The Conditioning House Limited v JBG Enterprises Limited & Anor

The Claimant (“the Company”) was, until 20 March 2019, the freehold owner of a property known as The Conditioning House, Cape Street, Bradford BD1 4RN (“the Property”). The Property comprised a substantial four-storey listed building built by Bradford Corporation in 1902 to check and control the moisture content of textiles. When acquired by the Company in 2016, the Property was derelict and in a poor condition, but a candidate for redevelopment.

The Company was previously, under its former name of Priestley Homes (Bradford) Limited, the vehicle for a joint venture between Priestley Homes Limited (“PHL”), a company controlled by Nathan Priestley, and Muniment Limited (“Muniment”), a company controlled by Trevor Walker. Until September 2020, PHL and Muniment were equal shareholders in the Company and Mr Priestley and Mr Walker were its two directors. Mr Walker is now the sole shareholder and sole director of the Company.

The First Defendant (“JBGE”) is a company of which the Second Defendant, John Giannotti, is a director and shareholder. Although his wife is a shareholder and she and their younger daughter are also directors, Mr Giannotti accepted that it was he who made all relevant decisions for JBGE.

JBGE made a loan of £900,000 to the Company and held a legal charge over the Property. On 20 March 2019 it sold the Property pursuant to its power of sale to Bradford Lofts Limited (“BLL”), a company of which Mr Priestley was a director, for the price of £1 million.

The Company contends that Mr Priestley was acting in breach of his duties as director and that the Property was worth double the sale price. It claims against both Defendants (a) damages for an unlawful means conspiracy and (b) equitable compensation for dishonest assistance in Mr Priestley’s breaches of duty. The losses claimed are, in the alternative, (i) the profits which the Company contends it would have made from developing the Property or (ii) the alleged difference in value between the sale price of £1 million and the true value of the Property on 20 March 2019. The Company further claims, against JBGE alone, damages or equitable compensation for breach of the mortgagee’s duty to take reasonable care to obtain the best price reasonably obtainable for the Property. In respect of all three causes of action, liability, causation and loss are in issue.

By order of 29 May 2025, Master Pester ordered a split trial. The trial in respect of which this judgment is given is to determine “all issues of liability, including the issue of the ‘market value’ of the Property…as at 20 March 2019”. In the event of the Company succeeding on the issue of liability, there is to be a further trial to determine the quantum of its loss in respect of the loss of profits claim. It is common ground that in this part of the proceedings, I should determine:

The Company’s claim involves allegations of dishonesty. There is now a body of caselaw which makes clear how the court should approach the pleading and proof of such allegations, summarised in National Bank Trust v Yurov [2020] EWHC 100 (Comm) at [50]; Sofer v Swissindependent Trustees [2020] EWCA Civ 699, 24 ITELR 160 at [23] and E D & F Man Capital Markets Ltd [2022] EWHC 229 at [69]-[71]. I have borne those principles firmly in mind.

I have also borne in mind that the Company’s causes of action against the Defendants involve allegations of serious wrongdoing by Mr Priestley, who is neither a party to these proceedings nor called as a witness by either party. Reluctant as the court may be to make findings about the conduct of a person who has not had an opportunity to put their side of the story, this is a necessary consequence of the claims made by the Company against the Defendants. Those claims fall to be judged against the available evidence, which includes a large number of contemporaneous emails to or from Mr Priestley.

I heard from two witnesses of fact, Mr Walker and Mr Giannotti.

Mr Walker is a fellow of the Chartered Institute of Loss Adjusters and a fellow of the Chartered Insurance Institute. He is an experienced property investor. I consider that he was an honest witness who was doing his best to assist the court. However, two things affect the reliability of some of his evidence. Firstly, he was clearly consumed by dislike of Mr Priestley and that, in my judgment, prevented him taking an objective view of some of the events which had occurred. Secondly, as I explain in more detail below, he has now been involved in litigation against Mr Priestley and his entities for many years. Mr Walker was very well prepared to give evidence and familiar with the documents. Consequently, it is likely that a substantial part of his evidence constitutes reconstruction from what he has read rather than true recollection.

Prior to establishing JBGE, Mr Giannotti had worked in the City of London as an investment banker, at JP Morgan, Bankers Trust and UBS, for over 25 years. His roles were not concerned with lending but focussed on trading, fixed income and equity derivatives, structured finance and corporate finance. He had previously given evidence as an expert witness. Mr Giannotti made two witness statements. The second of these, dated 22 August 2025, was made to correct certain statements made in his first, following disclosure of a file from the solicitors who acted for JBGE on the sale to BLL. Some of the documents on that file cast serious doubt on the veracity of parts of Mr Giannotti’s first statement. Cross-examination further revealed that much of the essential narrative in Mr Giannotti’s first witness statement was fundamentally inconsistent with the documentary record. I accept some of Mr Giannotti’s evidence, for example I accept what he said about the nature of JBGE’s business, his business practices and his relationships with his clients (including Mr Priestley) as broadly true. However, I have concluded that significant parts of his evidence were not true.

I also heard evidence from expert valuation witnesses for both sides: Peter W. Wilkinson, BA MRICS for the Company and William Ward BSc MRICS for the Defendants. Both expert witnesses were impressive, giving their evidence with care, thoroughness and candour.

In this section of my judgment I will set out the factual narrative, drawing mostly on the documents and uncontroversial evidence. In the following section I will set out my findings on the key factual issues in dispute. There are further factual findings specifically related to particular legal issues, discussed below in the context of the causes of action to which they are relevant.

Mr Walker lives in Singapore but Muniment invests in and develops property in the UK. Mr Walker was introduced to Mr Priestley, a property developer, in 2014. In the years following, Mr Walker or Muniment entered into a number of agreements with Mr Priestley and companies controlled by him.

In January 2016, Mr Priestley approached Mr Walker to ask what he thought of the Property as a development project, saying that the vendors wanted £2 million but they could get it for less than that, on the basis of a contract conditional on planning permission. Mr Walker expressed interest.

The Company was incorporated (as Priestley Homes (Bradford) Ltd) shortly thereafter, on 18 February 2016. On 18 August 2016, Mr Priestley sent Mr Walker a WhatsApp message saying that they had been looking at a price of circa £2 million, but that the vendors were willing to take £1 million for a “quick unconditional sale and an extra £10k towards their fees”. He said would be pushing on with the deal but wanted to invite Mr Walker to be involved on a 50/50 basis. He said he would be able to get some funding towards construction costs and that, with money coming in also from sales, each party would probably need to put in £3-£4 million. Mr Walker responded positively, telling Mr Priestley to “count him in”.

Mr Walker was appointed a director of the Company and Muniment acquired 50% of its shares. The Company purchased the Property for £1.01 million on 18 November 2016.

There was no formal joint venture or shareholders’ agreement between PHL and Muniment. The Company adopted model articles of association, under which the general rule about decision-making was that any decision of the directors must be made unanimously or by majority (Articles 7 and 8). By Article 5, the directors had a general power to delegate their powers to any person or committee as they thought fit.

The 50/50 basis of the joint venture should have meant that each joint venture partner paid half of the purchase price. However, in an email to Mr Walker dated 17 October 2016, Mr Priestley said:

“…I was hoping if it was ok with you if you fund the purchase and I fund the planning and professional fees (circa £150k) and the first part of the construction up to £1million. It will just help with our cash flow going into xmas and avoid the need for us to take out a small loan with high interest!”

This was agreed. Mr Walker’s evidence is that in a telephone call with Mr Priestley in late October 2016, they also agreed that Muniment’s funding of the purchase price would be treated as a loan owed by the Company to Muniment. Consistently with Mr Priestley’s WhatsApp message of 18 August 2016, it was always understood that the Company would borrow to meet construction costs, with the joint venture partners each meeting half of the balance of the costs. It was also understood that Mr Priestley’s construction company, Priestley Construction Limited (“PCL”), would be the main building contractor for the redevelopment.

By the spring of 2017, Mr Priestley and Mr Walker were discussing raising development finance. In this context, Mr Priestley arranged a valuation by AC Surveyors & Valuers Limited. Their report dated 3 May 2017 (“the ACS Valuation”), gave the market value of the Property as £2 million. By email of 13 June 2017, Mr Priestley wrote to Mr Walker:

“Also, not sure if I told you that it got valued at £2mill? That’s a 50% discount on market value we got!”

JBGE was incorporated in 1997 and is a small independent financial services business providing a range of services, including mezzanine financing and “angel” lending to businesses in their early stages.

JBGE is not a large-scale commercial lender; rather it lends to a relatively small number of small and medium-sized businesses, with a high proportion of repeat business. At any one time its loan portfolio would be up to £9 million of loans across 6 to 10 active clients. It sources its capital from Mr Giannotti personally and his family and friends.

Mr Priestley first contacted Mr Giannotti in the spring of 2017. In the summer of 2017 JBGE lent £900,000 to Priestley Homes (Leeds) Ltd to facilitate the development of a property called Hanover House. In November 2017 Mr Priestley approached Mr Giannotti with a proposal for a loan of £140,000 on a project in Leeds called Apex Quarry. Mr Giannotti said that JBGE did not usually do loans of that size, because the legal costs and administration for a relatively small loan were disproportionate, but that he was prepared to offer Priestley Homes (Leeds) Ltd that sum, in the interests of building a longer-term arrangement. In the context of that longer-term arrangement, it was agreed that Mr Priestley would give JBGE a “global facility” personal guarantee, that is to say, a guarantee which would cover all loans made to Priestley companies by JBGE. Consequently, on 1 December 2017 Mr Priestley executed a form of personal guarantee in favour of JBGE, capped at £4m. It was intended that the guarantee would include a schedule, to be updated from time to time, listing all the loans taken out by any Priestley company with JBGE, although the literal wording of the guarantee only covered lending to Priestley Homes (Leeds) Ltd.

On 6 December 2017, Mr Priestley emailed Mr Giannotti with a proposal to borrow £900,000 in respect of works at the Property. He said:

“The mill is already owned. We are wanting to raise a relatively small amount of funds (45% LTV) to complete further works (£500k already spent) in order to unlock our development finance. Loan will be for a maximum of 6 months and will be used to complete roof works and all timber replacements within the building as well as place pre orders (Lifts and services).”

He attached the ACS Valuation. The borrowing was therefore presented to Mr Giannotti as a short-term loan, to bridge the period until full development finance was available.

Terms for the loan were swiftly agreed by email and a formal loan agreement was executed by Mr Priestley on 11 December 2017. The term of the loan was up to six months from 17 December 2017, i.e. to 17 June 2018, subject to the potential for earlier repayment against a minimum interest amount. JBGE took a first legal charge over the Property dated 20 December 2017 and the loan agreement provided all sums that fell due under it would be added to the schedule to Mr Priestley’s personal guarantee.

Mr Giannotti’s evidence was that he was sceptical about the ACS Valuation, because Mr Priestley had told him that doubts had been raised about the valuers and that many large-scale lenders would not accept their valuations. He said, however, that as the loan was short-term and for substantially less than the ACS Valuation at £2 million, he thought it was acceptable in terms of JBGE’s loan-to-value lending policy.

Although Mr Giannotti had been told that the purpose of the loan was to fund specific works on the building, that was not how the money was in fact used. By emails of 15, 17 and 18 December 2017, Mr Priestley and Mr Walker agreed that £500,000 of the loan would be used to repay Muniment’s £1 million loan to the Company; arrangement and legal fees would be deducted from the remainder, leaving £380,000 which would be paid to PHL for costs already incurred or future costs to be incurred in relation to the Property. Mr Walker and Mr Priestley agreed a formal board minute dated 20 December 2017, ratifying Mr Priestley’s entry into the loan agreement with JBGE and resolving to split the loan monies between Muniment and PHL as had previously been agreed.

On 9 April 2018 the Company secured the grant of planning permission for the redevelopment of the Property as 133 residential units, a gym, café and office space.

Following the grant of planning permission, the Company proceeded to market the apartments for off-plan sales. As deposits were received, they were paid into a bank account of PHL, as the Company did not have a bank account of its own.

Mr Priestley also began work on preparing an application for development finance and there were some limited works commenced at the Property. Mr Priestley told one prospective lender on 24 May 2018 “we are on site doing some minor enabling works but nothing heavy. We are looking to start construction within the next three months”.

The term of JBGE’s loan expired on 15 June 2018. On that date, Mr Priestley signed an agreement extending the loan for up to six months from its date (i.e. to 15 December 2018), with the ability to repay early at any time on five days’ notice. The Hanover House loan to Priestley Homes (Leeds) Ltd was repaid at about the same time.

Mr Giannotti’s evidence, which was not in this respect challenged, was that Mr Priestley had told him that the Company had not secured development finance and was therefore not able to repay the loan by the June 2018 maturity date. He told Mr Priestley that he was not happy with the extension as JBGE would not ordinarily be providing bridging finance to borrowers in the first place, and that he agreed to extend the loan strictly on the basis of Mr Priestley’s assurances that development finance would be in place.

Although the loan had been extended for six months, Mr Priestley mistakenly remembered it as having been extended only for three months and therefore repayable in September 2018.

On 23 August 2018, Mr Priestley emailed Mr Giannotti, saying:

“Just had our finance meeting today and your loan is due for redemption on 15^th September here. We now have our full development finance in place. Please see attached.

However, I am wanting to delay draw down on this loan as I would like to spend a bit more time on our construction detail designs…So, Would you consider extending this loan for a further 3 months? Don’t worry if not, I can get it paid out if you have other plans for the funds?

Let me know

I am hoping to send you some other opportunities in the coming weeks as well!”

Despite the phrase “Please see attached”, there appears to have been no attachment to the email. It may have been that Mr Priestley intended to attach indicative terms which had been offered by Zorin Finance Limited (“Zorin”) on 14 August 2018, under which an immediate sum of £900,000 would have been available, sufficient to pay off the JBGE loan. However, it was not the case, as his email implied, of the loan documentation having been signed or at least being on the brink of being signed.

Mr Giannotti’s reply was:

“I hope you do not read building drawings with the same attention to detail as loan documents!

Based upon experience we extended the Conditioning loan agreement to 15^th December!

No need for any change.”

In the autumn of 2018, the relationship between Mr Walker and Mr Priestley broke down. I do not consider it necessary, for the purposes of this claim, to decide exactly why that was, or who was right or wrong on any particular point. The issues between them related to other projects and loans between their respective companies, as well as the Company and Property. It is sufficient to say that, prior to September 2018, the tone of their emails and WhatsApp messages was warm and friendly, but that changed markedly.

A particular turning point was an email from Mr Priestley dated 26 September 2018 in which he complained that Mr Walker was not pulling his weight in terms of the work of the joint venture and that Muniment was unable to meet its obligation to pay 50% of costs before the development funding commenced. He suggested that he take over the development and its liabilities and that they agree a set return for Muniment, to be paid to it with its initial investment, before any profit was taken by PHL. Mr Walker’s response was to remind Mr Priestley of PHL’s obligation to fund the first part of the construction, up to £1 million; to which Mr Priestley replied referring to the fact that the deal had changed with the repayment to Muniment of £500,000 on the making of JBGE’s loan.

By an email of 29 September 2018, Mr Walker asked Mr Priestley if he would like to buy out Muniment’s 50% share of the Company on a “willing buyer/willing seller basis”. He said he was open to a sale “provided, of course, that the price is fair and reasonable”. He appointed BWL Consultants (“BWL”) to advise him on the value of Muniment’s shareholding in the Company.

By early November, relations between the two men were so bad that Mr Walker blocked Mr Priestley on WhatsApp, then email. Communications thereafter were predominantly via (or at least included) Mike Gregory, Head of Finance for the Priestley Group, and Paul Benson of BWL.

Discussions by email took place about finding a mechanism for terminating the joint venture, but no agreement was reached. It is Mr Walker’s position that BWL could not value Muniment’s shareholding in the Company without documentation which Mr Priestley failed to provide. It was Mr Priestley’s position, in the email exchanges, that Mr Walker was failing to recognise the urgency of the situation; making unrealistic proposals and not telling him what sum would be acceptable to buy out Muniment’s shareholding.

Throughout November and December 2018, Mr Priestley and Mr Gregory (communicating on his behalf), in the context of the negotiations for ending the joint venture, repeatedly raised the prospect that JBGE would take action to repossess the Property when the loan became due for repayment on its extended maturity date.

By email of 12 November 2018 to Mr Walker and Paul Benson of BWL, Mr Priestley said:

“Please be aware that the lending on the building is due for redemption on 12^th December (£900k)…I have spoken to the lender who has stated that they cannot give any more extensions

This is now very urgent. It looks like we are no closer to resolution on Trevor or myself exiting the company so we need to decide what we are doing here. If the loan is not repaid, I would predict that the lender will immediately issue proceedings to reposes [sic] the building and give a winding up order on the company. Not only losing a large amount of money and assets, but also effecting [sic] our abilities for all future lending and even the ability to be a director of a company! Something I certainly do not want to happen”

(The date of 12 December was a mistake for 15 December).

Mr Priestley chased for a reply by email of 16 November 2018, saying that it was “very urgent given the circumstances”.

Mr Benson replied, asking for a site visit, to which Mr Priestley responded:

“I am more than happy to accommodate a site visit but this is over 1 month away? I cannot agree to this sort of delay. Why are you delaying this so long? And why are you only arranging this now when you were instructed two months ago?

I want to be as friendly as [sic] accommodating as possible but unfortunately your client is making it impossible to run this company. We seem to be prioritising the wrong things and completely ignoring the pressing issue…we will not have a building to inspect soon as it is due to be repossessed if the loan is not repaid…”

Mr Walker’s response was to email Mr Gregory on 19 November 2018 with a proposal involving repayment by PHL to Muniment of an outstanding loan of £338,000, which would then be immediately lent to the Company for the purpose of redeeming the JBGE loan, together with a further £180,000 odd on formal commercial lending terms. He finished his email:

“I note that you mentioned that default would mean losing the building and I presume it would also mean that the Directors won’t be able to borrow again. I have no plans to borrow again anyway and if I continue any UK business I will restrict it solely to Angel Finance lending. I think people will still borrow from me despite a default being on my credit record. Even so perhaps I’ll stop doing business in the UK and focus on other countries.”

Mr Gregory replied on 30 November 2018 saying that he could not comment on the separate loan to PHL and that this was completely unrelated to the Company, which he suggested was insolvent. He continued:

“In terms of the JBG loan, Nathan has kept the lender appraised of the issue as we feel it is always best to be upfront on these matters. JBG need resolution on this, and to understand what is happening, just like we do. Due to our track record and Nathans relationship with that lender, we are confident that if we present him with a deal that gives resolution to this matter, he will afford us some more time to complete matters. Interest will still need to be paid as it has been in the meantime of course.”

Mr Walker’s reply of 7 December 2018 suggested, as one option, that the Property be put up for auction in January 2019. Replying later that day (by inserting his comments in red on Mr Walker’s email), Mr Priestley said that they could not go to auction because, to pay off all liabilities, the Property would have to achieve £2 million, which was not likely to be achieved. Moreover, because of the off-plan sales, the title had unilateral notices on it which would inhibit a sale. Addressing a proposal from Mr Walker to formalise Muniment’s lending to the Company, he made a suggestion as to how that might be taken forward and said:

“If this can be agreed, we will not need any further funds from you (£170k as you suggest). I will work on our lending to either replace the lender or get an extension of the current lending with JBG. I have a good relationship with the lender so as long as I can present them with the solution as stated above, I know I can convince them to grant us more time to formalise everything without repossession proceedings. I can also seek another loan in the background if required.”

By email of 14 December 2018, Mr Priestley wrote to Mr Benson:

“Paul, can you please respond today. Lending should now have been repaid or renegotiated 2 days ago. It is only a matter of time before repossession proceedings commence which I really don’t want to happen.”

In a further email of 23 December, he said:

“I am running out of time with the lender and he has requested a call with me tomorrow for an update…I don’t really have an update as you know, so it will not be a comfortable phone call. For our own interests, I am going to again do everything in my power to buy time but after 4 months, we seem to have gone back to square one. So I implore you to please try and approach this subject with common sense with Trevor, so a decision can be made. A repossession is going to not only result in a huge loss of money for both parties, the subsequent bankruptcy proceedings will make it impossible for us to operate companies in the property sector again, and put peoples jobs and livelihoods in serious risk.”

On the following day, Christmas Eve, Mr Priestley wrote to Mr Benson and Mr Walker, attaching two reports. One was a report by Dalbergia Group, costs consultants, dated 10 December 2018 (“the Dalbergia Report”). It had been prepared for Zorin, to provide an assessment of the likely costs of the redevelopment. The second was a valuation report from JLL dated December 2018, prepared for Zorin and P2P Global Investments Plc (“the JLL Zorin Report”) on instructions dated 8 October 2018, valuing the Property for loan security purposes. The terms of reference contained within the report described it as “confidential to the parties to whom it is addressed” and said that “no part of this report may be disclosed to any third parties without our prior written approval of the form and context in which it will appear.”

There is no evidence to suggest that Mr Priestley reported back on any conversation with Mr Giannotti that day. However, on 4 January Mr Gregory emailed Mr Benson and Mr Walker:

“I trust you both had a good Christmas and New Year.

I have just come out of a meeting with Nathan regarding the current financing on Conditioning House.

Nathan has been speaking to the lender this morning and they have given us until 2pm (UK time) on Monday 7 January 2019 to have an agreed solution to the share sale and ultimate way forward regarding this project/company. The lender has stated this should be in the form of an agreed Heads of Terms, which must be sent to them no later than the 2pm deadline on Monday.

The lender has confirmed that if agreed Heads of Terms are not received by the deadline, they will commence repossession proceedings immediately. The repossession proceedings will incur significant default charges on day 1, with further charges until the property is repossessed and sold. As you know, we do not want this to happen…

I know Nathan has already emailed what we feel is a fair offer to solve this matter, so if this cannot be agreed and Heads of Terms completed by the 2pm deadline on Monday, we all have no alternative but to allow the repossession to commence, as the lender will not provide any further extensions under any circumstances.

As you can see, the lender has now set a line in the sand and I/we hope that the sensible choice can be made quickly to avoid the alternative, which will only result in all parties losing out on the significant time, effort and funds that have been put into this project.

I have taken the liberty of drafting some Heads of Terms (attached) in the hope that we can resolve this. I appreciate there are likely to be some amendments needed, so I will make sure I’m available all weekend.”

Mr Benson emailed Mr Gregory on 7 January 2019 at 10.42pm on behalf of Mr Walker/Muniment, rejecting the offer.

Written communications between Mr Priestley and Mr Giannotti towards the end of 2018 and into the New Year of 2019 relating to the Company’s loan are very limited. They were, however, communicating in relation to other loans, and the tone of their emails is friendly and informal.

On 10 October 2018, Mr Priestley approached Mr Giannotti (to whom he had spoken the day before) about a loan to Priestley Homes (Yorkshire) Ltd for the development of a property known as Leeds House. During the course of discussions about the terms of the loan, Mr Giannotti told Mr Priestley that he had changed solicitors and was now using Mark Hayward of Hayward Moon to document loan transactions. The emails discussing the proposed lending terms are chatty, with business proposals intermixed with conversation about the England football team and jokes about the lack of sunshine in Leeds. The loan agreement was executed on 27 November 2018, coinciding with the repayment of the Apex Quarry loan by Priestley Homes (Leeds) Ltd.

On 11 December 2018 – just days away from the maturity date for the loan to the Company - Mr Giannotti received a quantity surveyor’s report in relation to the Leeds House project which, under the terms of that loan, permitted Priestley Homes (Yorkshire) Ltd to draw down £140,000 of the loan. He prepared a drawdown confirmation for signature by Mr Priestley, who responded:

“Just thinking with the extension of the loan at conditioning, I’m happy to leave this to help with your cash flow? You’ve been a big help extending conditioning so it’s only fair?”

Mr Giannotti replied:

“Can do this one but appreciate repayment before next drawdown.

Have other clients also a bit late in paying”,

to which Mr Priestley responded:

“Absolutely. Like I say, happy to withhold any and all on this as you see fit.

I will sign and return shortly.

I will also ensure no further valuations are submitted until repayment of the conditioning house loan.”

It is clear that what Mr Giannotti meant (and Mr Priestley understood him to mean) was that he “would appreciate” repayment of the Company’s loan before the next drawdown of monies by Priestley Homes (Yorkshire) Ltd under its loan agreement for Leeds House. Mr Priestley was promising not to seek any such drawdowns for Leeds House until the Company’s loan was repaid.

The 15 December maturity date for the loan to the Company came and went without anything in writing apparently passing between Mr Giannotti and Mr Priestley. However, on 20 December 2018, Mr Giannotti wrote:

“Just trying to close office, FYI interest payment on Conditioning House has yet to arrive.

Understand it is probably manic,”

Mr Priestley replied

“No probs. Interest payment is on its way now. Will hit your account in the next couple of hours. Please let me know when received”

Mr Giannotti came back with “Ok thanks mate!” and the recommendation of an electrician. The email chain ends with Mr Priestley saying:

“If I don’t speak to you before Xmas, have an amazing Christmas and new year. Can’t wait for our next monthly drinks in January! That’s right, we’re making it a monthly thing without doubt. Have a business catch up and then move on to the mates piss up for the rest of the afternoon! Haha

Thanks again for being so great to work with this year. Always a pleasure dealing with you. Black and white, exactly how I like it!”

By email of Monday 7 January 2019 at 7:37pm, entitled “Conditioning House”, Mr Priestley wrote to Mr Giannotti:

“Hi Mate

Happy new year! Hope you had a great one

Are you available to meet up for a drink tomorrow late afternoon by any chance? I am having some issues with this development I want to talk through with you about. One, to appraise you of the situation and two, to maybe get some advise [sic] from you as I’m slightly stuck

Very briefly, our JV partner on this scheme has gone completely AWOL/crazy. He is refusing to sign off on any lending, off plan sale of flats and lots more. On one hand he has agreed to sell his half of the shares to us but then just refused all of our offers with absolutely no counter offer or indication of what he will accept. He is going out of his way to cause our companies serious harm and in particular, this company. You really wouldn’t believe some of his actions! He is on an egotistical crusade it seems with absolutely no care for anyone else. Not helped by the fact I have learnt he is an alcoholic recently.

My priority is yourself and your current lending and the 60+ apartments we have sold to individuals who have put in their hard earned money as deposits! So I want to talk through the full situation with you and discuss all options.

Don’t worry, I already have options to carry on as planned with repayment of your loan. It’s the way we do this that I want to discuss with you as I need to get out of this JV and protect the apartment buyers and our reputation!”

Following that email, there was a telephone conversation between Mr Priestley and Mr Giannotti. What was said during that conversation is at the heart of the conspiracy and dishonest assistance claims and I shall set out my findings below.

At 12.34pm on 8 January 2019, Mr Priestley wrote to Mr Giannotti:

“As discussed, please see attached in depth market and construction reports for the building. These were commissioned by Zorin. Please see page 50 on the valuation report from JLL for market value”

He attached the JLL Zorin Valuation and the Dalbergia Report.

At 9.22pm that evening, Mr Giannotti sent an email to Mr Priestley, copied to Mr Haywood of Hayward Moon, saying:

“THIS COMMUNICATION REPRESENTS A FORMAL NOTICE UNDER THE TERMS OF THE LOAN AGREEMENT BETWEEN JBG ENTERPRISES LTD. AND PRIESTLEY HOMES (Bradford) LIMITED DATED 15^TH JUNE 2018.

Dear Mr Priestley

As you are aware notwithstanding JBG Enterprises Ltd’s agreement to extend its loan to Priestley Homes (Bradford) Limited from 15^th June 2018 to 15^th December 2018, the principle [sic] sum remains unpaid.

As the repayment date on your loan has now passed and the loan has not been repaid I am formally calling in the loan and require you to repay this in accordance with the terms of the loan agreement by no later than 14^th January 2019.

We further advise you that in accordance with the terms of the Loan Agreement:

1.

Default interest of 20.75 per centum per annum shall be applied against all sums outstanding from 15^th December 2018 until their full settlement;

2.

All costs and expenses reasonably incurred by JBG Enterprises Ltd in connection with the process of recovering the sums outstanding shall be added to the principle [sic] balance from the date they are paid;

3.

JBG Enterprises Ltd shall exercise all of the powers available to it whether in the Loan Agreement or otherwise available to it under English law.

Mr Priestley, we are very disappointed that we have reached this stage, but Priestley Homes (Bradford) Ltd has been provided with ample opportunity to make arrangements for the repayment of this loan and has now failed to do so.

Yours sincerely,

John Giannotti

Director

JBG Enterprises Ltd”

At 9.42pm that evening, just 20 minutes later, Mr Priestley responded, again copying in Mr Hayward:

“Dear Mr Giannotti,

Thank you for your email and formal demand for repayment which is duly received

First of all, my sincerest apologies it has got to this stage. As you are aware, I have done everything within my power to try and find a solution and for Priestley Homes (Bradford) LTD to repay this debt. Unfortunately this has proved impossible and the company will be unable to repay the debt and comply with the loan agreement

Therefore, as director of Priestley Homes (Bradford) LTD, I must unfortunately accept repossession of Conditioning House. Myself and the company will not contest this. I will do all that is required to aid in your repossession of the property. Should you require any further information or input from me, please do not hesitate to ask.”

At 9.51pm, Mr Giannotti wrote back:

“Dear Mr Priestley,

I thank you for your response to our notice.

While I thank you for your candour, it is deeply disappointing that, under the circumstances, we shall have no option than to proceed with the repossession process on Conditioning House.

If Priestley Homes (Bradford) Ltd is to be legally represented in this process please advise whom we should contact. If not, we shall advise our solicitor – Mark Hayward of Hayward Moon Solicitors to contact you directly.”

This was followed by Mr Priestley, again copying in Mr Hayward, at 10.08pm:

“Thank you Mr Giannotti

We will have no formal representation on this matter as the company holds no funds and no legal recourse to argue this. The company has not performed on its obligations to you under the loan agreement. We will not contest the process in anyway and accept the outcome of repossession.”

He asked for all correspondence to be addressed to him.

At 10.41pm, Mr Giannotti emailed Mr Hayward:

“Hi Mark

You will have already received the formal notice of repayment demand, Nathan’s response and my reply and his confirmation that he shall be dealing with this himself – is that an issue?...

The last time I needed to do this I obtained the signed consent of the borrower to sell the property at a minimum price: I believe there is a specific consent document.

Please advise what I have to do”.

The following morning, 9 January, Mr Hayward acknowledged receipt of the previous evening’s emails. He explained to Mr Giannotti that he was not an expert at the litigation aspects of repossession but said that he believed the notices served should be sufficient to evidence calling-in of the loan. He gave advice about a mortgagee’s duties as regards getting the best price and suggested that he could refer the documentation to a specialist property litigator to get confirmation that there was no further action which needed to be undertaken before JBGE could proceed with a sale of the Property.

Mr Giannotti replied:

“All points understood.

1.

I am in possession of a full in-depth valuation of the project by values [sic] appointed by what were the take out lenders.

This places a valuation of the building pre development at £1,000,000. Whilst I believe this is a bit light I am pretty confident that this is a reasonable starting point. All the value is in the build/development that has hardly progressed because of the issues that have led to current impasse.

2.

The deposits for off plan sales are held in a client account of Priestley Homes Ltd – not the current owner/borrower. I have received an undertaking from the Directors of PH Ltd that they shall pass all deposits to a client account of the buyer and arrange for the transfer of sales contracts.

3.

I think it wise to refer the documentation a receive [I believe this should be “and receive”] direction as to the process JBG needs to follow and any documentation that you should prepare/submit on our behalf. These are reasonable expenses that the Borrower should meet as it ensures his interests are being protected.

You have authority to proceed on that path. In the meantime, I shall find a buyer!”

Mr Hayward actioned JBGE’s instructions to seek specialist property litigation advice, getting in touch with Joe Brightman of Ellisons solicitors. By email of 14 January he explained that JBGE wished to exercise its power of sale and dispose of the Property in its “partially-converted” state. He said that he had been asked specifically to raise some points with Mr Ellison, namely whether JBGE could now validly exercise its power of sale; whether the off-plan sale contracts were binding on JBGE and, if not, whether, if it wished to honour them, it could recover the deposits from the borrower or the stakeholder.

Meanwhile, Mr Priestley was taking steps to form a company to acquire the Property. On 9 January, he emailed a prospective lender (Together Commercial Finance Limited (“Together Commercial”)) with details about the proposed development, telling them:

“As explained, we will now be purchasing the property off the current owner for £1m (although value is much higher).”

On 16 January 2019, he emailed Michael Bush of Hyams solicitors, saying:

“I would like to look at instructing you to handle a property purchase for us please. It is a freehold commercial property that we own under another company. We are wanting to purchase it from one to another please. Can you please quote for this? Purchase price is £1m.”

On 17 January 2019 BLL was incorporated, with Derry McCulloch, Mr Priestley’s mother, as sole shareholder and director.

By 1pm the following day, 18 January, Mr Giannotti had had a call with Ms McCulloch. What was said during that call is another key factual issue in the claim. Ms McCulloch emailed him:

“Following our phone call, I have pleasure in confirming our offer for the building known as Conditioning House, Cape Street, Bradford. Our offer is £1m and we would like to move straight away with the purchase.

We will be purchasing the property under our newly formed company ‘Bradford Lofts LTD’.”

On 20 January, Mr Giannotti informed Mr Hayward that he had a written offer for £1 million that he wished to accept. He said he would draw up his own “consent form” and send it to the “Directors of PH Bradford Ltd”. He duly produced his own form of draft agreement headed “Repossession and Sale Consent Agreement” to be entered into between JBGE and the Company, which he sent to Mr Priestley on 21 January at 3.05pm, with another email, in formal terms, indicating JBGE’s intention to exercise its powers of repossession and sale under the loan agreement. Later that day, Mr Brightman of Ellisons advised Mr Hayward on the questions asked in his email of 14 January, saying that he did not consider the demand by email of 8 January to be sufficient for JBGE’s purposes and offering to draft a new one.

Meanwhile, from Singapore Mr Walker was taking advice from a friend, John Lim. By email of 21 January 2019, Mr Lim advised Mr Walker that he should tell everyone who was doing work for the Company – “the agent, the bridger, and others” (“the bridger” being JBGE) – that they could not take instructions from Mr Priestley alone. He said:

“The bridger is a critical piece as they hold the biggest stick - they can put the company in administration if their loan is not repaid. The administration process means you can effectively force the sale of the site (by continuing the deadlock) and get your 50% share back – less the enforcement costs…

Therefore you need to get in touch with the bridger straightaway and explain the situation. Let me know if I can help with this process.”

Despite Mr Lim’s advice, Mr Walker took no steps to get in touch with Mr Giannotti.

On 22 January 2019, a number of things happened. At 3.15pm, Mr Priestley emailed Mr Giannotti, returning the signed Repossession and Sale Consent Agreement and saying that he could see no benefit from the Property being repossessed through court, as opposed to “this method”. He continued:

“The other director is located overseas and is not in contact with me or the company anymore at his own request. I will forward an email from before Christmas when this process started, where he is clearly aware of the impending repossession and clearly demonstrates that he does not contest a repossession or have any issues with it.”

This was followed by an email from Mr Priestley timed 4.09pm, which attached two documents. One was an extract from an email from Mr Walker, the extract only containing the words “Dear Mike”. The second was an extract from Mr Walker’s email to Mr Gregory of 19 November 2018 containing the paragraph set out in paragraph 48 above. Mr Priestley told Mr Giannotti that he had removed some content “due to privacy law as it relates to another matter”. He contended that the email showed that Mr Walker was not concerned about repossession.

At 4.39pm, Ms McCulloch wrote confirming, following her discussions with Mr Giannotti, that BLL would take on the off-plan sale contracts and leases and honour those agreements, on condition that the current owner transferred all deposits to BLL.

At 5.38pm, Mr Giannotti sent the various documents and emails he had received to Mr Hayward, asking for advice as to whether JBGE needed to do anything else. He also said:

“Further to our conversation I can confirm that I have requested the valuation to be re-addressed to JBG Enterprises. I shall send to you as soon as I receive it.”

At 6.44pm, Mr Giannotti then emailed Mr Priestley, advising him that an offer had been received for the Property at a purchase price of £1 million, conditional on the transfer of the deposits from the Company.

At some point on 22 January, there was also a conversation between Mr Hayward and Mr Brightman, the contents of which were recorded on Ellisons’ fee note:

“Call with Mark – the property is vacant and no work has started – the borrower has juts [sic] run out of money. No-one is on site and there is a potential purchaser introduced to the site by the borrower. Borrower is a company and only one director is still around – he is co-operating but the other one is not. The co-operating director feels he does not have authority to sell the site, although Mark agrees that would be easier, particularly given the wish of the purchaser to take over the existing contracts for sale. JCB [i.e. Mr Brightman] advising that given site was vacant and this was consensual, we needed to ensure that we had triggered the power of sale. Mark would speak with client before reverting. JCB would likely need to re-jig the demand letter and then assist with advice over best value for sale.”

It is not clear when in the day that conversation took place, but I infer that it preceded the conversation between Mr Hayward and Mr Giannotti which is referred to in Mr Giannotti’s email of 5.38pm.

The conveyancing process began on 24 January, with Mr Hayward introducing himself to Michael Bush of Henry Hyams, who was instructed for BLL. Consequent on Mr Brightman’s advice that the original demand notice was insufficient, a formal demand notice was given by Hayward Moon on 7 February. Henry Hyams raised no pre-contract enquiries with Hayward Moon and when Mr Hayward queried this with Mr Giannotti, he was assured that BLL had “stated that they were very familiar with the site and had none to few queries”. Henry Hyams, for their part, viewed the transaction as “in essence an intercompany transaction”, as explained in an email to insurers dated 6 March. When dealing with the transfer of the apartment sale contracts and deposits, Mr Priestley also insisted to LCF, who were acting for the Company (on the instructions of Mr Priestley) in relation to the transfer of the off-plan sales contracts to BLL, that the sale to BLL was an “inter group transaction” and that “the sale is by consent order from myself as director. The lender has NOT taken possession”.

Mr Walker was informed in two communications that the Property was being repossessed: first, in an email from Mr Gregory to the Company’s accountants dated 18 February, into which he was copied, and secondly in an email from Mr Priestley to BWL dated 20 February. Neither of these prompted any reaction from him. In evidence, Mr Walker said that he thought Mr Priestley was lying.

On 28 February 2019, Mr Priestley became a director of BLL and was registered as such (Ms McCulloch’s directorship was subsequently terminated). This enabled Mr Priestley to assure LCF by email of 11 March “as both the director of Priestley Homes (Bradford) LTD and Bradford Lofts LTD, that all sales contracts between buyers and Priestley Homes (Bradford) LTD at Conditioning House, Old Canal Road, Bradford, will be transferred to Bradford Lofts LTD”.

On 30 January 2019, Together Commercial instructed JLL to prepare a valuation report on the Property in respect of Mr Priestley’s application for finance (“the JLL Together Commercial Report”). This took the same valuation date of 19 December 2018 as used for the JLL Zorin Report and gave “December 2018” as the date on the frontsheet of the report. The instruction letter of 30 January 2019 was appended to the report. The JLL Together Commercial Report gave the market value of the Property as at 19 December 2018 as £1 million. This was also its market value on the special assumption of a sale within a restricted marketing period of 180 days. The market value on the special assumption of a sale within a restricted marketing period of 90 days was given as £700,000. The terms of reference included the same provisions in relation to confidentiality as the JLL Zorin Report had done.

By 13 March 2019, the sale was on the brink of exchange of contracts. By email of that date, Mr Hayward wrote to Mr Giannotti:

“I have just taken a look at the Companies House records and I see that Nathan Priestley is a director of Bradford Lofts Limited as well as being a director of the defaulting borrower. You mentioned that you thought this might be the case in conversation yesterday.

Given this connection between the borrower and the purchaser I think it is particularly important that you satisfy yourself that you have achieved the best price for the property to ensure there is no comeback from the borrower so I just wanted to check to make sure that you did receive the independent valuation and also that you are satisfied that the property has been properly exposed to the market thus allowing you to achieve market value.”

Mr Giannotti telephoned Mr Hayward following that email, and Mr Hayward noted their subsequent conversation in an attendance note:

“I returned telephone call to John Giannotti who was responding to my earlier email. John advised that:

1.

He had got an independent valuation saying that the property’s value was £1,000,000.00; and

2.

At the time the offer was accepted Nathan Priestley was not a director of the buying company and he has got a copy of the Companies House print out which he undertook at the time.

John didn’t feel the fact that Nathan was now a director was a particular concern as, of course, there would be nothing to stop him being appointed a director of the company at anytime. He was happy that the property was being sold at the right price given that this was a forced sale. I asked whether he had had any contact with the other director of the borrowing company as I was concerned that he might allege the property was not sold at the correct value and John told me he hadn’t responded to any of his communications and he believed he was located in Singapore. As far as John was concerned Nathan Priestley was the person he had been dealing with during the loan process.

We spoke about marketing the property, but John’s feelings were that if this had been done there would be increased interest costs because of the delay and agents selling fees and given the valuation he had got he didn’t see that a higher price was likely to be achieved and indeed the borrowers might end up with less money as a result of the delay and additional fees. I was therefore instructed to proceed to exchange and complete as soon as the purchasers were ready.”

Simultaneous exchange of contracts and completion of the sale to BLL by JBGE took place on 20 March 2019. Of the sale proceeds, after discharge of JBGE’s loan and costs, there was a balance of £36,051.33 paid to the Company. £470,000 of the monies received by JBGE were immediately loaned out to Priestley Homes (Yorkshire) Ltd by way of drawdown on the Leeds House loan.

By email of 5 April 2019, Mr Walker made a proposal to Mr Giannotti under which another of his companies, Walker Capital Investments Limited, would take an assignment of JBGE’s loan and charge, in consideration of the payment of £900,000. Mr Giannotti replied that the loan had been repaid and was no longer outstanding. BWL investigated on Mr Walker’s behalf and discovered that the Property had been sold by JBGE to BLL.

Towards the end of May 2019, Muniment presented a petition under s.994 of the Companies Act 2006 (”CA 2006”) against PHL, Mr Priestley and BLL (Claim No. CR-2019-003767) (“the s.994 Proceedings”). The Company was also joined to the petition as a Respondent. The grounds of unfair prejudice relied on were (a) an alleged conspiracy between Mr Priestley and PHL to acquire the Property and the profits to be made from it from the Company to the exclusion of Muniment; (b) PHL’s alleged breaches of a shareholder’s agreement; (c) Mr Priestley’s alleged breach of a number of his duties as director; and (d) the irretrievable breakdown in trust and confidence between Muniment and PHL. In addition it was claimed that alternative causes of action/the potential for derivative claims lay against PHL and BLL on the grounds of their alleged dishonest assistance of Mr Priestley’s breaches of duty; BLL’s knowing receipt of the Property and PHL’s knowing receipt of deposit monies belonging to the Company.

Under Claim No. BL-2019-001013, Muniment also took action against PHL, Mr Priestley and other Priestley entities for repayment of monies loaned to PHL, which had been guaranteed by the other defendants (“the Loan Proceedings”). The sum claimed in the Claim Form was £1,993,926.20, plus the court fee of £10,000.

By a Deed of Settlement dated 13 January 2020 (“the Deed of Settlement”), made between Muniment on the one hand and (1) the respondents to the s.994 Proceedings (other than the Company) (2) the defendants to the Loan Proceedings and (3) other Priestley companies on the other, the s.994 Proceedings and the Loan Proceedings were settled on the basis that Muniment would be paid £1.68m by instalments and receive the leases of six apartments at the Property. The Company was not a party to the Deed of Settlement, having been struck off the register of companies and dissolved on 17 December 2019. However, it was agreed that it would be restored to the register and that PHL would transfer its shareholding to Muniment. By clause 8.2 of the Deed of Settlement, Muniment agreed that on restoration of the Company to the register it would not bring any claim against, amongst others, Mr Priestley and by clause 9.2 it was confirmed that the agreement not to sue extended to any claims which the Company had against any of the parties to the deed.

On 13 August 2020, the Company was restored to the register and on 18 March 2021, Muniment transferred its shareholding in the Company to Mr Walker.

The Deed of Settlement was varied by Deeds of Variation dated 6 January 2021 and 9 April 2021 and then replaced by a Deed of Settlement dated 3 October 2023 (“the Replacement Deed”). The Company was not a party to these agreements. By the Replacement Deed, Muniment was entitled to keep the monies paid and assets (including the six flats) already transferred to it pursuant to the Deed of Settlement, as varied, and to be paid a further sum of £85,000. There was a wide release of claims between the parties to the Replacement Deed, including on behalf of related parties, but these were defined in such a way as not to include the Company. There was no equivalent to clauses 8.2 and 9.2 of the Deed of Settlement.

Following its purchase, BLL proceeded with the redevelopment of the Property. On 18 April 2019, it applied for planning permission for an amendment to the redevelopment scheme, involving the installation of a mezzanine floor in the roof space to provide 17 additional apartments. This, therefore, brought the total number of apartments up to 150. The application was granted on 20 August 2019. A subsequent permission granted on 22 April 2022 allowed for a change of use of the lower ground floor to open-plan office space and gymnasium and 11 residential units, and a change of use of the ground floor link building as a further three residential units.

JBGE has continued to do business with Mr Priestley since the events with which this case is concerned. It has now done 14 deals with Priestley companies and currently has about £3 million-worth of loans outstanding with them.

The question whether JBGE was threatening to take enforcement action under its legal charge prior to Mr Priestley’s email of 7 January 2019 is relevant to understanding the subsequent discussions between Mr Priestley and Mr Giannotti.

The Defendants’ pleaded case is that, from at least mid-November 2018, Mr Giannotti had been making it clear to Mr Priestley that there would be no further extension to the Company’s loan and that, in the event of non-payment, JBGE would exercise all relevant powers under the loan agreement and legal charge to recover its funds. They therefore assert that the representations made by Mr Priestley, in his email of 24 December 2018, and by Mr Gregory in his email of 4 January 2019, about the imminence of possession proceedings, were true, except that it was said that Mr Giannotti had no recollection of imposing a specific deadline of 7 January 2019, or requiring heads of terms by that date.

Mr Giannotti’s first witness statement paints a picture of mounting concern and clear reminders to Mr Priestley that no extension would be permitted beyond 15 December 2018, and Mr Giannotti says that he informed Mr Priestley during telephone conversations after 15 December that JBGE would exercise its rights under the legal charge if a solution to repay the loan was not presented without further delay. In oral evidence, Mr Giannotti accepted that he had said nothing to Mr Priestley about repossession by 16 November, at which point Mr Priestley was saying “we will not have a building to inspect soon as it is due to be repossessed”. However, he insisted that by December he had been clear in conversations with Mr Priestley that the loan needed to be repaid on its maturity date and that when Mr Priestley said on 24 December 2018 that JBGE was “days away from repossession proceedings”, that was a fair summary of Mr Giannotti’s position.

The Company’s pleaded case is that the representations made in Mr Priestley and Mr Gregory’s late December/early January emails were untrue and Mr Walker’s evidence is that he considered Mr Priestley could obtain an extension from JBGE if he asked for one, given the good relationship he had with Mr Giannotti.

I find that Mr Giannotti did not mention or threaten any form of enforcement action prior to Mr Priestley’s email of 7 January 2019. Given the seriousness of such action, it is highly unlikely that any such suggestion would have been made without reference to it appearing in the email exchanges between Mr Giannotti and Mr Priestley. On the contrary, what does appear from the email exchanges relating to Leeds House was that Mr Giannotti took a fairly relaxed approach to dates for repayment. It was central to JBGE’s business model to build and sustain good business relationships with its clients and, within reason, that involved give and take on both sides. Mr Priestley was prepared to offer to hold back on drawing down monies to which Priestley Homes (Yorkshire) Limited was formally entitled, to assist with JBGE’s cashflow; equally, Mr Giannotti was tolerant of some delay, from both Mr Priestley and other clients, as long as it did not unduly disrupt JBGE’s cashflow. He took a holistic view of his relationship with clients and, by the email exchanges of 11 December 2018, gave Mr Priestley some control over the date on which the Company’s loan was repaid by tying it to the drawing down of instalments of the loan for Leeds House.

The fact that Mr Giannotti chased Mr Priestley in December 2018 for a quarterly interest payment, but not the principal which was then due, is entirely consistent with that approach. It is inconceivable that the emails between Mr Giannotti and Mr Priestley of 20 December 2018 would have been written as they were if there was a real prospect of enforcement action being taken in the new year over the failure to repay the principal.

That is not to say that Mr Giannotti would have formally extended the term of the Company’s loan without good reason. I consider that he was truthful when he explained in evidence that this was a short-term bridging loan, outside JBGE’s usual business. As I have said, his evidence that he told Mr Priestley in June 2018 that the loan would not be extended again was not challenged; it is also corroborated by a WhatsApp message from Mr Priestley to Mr Walker on 4 July 2018 (when they were still on good terms).

Nor, in my judgment, would Mr Giannotti have allowed the loan to run on, unpaid, for many months after the maturity date. His relationship with Mr Priestley, however friendly, was a business relationship. He had his own and the interests of his investors to consider. Had he been told that development finance was just about to be signed off, or that heads of terms between Mr Walker and Mr Priestley had been agreed to resolve a dispute and a little more time was needed for repayment, he would have given that time, rather than risking the productive relationship he had with Mr Priestley and having the inconvenience and cost of taking legal action. But that is different from allowing the loan to remain outstanding for a long period without any realistic prospect of repayment. Part of the reason for Mr Giannotti’s relaxed attitude was that he did not, I find, know about the breakdown in the relationship between Mr Priestley and Mr Walker before receiving Mr Priestley’s email of 7 January. Had he known about the deadlock in the Company he would have been more concerned about repayment of the principal and the absence of a realistic exit from the lending.

It suited Mr Priestley, in the context of the negotiations with Mr Walker, to play up the risk of enforcement action being taken by JBGE. However, his expressions of concern may not have been entirely tactical. The loan did become due for repayment on 15 December 2018 and the Company did not have the resources to make the repayment. The breakdown in his relationship with Mr Walker meant that the Company could not move forward with obtaining development finance, which would enable repayment of the loan. Mr Priestley was also much more exposed than Mr Walker was to the risks of enforcement action, by virtue of having given a personal guarantee and being a director of a number of active companies in the UK. But I find he was not being truthful in his emails in suggesting that there was a threat of repossession coming from Mr Giannotti. Mr Gregory’s email of 4 January 2019, in purporting to record a conversation between Mr Priestley and Mr Giannotti that day in which Mr Giannotti had imposed a deadline of 7 January for agreed heads of terms, is obviously untruthful. The fact that Mr Priestley’s email of 7 January starts with “Happy new year!” indicates that he had not spoken to Mr Giannotti since the start of the year and the information in it shows that Mr Priestley had not previously revealed to Mr Giannotti the breakdown in his relationship with Mr Walker. By saying that repossession action was imminent, Mr Priestley was hoping that he could get Mr Walker to agree to a form of resolution which he could then present to Mr Giannotti as an agreed way forward. The email of 7 January followed because he could not – he was, as he said in that email, “stuck”.

Mr Giannotti’s evidence was that, between Christmas and New Year 2018/2019, Mr Priestley provided him with an email containing the JLL Zorin Report and the JLL Together Commercial Report. He says that he noted the fall in value from the ACS Valuation of £2 million and attributed it to the poor state of repair of the Property. He also says that receipt of the two JLL Reports reinforced his view that it would not be possible for the Company to secure development finance and that the JBGE loan needed to be repaid immediately. He explained the lack of any covering email in the evidence by his habit of deleting emails which themselves contain no relevant information.

Mr Giannotti cannot have received the JLL Together Commercial Report before 7 January 2019, as it was not created until February 2019, but as that point was not put to him I will take his evidence as referring to just the JLL Zorin Report. I do not, however, accept this evidence. The way in which the JLL Zorin Report was provided to Mr Giannotti by Mr Priestley on 8 January 2019 is not consistent with the suggestion that it had been provided a few days earlier. In any event, it is improbable that Mr Priestley would have provided JBGE, as the Company’s lender, with a report showing a lower-than-expected market value figure for the Property until he had charted a clear way forward for breaking the deadlock position which had arisen with Mr Walker, which he did only following his email of 7 January.

The Company’s case critically depends on what was discussed between Mr Priestley and Mr Giannotti in the conversation which took place between Mr Priestley’s emails of 7 January (7:37pm) and 8 January (12.34pm), probably on the morning of 8 January.

The case as put to Mr Giannotti was that it was then agreed that JBGE would assist Mr Priestley to end the joint venture by exercising its power of sale; that the sale price would be £1 million, which was just sufficient to discharge JBGE’s loan; that the purchaser would be a new special purpose vehicle controlled by Mr Priestley; that Mr Priestley would raise the money from Zorin, who had obtained a valuation in the amount of £1m; that it was agreed that Mr Priestley would send Mr Giannotti the JLL Zorin Report so that Mr Giannotti could pretend to be relying on it; that there would be a paper trail to make the sale look genuine and to that end, Mr Giannotti agreed that he would email a formal demand for payment and a formal statement of intention to repossess the Property; that Mr Priestley would respond as director of the Company consenting to the sale; that it would not look as if the buyer was connected with Mr Priestley because it would be a new special purpose vehicle; that Mr Giannotti had not previously decided to exercise the power of sale and had no serious concerns about the Priestley Group and was content to extend the loan and that Mr Giannotti provided Mr Priestley with a route which enabled him to buy the Property for £1 million. Mr Giannotti denied these allegations.

Mr Giannotti’s evidence was that during the conversation he told Mr Priestley that he had shown patience and given him considerable time to find a solution; that he had no interest in getting involved in whatever disagreement was ongoing between him and his joint venture partner and that JBGE would be proceeding with enforcement of its rights under the legal charge.

In my judgment, the Company has proved the central allegations of its case in relation to this conversation, although not all of the detail which was put to Mr Giannotti.

First, I find that Mr Giannotti had not, prior to the 7 January email, decided that JBGE should exercise its power of sale. This is for the reasons set out in paragraph 106 above and caveated by the considerations in paragraph 109 above.

Second, I find that Mr Giannotti understood (as he accepted) that in his 7 January email, Mr Priestley was asking Mr Giannotti for help in ending the joint venture with Muniment.

Third, I find that it was agreed on 8 January that JBGE would exercise its power of sale over the Property and that Mr Priestley would, on behalf of the Company, consent to that exercise. Although Mr Priestley’s email of 8 January (21:42) refers to repossession rather than sale, this was a shorthand for the exercise by JBGE of its rights as mortgagee (only later, during discussions with LCF about the transfer of the deposits, did it become important to Mr Priestley to distinguish between repossession of the Property and exercise of the power of sale). Mr Giannotti’s relationship with Mr Priestley was such that he would not have sent his email of 8 January formally demanding repayment of the loan if he had not agreed this course of action with Mr Priestley in advance and known that Mr Priestley would consent to it. He would not have wished to risk the relationship with Mr Priestley or invite litigation by taking unilateral action, except as a last resort, which point had not been reached. Moreover, if Mr Priestley had not known that the demand was coming, he would never have responded to it as he did and as quickly. After all, Mr Priestley had said in his 7 January email that he had other means by which to “carry on as planned with repayment of your loan” and the demand gave the Company until 14 January to make repayment. If the demand had not been consensual, Mr Priestley would have striven to stave off any enforcement action, not welcomed it.

Fourth, I find that it was agreed that JBGE would sell the Property to a new entity controlled by Mr Priestley for the market value figure given in the JLL Zorin Report (£1 million), which Mr Priestley agreed to, and did by his email of 12.34pm, forward to Mr Giannotti. This course of action was understood by Mr Giannotti to be a way in which Mr Priestley could get out of the joint venture whilst still keeping control of the Property, protecting the apartment buyers and the Priestley Group’s reputation, which is what the 7 January email had indicated were Mr Priestley’s concerns. That a sale at £1 million had been agreed is apparent from the fact that the following day, 9 January, Mr Priestley could tell Together Commercial “we will now be purchasing the property off the current owner for £1m” and on 16 January – before BLL’s offer of £1 million had apparently been made - was sufficiently confident about the sale to instruct solicitors to act on the purchase, for which the price had been agreed at £1 million. Moreover, by 9 January Mr Giannotti had, as he explained to Mr Hayward, “received an undertaking from the Directors of PH Ltd that they shall pass all deposits to a client account of the buyer and arrange for transfer of sales contracts”. This indicates that he had already discussed with Mr Priestley the mechanics of the sale and the way in which the apartment buyers were to be protected (by ensuring that the purchaser honoured the existing contracts), which was seen as necessary to uphold the Priestley Group’s reputation.

In my judgment it is also telling that Mr Priestley did not, on receiving the formal demand, forward it to Mr Walker. Mr Priestley had, after all, been seeking to put pressure on Mr Walker to agree terms by suggesting that the Property was about to be repossessed. If he had been continuing that strategy, he would have immediately sent the demand to Mr Walker to prove that he had been right. But he did not do so. I find that was because, after the conversation on the 8 January, Mr Priestley’s strategy had changed. He had agreed that JBGE would sell the Property to a new company and now he needed time to set it up and organise the purchase through it. It therefore suited him not to immediately alert Mr Walker to the steps being taken by JBGE.

It is right to note that the conclusion to Mr Giannotti’s email to Mr Hayward of 9 January “In the meantime, I shall find a buyer!” points in the opposite direction. However, the evidence that Mr Giannotti had already agreed a sale to a Priestley entity is sufficiently strong that the conclusion must be that this was a pretence, intended to give the appearance to Mr Hayward that a sale had not yet been agreed.

I do not find that it was suggested that Mr Priestley would raise the money for the purchase from Zorin, since the day after the conversation Mr Priestley was applying to Together Commercial.

As regards the allegation that it was agreed that the JLL Zorin Report would be sent to Mr Giannotti so that he “could pretend to be relying on it” (it was also said to be a “figleaf”), the Defendants submitted in opening that this did not form any part of the Claimant’s pleaded case. The Company contested this. I allowed Mr Halpern to cross-examine on the basis that it was understood that Mr Simpson maintained his objection and that further submissions could be made in closing, as they were.

As to the pleaded case, paragraph 19(vi) of the Amended Particulars of Claim alleged that it was agreed that:

“[JBGE] would not obtain any valuation but would rely on a valuation previously procured by Mr Priestley who would provide the same to the Defendants”

Paragraph 24 continued:

“…the Defendants…failed to obtain any independent valuation and solely relied on a valuation provided by Mr Priestley to [Mr Giannotti]”.

In response, paragraph 22 of the Re-Amended Defence admitted that the Defendants did not obtain a new valuation and averred that they instead relied on the JLL Zorin Valuation which was reasonably understood to be both independent and accurate. Paragraph 23.5 of the Re-Amended Defence also contended that JBGE took reasonable steps to obtain the true market value of the Property by relying on the JLL Zorin Report; that it was a thorough and professional valuation prepared by independent valuers applying appropriate comparables; that the Defendants had no reason to doubt its contents and it was reasonable for JBGE to rely on it.

The Company pleaded at paragraph 74 of the Amended Reply that the Defendants had no reasonable basis to rely on the JLL Zorin Report given that it was confidential and, in the absence of JLL’s consent, the Defendants were aware that Mr Priestley’s supply of the same amounted to a breach of confidence, further that the Defendants were aware that the report was not provided with a view to the Property being sold, either at the date of the report or at the date of the sale to BLL. In paragraph 86(ii) the Company also relied on the fact that Mr Priestley had procured the JLL Zorin Report as a reason why it was not reasonable for the Defendants to have relied on it.

By paragraph 5 of a request for further information, the Defendants asked whether the Company was suggesting that Mr Priestley procured JLL knowingly to provide a false valuation and, if so, as to the Company’s case in that respect. The response was that as Mr Walker had no involvement in relation to the valuation, the Company was unable to add to its Amended Reply.

Paragraph 6 of the same request for further information asked whether it was the Company’s case that Mr Giannotti merely doubted the contents of the valuation or that he in fact knew that the valuation was false and, if so, for details of the Company’s case in that respect. The Company’s response was that this was an improper request and irrelevant to the facts and matters pleaded in paragraph 86(ii) of the Amended Reply.

Against this background, I agree with the Defendants that it is not open to the Company to contend (nor for me to find) (a) that the JLL Zorin Report was known by JLL to be “false” (by which I understand to mean that it did not reflect the author’s honest opinion of the market value of the Property at the time of the report); (b) that Mr Giannotti knew that the JLL Zorin Report was false or (c) that Mr Giannotti doubted the contents of the JLL Zorin Report (by which I understand to mean that Mr Giannotti did not believe that JLL’s estimate of market value was a reasonable estimate within the range of values which might be advised by reasonably competent valuers at the date of the report). In so far as the Company’s case that it was agreed that the JLL Zorin Report would be used as a “pretence” or “figleaf” is intended to imply any of these facts, it is not pleaded.

It seems to me that the Company’s pleaded case, in paragraphs 19(vi) and 24 of the Amended Particulars of Claim, is to the effect that the point of Mr Priestley sending Mr Giannotti the JLL Zorin Report was to enable him to use it to justify the agreed sale price, if challenged. That is what I find to be what occurred; if the Company’s argument of “pretence” or “figleaf” goes further than that, I reject it.

The Company’s case about setting up a paper trail is more elaborate than is likely. By the time the conversation concluded, Mr Priestley would have known that he would receive a formal demand for repayment and Mr Giannotti knew that Mr Priestley would consent to a sale. The conversation is unlikely to have gone any further. The marked change in the tone of the emails between Mr Giannotti following their conversation, from friendly informality to formal expressions of disappointment and contrition, was for the benefit of Mr Hayward, to whom Mr Giannotti copied his demand email. Mr Priestley is likely to have taken his cue from Mr Giannotti in this respect, rather than the details of the communications being planned out in advance.

As indicated above, around the time that BLL was incorporated, Mr Giannotti had a conversation with Ms McCulloch, which was followed by an email of 18 January. Mr Giannotti’s evidence was that he received an unsolicited phone call from Ms McCulloch, whom he did not know to be connected to Mr Priestley and who described herself as a property developer; that Ms McCulloch said she was aware that the Property had been dormant for some time and that JBGE had a legal charge over it; that, on being told that JBGE was preparing to put the Property up for sale, she offered £800,000 for it, which was declined and followed by the offer of £1 million in her email of 18 January. Mr Giannotti said that he had looked at the Companies House registration for BLL and printed off the page that showed Ms McCulloch as sole director but had not looked to see what other directorships she had. In answer to a question from me, Mr Giannotti said that, although he knew BLL was a special purpose vehicle, he had not asked which group it was part of.

Mr Giannotti’s evidence that Ms McCulloch’s initial offer was at £800,000 was not specifically challenged in cross-examination but, save to that extent, I do not accept this evidence. Mr Giannotti may well not have known who Ms McCulloch was before the conversation on the 17 or 18 of January. She had been described as Mr Priestley’s PA as part of an email chain received by Mr Giannotti in relation to Leeds House, but he was unlikely to have picked up that detail and all Mr Giannotti’s dealings in relation to any Priestley Group company had been with Mr Priestley. But I find that by the time Mr Giannotti received the email of 18 January, he knew that BLL, the company of which Ms McCulloch was a director, was the vehicle which Mr Priestley had discussed setting up in their telephone conversation on 8 January. He understood that Ms McCulloch had been appointed as sole director to avoid revealing Mr Priestley’s relationship with the company.

By 22 January 2019, as recorded in Ellisons’ fee note, Mr Giannotti had informed Mr Hayward that BLL had been “introduced to the site by the borrower”. Whilst this note does not mean that Mr Hayward then understood BLL to be a company controlled by Mr Priestley, it contradicts Mr Giannotti’s version of events. Mr Giannotti denied that this information came from him and attempted to suggest that the information may have come from Mr Priestley. Mr Simpson and Mr Yap sought to support this contention, arguing that Mr Hayward must have contacted Mr Priestley directly, having been put in contact with him through Mr Giannotti’s email of 8 January. This is implausible and in my judgment it was Mr Giannotti who had told Mr Hayward of the supposed introduction, by way of explanation as to how a buyer had been found so quickly.

In his first witness statement, Mr Giannotti said that he was unaware that Mr Priestley was in any way affiliated with BLL. This was corrected in his second witness statement, Mr Giannotti having by then seen the email from Mr Hayward dated 13 March 2019 and his attendance note of the same day. His evidence was that he did not recall either the conversation of 12 March referred to in Mr Hayward’s email (in which Mr Giannotti is said to have indicated that he thought Mr Priestley might be a director of BLL), or the call recorded in the attendance note.

In his second witness statement, Mr Giannotti said about the conversation on 12 March that, although he could not recall it, he believed that if Mr Hayward had told him on the call that Mr Priestley was a director of BLL, he would have said something along the lines of “oh it wouldn’t surprise me given what was happening there.”. When asked in cross-examination what he meant by that, he said “Not a lot really. Well, I don’t know. I don’t know what I would have said. I don’t remember the conversation”.

It is clear, however, from Mr Hayward’s email, that the conversation with Mr Giannotti on 12 March had taken place before Mr Hayward had checked the Companies House records for BLL. It had involved Mr Giannotti speculating that Mr Priestley might be a director, not Mr Hayward telling him that he was. In my judgment, it is probable that Mr Hayward had raised the potential for there to be a relationship between BLL and the Company, given, for example, the absence of standard pre-contractual enquiries from BLL, and that Mr Giannotti had said that might be the case. This then prompted Mr Hayward to search Companies House and report his findings to Mr Giannotti by the email.

When it comes to the attendance note, in my judgment it is significant that Mr Hayward chose to make a formal attendance note recording his conversation with Mr Giannotti. He clearly appreciated the potential for future dispute and wanted to ensure that his advice and Mr Giannotti’s instructions were fully recorded.

There are three points to note on the attendance note:

At various points in the analysis, it is relevant to consider Mr Priestley’s authority to act for the Company in its relations with JBGE, and Mr Giannotti’s beliefs in relation to that authority.

The Company contends that under its articles, Mr Priestley did not have actual authority to act without reference to Mr Walker, and any apparent authority terminated when Mr Giannotti was informed of the deadlock between the directors by Mr Priestley’s 7 January email.

The Defendants contend that Mr Priestley had implied authority to act on behalf of the Company in all its dealings with JBGE. Mr Giannotti’s evidence is that he understood Mr Walker to be a “finance partner”, by which he meant that Mr Walker/Muniment had put money into the Company but were not involved in its day-to-day operation, and that he understood Mr Priestley to have complete authority to bind the Company and to have full control over the Company’s operational and financial affairs.

In my judgment, Mr Priestley was given implied authority by the board of directors to deal on the Company’s behalf with the JBGE loan. Whilst Mr Priestley’s entry into the original loan agreement had been formally ratified by the board, there was no equivalent ratification of the extension agreement of June 2018, which was nevertheless treated as binding on the Company. Moreover, Mr Walker’s evidence that he thought Mr Priestley could obtain a further extension of the loan agreement if he asked for one also shows that he treated Mr Priestley as authorised to decide whether a further extension was appropriate and then to negotiate and sign it. That implied authority did not, however, extend to allowing Mr Priestley to sell the Property or to consenting to JBGE repossessing or selling the Property, in circumstances where such consent was required to allow JBGE properly to exercise its powers to take possession or to sell the Property.

I do not consider that Mr Priestley had any apparent authority which went beyond the terms of his implied authority. Mr Walker did not hold Mr Priestley out as being authorised to sell the Property and the note of the call between Mr Hayward and Mr Brightman of 22 January 2019 is evidence that Mr Giannotti did not understand him to have that power. Furthermore, any apparent authority to act unilaterally for the Company was terminated when Mr Giannotti received the email of 7 January, which made clear that Mr Walker was required to, but refusing to, “sign off on any lending, off plan sale of flats and lots more”. In evidence, Mr Giannotti accepted that he understood the email of 7 January to mean that there was “probably an irrevocable breakdown in their relationship and the project”. Moreover, the advice given to Mr Giannotti by Mr Hayward on 13 March 2019 was inconsistent with the idea that it was enough to have Mr Priestley’s consent to the sale to BLL: Mr Giannotti was warned that there could be “comeback from the borrower” if he had not achieved the best price for the property.

For the reasons given in paragraph 129 above, I must approach this case on the basis that Mr Giannotti believed that JLL’s estimate of market value was a reasonable estimate within the range of values which might be advised by reasonably competent valuers at the date of the report. This was in fact the gist of Mr Giannotti’s evidence, in his second witness statement, about what he meant by describing the valuation in the JLL Zorin Report as “a bit light [but] a reasonable starting point” in his email to Mr Hayward of 9 January 2019: he said “I thought that £1 million was a very solid valuation but you get good valuers and bad valuers and someone might have valued the Property at £1.1 million”. In cross-examination he offered a different and completely implausible explanation of the email of 9 January, namely that it was referring to a loan-to-value ratio at which development finance lenders would lend.

Furthermore, in places in his witness statements (paragraph 117 of his first witness statement and paragraph 33 of his second), Mr Giannotti went further and positively asserted that he believed that £1 million was the best price which could be achieved for the Property. He was not challenged on this evidence, which I must therefore accept as true.

I find that Mr Priestley believed that £1 million was an undervalue. This is apparent from his email to Mr Benson and Mr Walker of 24 December 2018 where he disagreed with JLL’s valuation at £1 million, saying that £1.2m could be achieved “if we had enough time”. This comment about time came in the context of Mr Priestley untruthfully seeking to persuade Mr Walker that enforcement action by JBGE was imminent. It is also apparent from Mr Priestley’s email to Together Commercial of 9 January, in which he referred to the value being “much higher” than the agreed purchase price. I allow for the likelihood that Mr Priestley was puffing up the value of the Property to Together Commercial to persuade them to lend but still consider that Mr Priestley genuinely believed the Property to be worth more than £1 million, if sold on the open market.

The Company’s primary claim is the claim of conspiracy and it was put at the forefront of both parties’ submissions. However, as elements of the claims of breach of JBGE’s equitable duties as mortgagee and dishonest assistance provide some of the building blocks of the claim in conspiracy, I consider it is more helpful to consider those two causes of action first.

It is common ground that, although a mortgagee is not a trustee of the power of sale for the mortgagor and is entitled to exercise that power for his own purposes at a time of its choosing, it owes the mortgagor certain equitable duties. First, its powers must be exercised in good faith for the purpose of obtaining repayment or protecting the security. Second, it has a duty to take reasonable care to obtain the best price reasonably obtainable at the date of sale: Cuckmere Brick Co v Mutual Finance Ltd [1971] Ch 949 at 966A-F; Meretz Investments NV v ACP Ltd [2006] EWHC 74 (Ch), [2007] Ch 197 at [288]-[290].

The Company alleges JBGE breached both of those duties and that the first breach is an unlawful means for the purposes of its conspiracy claim, whilst the second provides it with a standalone claim against JBGE. I shall consider the position first without reference to the Repossession and Sale Agreement and then turn to the effect of that agreement.

In Devon Commercial Property Ltd v Barnett [2019] EWHC 700 (Ch), His Honour Judge Matthews reviewed the authorities and said, in relation to good faith, at [188]:

“… in analysing different kinds of civil liability in private law (and defences to such liability) into their constituent elements, it seems to me that, absent a specific statutory context, “good faith” ought to mean more or less the same thing. Taking all of these authorities into account, therefore, I conclude that a breach of the duty of good faith owed by a receiver to the mortgagor must involve intentional conduct amounting to more than mere negligence, and encompassing either an improper motive or an element of bad faith, but it need not amount to dishonesty. …”

and, in relation to acting for a proper purpose, at [191]-[192]:

“…where the receiver is exercising the powers of sale and management conferred on him or her by the mortgage, the receiver is doing so for the purpose of securing repayment of the debt owing to the mortgagee, and therefore he or she must exercise those powers in good faith and for the purpose of obtaining repayment of the debt: see Downsview Nominees, 312D-E. For this purpose it is sufficient if the receiver is exercising the power at least in part for a proper purpose, ie that at least one of the purposes for which the power is exercised is a proper one (Meretz Investments NV v ACP Ltd [2007] Ch 197, [314], [335], reversed in part on other grounds [2008] Ch 244, CA).

In this context a proper purpose is one to protect or realise the security or otherwise to secure repayment of the debt. That is what the security is granted for. Exercising the powers of management or sale attached to that security so as to protect or benefit some other, collateral interest of the creditor, eg to disrupt enforcement of a lower ranking security (Downsview), to assist a friend or relative to avoid the consequences of security of tenure legislation in relation to a tenancy granted by that person (Quennell v Maltby [1979] 1 WLR 318, CA), or perhaps to injure a commercial competitor (Lightman & Moss, 13-011), would therefore not be a proper purpose.”

In the Meretz case, referred to above, Lewison J conducted a review of the authorities relating to the mortgagee’s motives for exercising its powers. The submission made to him that a power of sale would only be properly exercised where the mortgagee had “purity of purpose”, that is to say where the mortgagee’s only motive was to recover the debt secured by the mortgage, was rejected. He said at [314]:

“Drawing the threads together, it seems to me that none of the authorities to which I was referred gives unequivocal support to Mr Morgan's submission that the mortgagee must have “purity of purpose”. On the contrary, Nash v Eads 25 SJ 95 and Belton v Bass, Ratcliffe & Gretton Ltd [1922] 2 Ch 449 are inconsistent with it. So, too, is the statement in Fisher & Lightwood, Law of Mortgages, para 16.13. A dissection of a mortgagee's motives is likely to be difficult in practice. Moreover, unlike statutory powers conferred for the public benefit, or trustees' powers conferred for the benefit of beneficiaries (which were two analogies on which Mr Morgan relied) a mortgagee's powers are conferred upon him for his own benefit. In such circumstances “purity of purpose” may be difficult to achieve. The cases do support the proposition that a power of sale is improperly exercised if it is no part of the mortgagee's purpose to recover the debt secured by the mortgage. Where, however, a mortgagee has mixed motives (or purposes) one of which is a genuine purpose of recovering, in whole or in part, the amount secured by the mortgage, then in my judgment his exercise of the power of sale will not be invalidated on that ground. In addition I consider that it is legitimate for a mortgagee to exercise his powers for the purpose of protecting his security.”

In my judgment, JBGE was not in breach of this duty when exercising its power of sale. It is true that it was prompted to use its power of sale by Mr Priestley’s email of 7 January and the conversation on 8 January 2019. It was undoubtedly part of Mr Giannotti’s motivation to assist Mr Priestley with his goal of getting the Property out of the Company, as the joint venture vehicle, whilst still keeping it under his control. But for that conversation, Mr Giannotti would not have caused JBGE to start taking steps towards a sale when he did. But I do not think it can be said that it was no part of JBGE’s purpose to recover the secured debt. The date for repayment had passed; there was no request to extend the loan; the lending had been intended as short-term bridging finance and there was no obvious other way in which the principal was going to be repaid in any reasonable timescale, given the deadlock between Mr Priestley and Mr Walker which Mr Giannotti only learned about on 7 January. The sale of the Property therefore gave JBGE an exit from a potentially troublesome lending position, whilst at the same time helping out a valued client. These mixed motives prevent JBGE being in breach of duty.

Fisher and Lightwood’s Law of Mortgage, 15^th edn. paragraph [30.24] summarises the relevant principles as follows:

“If the mortgagee decides to exercise his power of sale, he is under a specific duty to take reasonable care to obtain the best price reasonably available for the mortgaged property at the time, which will normally equate with the current market value. This duty arises in equity, rather than in tort or contract...It is a matter for the mortgagee how that general duty is to be discharged in the circumstances of any given case (eg mode of sale, advertisement, time on the market). Such decisions inevitably involve an exercise of informed judgment on the part of the mortgagee, in respect of which there are no absolute requirements. The mortgagee will not be adjudged to be in default unless he is plainly on the wrong side of the line, even though he might have obtained a higher price. The best price reasonably obtainable is not synonymous with a RICS 'red book' valuation…

A mortgagee is not under a duty to obtain the best available price where it co-operates with the mortgagors to effect a sale at a lower price, because such a sale is more satisfactory to the mortgagors for other reasons.

The burden of proof is on the mortgagor, or other person seeking to set aside the sale, to prove breach of this duty by the mortgagee. If, however, the mortgagee has sold the property to a connected company, it will bear the burden of proving it took all reasonable steps to comply with its duty. In view of the sufficient equity in the property required by most mortgagees, a sale at just above the sum to discharge the mortgage may be looked at carefully by the court, but that is not to say that there may not be occasions when that sum is the proper price or true market value. The fact a property has been repossessed by a mortgagee may often cause the property to sell at a reduced price. The fact that the property is resold shortly after the mortgagee sale for a substantially higher price is a matter of suspicion. Often, however, an alleged undervalue will merely be the difference in the opinions of several valuers. Thus a sale price may be considered to be 'on the low side' and yet not at an undervalue. Where the property is subject to a right of pre-emption binding on the mortgagee, there is nothing more the mortgagee can do than offer the property to the person with the benefit of the right, or, possibly, depending on the wording of the right, foreclose, rather than sell.

A mortgagee will not breach its duty to the mortgagor if, in the exercise of its power to sell the mortgaged property, it exercises its judgment reasonably; and to the extent that the judgment involves assessing the market value of the mortgaged property, the mortgagee will have acted reasonably if its assessment falls within an acceptable margin of error. In so far as the exercise of the mortgagee's power of sale calls for the exercise of informed judgment by the mortgagee, whether as to market conditions, or as to market value, or as to some other matter affecting the sale, the court can use a valuation 'bracket' or a margin of error as a means of assessing whether the mortgagee has failed to exercise that judgment reasonably. Where the property has been exposed to the market, and a number of genuine offers were received, the court should start by considering the steps that the mortgagee took to sell the property, and then consider whether, in all the circumstances, the mortgagee acted reasonably in accepting the purchaser's offer, andcontracting to sell the property at that price. Where the mortgagee has accepted the first offer it received, without the property having been exposed to the market at all, the likelihood is that the only evidence of market value available to the court will be valuation evidence.

The mortgagee should follow up the possibility of a sale at a higher price. To accept less in a private sale than a prospective purchaser, with means, has indicated he would bid at a proposed auction may be a breach of the mortgagee's duty; the mortgagee has to balance a higher offer, which is not firm, against a lower firm offer which will be withdrawn if not accepted within a specified period. If possible, interested parties should be put in a position where they are required to compete with one another...

Where, by agreement with the mortgagor, a mortgagee sold the property via a transaction initiated and devised by the mortgagor, and on terms all of which had been agreed by the mortgagor, the mortgagor could not complain that the mortgagee had breached its duty to obtain the best price reasonably obtainable...

The remedy for breach of the equitable duty is not common law damages, but an order that the mortgagee account to the mortgagor and all others interested in the equity of redemption, not just for what he actually received, but for what he should have received. The prima facie measure of damages for breach of the mortgagee's duty by sale at an undervalue is the reduction in value of the equity of redemption. Such damages are to be assessed with the benefit of the knowledge of what has happened up to the time of trial…”

This case raises questions in particular about the extent to which a mortgagee may rely on a valuation, rather than exposing the mortgaged property to the market, and, if so, the relevance of (a) the valuation having been provided in confidence to another person or for another purpose and (b) there being a reasonable potential difference of opinion between different valuers (the range between different valuations which might be given by competent valuers sometimes being referred to as “the bracket”).

The second of these questions was addressed directly by the Court of Appeal in Michael v Miller [2004] EWCA Civ 282, [2004] 2 EGLR 151. There, mortgagors of an estate including land planted with lavender and other herbal plants contended that the mortgagees had failed to take care to obtain the best price reasonably obtainable when selling the estate by private treaty for £1.625m, the plants having been treated as valueless on the advice of an expert in the production and marketing of lavender oil, Mr Head. The mortgagees had also been advised on the sale by an estate agent and valuer, Mr Hextall. The first instance judge found that the market value of the estate was £1.75m, but that an acceptable bracket for valuations ranged from £1.6m to £1.9m. He found that, although Mr Hextall, who had valued the estate at £1.6m, had not acted negligently, the mortgagees had breached their duty in two respects: first, by agreeing a last-minute reduction in the price without reference to Mr Hextall and second, in failing to market the lavender plants separately from the land. He found that Mr Head had been negligent. The judge had concluded that the mortgagees were liable for any negligence of their advisers and there was no appeal from that part of the decision. Permission to appeal was granted, amongst other issues, on the question of the significance of the bracket of non-negligent valuations. Counsel for the mortgagors argued that the concept of a bracket is relevant only in the context of claims of negligent valuation. Counsel for the mortgagees submitted that, in the context of a claim against a mortgagee for breach of duty to take reasonable steps to obtain the best price reasonably obtainable, the “bracket” approach can provide a useful evidential tool in resolving the issue of liability.

Jonathan Parker LJ (with whom the other members of the court agreed) said on this issue:

“[131] It is well settled that, in exercising its power of sale over mortgaged property, a mortgagee is under a general duty to take reasonable care to obtain the best price reasonably obtainable at the time: see Fisher and Lightwood's Law of Mortgage (11th ed), at para 20.23. In this context, "the best price reasonably obtainable" is synonymous with "a proper price" (the expression used by Lord Templeman in Downsview Nominees, at p315, and by Robert Walker LJ in Yorkshire Bank, at p1728F and with "the true market value of the mortgaged property" (the expression used by Salmon LJ in Cuckmere Brick, at p966).

[132] It is a matter for the mortgagee how that general duty is to be discharged in the circumstances of any given case. Subject to any restrictions in the mortgage deed, it is for the mortgagee to decide whether the sale should be by public auction or private treaty, just as it is for it to decide how the sale should be advertised and how long the property should be left on the market. Such decisions inevitably involve an exercise of informed judgment on the part of the mortgagee, in respect of which there can, almost by definition, be no absolute requirements. Thus (as the judge recognised at p68F of his judgment) there is no absolute duty to advertise widely. As he correctly put it, at p69A:

‘What is proper advertisement will depend on the circumstances of the case.’

[133] Similarly, in some cases, the appropriate mode of sale may be sale by public auction (in the instant case, no one has suggested that); in others, for example where there is a falling market, it may not. Moreover, a mortgagee who receives an offer in advance of an auction may have to make a judgment as to whether to accept it or whether to proceed to the auction.

[134] The need for the mortgagee to exercise informed judgment in exercising its power of sale in turn means that a prudent mortgagee will take advice, including, where appropriate, valuation advice, from a duly qualified agent.

[135] I turn, then, to the position of a mortgagee's agent such as Mr Hextall, whose duties included the giving of valuation advice. In my judgment, just as applying the Bolam principle, a valuer will not breach its duty of care if its valuation falls within an acceptable margin of error (see, for example, Merivale Moore and Arab Bank), so a mortgagee will not breach its duty to the mortgagor if, in the exercise of its power to sell the mortgaged property, it exercises its judgment reasonably, and to the extent that that judgment involves assessing the market value of the mortgaged property the mortgagee will have acted reasonably if its assessment falls within an acceptable margin of error.

[136] As Salmon LJ said in Cuckmere Brick, at p968H:

‘I conclude, both on principle and authority, that a mortgagee in exercising his power of sale does owe a duty to take reasonable precautions to obtain the true market value of the mortgaged property at the date on which he decides to sell it. No doubt in deciding whether he has fallen short of that duty the facts must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.’ (Emphasis added.)

[137] To the same effect is the observation of Lord Templeman in Downsview Nominees, at p315, that:

‘if a mortgagee exercises power of sale in good faith and for the purpose of protecting his security, he is not liable to the mortgagor even though he might have obtained a higher price (Emphasis added.)

[138] I accordingly reject Mr Jourdan's submission that as a matter of principle a "bracket" approach is inappropriate in the context of the exercise of a mortgagee's power of sale. In so far as the exercise of the mortgagee's power of sale calls for the exercise of informed judgment by the mortgagee, whether as to market conditions, or as to market value, or as to some other matter affecting the sale, the use of a bracket or a margin of error must, in my judgment, be available to the court as a means of assessing whether the mortgagee has failed to exercise that judgment reasonably.

[139] It seems to me that Mr Jourdan's submissions on the bracket issue confuse the issue of breach of duty with the measure of damages should a breach of duty be established. As Lord Hoffmann said, in SAAMCO, at p221F:

‘Before I come to the facts of the individual cases, I must notice an argument advanced by the defendants concerning the calculation of damages. They say that the damage falling within the scope of the duty should not be the loss which flows from the valuation having been in excess of the true value, but should be limited to the excess over the highest valuation which would not have been negligent. This seems to me to confuse the standard of care with the question of the damage which falls within the scope of the duty. The valuer is not liable unless he is negligent. In deciding whether or not he has been negligent, the court must bear in mind that valuation is seldom an exact science and that within a band of figures valuers may differ without one of them being negligent. But once the valuer has been found to have been negligent, the loss for which he is responsible is that which has been caused by the valuation being wrong. For this purpose the court must form a view as to what a correct valuation would have been. This means the figure which it considers most likely that a reasonable valuer, using the information available at the relevant date, would have put forward as the amount which the property was most likely to fetch if sold upon the open market. While it is true that there would have been a range of figures which the reasonable valuer might have put forward, the figure most likely to have been put forward would have been the mean figure of that range. There is no basis for calculating damages upon the basis that it would have been a figure at one or other extreme of the range. Either of these would have been less likely than the mean.’

[140] In Skipton Building Society, relied upon by Mr Jourdan, the judge at first instance had found that the plaintiff had negligently failed to take reasonable care to ensure that the premises were sold at the best price that could reasonably be obtained: the issue before the Court of Appeal was as to the measure of damage. As explained by Lord Hoffmann in SAAMCO (see the preceding paragraph), in calculating damages the task of the court is to determine the true market value of the property, and where there is a bracket of acceptable valuations the court will take the mean figure within that bracket as being the market value. In the instant case, by contrast, the issue is as to liability. Accordingly, I derive no assistance from Skipton Building Society.”

His Lordship also commented on the approach taken by the first instance judge to determining whether there had been a breach of duty:

“[141] In the instant case, the judge took the, to my mind, somewhat unsatisfactory course of deciding, first, what was the market value of the estate at the relevant time (concluding that it was £1.75m) and then asking himself whether the respondents, through Mr Hextall, had been negligent in achieving a price substantially less than that. The judge's approach might perhaps be appropriate in a case where the mortgagee accepts the first offer that it receives, without the property having been exposed to the market at all. In such a case, the likelihood is that the only evidence of "market value" will be expert valuation evidence. But where, as in the instant case, the property has been exposed to the market and a number of genuine offers have been received, the more logical approach (to my mind) is to start by considering the steps that the mortgagee took to sell the property and then to consider whether, in all the circumstances, the mortgagee acted reasonably in accepting the purchaser's offer and contracting to sell the property at that price.”

In Aodhon LLP v BridgeCo Ltd [2014] EWHC 535 (Ch), the court rejected a submission that the effect of Miller was to require the court to mathematically fix an appropriate bracket of value in a particular case. What the Court of Appeal intended was to reinforce the point made in earlier cases that, to be in breach, the mortgagee must be plainly on the wrong side of the line.

Mr Simpson referred me to Close Brothers Ltd v AIS (Marine) 2 Ltd (in liquidation)( The “Ocean Wind 8 of Hartlepool”) [2019] 1 Lloyd’s Rep 510 at [22] as an example of a case where the claimant’s expert’s evidence that the sale price of a mortgaged vessel (in relation to which the legal principles are the same as mortgaged land) was in the appropriate bracket, albeit on the low side, led to the rejection of a claim of breach of duty on the part of the mortgagee.

I was also referred to the Court of Appeal’s decision in Predeth v Castle Phillips Finance Co Ltd [1986] 2 EGLR 144. The trial judge found that the mortgagee had not discharged its duty to exercise reasonable care when selling a property for £6,000, having obtained a “crash sale valuation” of £5,750. He said:

“In the circumstances of this case, I consider that the exercise of reasonable care by the defendant to obtain the true market value required him, first of all, to obtain from a valuer a valuation on that basis. He has given in evidence no reason for asking for a valuation on the basis that he did: that was, a crash sale valuation. He failed to obtain a valuation on the basis that the exercise of reasonable care required.

Secondly, in my judgment, the exercise of reasonable care required him to expose the property to the market through local estate agents for a period of approximately three months. He failed to instruct any agents to expose the property at all. Such exposure as there was to the market through his own efforts was completely inadequate, for reasons that I have given, and was unduly short having regard to the sound financial strength of the defendant company, as described by Mr Phillips himself.”

He, however, held that the valuer, brought into the proceedings as a third party by the mortgagee, had not been negligent in valuing in accordance with his instructions, a conclusion which was upheld by the Court of Appeal.

In Michael v Miller the Court of Appeal considered that there might be cases, including ones in which a property is not exposed to the market at all before a sale, in which it is appropriate for the judge to start by making findings about the true market value of it. In the present case I do not consider that is the appropriate approach. This is, first, because the steps which were reasonably required to be taken by JBGE were strongly influenced by the particular and unusual circumstances in which the sale came about. Second, in this case the expert witnesses are a large way apart, despite (as I have found) both approaching their instructions conscientiously and with full regard to their duty to the court. That suggests that ascertaining the true market value of the Property at the date of sale is less straightforward in this than in some other cases and that the bracket of reasonable valuation opinion is a wide one. Indeed, the sensitivity analyses in the experts’ reports show – as is notorious with valuations achieved using a residual valuation methodology – that relatively small changes in particular inputs to the valuations can make very significant differences to the end result. I consider it more appropriate to determine first whether JBGE reasonably exercised an informed judgment in the particular circumstances of this case, in accordance with the principles discussed above.

The equitable duty required JBGE to inform itself sufficiently about the market for the Property and then, with the benefit of that information, to exercise a reasonable judgment about how, where and for how long the Property should be marketed for sale; whether it should be sold by auction or private treaty and for what price.

In my judgment the facts of this case absolutely cried out for JBGE to obtain advice, not only on valuation but also on the people who might be in the market for this Property and how best they might be approached to ensure that competitive bids were received for it, and then to act on that advice. JGBE was being asked to exercise its power of sale by one of two joint venture partners, having been told that there was deadlock between the partners. One of the joint venture partners was seeking, by the sale, to maintain control over the sole asset of the joint venture and this gave rise to an obvious conflict between his interests and those of the borrower. The amount on offer was enough to pay off JBGE’s loan but would leave little surplus for the borrower. It was, as Mr Hayward advised Mr Giannotti, in these circumstances very important to ensure that the best price was achieved. Moreover, there was a very large difference (a decline in value of 50%) between the ACS Valuation on which the loan had originally been based and JLL’s opinion of market value at the date of their report, despite the fact that planning permission had been granted in the meantime. This called out for an explanation. Mr Giannotti’s evidence is that he attributed this difference in value to a decline in the state of the Property, but it was not reasonable for him to have made this assumption without professional advice.

JBGE neither took sufficient advice on valuation or marketing, nor did it advertise or otherwise expose the Property to the market for sale in any way at all.

As to the taking of advice, the JLL Zorin Report was not prepared for JBGE and it was not prepared for the purpose of advising it on an immediate sale. Although it gave a figure for the market value of the Property at the date of the report, which was no doubt relevant to the amount which Zorin might have allowed by way of initial drawdown of any lending, Zorin’s primary interest (as is apparent from the report) was in the ratio of the loan to the gross development value and costs. Furthermore, the report was confidential to Zorin and Mr Giannotti knew (as he accepted in evidence) that if it was erroneous, he had no right to claim against JLL. JLL had not been asked to, and did not, explain whether the difference between their view of market value and that given in the ACS Valuation was attributable to an overvaluation by ACS, market movement between the date of the two valuations, a deterioration of the condition of the Property or some other issue. All of these factors meant that it was not reasonable for JBGE to rely on the JLL Zorin Report (and the JLL Together Commercial Report, once that was provided) to determine the price payable by BLL and JBGE did not properly inform itself about the market for the Property. Moreover, in agreeing the price of £1 million during the conversation on 8 January 2019, Mr Giannotti was not even relying on the JLL Zorin Report itself (which he had not then seen), but only on Mr Priestley’s report of what it said about the market value.

The position is not improved by the fact that Mr Giannotti’s evidence is that he spoke to Mr Brearley of Brearley & Co, the agent who had originally sold the Property to the Company, who said that £700,000 to £1m was a very full valuation. There is no record of the advice given, of the instructions given to Mr Brearley, the assumptions he was making or whether he had even visited the Property before expressing this apparently wholly informal opinion. Nor does he appear to have been asked about appropriate marketing. This was not the comprehensive and robust advice which a mortgagee, properly concerned to fulfil its duty to obtain the best price reasonably obtainable, would have sought.

In the circumstances it was wholly unreasonable for JBGE to proceed without the independent valuation which Mr Giannotti had told Mr Hayward he was getting and, indeed, that he had in fact obtained.

Mr Giannotti also agreed the price of £1 million on 8 January without having taken any steps at all to advertise the Property for sale or invite competitive bids. He maintained that position even after receiving Mr Hayward’s sound advice on 13 March 2019 that he should satisfy himself that the property had been properly exposed to the market, which he simply ignored. It was, in my judgment, wholly unreasonable for JBGE to proceed to contract with BLL without proper marketing.

I am therefore satisfied that JBGE was plainly on the wrong side of the line, and in clear breach of its equitable duty to take reasonable care to obtain the market value for the Property. This is notwithstanding:

I should say that Mr Simpson and Mr Yap argued that the only criticism of JBGE which was pleaded was that it was unreasonable to rely on the JLL Zorin Report. I disagree: by paragraph 32 of the Amended Particulars of Claim, the Company relied upon “the aforementioned facts and matters” in respect of this part of the claim, which included, for example, the agreement of the price of £1 million on 8 January 2019. I have dealt at paragraph 129 above with the scope of the Company’s pleading in relation to the JLL Zorin Report. I am satisfied that all of the above findings are open to me on the pleadings and evidence.

As the extract from Fisher and Lightwood above makes clear, a mortgagor will not be able to complain about a breach of the equitable duty of care if it has devised, initiated and agreed to all of the terms of a sale. There is no pleaded claim by JBGE that the Repossession and Sale Agreement provides it with a defence to the claim of breach of duty. However, in oral closing submissions Mr Simpson argued that the Repossession and Sale Agreement bound the Company to treat £1 million as the true market value of the Property.

This is plainly not correct, since the terms of the Repossession and Sale Agreement, even if binding on the Company, would not absolve JBGE of liability. By clause 1 of the Agreement, the Company agreed that:

“the Property shall be sold directly by private agreement or through an estate agent to be nominated by [JBGE], for such price as may be recommended by the selling agent and or agreed between the parties or in default of agreement for £1,000,000 or more.”

The price of £1 million for which JBGE sold to BLL was neither “recommended by the selling agent” (since there was no such selling agent) nor “agreed between the parties” (i.e. JBGE and the Company), although Mr Priestley, in his capacity as director of the Company, was informed of it by Mr Giannotti’s email of 20 January 2019 (and of course knew of the price all along). The final part of the clause, in purportedly agreeing to a sale at “£1,000,000 or more” provided a floor to the sale price, but did not consent to a sale at the minimum level in such a way as to absolve JBGE of its duty to try for more, if appropriate.

In any event, for the reasons given in paragraphs 140-144 above, Mr Priestley had no actual or implied authority to act for the Company when entering into the Repossession and Sale Agreement.

A mortgagee which breaches its duty to take reasonable care to obtain the best price is liable to account to the mortgagor for the proceeds of sale it would have achieved if it had complied with its duty, credit being given for the proceeds in fact achieved. In the present case the Company acknowledges that it is for a mortgagee to choose when to sell the mortgaged property (assuming that the power of sale has arisen) and it cannot therefore argue that it was a breach of the equitable duty not to delay the sale. Consequently, any sale effected in accordance with JBGE’s duties would have taken place – probably in practice by auction – on the same date on which the actual sale to BLL took place, namely 20 March 2019. The relevant question for me, therefore, is the price which JBGE would have obtained if it had sold the Property, after proper marketing, on that date, i.e. what the true market value of the Property was. I address that question now.

Mr Wilkinson and Mr Ward both approached the market value of the Property (defined by reference to RICS Valuation Standard VPS4) as at 20 March 2019 using a residual valuation methodology. Mr Ward also had reference to comparable transactions of buildings for residential development but, given the lack of relevant evidence and the site-specific nature of property development, he placed greater reliance on the residual approach.

The expert witnesses had made good progress in agreeing a number of the inputs into their residual valuations, recorded in their Joint Statement dated 21 August 2025. Following the discussions between them and these agreements, Mr Wilkinson’s valuation of the Property was £2 million and Mr Ward’s was £1 million. What follows are my conclusions on the inputs into the residual valuation which remain in issue.

Both experts took as their starting position the potential revenue from, and costs of building, the development for which planning permission had been granted in July 2018, namely 133 residential units and commercial space comprising offices, managed offices, a gym and a café. Mr Ward, however, ascribed no value to the gym and café. He expressed the view that the gym was unlikely to be used for commercial purposes and assumed that it would be for residents’ use only. He also considered that the café was unlikely to be viable as a commercial concern given its location and was also likely to be used by residents as an amenity area. Mr Wilkinson, following his discussions with Mr Ward, tended to agree with this conclusion, but ascribed a positive value to these areas on the basis that they could have more profitable alternative uses. The café area could be used as a management office or an area for residents, for which the freeholder would charge a notional rent through the service charge. The gym, he thought, had potential value as storage space or indeed as additional residential space. He explained that a subsequent planning permission, granted in 2022, permitted the gym space to be developed as one-bedroomed residential apartments.

On this issue, I prefer the evidence of Mr Ward. At the valuation date, the gym and café were part of the offer to purchasers of the residential units; had they not been planned for, the residential GDV may have been lower. It also seems illogical that the café and gym would be treated as having no value because they were only for residents’ use, but a management office or storage space, equally used only for residents’ purposes, would be treated as having a value. Whilst valuable additional residential space has in fact been created, this was long after the valuation date and pursuant to a planning permission which may have made other changes to the building. I therefore find that commercial GDV should be £820,000.

Mr Wilkinson included a sum of £475,000 in his revenue calculations to reflect the capitalised value of ground rents on the 133 apartments, at a rate of £250 per year. In his report he described ground rents at that level, with rent review provisions, as being conventional at the valuation date. Mr Ward did not include any allowance for ground rent income. This was on the basis that the Government was proposing legislation which would, effectively, ban ground rents on long leases.

Mr Wilkinson indicated that he had taken into account the risk of the legislation operating retrospectively, which he considered minimal, in the 7% yield applied to capitalise the rents. He would otherwise have applied a yield in the region of 4%-5%.

Mr Ward did not agree that at the March 2019 date a purchaser would take account of ground rent income, because of the uncertainty around prospective legislation and also because lenders were typically not lending on ground rents at the time and purchases in this market are generally debt-funded.

In July 2017 the Department for Communities and Local Government published a consultation paper called “Tackling unfair practices in the leasehold market”. It invited views on limiting ground rents in new leases, making clear at paragraph 4.16 that “any change limiting ground rent would only apply to new leases, following any commencement of new legislation”. The Government’s response to the consultation, published in December 2017, stated:

“We will introduce legislation so that, in the future, ground rents on newly established leases of houses and flats are set at a peppercorn (zero financial value).”

In a further consultation paper in October 2018, called “Implementing reforms to the leasehold system in England” the Government asked for views to be expressed on a proposal that future ground rents would be capped at £10 per annum. In response to an argument that a three- to five-year implementation period should be introduced, it said

“The Government made clear its intention to restrict ground rents on 21 December 2017. Should our proposals be taken forward in 2019, any legislation would [be] unlikely to complete its passage until mid 2020 at the earliest. A further transitional period of three to five years post 2020 would place consumers at a potential disadvantage for between six and eight years after our initial announcement…Therefore we propose that the cap on ground rents for all newly created leases will come into force three months after commencement of the Act.”

At the valuation date in March 2019, Mr Ward agreed with Mr Halpern that the process of legislating on residential ground rents was not going any faster than it had been in late 2018: it was, he said, “grinding along”.

In fact, legislation was not passed until February 2022, in the form of the Leasehold Reform (Ground Rent) Act 2022. Its provisions prevent landlords recovering more than a peppercorn rent under “regulated leases”, that term being defined in s.1 of the Act to mean (with certain exceptions) long leases of dwellings, granted for a premium on or after the relevant commencement day, otherwise in pursuance of a contract made before that day.

I agree with Mr Wilkinson that at the valuation date, the risk of future legislation being passed to prevent the recovery of ground rents due under leases in existence at the commencement of the Act was minimal. The Government’s consultation papers referred to above had been consistent and clear that the proposed legislation would only apply to new leases granted after the legislation had been passed. What was less clear was whether the legislation would apply to leases granted pursuant to contracts which predated the legislation coming into force. In my view an informed lawyer in 2019 would have expected the legislation to exempt leases granted pursuant to existing contracts, but the consultation papers did not spell that out and I accept there would have been uncertainty in the market.

In the case of the Property, the question whether future legislation could apply to contracts which pre-dated its commencement could be one of considerable significance, given the extent to which apartments had been at the valuation date, and were likely to be, the subject of off-plan sale contracts well before practical completion of the development and the grant of the leases. The JLL Zorin Report refers to contracts for 23 apartments already having been exchanged and a further 28 apartments where exchange of contracts was imminent. Although none of those contracts is in evidence, it is highly probable that the leases to be granted under them provided for a modern ground rent, of about £250 per annum, subject to review. This is apparent from a valuation report of Dove Haigh Phillips for Bradford Council and the West Yorkshire Combined Authority dated November 2022 (produced in relation to the provisions of an overage deed) which refers to each of the then 166 apartments at the Property producing a ground rent, said to be £250 per annum. This may be an understatement, as the leases granted to Muniment are subject to ground rents of £285 per year.

The valuation experts are agreed that a purchaser for the Property would anticipate a 15-month construction period, although they differ to some extent on the timescale for completions of the leases. On Mr Ward’s somewhat slower timetable, the leases would be completed between June and December 2020.

Thus as at the valuation date, in my judgment a purchaser would have perceived the risks to be (a) that Parliament moved to legislate in accordance with the expectations in the October 2018 consultation paper (so that new ground rents were prohibited or capped from the autumn of 2020, at about the time leases were being granted) or (b) the development project was delayed, (so that the leases were not granted until after the legislation came into force) and (c) that the proposed legislation applied to all new leases, even if contracted for earlier.

These risks were real, but in my judgment a willing seller of the Property in an arm’s length transaction would not have been prepared to allow the purchaser to keep the whole of the ground rental income stream. There was every chance that the risks would not materialise. Moreover, as Mr Wilkinson explained, if ground rents are set to zero or a nominal amount, the amount of the premiums payable for leases of the apartments, and therefore the residential GDV, should increase. To put this another way, the comparable transactions used to inform the residential GDV (and in particular the off-plan sales of apartments at the Property) were likely to be transactions at a substantial ground rent and would require adjustment if the ground rents were assumed to be nominal.

I do not find these considerations are outweighed by Mr Ward’s evidence that some lenders were not lending against ground rental values at the valuation date. Lenders may understandably wish to take a cautious approach to valuing their security. However, the task which I am undertaking is to ascertain what amount the Property would have sold for, if properly exposed to the market in March 2019. In my judgment a prospective purchaser which failed to include any part of the ground rental income in the calculation of its offer would have been outbid by one which did.

Consequently, I do consider that a willing purchaser and a willing seller would have agreed to include ground rent income when agreeing a price at the valuation date, albeit at a larger discount than allowed for in Mr Wilkinson’s 7% yield. I consider the right amount to be £375,000, this being about 50% of the amount generated by applying a 4%-5% yield.

Both experts take as their base building costs figure the amount shown in the Dalbergia Report of 10 December 2018, namely £8,021,170. To this Mr Wilkinson adds 1.5% to reflect inflation (measured by way of the Building Cost Information Service (“BCIS”) index) between December 2018 and the valuation date of 20 March 2019. Mr Ward does not allow for inflation but acknowledges that BCIS does show an increase in cost during that period.

In my judgment it is right to allow for inflation of building costs between the date on which they were assessed by Dalbergia and the valuation date. A purchaser would bid, in my view, on the basis that it would enter into a new building contract for the development at current prices. However, there is merit in the point put to Mr Wilkinson by Mr Simpson (which Mr Wilkinson accepted), that the 1.5% is a rate of increase in costs over a year, whereas the period between the Dalbergia Report and the valuation date is closer to a quarter, for which the BCIS index shows a 0.3% increase. I will therefore allow £25,000 for build costs inflation.

At the end of his valuation, Mr Wilkinson adds a credit to his valuation of £350,000, to reflect work done (and therefore costs saved for any purchaser) on the Property between the date of the Dalbergia Report and the valuation date. Mr Ward makes no such allowance.

It is a question of fact as to whether any work was done at the Property following the Dalbergia Report but before the valuation date. Dalbergia produced a progress report No. 1 on 28 June 2019 which shows “expenditure to date” of £1,072,800, however a subsequent report dated July 2020 shows this sum in a column headed “May 2019”. Mr Halpern accepted that there is no direct evidence of works being done in the relevant period but invited me to find that this meant that £1,072,800-worth of work had been done up to the end of May 2019, including in the period up to the valuation date. Given the breakdown in the relationship between Mr Walker and Mr Priestley, the absence of development finance, the Company’s lack of funds and the fact that for most of this period Mr Priestley was pursuing a purchase through BLL, it is unlikely that any work will have taken place on the Property between 10 December 2018 and 20 March 2019 and, in the absence of any evidence to suggest that any such work was done, I consider it inappropriate to add any credit in this respect. The credit for a build costs saving is therefore £nil.

Mr Ward allows for the cost of warranties in his estimate of professional fees, £500,000. Mr Wilkinson adopts the same estimate for professional fees, which derives from the Dalbergia Report, but adds 1% of build costs for the additional cost of building warranties.

It is not clear whether the Dalbergia estimate of £500,000 for professional fees includes the cost of warranties, but as they thought that sum to be on the low side, I consider it prudent to treat the cost of building warranties separately. Consequently, I include building warranties under costs, at 1% of build costs.

There is a minor difference between the experts as regards the costs of marketing, with Mr Wilkinson at 2.5% of residential and commercial GDV, and Mr Ward at 3%. This is clearly simply a matter of valuer judgment and neither expert was in fact asked about it in cross-examination. I shall split the difference and adopt 2.75% for marketing costs.

There were two things which occurred after the valuation date for which Mr Wilkinson adds “hope value” to his valuation. The first is the grant of planning permission on 20 August 2019 which allowed for an additional mezzanine floor of residential accommodation within the roof space, increasing the total number of units from 133 to 150. The second is a grant of £1.5 million awarded to BLL in March 2021 by the West Yorkshire Combined Authority under a scheme for the regeneration of listed buildings.

In his report, Mr Wilkinson prepared two valuations. The first assumed ignorance of the potential for an enhanced planning permission and grant; the second assumed that both were forthcoming.

By the time of the experts’ joint statement, further information had become available regarding the application for the grant. The joint statement explains that the application process was ongoing in 2018 (it seems a draft business case had been prepared by 4 October 2018) and by the valuation date the relevant officer at Bradford Metropolitan District Council had confirmed to BLL that he had prepared a report recommending approval. It had also become apparent that the grant included an overage clause requiring repayment of the monies to the extent that the developer’s profit margin exceeded 20%. Neither valuer had seen the grant documentation with the details of this clawback provision, although Mr Ward had obtained a copy of an accountant’s certificate showing the formula by which it was calculated, but without the necessary definitions to enable a complete understanding.

As regards the enhanced planning permission, a planning application was submitted on 18 April 2019, about a month after the valuation date.

Mr Wilkinson’s evidence was that there was a relationship between the enhanced planning permission and the grant: the availability of the grant would give a developer greater confidence to embark on what was otherwise a complicated and expensive scheme to install a mezzanine floor.

In his final valuation, Mr Wilkinson added a sum of £134,000 by way of hope value to reflect the potential, known at the valuation date, to obtain both the grant and the enhanced planning permission. He calculated this by working out that the additional profit generated from creating the mezzanine floor was £400,000. He discounted this by a third for uncertainty at the valuation date and then divided it in half between vendor and developer.

Mr Wade did not include any hope value in his valuation for either element. As regards the planning permission, the application was not registered until after the valuation date and, due to the changes to the roof and windows, carried a greater risk of refusal. He also considered that the new space created in the roof was compromised and would not attract the same sales value per floor area as the rest of the building. As regards the grant, Mr Ward referred to a case paper in June 2019 which indicated only a potential grant of £700,000. He also considered that based on the figures in the appraisals, most or all of the grant would have been clawed back. Consequently, a party buying the Property at the valuation date would not have treated it as adding value.

In my judgment it is right to add some hope value to the valuation to reflect the prospect of both of these matters. As regards the planning permission, Mr Ward fairly accepted in his oral evidence that the planning application must have been at an advanced stage of preparation by the valuation date and there were likely to have been pre-application meetings between BLL and the local planning authority. The grant application had been made and was in progress at the valuation date. A willing seller, keen to get the best price, would ensure that any prospective purchaser would know of these potential benefits. I consider Mr Ward is being too pessimistic in concluding that there was no hope value at all because of the extent of the risks involved in taking on the mezzanine floor element of the project.

Both experts agreed that in the real world, the potential additional value would be recognised, if at all, in the structure of the deal between vendor and purchaser. Mr Wilkinson thought there would be overage arrangements, allowing the vendor to take the benefit of any additional planning permission only if it were granted. Mr Ward thought it would be structured rather as a conditional sale, with the sale only completing after the grant of permission. However, for current purposes it is necessary to assume an immediate sale of the Property at a known price. No doubt there are different ways in which valuers might approach this task, but Mr Wilkinson’s seems to be a reasonable one which fully factors in all of the risks. I therefore agree with him that it is appropriate to add £134,000 to the valuation to reflect the hope value.

My findings on the disputed elements of the valuation are therefore as follows:

On the basis of these findings, Mr Wilkinson and Mr Ward are agreed that that the market value of the Property on 20 March 2019 was £1,331,000, and I find that is the price for which it would then have sold if JBGE had complied with its duties.

It is accepted by the Company that if (as I have found) any sale of the Property would have been by way of auction, JBGE would have been required to pay an auction fee, which would have been deducted from the sale proceeds. Mr Wilkinson’s enquiries of a firm of auctioneers in Leeds indicate a fee of 1.2% plus VAT, whereas Mr Ward’s colleague, head of Savills Commercial Auctions, says that Savills would have charged 1.5% plus VAT. I shall therefore treat the auction fee as 1.35% of the sale price (£17,968.50), which with VAT comes to £21,562.20.

JBGE is therefore required to account to the Company for £309,437.80, being the difference between the £1 million price received from BLL and the price it would have received if it had complied with its duties, less the auction fee.

There was little between the parties in relation to the law relating to a claim of dishonest assistance. I can summarise the principles as follows:

The directors’ duties which Mr Priestley is said to have breached, and in which breaches the Defendants are said to have assisted, are codified in CA 2006.

Section 172 of CA 2006 obliges a director of a company to act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard to various factors. The duty requires the director subjectively to act in good faith, believing that he or she is acting in the best interests of the company: Re Regentcrest Plc v Cohen [2001] BCC 494 at [120].

In my judgment, Mr Priestley was in breach of section 172 in reaching the agreement he did with Mr Giannotti on 8 January 2019 and executing it through the purchase by BLL from JBGE on 20 March 2019. He did not in good faith believe that he was acting in the best interests of the Company. On the contrary he intended to take the Company’s assets into a company under his control at what he believed to be an undervalue.

Section 175 of CA 2006 requires a director of a company to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company. This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity) but does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company.

Mr Simpson argued that Mr Priestley was not in breach of this duty because, by failing to contribute to repayment of the JBGE loan, and ignoring the warnings given by Mr Priestley, Mr Walker had brought about a default which would inevitably lead to a sale of the Property. It is submitted that the opportunity to redevelop the Property had been effectively abandoned by the Company, leaving Mr Priestley liberated of this duty. I disagree. Mr Priestley’s desire to remove the Property from the Company but retain it under his own control created a very clear conflict of interest between him and the Company, and it was a breach of s.175 to reach the agreement he did with Mr Giannotti and implement it through the incorporation of BLL and its purchase of the Property.

Section 177 of CA 2006 requires that, if a director is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors before the company enters into the transaction or arrangement.

Mr Simpson argued that this alleged breach was not put to Mr Giannotti and did not arise because there was no “proposed transaction or arrangement with the company” (as opposed to a transaction between JBGE and BLL). Again, I disagree on both points. On 8 January 2019, Mr Priestley and Mr Giannotti agreed an arrangement, under which the Company would consent to a sale by JBGE to a company controlled by Mr Priestley. That was, in my judgment, a ”transaction or arrangement” caught by s.177. Furthermore, the relevant facts (and in particular the agreement reached on 8 January) were properly put to Mr Giannotti. It is a matter of legal submission whether those facts support the claim of a breach of s.177. Given that Mr Priestley did not declare to Mr Walker the nature and extent of his interest in the prospective new company which would purchase the Property, Mr Priestley breached s.177.

Section 171 of CA 2006 provides that a director must (a) act in accordance with the company’s constitution and (b) only exercise powers for the purpose for which they are conferred. It is pleaded (Amended Particulars of Claim paragraph 25(i)(a)) that Mr Priestley was in breach of this duty in purporting to make decisions unilaterally without the prior agreement of Mr Walker or Muniment. The specific decisions are not pleaded but the focus in argument was on Mr Priestley purporting to agree (in his email of 8 January (21:42)) to accept repossession of the Property and entering into the Repossession and Sale Agreement.

I have found, in paragraphs 140-144 above, that Mr Priestley did not have authority to agree to repossession of the Property or to enter into the Repossession and Sale Agreement. Consequently, insofar as he purported to do so, these acts are not binding on the Company. In those circumstances, it seems to me doubtful that there is any breach of s.171. Given my findings above as regards breach of ss.172, 175 and 177, there would appear to be no additional consequences flowing from a finding of breach of s.171.

I agree with the Defendants that there is a lack of clarity about the Company’s case as to what constitutes the relevant act or acts of assistance for the purposes of this part of its claim. The Amended Particulars of Claim plead the claim in unlawful means conspiracy, then that “by reason of all the aforementioned facts and matters, the Defendants or either of them dishonestly assisted…”.

By the time of closing submissions, it was accepted by the Defendants that if Mr Priestley’s actions constituted a breach of ss. 172 or 175, the execution of the sale of the Property to BLL would satisfy the requirement of assistance. I agree. I do not consider that the preparations for the sale, including the agreement reached on 8 January 2019, can be said to be more than minimal acts of assistance for the purposes of this part of the claim, as they had no impact on the Company, of themselves.

The sale was effected by JBGE, by way of exercise of its power of sale as mortgagee, and in my judgment only JBGE, and not Mr Giannotti, can be said to have assisted Mr Priestley’s breaches of duty in carrying it out.

I do not consider that JBGE or Mr Giannotti can be said to have assisted Mr Priestley’s breach of s.177 CA 2006. It was for Mr Priestley to declare the nature and extent of his interest to Mr Walker; nothing that JBGE or Mr Giannotti did or omitted to do assisted Mr Priestley in failing to do so.

If, contrary to what I have said in paragraph 224 above, Mr Priestley was in breach of s.171 CA 2006, I do not consider that Mr Giannotti or JBGE can be said to have assisted him in such a breach, in a more than minimal way. Providing Mr Priestley with the opportunity to agree to accept repossession and offering the Repossession and Sale Agreement for signature are not, in my judgment, sufficient acts of assistance in a breach of Mr Priestley’s duty.

The relevant assistance in Mr Priestley’s breaches of fiduciary duty is therefore the execution of the sale by JBGE to BLL. The next question is whether it was acting dishonestly in rendering that assistance. In this context, the knowledge and honesty of Mr Giannotti, as JBGE’s controlling mind, is imputed to JBGE.

At the time of the sale on 20 March 2019, Mr Giannotti knew:

I have no doubt that, in the circumstances, JBGE was acting dishonestly by the standards of ordinary decent people in effecting the sale, notwithstanding that Mr Giannotti believed that the price was right. Ordinary decent people would consider it dishonest for a mortgagee to assist one of two joint venturers get around a deadlock by taking the joint venture property for themselves. It was argued that the fact that Mr Giannotti took legal advice was inconsistent with dishonesty: however, what is notable here is that Mr Giannotti ignored Mr Hayward’s advice on 13 March 2019 about getting an independent valuation and met his advice about the importance of getting in contact with Mr Walker with a lie.

There was a dispute as to whether blind-eye dishonesty had been pleaded by the Company, but I do not need to resolve that dispute, on the basis of my findings as to Mr Giannotti’s actual knowledge.

I therefore conclude that the Company has established its claim of dishonest assistance against JBGE.

In submissions made after this judgment was circulated in draft, the Company argued that Mr Giannotti is also liable for dishonest assistance, on the basis of my findings above. It was submitted that Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2025] AC 1 establishes that a director who procures his or her company to commit a tort is liable as an accessory, provided he or she has the required mental state; that dishonest assistance is the equitable counterpart to accessory liability at common law and that, therefore, since I have found that Mr Giannotti had the requisite mental state and this should be attributed to JBGE, Mr Giannotti is equally liable.

In my judgment, this misses the point. In Lifestyle Equities, the Supreme Court was concerned to reject the proposition that a person who would ordinarily be liable as an accessory to a wrong could escape that liability by virtue of being a director of the company which had committed the wrong. It does not follow that, whenever a company is liable for a wrong, its directors must also be liable. This would be contrary to the separation of personality between the company and its directors. Lord Leggatt JSC, with whom all other members of the court agreed, recognised that a company may incur liabilities which are not liabilities of the directors ([37]), for example where the company assumes responsibility for the accuracy of statements but its directors do not ([41]–[44]). The Supreme Court’s decision is particularly focussed on the mental state required to be liable as an accessory because the directors in that case did not dispute that their conduct induced the company to commit the relevant wrong (trademark infringement): [29]. That does not mean that the fact that a director has the requisite mental state for an accessory is sufficient to render them liable with the company.

Unlike Lifestyle Equities, the present case is not concerned with an allegation that a director is liable as an accessory to his or her company’s wrong. Rather the principal liability is that of Mr Priestley and the contention is that JBGE and Mr Giannotti are each an accessory to Mr Priestley’s wrong, having dishonestly assisted his breaches of duty. The equitable cause of action for dishonest assistance is not established unless the defendant has assisted the principal’s breach of fiduciary duty. The only act constituting assistance which I have found to be established is the sale of the Property. Only JBGE had the power to sell the Property and only it exercised that power; Mr Giannotti did not. Mr Giannotti is not liable for dishonest assistance: this is not because he is shielded from liability for his acts by some protection given to him as director of JBGE but because he did not personally carry out the relevant act which would make him liable.

I now turn to consider what would have happened, but for Mr Priestley’s breaches of his duties under ss. 172 and 175 CA 2006, which JBGE assisted.

In considering this question, the hypothetical actions of the parties are judged against a balance of probabilities standard, whereas the hypothetical actions of third parties are assessed on a loss of chance basis: Perry v Raleys Solicitors [2019] UKSC 5, [2020] AC 352 at [20]. Mr Priestley, Mr Walker, Muniment and PHL are not parties to the proceedings, but ultimately the question is what they, as directors or shareholders, would have caused the Company, which is a party, to do. That ultimate question falls to be assessed on a balance of probabilities.

If Mr Priestley had been acting in the way he considered, in good faith, would most likely promote the success of the Company and had avoided a situation in which he had a conflict of interest, he would not have approached Mr Giannotti as he did on 7 January 2019 or agreed the strategy they did on 8 January. Rather he would have attempted to stall repayment of the JBGE loan, perhaps by putting on hold the further drawdown of Priestley Homes (Yorkshire) Limited’s loan for a period, whilst he tried to resolve the joint venture position with Mr Walker. However, as I have found above, Mr Giannotti would not have been willing to formally extend the loan or have allowed it to remain outstanding for an indefinite period beyond its maturity date. Nor could Mr Priestley be expected to sacrifice the interests of Priestley Homes (Yorkshire) Limited for any extended period. Moreover, the interest on the loan had to be met; the Company had no income from which to do so and Mr Walker and Mr Priestley were in dispute about Muniment and PHL’s respective liabilities for ongoing costs. In all the circumstances, there was in the counterfactual only a limited time before JBGE would genuinely have started pressing for repayment of its lending.

There were three ways in which JBGE’s loan could have been paid off: first, by raising development finance and remortgaging the Property; second, by one or both of the joint venture parties paying off the loan and third, by a sale, agreed to by both directors.

As to the first of these options, by January 2019 the relationship between Mr Priestley and Mr Walker was so poor that there was no realistic prospect of them patching up their difficulties and continuing to work together on the development of the Property. Mr Walker accepted that the Company could not have raised development finance with its board in a position of deadlock. Nor had any real progress been made on agreeing terms for an exit from the joint venture. I consider it improbable that the Company would, within the necessary timescale for repayment of JBGE’s loan, have proceeded to raise development finance, pay off JBGE’s lending and continued with the development of the Property.

As to the second option, there was a certain amount of evidence given about Mr Walker’s or Muniment’s ability and willingness to pay off the loan. I am satisfied that Muniment, or Mr Walker personally, could have raised the funds to repay JBGE’s loan in part or whole, either from liquid funds or by borrowing against assets. However, in the counterfactual, Muniment would not, in my judgment, have paid off JBGE’s loan without resolution of the dispute between it and the Priestley companies. Mr Walker was not prepared to put fresh money into the venture whilst the other loans to Priestley companies remained outstanding. That is why, on 19 November 2018, he had responded to Mr Priestley’s warnings about repossession of the Property with a proposal that he re-lend monies to the Company, upon repayment of an outstanding loan of £338,000. Moreover, even when Mr Walker was copied into Mr Gregory’s email to the Company’s accountants in February 2019 (an unlikely forum for a blatant untruth) and told that “the loan is now in default and the lender has taken steps to enforce their security and repossess the property”, Mr Walker’s distrust and dislike of Mr Priestley blinded him to the possibility that that statement might be true. He took no action to find out what the position with JBGE really was, let alone offer to repay the loan to take the pressure off. When he finally did approach JBGE on 5 April 2019, it was in an attempt to gain the upper hand in the negotiations with Mr Priestley by having his own company take an assignment of the loan, not to repay it on behalf of the Company. There was equally nothing in the evidence to suggest that it was likely that PHL could or would have repaid the loan unilaterally.

In consequence, I find on the balance of probabilities that what the Company would have done in the counterfactual is to make arrangements to sell the Property, with both Muniment and PHL (and any other Walker/Priestley entities) being able to bid for it. That would have enabled JBGE’s loan to be repaid before the joint venture dispute had been resolved, whist maximising the sale proceeds achieved through competitive bidding. Given both the urgency and the deadlock on the JBGE board, auction, after a proper period of marketing, was the obvious method of sale and it is probable that such auction would have taken place at around the same time as JBGE in fact contracted to sell the Property to BLL. Mr Giannotti was likely to have held JBGE off any enforcement action if it was demonstrated that steps were being taken in early 2019 to market the Property for sale.

The basis of a claim for unlawful means conspiracy was set out by Nourse LJ in Kuwait Oil Tanker SAK v Al Bader [2000] 2 All ER 271 (Comm) at [108]:

Cockerill J summarised the elements of the cause of action in FM Capital Partners Ltd v Marino [2018] EWHC 1768 at [94] as follows:

“The elements of the cause of action are as follows:

i)

A combination, arrangement or understanding between two or more people. It is not necessary for the conspirators all to join the conspiracy at the same time, but the parties to it must be sufficiently aware of the surrounding circumstances and share the same object for it properly to be said that they were acting in concert at the time of the acts complained of: Kuwait Oil Tanker at [111].

ii)

An intention to injure another individual or separate legal entity, albeit with no need for that to be the sole or predominant intention: Kuwait Oil Tanker at [108]. Moreover:

a)

The necessary intent can be inferred, and often will need to be inferred, from the primary facts – see Kuwait Oil Tanker at [120-121], citing Bourgoin SA v Minister of Agriculture [1986] 1 QB : "[i]f an act is done deliberately and with knowledge of the consequences, I do not think that the actor can say that he did not 'intend' the consequences or that the act was not 'aimed' at the person who, it is known, will suffer them".

b)

Where conspirators intentionally injure the claimant and use unlawful means to do so, it is no defence for them to show that their primary purpose was to further or protect their own interests: Lonrho Plc v Fayed [1992] 1 AC 448, 465-466; see also OBG v Allan [2008] 1 AC 1 at [164-165].

c)

Foresight that his unlawful conduct may or will probably damage the claimant cannot be equated with intention: OBG at [166].

iii)

In some cases, there may be no specific intent but intention to injure results from the inevitability of loss: see Lord Nicholls at [167] in OBG v Allan, referring to cases where:

"The defendant's gain and the claimant's loss are, to the defendant's knowledge, inseparably linked. The defendant cannot obtain the one without bringing about the other. If the defendant goes ahead in such a case in order to obtain the gain he seeks, his state of mind will satisfy the mental ingredient of the unlawful interference tort."

iv)

Concerted action (in the sense of active participation) consequent upon the combination or understanding: McGrath at [7.57].

v)

Use of unlawful means as part of the concerted action. There is no requirement that the unlawful means themselves are independently actionable: Revenue and Customs Commissioners v Total Network [2008] 1 AC 1174 at [104].

vi)

Loss being caused to the target of the conspiracy.”

There is a similar helpful summary in 4VVV Ltd v Spence [2024] EWHC 2434 at [625]-[632], to which Mr Halpern directed my attention. Looking more closely at some of the elements of the tort:

Combination: It is not necessary to show that there is anything in the nature of an express agreement, whether formal or informal. It is sufficient if two or more persons combine with a common intention, or, in other words, that they deliberately combine, albeit tacitly, to achieve a common end: Kuwait Oil Tanker, above at [111]. A useful preliminary question is to ask whether the alleged conspirators were “in it together”: E D & F Capital Markets Ltd v Come Harvest Holdings Ltd [2022] EWHC 229 (Comm) at [469]. A director can conspire with a company of which s/he is a director, although it is unclear whether that applies where the director is the sole controller of the company: Palmer Birch (a partnership) v Lloyd [2018] EWHC 2316 at [211]; Civil Fraud, 1^st edn, 2-019 – 2-021. A director may, in appropriate circumstances, be a joint tortfeasor with his or her company: Palmer Birch, above, at [212] – [217].

Intention to injure: It is not enough that there is an intention to do an act which in fact causes loss. The act must be done with the intention that it will cause loss: Meretz Investments v ACP Ltd [2007] EWCA Civ 1303, [2008] Ch 244 at [146]). That intention must be common to the conspirators: HMRC v Sunico A/S [2013] EWHC 941 (Ch) at [79]. In OBG v Allan [2007] UKHL 21, [2008] 1 AC 1 the House of Lords considered the issue of intention in the context of the torts of inducing breach of contract and unlawful interference and in doing so distinguished between ends, means and consequences. This analysis has subsequently been treated as applying equally to the requirement of intention in unlawful means conspiracy. The position was summarised By Calver J in E D & F, above at [487]-[489] as follows:

“487.

…in OBG, Lords Hoffmann and Nicholls considered that it is necessary to distinguish between: (i) ends; (ii) means; and (iii) consequences. In summary:

a)

Ends: If harm to the claimant is the end sought by the defendant (e.g. because of some animus) then the requisite intention is made out. In such cases intention to injure the claimant will also almost always be the "predominant purpose" of the defendant (category 1).

b)

Means: If harm to the claimant is the means by which the defendant seeks to secure his/her end (usually to secure a benefit for himself/herself) then the requisite intention is made out (even if the defendant would have rather secured the end without causing loss to the claimant (i.e. without malice) (category 2).

c)

Consequences: If harm is neither the end nor the means but merely a foreseeable consequence, the requisite intention is not made out. This could, perhaps, also be conceptualised as a statement that "recklessness" will not suffice – a person is considered reckless in relation to a particular consequence of their conduct if they realise that their conduct may have a particular consequence (i.e. it is a "foreseeable consequence") but they go ahead anyway (category 3).

488.

So far as category 3 is concerned, in OBG at [167] Lord Nicholls added a further explanatory gloss:

Other side of the coin: “I add one explanatory gloss to the above. Take a case where a defendant seeks to advance his own business by pursuing a course of conduct which he knows will, in the very nature of things, necessarily be injurious to the claimant. In other words, a case where loss to the claimant is the obverse side of the coin from gain to the defendant. The defendant's gain and the claimant's loss are, to the defendant's knowledge, inseparably linked. The defendant cannot obtain the one without bringing about the other. If the defendant goes ahead in such a case in order to obtain the gain he seeks, his state of mind will satisfy the mental ingredient of the unlawful interference tort." (emphasis added)

489.

In other words, if harm to the claimant was the necessary consequence (i.e. obverse side of the coin) of the defendant's actions and the defendant knew this then although the purpose of the defendant's action was not to harm the claimant, he/she will be considered as having intended to harm the claimant (category 4).”

Knowledge and intention are intimately connected. This is, not least because evidence of what a defendant knew is often the material from which the court draws an inference as to that defendant’s intention: Civil Fraud, 1^st edn. 2-122; E D & F, above, at [523].

An honest belief defence? It is established that it is not necessary for the conspirators to know that the acts to be employed are unlawful, provided that they have knowledge of all the facts which make them unlawful: Racing Partnership Ltd v Done Bros (Cash Betting) Ltd [2020] EWCA Civ 1300, [2021] Ch 233 at [133], [139] and [171]. Mr Simpson and Mr Yap argue that that conclusion does not preclude a first instance judge finding that it is a defence to a claim of unlawful means conspiracy that the defendant had a positive, honest belief in the lawfulness of the means used. As I do not consider that Mr Giannotti and JBGE had such an honest belief, I shall leave those arguments to be developed in another case in which the issue is decisive of the result.

Unlawful means: This element of the tort has two parts. First, the acts relied on must be unlawful and capable of founding liability. Second, those unlawful acts must be the means by which injury is inflicted on the claimant pursuant to the conspiracy: Revenue and Customs Comrs v Total Network [2007] EWCA Civ 39, [2008] 1 AC 1174 at [95]. Thus the only damage to the claimant which is relevant is damage which follows from the unlawful means themselves: Adams v Atlas International Property Services Ltd [2016] EWHC 3120 (QB) at [218]. This is a question of causation: the unlawful means must have caused loss to the claimant, rather than merely being the occasion of such loss being sustained: Racing Partnership Ltd v Done Bros (Cash Betting) Ltd [2020] EWCA Civ 1300, [2021] Ch 233 at [154]. There is no additional requirement that the defendant intended to cause the loss by those means (i.e. it was not aiming to cause loss in some other way): E D & F, above, at [537]-[546].

Loss: Damage is an essential element of the tort. The claimant must prove that each unlawful act relied upon was causative of loss and that each such act was carried out pursuant to the alleged conspiracy: Palmer Birch, above, at [239]. Damages for conspiracy are “at large”: 4VVV, above, at [632]. This means that the court is not limited to awarding the amount of loss which is strictly proven, recognising that it may be difficult to prove strictly what pecuniary loss has been caused by a conspiracy: Capital for Enterprise Fund A LP v Bibby Financial Services Ltd [2015] EWHC 2593 (Ch) at [14]. The claimant is entitled to recover all losses directly flowing from the conspiracy, whether or not they are reasonably foreseeable and including consequential losses: 4VVV, above, at [56], [57] and [649].

Against that discussion of the legal principles, I turn to their application to the facts of this case as I have found them. It is not suggested in this case that any relevant distinction is to be drawn between JBGE and Mr Giannotti in terms of their potential liability.

On my findings of fact, Mr Giannotti and JBGE first entered into a combination, agreement or arrangement with Mr Priestley on 8 January 2019, following Mr Priestley’s email of 7 January, and this combination continued until the sale of the Property to BLL on 20 March 2019. Whilst it may be moot whether Mr Giannotti could conspire with JBGE, there is no doubt that he and JBGE could each conspire with Mr Priestley.

Mr Giannotti and, through him, JBGE, had the knowledge set out in paragraph 231 above. I have found above, at paragraph 232, that JBGE was acting dishonestly when effecting the sale of the Property. But in my judgment, the Company has not established that JBGE or Mr Giannotti intended to injure it. Intentional harm and dishonesty are different concepts. The Defendants intended to bring about a situation in which the Company was deprived of its only asset, the Property. Put like that, it seems obvious that they intended to injure the Company. But the way in which the Property was to be taken out of the Company’s ownership was by a sale, at a price which the Defendants honestly, though unreasonably, believed to be the best price available. They therefore intended that the Company would be fully compensated for the loss of its asset. That does not constitute an intention to injure the Company.

Consequent upon the combination, agreement or arrangement, the Defendants and Mr Priestley used concerted action, by putting the sale transaction into effect and taking the action they did in the period 8 January – 20 March 2019.

I have found above at paragraphs 216-222 that Mr Priestley breached his duties under ss.172, 175 and 177 CA 2006. It is common ground that such breaches are capable of being unlawful means for the purposes of the tort of unlawful means conspiracy. Furthermore, for the reasons given in paragraphs 238-244 above, those breaches were the means by which loss, namely the difference between the true market value of the Property and the price received, was inflicted upon the Company.

The Company accepts that the breach of duty to obtain a proper price, being a duty of care, should not be relied upon as unlawful means. It relied on its claim for breach of the mortgagee’s duty to act in good faith and for a proper purpose, but I have found that JBGE was not in breach in that regard.

As indicated above, the Defendants seek to raise a defence based on their honest belief in the lawfulness of the means used. I find that there was no such honest belief. The unlawful means were Mr Priestley’s breaches of his duties as director; Mr Giannotti accepted in evidence that he knew that Mr Priestley owed the Company duties to act in good faith and avoid conflicts of interest and I find that he knew that Mr Priestley was in breach of those duties.

The same causation analysis applies to the claim of conspiracy as I have set out in Section VIII above, in relation to dishonest assistance.

I conclude that the claim to an unlawful means conspiracy fails on the grounds of lack of the necessary intention to injure on the part of JBGE and Mr Giannotti.

By paragraph 39 of the Re-Amended Defence, the Defendants pleaded

“The Claimant must give credit for all sums paid to Muniment in satisfaction of all claims by which the same damage was claimed as is now claimed against the Defendants in this action. For such purposes, the Defendants will aver that monies and assets transferred to Muniment in satisfaction of such claims under the Deed of Settlement should be treated as having been received by the Claimant on the grounds that Muniment became the sole shareholder of the Claimant following its restoration to the register following execution of the Deed of Settlement”.

By paragraph 110 of the Amended Reply, the Company denied this contention, saying:

“For the avoidance of doubt, it is denied that the Claimant suffered the same loss to that of Muniment and/or that any settlement agreement as pleaded in the Amended Defence had the effect of preventing the Claimant from pursuing any cause of action against the Defendants or either of them.”

In paragraph 29 of the Amended Particulars of Claim, the Company also set out an alternative case as to the amount of any credit which should be given if, contrary to its primary position, it was not entitled to claim the full amount of its loss.

The question therefore arises whether, in the calculation of the compensation payable for breach of JBGE’s duty of care to obtain a proper price, or for its dishonest assistance of Mr Priestley’s breaches of his director’s duties, the Company is obliged to give credit for anything received by Muniment under the Deed of Settlement or Replacement Deed and, if so, in what amount.

In their skeleton argument, Mr Simpson and Mr Yap said that they would address the basis for the Defendants’ pleaded contention in their closing submissions. When it came to closing submissions, they sought to argue that Muniment holds the six flats transferred under the Deed of Settlement on constructive trust for the Company and that the value of that proprietary interest must be taken into account when assessing loss. I agree with the Company that this was an entirely different contention from that which had been pleaded and would have involved both different evidence to have been adduced and different legal submissions to be made, had it been pleaded. It is therefore not fair to the Company to allow that argument to be put forward. Therefore, the Defendants effectively abandoned the case they had pleaded (that the Company must give credit for all monies and assets paid in compensation for the same damage as is in these proceedings contended to have been suffered), in favour of a case which had not been pleaded (the constructive trust proposition).

The contention as pleaded raises difficult and interesting questions about the extent to which, if at all, recovery by a shareholder under a s.994 petition should be treated as reducing the company’s loss, so as to prevent double recovery, despite the rule in Salomon v A. Salomon & Co Ltd [1897] AC 22 that a company is a separate legal entity from its shareholders. This issue was briefly touched on in obiter comments of the Court of Appeal in Taylor Goodchild Ltd v Taylor [2022] BCC 1155 at [46] and [53] but did not arise on the facts there. In my judgment those questions do not arise in this case, either, on my findings above. That is because:

I will therefore leave the questions of law to be considered in a case in which they will make a difference to the result.

For the reasons given above, I conclude that JBGE is liable to account to the Company in the sum of £309,437.80 by reason of breach of its duty as mortgagee to take reasonable care to obtain the best price reasonably obtainable. I will hear Counsel as to whether interest should be paid on that sum and, if so, in what amount.

Although I find JBGE (but not Mr Giannotti) liable to the Company for dishonestly assisting Mr Priestley’s breaches of fiduciary duty, once it has accounted to the Company as mortgagee, there is no further loss for which equitable compensation for dishonest assistance is payable.

I dismiss the claim of conspiracy against both Defendants.