Barnsley v Noble
| Jurisdiction | England & Wales |
| Judge | Lord Justice Sales,Lord Justice Patten |
| Judgment Date | 02 August 2016 |
| Neutral Citation | [2016] EWCA Civ 799 |
| Docket Number | Case No: A3/2014/3555(A) |
| Court | Court of Appeal (Civil Division) |
| Date | 02 August 2016 |
[2016] EWCA Civ 799
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE (CHANCERY DIVISION)
HIS HONOUR JUDGE NUGEE
HC-2010000008
Royal Courts of Justice
Strand, London, WC2A 2LL
THE CHANCELLOR OF THE HIGH COURT
Lord Justice Patten
and
Lord Justice Sales
Case No: A3/2014/3555(A)
Mr Romie Tager QC and Mr Justin Kitson (instructed by Addleshaw Goddard LLP) for the Appellant
Mr Joe Smouha QC and Mr Ciaran Keller (instructed by Debevoise & Plimpton LLP) for the Respondent
Hearing date: 14 th July 2016
Approved Judgment
This judgment concerns the proper interpretation of an exoneration clause contained in a will to relieve the trustees under trusts set out in the will of personal liability in respect of certain breaches of duty by them.
Michael Noble ("Michael") and Philip Noble ("Philip") were brothers who together built up a substantial business and property empire known as the Noble Organisation. The business side included amusement arcades, bingo halls and the operation of slot machines and gaming machines of various kinds. The Noble Organisation had a complex ownership and management structure involving a number of companies and partnerships and certain trusts for the benefit of Michael's and Philip's respective families.
Michael died on 19 April 2006. He had made a will ("the Will") governing the disposal of his estate ("the Estate"). The executors who were granted probate and control of the Estate under the Will were Philip, Michael's widow Gillian ("Gill") and John Barnsley (an accountant associated with PricewaterhouseCoopers, "PwC", the accountants for the Noble Organisation). The Will as drafted had also made provision for other professional executors (lawyers and an accountant), but in the event they did not take on that role.
After Michael's death, Philip and Gill agreed that there should be a demerger of the business side and property side of the Noble Organisation, on a basis of broad equality of value, with Philip and his family taking the business assets and Gill and her family taking the property assets. The demerger negotiations were conducted over an extended period in 2008 and 2009. It was agreed that Philip should negotiate on behalf of his side of the family and that Mr Barnsley would represent Gill and her side of the family in the negotiations. Eventually a large number of formal documents were executed by relevant persons, including Philip, at a meeting on 9–10 March 2009.
Litigation has arisen in relation to the demerger and the background to it is set out in considerable detail in the judgment of Morgan J in Crossco No. 4 Unlimited v Jolan Ltd [2011] EWHC 803 (Ch) and the judgment of Nugee J in the present case. Philip's appeal from the judgment of Morgan J was dismissed by this court: [2011] EWCA Civ 1619. For the purposes of the present appeal, it is only necessary to summarise the key points on the facts.
Prior to the demerger, advisers of the Noble Organisation identified claims that trading companies on the business side might have to recover payments of VAT they had previously made to HM Revenue & Customs ("HMRC") in relation to bingo games and slot machines, on the grounds that it had been contrary to EU law for HMRC to claim this tax. The complex background to the claims for repayment of VAT is explained by Nugee J at paras. [11]–[80] of his judgment.
The full detail does not matter for our purposes. What is important is that the extent of the claims for repayment of VAT which it was believed by advisers might be available to companies in the Noble Organisation changed in the course of the demerger negotiations. A first set of claims was identified following the judgment of the ECJ in Cases C-453/02 and C-462/02 Finanzamt Gladbeck v Linneweber, delivered on 17 February 2005. The implications of this ruling and other domestic judgments following it for possible claims by the Noble Organisation for repayment of VAT and another tax called Amusement Machine Licence Duty had been the subject of debate with advisers well before the demerger negotiations commenced. A first claim for repayment of what have been referred to as Linneweber claims had been submitted by PwC on behalf of the Noble Organisation in October 2005. As of October 2008, the Linneweber claims made on behalf of the Noble Organisation were for repayment of sums of the order of about £30 million.
However, the extent of the claims for repayment of VAT which were thought to be viable changed with an important ruling of the House of Lords in Fleming (trading as Bodycraft) v Revenue and Customs Commissioners [2008] UKHL 2, handed down in January 2008. In Fleming, the House of Lords held that a limitation provision in primary legislation in relation to certain VAT repayment claims was in breach of EU law and could not be relied upon by HMRC. The result of this was that in February 2008 HMRC announced that claims could be made for repayment of VAT representing overpaid or overdeclared output tax in accounting periods before 4 December 1996. These have been referred to as Fleming claims. The ability to go back to earlier periods as far back as 1973 to reclaim overpaid VAT potentially increased the amount which the Noble Organisation trading companies might recover by a substantial amount, although any claims for repayment were subject to significant uncertainties and contingencies.
Meanwhile, another taxpayer, The Rank Group plc ("Rank"), pursued domestic litigation against HMRC and secured a significant victory at tribunal level in May 2008 in relation to repayment of VAT on bingo gaming. On 10 November 2008 Rank announced that HMRC had repaid it £59.1 million in respect of overpaid VAT on bingo gaming, subject to the outcome of an appeal launched by HMRC. Rank was also considering claims for overpaid VAT in relation to slot machines and Fleming claims in respect of periods before 1997.
In the period until completion of the demerger the Noble Organisation and PwC continued to assess the implications of these developments and the Fleming case for reclaiming VAT. In a general way, Philip was kept abreast of matters, but he did not know the details or the amounts of claims.
After execution of the demerger documentation on 9–10 March 2009, the Noble Organisation submitted a series of additional claims for repayment of VAT: on 20 March 2009, a claim of £31.5 million in relation to gaming machines for the period 1 February 2006 to 31 January 2009; on 30 March 2009, Fleming claims for repayment of some £70 million in relation to gaming machines and bingo for the period 1 April 1973 to 31 October 1996; and on 30 July 2009, an additional claim for repayment of some £1.5 million in relation to bingo for the period 4 November 2002 to 1 August 2004. A further additional claim for the period 1 February 2009 to 31 January 2013 was submitted in April 2013.
When the scale of the additional claims for repayment of VAT, particularly the Fleming claims, came to be appreciated by Mr Barnsley and Gill after the demerger, they felt they had been misled by Philip in the course of the demerger negotiations about the value of the VAT repayment claims available to the business side of the Noble Organisation which would be acquired by Philip and his family under the demerger. Relations also deteriorated as a result of arguments in relation to use by one of the trading companies of one of the properties acquired by Gill's side of the family as a result of the demerger which resulted in the Crossco No. 4 Unlimited litigation brought by Philip, referred to above.
Eventually, Mr Barnsley and Gill (with other relevant claimants) commenced the present proceedings against Philip, asserting a number of causes of action against Philip. These included causes of action in contract, in deceit (based on a statement made by Philip to Mr Barnsley at a meeting on 8 December 2008) and for negligent misstatement. The claims made against Philip also included claims for breach of duty as a fiduciary (as an executor of the Will and trustee under the Will trusts), first by infringement of the prohibition on self-dealing and secondly by failure to make full disclosure of all the information he had about the VAT repayment claims in the course of the demerger negotiations, down to the execution of the demerger documentation on 9–10 March 2009. Mr Barnsley, Gill and the other claimants did not, however, claim to rescind the demerger on the grounds of the alleged breaches of fiduciary duty. Instead, they claimed equitable compensation from Philip in respect of such breaches.
In a full and thorough judgment, Nugee J dismissed all these claims. The judge found that no relevant contract had been made to share the VAT repayment claims. He found that at the end of the meeting on 8 December 2008, which dealt with many other matters, Mr Barnsley, without any notice to Philip, had raised the question of how the benefit of the VAT repayment claims might be split in the demerger. There was a brief discussion lasting less than five minutes, in which Philip used words to convey the idea that he did not think the claims were likely to succeed and suggested that Mr Barnsley might like to buy them at a low price. The judge found that this was a true statement by Philip referring to his genuine and honest belief at the time regarding the prospects of success for the repayment claims and his assessment of their value. He also found that (a) Philip's statement was not one which Mr Barnsley was intended and entitled to rely on and (b) on the facts Mr Barnsley was not induced to enter into the demerger on behalf of Gill and her family interests by what was said by Philip. The judge found that Philip owed no relevant duty of care in tort.
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...no reasonable professional trustee could have thought that what he did or agreed to do was for the benefit of the beneficiaries.” 53 In Barnsley v Noble [2017] Ch 191, a claim for breach of fiduciary duty, by way of acting in breach of the self-dealing rule, was made against one of the tru......
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