(1) Ross River Ltd (2) Blue River Ltd Partnership v (1) Waveley Commercial Ltd (2) Peter Barnett and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 25 January 2012 |
| Neutral Citation | [2012] EWHC 81 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C00596 |
| Date | 25 January 2012 |
[2012] EWHC 81 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Morgan
Case No: HC09C00596
Mr David Cavender QC and Mr David Caplan (instructed by Mishcon de Reya) for the Claimants
Mr Nicholas Davidson QC and Mr Malcolm Chapple (instructed by Geoffrey Leaver LLP) for the First, Second and Fourth Defendants
Hearing dates: 13,14,15,18,19,20,21,22,25,26 and 27 July and 4,5,6,7,10 and 11 October 2011
| Heading | Paragraph |
| The case in outline | 1 |
| The parties and others involved | 7 |
| The joint venture agreement ("JVA") | 23 |
| The side agreement | 40 |
| The guarantee | 43 |
| The first supplemental agreement | 44 |
| The second supplemental agreement | 45 |
| The third supplemental agreement | 46 |
| Other matters | 48 |
| The proceedings | 49 |
| The issues | 54 |
| The witnesses | 63 |
| Net Profits: | 69 |
| - general remarks | 69 |
| - disputes as to revenue | 80 |
| - the Financial Proposal | 87 |
| - the cost of the freehold | 105 |
| - Bradcliffe historic costs | 111 |
| - the snooker club | 119 |
| - legal fees | 125 |
| - management fees | 138 |
| - administration costs | 148 |
| - Westbury | 154 |
| - bank charges and interest | 156 |
| - miscellaneous matters | 157 |
| The issues as to the side agreement | 160 |
| The JVA:the alleged implied terms | 199 |
| Implied terms: the law | 217 |
| Implied terms: discussion and conclusions | 220 |
| The alleged fiduciary obligations | 231 |
| Fiduciary obligations: the law | 235 |
| Fiduciary obligations: discussion | 256 |
| Any breach of fiduciary obligations? | 264 |
| Accessory liability | 280 |
| The next steps | 283 |
| APPENDIX I |
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| APPENDIX II |
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| APPENDIX III |
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The case in outline
This dispute arises out of a property development carried out by Waveley Commercial Limited ("WCL") at Bedford Street, Ampthill. The development involved the construction of a supermarket, 5 shops and 17 flats. The part of the development comprising the 5 shops and the 17 flats was known as Oxlet House.
The development was the subject of an agreement, called "a joint venture agreement". Ross River Limited ("Ross River") and Blue River Limited Partnership ("Blue River") and WCL were parties to the joint venture. Mr Harney, a director of WCL also joined in the joint venture agreement. So too did Mr Barnett, who was described at the trial as a shadow director of WCL. There is a dispute as to the consequences of Mr Barnett and Mr Harney being parties to the joint venture agreement. The joint venture agreement was later the subject of a number of supplemental agreements. There was also an agreement called "a side agreement".
The development was completed in around 2007. During the course of the trial, the last outstanding interest in the development was sold by WCL. It is common ground that a sum is payable by WCL to Ross River and Blue River under the joint venture agreement. The parties are very far apart, for a large number of reasons, as to the amount payable. The court is asked in these proceedings to determine the many disputes as to that amount.
There is a separate issue as to the status of and, if appropriate, the true interpretation of the side agreement. WCL says that the side agreement was a sham. If the side agreement is genuine, there are real difficulties in construing it.
The sum payable under the joint venture agreement and any sum payable under the side agreement are payable by WCL to Ross River and Blue River. Mr Barnett and Mr Harney are not personally liable to pay the sums which may be due. Ross River and Blue River assert that WCL will be unable to pay very much of the sums due from it. Apparently for this reason, Ross River and Blue River have also sued Mr Barnett and Mr Harney. They are said to be personally liable to Ross River and Blue River under terms to be implied into the joint venture agreement or pursuant to fiduciary obligations which, it is said, they owed Ross River and Blue River. The alleged implied terms and fiduciary obligations are very much disputed by Mr Barnett. Ross River and Blue River have obtained a default judgment against Mr Harney and he took no part at the trial, either as a party or as a witness. In the event, I am not asked to decide anything in relation to Mr Harney's liability to Ross River and Blue River. In addition to the claims that Mr Barnett and Mr Harney are liable as principals pursuant to implied terms and fiduciary obligations, it is also alleged that they are liable as accessories to various unlawful acts committed by WCL. They are said to be liable for inducing breach of contract, or for conspiracy to injure by unlawful means or for dishonestly assisting WCL to break its alleged fiduciary obligations to Ross River and Blue River.
Mr Cavender QC and Mr Caplan appeared on behalf of Ross River and Blue River and Mr Davidson QC and Mr Chapple appeared on behalf of WCL and Mr Barnett.
The parties and other persons involved
The Claimants are Ross River and Blue River. Blue River is a property development partnership based in the Isle of Man. It was originally called York Development Limited Partnership, sometimes abbreviated to "YDLP". Mr Brian York was the settlor of a family trust with a corporate trustee. His wife was similarly the settlor of a family trust with a corporate trustee. The corporate trustees are both owned by Tenon (IOM) Nominees Ltd. The two corporate trustees are the limited partners (in unequal shares) in Blue River. Mr and Mrs York are the ultimate beneficiaries in relation to Blue River.
Ross River is the general partner of Blue River. Ross River was incorporated in the Isle of Man on 13 th October 2004. Its sole shareholder was originally Tenon (IOM) Nominees Ltd which transferred its share to Tenon (IOM) Corporate Services Ltd on 23 rd May 2007.
Both Blue River and Ross River are managed by a corporate nominee in the Isle of Man called RSM Tenon (IOM) Ltd. This company provides fiduciary services, financial management and administration. This company has also provided directors for Ross River. At the material time, they were Mr Brent Thomas and Mr Mark Schofield.
For the purposes of these proceedings, it is not usually necessary to differentiate between Ross River and Blue River. Accordingly, for convenience, I will refer to both Ross River and Blue River, as "Ross River" or "the Claimants" unless I need to distinguish between the two companies.
Mr Brian York describes himself as a businessman and property consultant. He appears to have started as a building contractor but later expanded into property development. He controls a building company, York Construction (Cambridge) Ltd. He is connected with Ross River and Blue River in the way described above.
Mr Derek Carr was a former HMRC tax inspector and is a chartered tax adviser. He is a partner at Peters Elworthy Moore of Cambridge. Mr York relied upon Mr Carr for advice, not confined to tax matters, in relation to the matters with which this litigation is concerned.
There was some investigation at the trial as to the extent to which Ross River (and Blue River) acted on the direction of Mr York either directly, or indirectly through Mr Carr, and the extent to which Ross River (and Blue River) made their own decisions, albeit having consulted Mr York and Mr Carr and considered any recommendations from them. It is not necessary for me to come to any conclusion on this question for the purpose of deciding the issues before me.
WCL is the First Defendant. WCL was incorporated on 9 th December 2004. Its memorandum stated that the company's objects were to carry on any business that could be conveniently carried on. Mr Barnett is the Second Defendant. Mr Harney is the Third Defendant. On the incorporation of WCL, Mr Harney was the sole director. Mr Barnett became a director of WCL for the first time on 21 st November 2008. He accepted in his evidence that at all times he was acting as a shadow director of WCL. Mr Harney resigned as a director on 11 th November 2009, after the present litigation had commenced. Mr Harney was initially the secretary of WCL but was replaced as secretary by Mrs Barnett at some time before December 2009; I presume he resigned as secretary at the same time as he resigned as a director. On incorporation, 100 shares were issued, all of them to Mr Harney. It is clear that Mr Barnett and Mr Harney at all times considered that some of these 100 shares were held on trust for Mr Barnett. The Claimants appeared to have understood at all times that 80 of the shares were beneficially owned by Mr Barnett. There is an indication in the documents that there might have been an intention at one time for Mr Harney to own 30 of the issued shares so that Mr Barnett would be the beneficial owner of the other 70 and then, later, they agreed that Mr Barnett would be the beneficial owner of 80 of the shares. In any event, eventually, on 10 th April 2008, Mr Harney transferred 80 of the 100 issued shares into the name of Mr Barnett.
Mr Barnett described himself as a property developer with over 30 years experience. In 2003, he moved to Dubai. In March 2007, he moved to live in Spain. He frequently travelled from his home in Dubai and later his home in Spain to deal with his business interests in the United Kingdom.
Mr Harney was described by Mr York as an architect and...
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