Akita Holdings Ltd v Attorney General of the Turks and Caicos Islands
| Jurisdiction | UK Non-devolved |
| Judge | Lord Carnwath |
| Judgment Date | 27 March 2017 |
| Neutral Citation | [2017] UKPC 7 |
| Docket Number | Appeal No 0064 of 2016 |
| Court | Privy Council |
| Date | 27 March 2017 |
[2017] UKPC 7
Privy Council
From the Court of Appeal of the Turks and Caicos Islands
Lord Neuberger
Lord Kerr
Lord Sumption
Lord Reed
Lord Carnwath
Appeal No 0064 of 2016
Appellant
Ariel Misick QC
Samuel Nicholls
(Instructed by Harcus Sinclair LLP)
Respondent
David Phillips QC
Patrick Patterson
(Instructed by Cooley (UK) LLP)
Heard on 1 February 2017
This appeal concerns the remedies available against a knowing recipient of property acquired at an undervalue from the government by a minister acting in breach of his fiduciary duty.
The property in question is made up of four parcels of land on Providenciales, Turks & Caicos Islands ("TCl") registered at the Land Registry with title numbers 60605/13, 92, 96 and 107 ("the land") Mr Hanchell is a "belonger" (that is, a TCI citizen). In August 2003, he was appointed Minister for Works, Utilities and Communication of the TCI. As such, he was a member of the TCI's Executive Council (later the Cabinet). He remained a government minister until 2008.
At that time the Crown Land Policy entitled a belonger to apply for and be granted a Conditional Purchase Lease ("CPL") over Crown Land subject to certain conditions, including the obligation to pay rent and develop it in accordance with the terms of the CPL. If those conditions were satisfied, the belonger became entitled to purchase the freehold title at a discounted rate, in this case 50% of the open market value.
In 2004 Mr Hanchell applied for and was granted a CPL over the land. In setting the sale price under the CPL, the government relied on a 1998 valuation which gave its open market value as $150,400, resulting in a discounted price of $75,200. Unknown to the government, Mr Hanchell had recently obtained a private valuation of the property in its unimproved state at $500,000. A further private valuation in February 2006, after commencement of development, valued it at $1,200,000, apportioning $600,000 to the value of the bare land and $600,000 to the development so far carried out.
The development was substantially completed in accordance with the CPL. Before exercising his right to buy, Mr Hanchell transferred the right to the appellant ("Akita"), a TCI company jointly owned by himself and his brother. In December 2006, Akita acquired the freehold title, having paid the discounted price of $75,200. After the sale, development of the property continued, in part funded by bank loans, amounting eventually to some US$3.9m, charged on the property. In November 2008 a private valuation report for Mr Hanchell following further development valued the property with improvements at $4,250,000.
The Attorney-General (acting on behalf of the government) issued proceedings against Akita. As appears from the re-amended Statement of Claim, the basis of the claim was expressed in the alternative as for "unjust enrichment" or "unconscionable receipt". The former was put as a claim for US$174,800, being the difference between the price paid ($75,200) and the price which would have been paid on the undisclosed valuation ($250,000). The latter relied on the assertion that the price paid represented only 30.08% of the price which should have been paid, with the result that Akita "holds 69.92% of the land on trust for (the government)", which was accordingly entitled to "that proportion of the value of the land, including a proportionate share of any benefits made by the (Akita) that are attributable to its use of the land" (para 26E). Reference was also made to the fact that the improvements had been financed by bank loans secured on the land. The relief claimed was a declaration that the property was held on "constructive trust" for the payment of sums due, an account of the benefits received by the Akita "by reason of the 69.92% of the land that it holds on trust for the (government)"; and "restitution" of $174,800 with interest.
The matter came before the Chief Justice (Goldsborough CJ) who on 5 September 2014 gave judgment for the government. Having found the facts as summarised above, he turned to the appropriate remedy (paras 40ff), which he described as being "to trace the value of the benefit obtained by (Akita)", the starting point being to determine "the nature of the asset" held by it. He identified the asset as the land itself, which he regarded as "a mixed asset as described in Foskett v McKeown [2001] 1 AC 102". This was on the basis that the value put into its purchase by Akita represented "but a proportion of its value"; the balance having come "from the property of the (government)", the proportions being 30.02% to 69.92%. Having cited extracts from Lord Millett's speech relating to such mixed assets, he said:
"Applying those principles, I arrive at the conclusion that (Akita) holds the freehold title on a constructive trust for payment of the value of the benefit to the (government). The (government) is entitled to recover the value of that proportion of the land for which it has not received value (referred to earlier on the present evidence as being 69.92%) that being the value of the unimproved land and the same percentage of the current value of the improved land insofar as the improvements are attributable to the (Akita's) use of the land. To that end I order that (Akita) account to the (government) for the benefit of its use of the land for which it has not received value." (para 45)
The governing principles for drawing up the account were to be as set out by Lewison J in Ultraframe (UK) Ltd v Fielding [2005] EWHC 1836 (Ch); [2006] FSR 17, the "fundamental rule" being that the fiduciary must not make an unauthorised profit; but the account "should not be allowed to operate as the unjust enrichment of the claimant". He invited counsel to make proposals on that basis.
On 15 September 2014, having heard telephone submissions from leading counsel for both sides, he made an order for the account, largely in terms prepared (we were told) by counsel for the plaintiff. In summary, the plaintiff was to be entitled to 69.92% of (a) the current value of the unimproved land, (b) the current value of the improved land "insofar as the improvements are attributable to the defendant's use of the land", and (c) "the benefit received by the defendant by reason of its use of the land for the purposes of raising finance".
Akita appealed to the Court of Appeal, in summary on the grounds that the court had erred in applying the rules relating to mixed funds; and that, having elected not to assert a proprietary remedy by seeking return of the property, the only benefit for which Akita was accountable was the difference between the value of the land and the amount paid. A respondent's notice supported the reasoning of the Chief Justice, but in...
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