provided by the defendant, of an additional cause of action against the defendant, which is quite different from that asserted in his existing claim and one which it would not be reasonable, in the circumstances, to expect him to seek to combine with that existing claim, he must inform the defendant of the fact that he is contemplating bringing such a claim in future before he brings his existing proceedings to trial. Different facts might lead to a different conclusion. For example, it might be different if the information came from another source, so that the parties’ knowledge of the facts was not the same. It might well be different if the claims were essentially similar (as in Johnson v Gore Wood & Co [2002] 2 AC 1) or closely related (as in the Aldi Stores Ltd case [2008] 1 WLR 748) so that they could readily have been combined. It might perhaps be different if the information had come to the claimant’s knowledge at a much earlier stage than occurred here. But on the facts of this case I cannot, with respect, agree with the master or the judge that the claimant’s failure to tell the defendants, before the trial of the 2000 action, that he was contemplating asserting the inducement claim made the bringing of the 2005 action an abuse of the process. The same goes, all the more strongly, for the misrepresentation claim, as to which the claimant did not know all the relevant facts at the time of the trial of the 2000 action.

…

77.

Secondly, as the Aldi Stores Ltd case again makes clear and as Sir Anthony Clarke MR stresses, a claimant who keeps a second claim against the same defendant up his sleeve while prosecuting the first is at high risk of being held to have abused the court’s process. Moreover, putting his cards on the table does not simply mean warning the defendant that another action is or may be in the pipeline. It means making it possible for the court to manage the issues so as to be fair to both sides.

…

86

In these circumstances, applying the principles identified by Thomas LJ in the Aldi Stores Ltd case [2008] 1 WLR 748 it is as I see it for us to consider afresh whether this action is an abuse of process. While I have ultimately reached the conclusion that, in all the circumstances, this action is not an abuse, I have found this issue more troubling than perhaps Lloyd LJ has done. In particular it seems to me that there are some aspects of the claimant’s approach to the first action which were abusive, or at the very least would now be held to be abusive in the light of the guidance in the Aldi Stores Ltd case.

…

88

As Lloyd LJ says, at paras 15 and 16, the relevance of this aspect of the story to the first trial was not the effect of the statements on Mr Vardinoyannis but to enable Mr Linde to show that the claimant was a fantasist, whose evidence should not be believed. Once he had read the witness statement, the claimant knew enough to realise that he might have a claim for inducement of breach of contract against Mr Linde. Yet he decided not to advance the claim. It is plain that this was a deliberate decision made on legal advice. This can be seen from the document quoted by Lloyd LJ, at para 34:

“The claimant’s legal advisers …... advised not to obscure the issue of breach of undertaking with other emerging claims, in a situation where the defendants were not disclosing any information, and that such other issues would be better dealt with within subsequent separate proceedings when more information could be gleaned from the defendants, as transpired as a result of cross-examination.”

The deliberate decision taken was thus not to raise “other emerging claims” but, in effect, to prepare for “subsequent separate proceedings” after more information had been gleaned from Mr Linde as a result of cross-examination.

89

As Lloyd LJ puts it, at para 16, Mr Linde’s story was no doubt explored a good deal more in cross-examination by the claimant in order to show that Mr Linde should not be believed. Thus it was decided by the claimant, on legal advice, to use the material to cross-examine Mr Linde as to his credit for two purposes, first to improve his case at the trial in 2001 and secondly to prepare his case for future proceedings. In short, it was a purely tactical decision. In these circumstances, there appears to me to be a strong case for concluding that the issues arising out of these conversations naturally belonged to one set of proceedings, that it was undesirable for a trial judge to have to reach conclusions on credibility in one action when either the very same or similar issues of credibility were likely to become relevant in a future action, which would be likely to be tried by a different trial judge, with the consequent risk of inconsistent conclusions.”

Mr Cunningham submits that Mr Mellor and the other CMS/Mellor Defendants and WPL were not parties to the Ludsin Proceedings and therefore, the principle is of no application here. I have to say that I agree. All of the cases to which I was referred concerned circumstances in which information was obtained or intentionally gathered in relation to a party in proceedings but was kept back for use on a subsequent occasion against that party. That is not the case here. The CMS/Mellor Defendants were not parties to the Ludsin Proceedings at all. This is not a case therefore, of having been “vexed twice”, although I do accept that it might have been possible to combine the proceedings. In the circumstances, therefore, it cannot be said that the present proceedings amount to an abuse.

Assignment and Amendment

Courtwood is the assignee of causes of action from SFPL having taken separate assignments of the proprietary and personal claims from Ludsin, which in turn took an assignment of those and other causes of action from the liquidator of SFPL. The assignment from SFPL in liquidation and its liquidator to Ludsin is contained in a Deed of Assignment dated 19 May 2010 (the “Ludsin Assignment”). Both the CMS/Mellor and the IG Defendants submit that the Ludsin Assignment was only effective to assign causes of action existing at that date and therefore, did not include the knowing receipt claims which are the subject of the action because the distributions took place after 19 May 2010. Courtwood on the other hand argues that if one construes the relevant provisions of the Ludsin Assignment in the context of the Ludsin Assignment as a whole and against the background of the relevant factual matrix, such a position is untenable. Mr Cunningham also says that the evidence from SFPL’s liquidator, Mr Rubin, is a relevant part of the factual matrix for this purpose.

In any event, both the CMS/Mellor Defendants and the IG Defendants accept that a further assignment dated 10 February 2016 made between the same parties as the Ludsin Assignment (the “Second Assignment”) was effective to vest the appropriate causes of action in Courtwood. If the Ludsin Assignment should be construed narrowly, Courtwood submits therefore, that permission to amend the Particulars of Claim should be granted in order to enable it to rely upon the Second Assignment for the purposes of the action. However, the CMS/Mellor Defendants oppose the application to amend.

First, I should mention that it was not suggested that I am not in a position to construe the Ludsin Assignment and all parties who were before the court agreed on the matters constituting the relevant factual matrix. In fact, Ms Stevens-Hoare on behalf of the CMS/Mellor Defendants referred me to ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 per Moore Bick LJ at [24] where in the context of CPR Part 24 it was stated that if a short point of construction arises and the court is satisfied that it has before it all the evidence necessary and the parties have had a proper opportunity to address it in argument, it should “grasp the nettle” and decide the point. Accordingly, as I have heard full argument and the necessary evidence as to the relevant factual matrix is available, I will do so.

I was referred to the following provisions of the Ludsin Assignment:

“INTRODUCTION

…

(B)

The Assignor [SFPL in liquidation] (acting by the Liquidator) has agreed to assign to the Assignee such right, title and interest (if any) as the Assignor may have in the Causes of Action (as defined in clause 1 below at the date of this Agreement on the terms set out below.

…

1.

DEFINITIONS AND INTERPRETATION

1.1

In this Agreement unless the context otherwise requires:

….

“Causes of Action” means those causes of action listed in the Schedule but excludes the Excluded Causes of Action;

“Consideration” mans the sum of £17,625,00 . . .together with the Further Consideration, if any;

“Excluded Causes of Action” means any claims which can only be brought by the Liquidator or which the parties agree will be excluded causes of action;

…

2.

ASSIGNMENT

In consideration of the payment of the Consideration by the Assignee, the Assignor hereby assigns to the Assignee absolutely all its right, title and interest in and to the Causes of Action tougher with the right absolutely to commence and to continue any and all proceedings in relation to such Causes of Action. In the event that, for whatever reason, the Assignment of any of the Causes of Action are void or invalid this shall not affect the validity of the assignment of any other Causes of Action.

3.

FURTHER CONSIDERATION

As further consideration for the assignment of the Causes of Action, the Assignee shall pay to the Assignor a sum equal to 15% . . . of any Net Proceeds. …

…

5.

NO WARRANTY

The Assignee acknowledges that nothing in this Agreement shall constitute either a representation or a warranty in respect of the Causes of Action and specifically neither the Assignor nor the Liquidator offer any warranty that any of the Causes of Action exist.”

The Schedule which is referred to in the definition of “Causes of Action” and is itself headed “Causes of Action” contains 7 paragraphs: the first containing specific details of causes of action against Forsters LLP; the second sets out the claims against the former directors of the Assignor; the third specifies claims against Wharf and/or WDL in relation to fees paid to WDL; the fourth specifies three heads of claim against Wharf being the sale by Law of Property Act Receivers of Sandford Farm, breach of the Property Advisory Agreement and payment of £532,000 to Ultramarine and the repayment of “loan and other monies”; the fifth specifies claims in connection with the payment of fees and expenses relating to the planning application and appeal in respect of Sandford Farm to which my attention is drawn in particular; the sixth is concerned with ANTS and the LPARs for negligent sale of the property at an under value; and the seventh to which my attention is also specifically drawn is as follows:

“Any and all other claims that the Assignor may have, other than Excluded Causes of Action.”

Mr Cunningham submits that the ordinary meaning of the phrase “may have” which is used both in paragraph (B) at the beginning of the Ludsin Assignment and in clause 7 of the Schedule setting out the Causes of Action, is prospective and that had its meaning been restricted to the present tense, the draftsman would have used the word “has”. He says that such a construction is also consistent with the operative clause 2 which refers to Causes of Action “together with the right absolutely to commence . . . proceedings.” Mr Cunningham says that “to commence” also looks to the future. In his written submissions he went on to argue that the CMS/Mellor Defendants’ construction requires the seventh paragraph of the Schedule in which the Causes of Action are set out to be construed as if the words “against any parties not expressly referred to in clauses 1 to 6 above” were read into it.

Mr Cunningham also asked me to take into account as part of the factual matrix of the Ludsin Assignment, the Liquidator’s evidence contained in a witness statement dated 1 March 2016 and in particular that: SFPL had no assets or financial resources available to pursue its claims; an agreement was reached to assign to Ludsin all causes of action which the liquidator was capable of assigning in exchange for a payment of £17,625 and 15% net of costs of any recovery made by Ludsin; there was little prospect of SFPL coming into funds and as a result, he did not think it likely that it would be in a position to litigate claims itself in the short or medium term; there were certain statutory causes of action vested in the liquidator which he was unable to assign but otherwise “the company had no commercial interest in retaining any claim which was capable of being assigned to Ludsin.”; it would have made little sense only to assign claims existing at the date of the Ludsin Assignment; and he had been made aware of “accessory liability” claims and that there was no good reason for SFPL to have retained them.

Both Ms Stevens-Hoare on behalf of the CMS/Mellor Defendants and Mr Robinson on behalf of the IG Defendants submit that the Ludsin Assignment when properly construed against the relevant factual matrix does not include future claims which had not arisen on the date on which it was executed. They both submit that “have” in clause (B) is in the present tense and “may” in the phrase “may have” should be construed in the light of clause 5 which states that no warranty or representation was made that the Causes of Action existed. They say, therefore, that “may” reflects an uncertainty as to the existence of such causes of action. Ms Stevens-Hoare also relies upon the fact that “exist” in clause 5 is in the present tense in support of her submission that clause 2 should be construed to refer only to Causes of Action in existence at the date of the Ludsin Assignment. She also says that the phrase “to commence” in clause 2 cannot bear the weight which Mr Cunningham would have it bear. She says that the phrase when read in the context of the clause as a whole quite clearly refers to any proceedings and therefore, is of no assistance to Mr Cunningham. Mr Robinson agrees and points out that clause 2 does not say that the assignee shall have a right to commence proceedings which is in effect, how Mr Cunningham requires it to be construed.

Furthermore, Ms Stevens-Hoare draws attention to the structure of the Ludsin Assignment itself. She points out that the definition of “Causes of Action” rather than refer to all causes of action but for Excluded Causes of Action, makes express reference to those set out with particularity in the Schedule. She says therefore, that it is not drafted in a “sweep up or catch all” manner. She also submits that paragraph 7 of the Schedule cannot bear the meaning which Mr Cunningham tries to attribute to it. She say that if its meaning were as wide as he suggests there would have been no point in setting out the specific provisions in paragraphs 1 - 6 and that it should be construed in the light of the Schedule as a whole.

Lastly, in relation to the evidence of the liquidator, she says that it is subjective and therefore, of no assistance in the construction process with which Mr Robinson agrees. She also goes further and questions it in the light of the 2013 draft to which I have referred. Mr Robinson referred me to Arnold v Britton [2015] AC 1619 in which Lord Neuberger reiterated that when construing a contract, evidence of the parties’ subjective intentions should be disregarded: see [15]. He also drew attention to Lord Neuberger’s statement at [17] that reliance upon commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision to be construed, his third point set out at [19] that commercial common sense should not be invoked retrospectively and his fourth at [20] that although commercial common sense is a very important factor to take into account, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term to have agreed. Lastly, he drew my attention to the statement at [21] that it cannot be right when interpreting a contractual provision to take into account a fact or circumstance known only to one of the parties. He submits that this applies in relation to the evidence of the liquidator of SFPL as to the position of the company to commence proceedings in the short to medium term. In addition, Mr Robinson submits that the Ludsin Assignment read as a whole is an assignment and not in addition, an agreement to assign future causes of action. He points to the phrase “hereby assigns” in clause 2 in this regard.

In my judgment, clause 2 of the Ludsin Assignment read in the context of the document as a whole and against the background of the relevant factual matrix would not be understood by the reasonable reader with the requisite knowledge, to include future claims. It uses the phrase “hereby assigns” which is consistent with an assignment rather than an agreement to assign future rights. Further, it seems to me quite clear that “may have” in the last paragraph of the Schedule which is incorporated into or contains the details of the definition of “Causes of Action” when read in the light of the warranty clause and in the context of the liquidation of SFPL should be construed as reflecting uncertainty as to the existence of causes of action rather than a reference to the future. I agree with Miss Stevens-Hoare that to give it the wide meaning which Mr Cunningham supports, would be to render the other paragraphs in the Schedule all but superfluous. I also agree that a such a construction limited to causes of action in existence at the date of the Ludsin Assignment is consistent with the use of “exist” in clause 5 which is in the present tense. Furthermore, it seems to me that the natural meaning of “commence” in clause 2 is not one which naturally encompasses future claims. In my judgment, it most naturally refers to proceedings based on claims already in existence.

What then of the effect of the Second Assignment? Ms Stevens-Hoare submits that it cannot cure what was a nullity and therefore, the application for permission to amend should be refused. She also says that the CMS/Mellor Defendants have suffered prejudice as a result of the commencement of the proceedings by Courtwood without having a cause of action and have been subject first to an interim injunction sought without notice and thereafter have been subject to undertakings since August of last year which have prevented them even from using the monies affected in order to fund this litigation.

In relation to the contention that the proceedings as they stand are a nullity and cannot be cured by the subsequent Second Assignment, Ms Stevens-Hoare relies upon Milburn-Snell & Ors v Evans [2012] 1 WLR 41. That was a case in which the claimants commenced an action purportedly as personal representatives in which they claimed a 50% beneficial interest in a property. The claim was struck out on the basis that without the grant of letters of administration at the time they commenced the action they had no title to sue. The issue raised on appeal turned on CPR 19.8(1) which amongst other things provides that where a person who had an interest in a claim has died and has no personal representatives, the court may order the claim to proceed in the absence of a person representing the estate. In particular, I was referred to paragraphs [29] and [30] of the judgment of Rimer LJ with which Hooper LJ and Lord Neuberger MR agreed. They are as follows:

“29

Accepting all this, where I have difficulty is in seeing how any of it helps the claimants. In my judgment the flaw in their case is exposed by the decision in Ingall’s case [1944] 1 KB 160. What that case decided, by a decision binding upon us, is that a claim purportedly brought on behalf of an intestate’s estate by a claimant without a grant is an incurable nullity. Subject only to whatever rule 19.8(1) may empower, it follows that the claim the claimants issued was equally an incurable nullity. The logic of Mr Oakley’s submission is however that the force of rule 19.8(1) is to confer a jurisdiction upon the court to turn such a nullity into valid proceedings which may be pursued to judgment.

30

I am unable to accept that and, in agreement with the judge, consider that rule 19.8(1) has no application to the present case. The claimants’ invocation of rule 19.8(1) was responsive to the defendant’s strike out application. Logically, however, if they are right about rule 19.8(1), they could (indeed should) promptly after issuing their claim form have applied to the court for an order that the nullity they had thereby conceived should have life breathed into it by way of an order that they be appointed to represent the estate of the deceased intestate and the claim permitted to proceed to trial. The reason that any such application should and would have failed is because rule 19.8(1) does not, in my view, have any role to play in the way of correcting deficiencies in the manner in which proceedings have been instituted. It certainly says nothing express to that effect and I see no reason to read it as implicitly creating any such jurisdiction. It is, I consider, concerned exclusively with giving directions for the forward prosecution towards trial of validly instituted proceedings when a relevant death requires their giving. In the typical case, that death will occur during their currency and will usually be of a party. More unusually, it may have preceded them. But on any basis it appears to me clear that it is no part of the function of rule 19.8(1) to cure nullities and give life to proceedings such as the present which were born dead and incapable of being revived. In ordinary circumstances there is no reason why anyone with a legitimate interest in bringing a claim on behalf of an intestate’s estate should not first obtain a grant of administration and so clothe himself with a title to sue. I am unable to interpret rule 19.8(1) as providing an optional alternative to such ordinary course. I would dismiss the appeal on the rule 19.8(1) issue.”

Mr Cunningham on the other hand referred me to Munday & Anr v Hilburn & Anr [2014] EWHC 4496 (Ch) which was an appeal from a decision to strike out the claimants’ case on the basis that one of the claimants, the husband had been declared bankrupt, as a result of which his claims had vested in his trustee in bankruptcy and it was an abuse of process for him to pursue them. Much of the judgment is concerned with whether Mr Munday knew that the cause of action was not vested in him and therefore, the proceedings were an abuse of process and how the judge at first instance had dealt with that matter. However, Nugee J went on at [47] – [50] in the following terms:

“47

Secondly, it is not I think suggested that the fact the cause of action was not vested in both claimants at the outset makes the proceedings incurably bad. There was some ancient authority to that effect but the modern law is that even if there is a defect in the proceedings when issued in that either the claimant’s cause of action is not then complete, or that the claimant’s cause of action is not then vested in the claimant, it is open to the Court to cure the defect. That sufficiently appears from a decision of the Court of Appeal in Hendry v Chartsearch Ltd. [1998] CLC 1382 when Evans LJ said that:

‘In accordance with modern practice generally, the Court has a general discretion which should not be restricted by hard-and-fast rules of practice, if not of law, such as that which is suggested here.’

That was a case where the defendants applied to strike out the claim on the ground that the plaintiff was not party to the agreement on which he sued and the plaintiff maintained that shortly before the hearing of the application he had taken an assignment from his company of its claims against the defendants under the agreement. The defendants resisted leave to amend on the ground that it was not appropriate to add a fresh cause of action unless the plaintiff had some valid cause of action at the date of the writ.

48.

That was said by all three members of the Court of Appeal in Maridive & Oil Services (SAE) & Anor v CNA Insurance Company (Europe) Ltd [2002] EWCA Civ 369 to be binding on them. See Mance LJ at paragraph [23]:

‘We are in my view bound by Hendry v Chartsearch Ltd, which appears to me also to reflect the appropriate modern approach.’

Chadwick LJ at paragraph [54]:

‘I agree with his conclusion’ - that is Mance LJ’s conclusion - ‘that we are bound by the decision of this Court in Hendry v Chartsearch Ltd [1998] CLC 1382. There is no absolute rule of law or practice which precludes an amendment to rely on a cause of action which has arisen after the commencement of the proceedings in circumstances where (but for the amendment) the claim would fail.’

And Ward LJ at paragraph [70]:

‘I agree with My Lords, whose judgments in draft I have had the chance to read, that we are bound by Hendry v Chartsearch Ltd.’

It is also illustrated by the Maridive case itself. That was not a case of a claimant not having title to sue but not having a cause of action at all at the date of issue of proceedings, the claimant having purportedly made a demand under an instrument called a lease bond in the name of one person and that demand being held to be invalid and the claimant seeking to amend to introduce reliance on a second demand in the name of the right person which was not made until after the proceedings had been issued.

49.

The principle was also applied shortly afterwards in Smith v Henniker-Major & Co [2002] EWCA Civ 762, another decision of the Court of Appeal in 2002, in which Robert Walker LJ said at paragraph [92]:

‘92. The first argument was that at time of issue of the claim form Mr Smith had no cause of action at all (or if different, no title to sue at all) and that the claim form was therefore a nullity (or of no effect) and could not be cured by amendment. The judge rejected that argument.

93.

In my view the judge was right to do so. Mr Symons relied on the decision of this Court in Ingall v Moran [1944] KB 160. But that decision was on a different point (change of capacity); was described (while still extant) as a blot on English jurisprudence; and has since been overturned by Section 35(7) of the Limitation Act 1980 and CPR 17.4(4). So far as it embodied any larger principle it has been overtaken by the modern approach as described by Evans LJ in Hendry v Chartsearch Ltd [1998] CLC 1382, para 23. In that case this Court disapproved the more rigid approach adopted in Eshelby v Federated European Bank Ltd [1932] KB 254.’

That, although a dissenting judgment in the result, was agreed to by both of the judges in the majority, Carnwath LJ at paragraph [103] and Schiemann LJ at paragraph [130]. A further illustration of the principle was drawn to my attention by Mr Lightman, namely a decision of Blackburne J in Finlan v Eyton Morris Winfield (A Firm) [2007] EWHC 914 (Ch) where he said at [46]:

‘The modem practice is to allow an amendment, the effect of which is to make good a defect in the claimant’s title to sue even though the event relied on did not arise until after the proceedings were issued so that in strict law the claimant did not have a cause of action at the time he issued his process.’

He then referred to Maridive. Both Smith v Henniker-Major and that case, Finlan, are cases where, although there was said to be a cause of action at the date when the claim was issued, the claimant did not have it vested in him and subsequently took an assignment and sought to amend to plead the assignment.

50.

The fact that at the date when the proceedings were issued the causes of action were not vested in Mr and Mrs Munday but in Mrs Munday and the official receiver does not therefore present an obstacle to the proceedings being pursued to trial, if necessary after an amendment.”

Mr Cunningham submits therefore that there is nothing to prevent the Second Assignment from breathing life into the action and that permission to amend should be granted. However, Ms Stevens-Hoare submits that the circumstances in the Munday case were different because the proceedings were not an entire nullity because Mrs Munday always had title to sue. She also submits that although the Schedule referred to in the definition of “Causes of Action” for the purposes of the Ludsin Assignment included claims against Wharf in relation to fees and the sale of Sandford Farm by the LPARs, at paragraphs 3 and 4, there is no financial claim against it in the Particulars of Claim but only an allegation of breach. She characterises that as a device and submits that this should weigh heavily against Courtwood in relation to the exercise of the court’s discretion. She also referred me to a draft set of proceedings in similar terms to the present action, prepared in 2013 with SFPL in liquidation named as the claimant. There is no evidence before the court to explain how that draft came about and Ms Stevens-Hoare did not appear to be making an express submission that Courtwood had knowledge of its lack of title to sue at the date the proceedings were commenced whether as a result of the draft or otherwise. In any event, Mr Cunningham explained from the Bar that the draft had been an aberration of his junior and had never been progressed.

First, it is clear from Nugee J’s judgment in the Munday case that he was not influenced by Mrs Munday’s position and addressed the matter purely from the point of view of Mr Munday’s title to sue. Furthermore, in my judgment, it is abundantly clear from the extracts from the judgments of Evans LJ in Hendry v Chartsearch Ltd, Mance and Chadwick LJJ in Maridive & Oil Services (SAE) & Anor v CNA Insurance Company (Europe) Ltd and Robert Walker LJ in Smith v Hennicker–Major & Co to which Nugee J referred and upon which he relied, that a claim can be cured by amendment where there is only one claimant which at the time of the issue of the claim form lacked a cause of action at all and that there is no absolute rule which precludes such an amendment. The approach in Ingall v Moran is described by Robert Walker LJ in Smith v Hennicker –Major as turning on a change of capacity. This is equally true of the case of Millburn-Snell upon which Ms Stevens-Hoare relies. It was concerned with a claim purportedly brought on behalf of an intestate’s estate by a claimant without a grant of Letters of Administration. It was held in those circumstances that the proceedings were a nullity and could not be cured. The reason for that it seems to me, is because the necessary status cannot be obtained subsequently with retrospective effect. This case is not concerned with capacity to sue on behalf of the estate of a deceased person and it seems to me that the principle set out by Nugee J and the Court of Appeal authorities to which he refers applies here.

In my judgment, therefore, there is nothing to prevent reliance on the Second Assignment for the purposes of the action and the question is whether the court should exercise its discretion to grant permission to amend. In this regard, I take account of all of the relevant elements of the overriding objective. In my judgment, in order to deal with this matter expeditiously and fairly and in accordance with the other provisions of CPR 1.1(2), permission should be granted. I come to this conclusion despite what is said by Ms Stevens-Hoare to be the prejudice suffered by the CMS/Mellor Defendants as a result of first the interim injunction and then the undertakings which were given.

Further Amendments

There were also a number of complaints about the alleged lack of particularity of the Particulars of Claim which were raised by the CMS/Mellor Defendants but which for the most part were not pursued by Ms Stevens-Hoare on her feet. Mr Cunningham conceded that the Particulars of Claim require amendment to make clear that breach of fiduciary duty is not alleged against the individuals who are defendants or their associated companies other than Wharf. He also made clear that despite the reference in the pleading, Courtwood does not allege conspiracy and the Particulars of Claim will require amendment in that regard. I have also mentioned another aspect of the claim which requires amendment, namely the nature of SFPL’s property transferred.

Mr Cunningham submits that Courtwood’s primary concern pending trial is WPL’s ability to distribute monies or assign and/or charge its right to overage and to trace the proceeds of sale of Sandford Farm which have already been distributed to the individual defendants and their associated companies. It is said that the concerns are exacerbated by the opacity of the way in which receipt has been dealt with in the witness statements on behalf of those defendants. Mr Cunningham submits that there can be no doubt that interim relief over until trial or further order is necessary in order to protect Courtwood and that WPL should disclose the information sought so that further steps can be taken to protect its interests, if necessary. He submits therefore, that there is a serious issue to be tried, damages are not a satisfactory remedy, the balance of convenience is in favour of relief being granted and there is a real risk of dissipation.

It will be evident from the conclusions at which I have already arrived, that I consider that there is a serious issue to be tried as to SFPL’s case. It has not been the subject of any real dispute that damages are not an adequate remedy in this case and for my part, given all of the circumstances to which I have already referred, I consider that they are not. Were it strictly necessary, I would also be satisfied that given the way in which the proceeds of sale were dealt with there is a real risk of dissipation. I also consider that the balance of convenience is in SFPL’s favour, although it is fairly finely balanced. I come to this conclusion despite the period prior to the Second Assignment during which the Defendants were subject either to an interim injunction or had given undertakings. Despite the existence of the 2013 draft, there is no suggestion that SFPL was aware of its lack of title and the point could have been taken earlier. It seems to me, therefore, that SFPL’s interest must be protected over until trial or further order. It will be necessary to hear further submissions as to the precise nature of the relief to be granted.