Berkeley Square Holdings and Others v Lancer Property Asset Management Ltd

JurisdictionEngland & Wales
JudgeMr Justice Roth
Judgment Date01 May 2020
Neutral Citation[2020] EWHC 1015 (Ch)
CourtChancery Division
Docket NumberClaim No: BL-2018-001982
Date01 May 2020

[2020] EWHC 1015 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

BUSINESS LIST (ChD)

Royal Courts of Justice

Rolls Building, London, EC4A 1NL

Before:

THE HONOURABLE Mr Justice Roth

Claim No: BL-2018-001982

Between:
Berkeley Square Holdings and Others
Claimants
and
(1) Lancer Property Asset Management Limited
(2) John Townley Kevill
(3) Duncan Robert Ferguson
(4) Andrew John Windle Lax
(5) Byron Howard Pull
(6) Lancer Property Holdings Limited
Defendants

David Quest QC and George McPherson (instructed by Eversheds Sutherland (International) LLP) for the Claimants

David Wolfson QC and Richard Mott (instructed by Reynolds Porter Chamberlain LLP) for the Defendants

Hearing dates: 28–29 January 2020

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Roth Mr Justice Roth

INTRODUCTION

1

This case comes before the Court on an application by the Claimants to strike out parts of the Defence as an abuse of process and an application by the Defendants to amend their Defence. However, both applications turn on the question whether certain facts on which the Defendants seek to rely are excluded as privileged under the Without Prejudice (“WP”) rule, or admissible under one or more of the exceptions to that rule. If they are admissible, then the Defendants can rely on that material in their pleaded Defence and further in the amendments which they seek to make to that Defence, and the application to strike out fails.

2

The applications therefore involve issues of principle concerning the scope of the WP rule and the proper interpretation of the exceptions to it. They have been very well argued by Mr David Quest QC leading Mr George McPherson for the Claimants and Mr David Wolfson QC leading Mr Richard Mott for the Defendants.

3

It will be necessary in this judgment to refer to some of the contested passages of the pleading and the facts which are said to be privileged. As should be obvious, if the Court holds that those passages are not allowed because the underlying facts are privileged, this judgment may not be relied on as a means of adducing that information. That is important, because it enables the delivery of an open judgment and avoids the need for undesirable redactions.

THE FACTS

4

The Claimants are 24 companies incorporated in the British Virgin Islands (“BVI”). The ultimate beneficial owner of all except the 8 th Claimant is Sheikh Khalifa bin Zayed Al Nahyan (“Sheikh Khalifa”), who since November 2004 has been the Emir of Abu Dhabi and President of the United Arab Emirates. The 8 th Claimant is beneficially owned by his daughter. The Claimants between them own a portfolio of valuable properties in Central London currently worth about £5 billion (the “Portfolio” and the “Properties”).

5

From 2004 to 2017, the 1 st Defendant (“Lancer”) acted for the Claimants as the asset manager for the Properties. The 6 th Defendant was until 2018 the holding company of Lancer. The 2 nd to 5 th Defendants are directors of Lancer and of the 6 th Defendant.

6

Dr Mubarak Al Ahbabi was, from the outset of the Claimants' dealings with Lancer, the chairman of the Department of Presidential Affairs in Abu Dhabi, an office with responsibility for management of Sheikh Khalifa's private assets. Dr Al Ahbabi held powers of attorney from the Claimants.

7

By an agreement dated 18 November 2005 (the “2005 Agreement”), the 1 st to 14 th Claimants appointed Lancer to act as asset manager of the Portfolio. The 15 th to 19 th Claimants subsequently became parties to the 2005 Agreement and the 20 th to 24 th Claimants either became parties or in any event acted as if they were parties. For present purposes, nothing turns on that distinction.

8

By clause 4.1 of the 2005 Agreement, Dr Al Ahbabi (there referred to as HE Engineer Dr Mubarak) was appointed the “Owners' Representative” for the purpose of all dealings under that agreement.

9

By clause 7.1 and Schedule 2 of the 2005 Agreement, Lancer was to be paid in respect of asset management services a “performance fee” of 10% of the excess of the net proceeds of sale of any individual Property above its value at purchase after allowing for annual RPI increases. Lancer was also to receive fees for particular management services under Schedule 3.

10

The 2005 Agreement was executed as a deed and signed by Dr Al Ahbabi on behalf of the Claimants.

11

By a side letter to the 2005 Agreement (“the Side Letter”) signed in about April 2006 on behalf of Lancer and approved by Dr Al Ahbabi, but back-dated to 18 November 2005, it was provided that the fees payable to Lancer under the 2005 Agreement were increased and amended by:

i) the payment of a “capital performance bonus” if “as a direct result of the actions of Lancer, the capital value of a property has been increased”, calculated at 10% of the difference in value of between the original purchase price and the resultant increase in value, after deduction of (a) the effects of inflation based upon the RPI, and (b) all costs of the exercise including legal and other fees;

ii) a set of fees related to the rental income derived from the individual Properties;

iii) revised fees for asset and property management, in place of those set out in Schedule 3 to the 2005 Agreement.

12

Dr Al Ahbabi is the ultimate beneficial owner of Becker Services Ltd (“Becker”) and the Claimants allege (and the Defendants do not dispute) that he is also beneficially interested in Reilly Consultants Ltd (“Reilly”). Both Becker and Reilly are BVI companies. Part of the further fees payable under the Side Letter as set out in para 11(ii) and (iii) above when received by Lancer were paid over to Becker and, to a much lesser extent, to Reilly. The Claimants allege that between 2005 and 2015 Lancer made payments to Becker in the sum of about £26.48 million and that Becker did not provide any services in relation to the Portfolio or otherwise. A major area of dispute between the parties is whether those payments were authorised by, and known to, the Claimants and/or Sheikh Khalifa.

13

In March 2011, the 1 st to 14 th Claimants and Lancer executed a deed of variation to the 2005 Agreement (“the 2011 Variation”). The 2011 Variation:

i) provided that the 15 th to 19 th and 21 st to 24 th Claimants were to become parties to the 2005 Agreement and added specified Properties to the Portfolio;

ii) confirmed that the Owners' Representative (i.e. Dr Al Ahbabi) had authority to vary the terms and fees in Schedules 2 and 3 of the 2005 Agreement and direct the 6 th Defendant and Lancer to make payments to third parties, including Becker;

iii) ratified all payments made prior to the 2011 Variation by Lancer at the direction of the Owners' Representative to Becker and other third parties and required Lancer to submit to the Owner's Representative an annual reconciliation of future payments to Becker.

14

By early 2012, a dispute had developed on Lancer's demand from the Claimants of payments in respect of the capital performance bonus pursuant to the Side Letter as set out at para 11(i) above. Lancer claimed that the total due was just over £75.5 million. The parties agreed to go to mediation under the auspices of the Centre for Effective Dispute Resolution (“CEDR”).

15

On 5 September 2012, Lancer submitted its position statement, prepared by its then solicitors, for the mediation. On 12 September, the Claimants submitted their position statement, prepared by the solicitors who continue to act for them in these proceedings. And on 17 September, Lancer submitted its statement in response. The parties' respective mediation statements essentially agreed in identifying the key issues for the mediation as being:

i) the proper interpretation of the provision in the Side Letter setting out the capital performance bonus;

ii) what actions for what Properties gave rise to a right to such a bonus; and

iii) the quantum of the claim.

In their position statement, the Claimants expressly reserved their right to dispute the legality of the Side Letter but agreed not to take that point in the mediation in order to try to compromise the dispute. All the position statements were marked “Without Prejudice”.

16

The mediation was held on 24 September 2012. The dispute was settled, not in the mediation itself but shortly afterwards. The settlement included the Claimants making a payment of £30 million to Lancer, which was approved by Sheikh Khalifa in writing on about 3 October 2012. The terms of the settlement were set out in two deeds dated 28 November 2012: A Deed of Settlement and a linked Deed of Variation (“the 2012 Deed of Variation”). The 2012 Deed of Variation was stated to be effective from 29 September 2012. It revoked the Side Letter, stated that the 16 th and 21 st to 24 th Claimants were no longer parties to the 2005 Agreement, and made various amendments to the 2005 Agreement including the substitution of a new Schedule 2 of in respect of fees. The Deed of Settlement and the 2012 Deed of Variation were signed by Dr Al Ahbabi on behalf of the Claimants.

17

Following this settlement, the Claimants made payments to Lancer in accordance with the terms of the 2005 Agreement as varied by the 2012 Variation.

18

The Defendants say that Sheikh Khalifa is reported to have suffered a stroke in January 2014. On 8 May 2015, Dr Al Ahbabi was removed as chairman of the Department of Presidential Affairs and on 3 September 2015 he was replaced as Owner's Representative under the 2005 Agreement. In August 2016, Dr Ahmed Al Mazrouei became the sole Owner's Representative pursuant to clause 4.1 of the 2005 Agreement. Since about 1 October 2016, he has been assisted in that role by Mr Qazi Bhatti.

19

In September 2016, the Claimants...

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