Berkeley Square Holdings Ltd & Others v Lancer Property Asset Management Ltd & Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Henderson,Lord Justice Popplewell |
| Judgment Date | 15 April 2021 |
| Neutral Citation | [2021] EWCA Civ 551 |
| Docket Number | Case No: A3/2020/1210 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 April 2021 |
[2021] EWCA Civ 551
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Mr Justice Roth
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice David Richards
Lord Justice Henderson
and
Lord Justice Popplewell
Case No: A3/2020/1210
David Quest QC and George McPherson (instructed by Eversheds Sutherland (International) LLP) for the Appellants
Adrian Beltrami QC and Richard Mott (instructed by Reynolds Porter Chamberlain LLP) for the Respondents
Hearing dates: 17 December 2020
Approved Judgment
Introduction
The parties have been informed of our decision to dismiss this appeal. In this judgment, I give my reasons for that decision.
This is an appeal against an order of Roth J, dismissing the claimants' application to strike out certain paragraphs of the defence. The grounds of the application were that those paragraphs pleaded statements made without prejudice in a mediation between the parties which were therefore inadmissible. It was and remains common ground that, unless falling within an exception to the without prejudice principle, the statements were inadmissible. Roth J held that they did fall within exceptions to the principle. He granted permission to appeal.
Facts
The twenty-four claimant companies own a portfolio of properties in London with an estimated value of about £5 billion. The companies are beneficially owned by Sheikh Khalifa bin Zayed Al Nahyan, the Emir of Abu Dhabi and President of the United Arab Emirates, or in one case by his daughter.
From 2004 to 2017 the properties were managed by the first defendant Lancer Property Asset Management Limited (Lancer). The other defendants are its holding company and some or all of Lancer's directors at the material times.
Sheikh Khalifa's agent and representative in respect of the companies and their properties was, from a date before Lancer's engagement until September 2015, Dr Mubarak Al Ahbabi. He held powers of attorney for each of the claimant companies. Until his removal in May 2015, he was chairman of the Department of Presidential Affairs in Abu Dhabi, which had responsibility for the management of Sheikh Khalifa's private assets.
By an agreement dated 18 November 2005 (the 2005 agreement), Lancer was appointed to act as asset manager of the portfolio owned by the first to fourteenth claimants. The management of the properties owned by the other companies subsequently became subject to the terms of the agreement. Under the 2005 agreement, Lancer was entitled to fees for particular management services and to a performance fee of 10% of the excess of the net proceeds of sale of any property above specified values.
By a side letter dated 18 November 2005 but signed in or about April 2006, (the side letter), the fees payable to Lancer were increased and amended in a number of respects, which included the introduction of a “capital performance fee” if “as a direct result of the actions of Lancer, the capital value of a property has been increased”. The fee was a sum equal to 10% of the difference between the original purchase price and the resultant increased value, after deduction of an amount for inflation and certain fees.
By a deed of variation to the 2005 agreement, executed in March 2011, it was agreed that Dr Al Ahbabi had authority to direct Lancer and its holding company to make payments to third parties, including Becker Services Limited (Becker), a company incorporated in the British Virgin Islands. The deed also ratified all earlier payments made by Lancer, at Dr Al Ahbabi's direction, to Becker and other third parties.
Becker was at all material times beneficially owned by Dr Al Ahbabi. A large part of the fees paid to Lancer under the side letter were paid on by it to Becker and, to a much lesser extent, to another BVI company owned by Dr Al Ahbabi, Reilly Consultants Limited (Reilly). The claimants allege that between 2005 and 2015 Lancer made payments totalling about £26.48 million to Becker, for which Becker provided no services.
By early 2012, a dispute had developed as to the amount of Lancer's entitlement to the capital performance bonus under the side letter. The parties agreed to a mediation under the auspices of the Centre for Effective Dispute Resolution (CEDR). Both parties signed the CEDR Model Mediation Agreement (13 th ed.) containing the following provision:
“4. Every person involved in the Mediation —
4.1 will keep confidential all information arising out of or in connection with the Mediation, including the fact and terms of any settlement, but not including the fact that Mediation is to take place or has taken place or where disclosure is required by law to implement or to enforce the terms of settlement or to notify their insurers, insurance brokers and/or accountants; and
4.2 acknowledges that all such information passing between the Parties, the Mediator and/or CEDR Solve, however communicated, is agreed to be without prejudice to any Party's legal position and may not be produced as evidence or disclosed to any judge, arbitrator or other decision-maker in any legal or other formal process, except where otherwise disclosable in law.”
Position papers, all marked “without prejudice”, were exchanged before the mediation. The essential issues identified by the parties were the proper interpretation of the relevant provisions of the side letter, the determination of the specific actions of Lancer on specific properties as a basis for payment of capital performance bonuses, and the quantum of Lancer's claim. The claimants expressly reserved their right to dispute the legality of the side letter but agreed not to take that point in the mediation.
Lancer's position paper dated 5 September 2012 contained the following:
“15. On 14 March 2005, AL [Andrew Lax, a director of Lancer and the fourth defendant] met with HE Mubarak and Ismail [Mohammed Ismael, the financial controller of the Department of the President's Affairs] at the Owners' London office at 5 Tilney Street. HE Mubarak said that Sheikh Khalifa had become the President of the United Arab Emirates in November 2004. He said that, as a result, his own responsibilities had increased, and that he had received Sheikh Khalifa's specific approval to receive fees relating to the asset management of the Portfolio, which would be payable under the new management agreement to be entered into with Lancer. This meant that the fees payable overall would need to be increased to facilitate these payments. During the course of this meeting, the parties also discussed the capital uplift bonus to which Lancer was to be entitled. It was agreed in principle that Lancer would be entitled to a capital uplift bonus and it was understood by Lancer that this bonus would be incorporated within the main body of the new management agreement.
17. At a meeting on 31 August 2005 attended by AL, Ismail and HE Mubarak, HE Mubarak and Ismail stated that HE Mubarak's entitlement to fees would be contained in a side letter to the main agreement and paid to his BVI registered company. It was also proposed that Lancer's capital uplift bonus be included in this side letter, which was to be dated at the same date as the new management agreement.
25. On 4 April 2006, the parties signed the Side Letter. By this time, agreement had been reached as to the nature of the “actions” which would qualify for a capital uplift bonus. In addition to the wording of the Capital Uplift Bonus, the Side Letter also records the uplift in the management fees applicable under Schedule 3 of the 2005 Agreement, the difference between the fees in the 2005 Agreement and the Side Letter respectively representing the sums to be paid to HE Mubarak's company, Becker Services Limited.”
In its position paper dated 17 September 2012 in response to the claimants' position paper, Lancer stated that a total of £27.04 million had been paid pursuant to the side letter, all of which had been paid to Becker.
The mediation took place on 24 September 2012. It was attended on the claimants' side by Dr Al Ahbabi, Mr Ismail, representatives of Eversheds, the solicitors acting then as now for the claimants, and Dr Elgaili Abbas. The defendants allege, but the claimants dispute, that Dr Abbas was Sheikh Khalifa's personal lawyer. A compromise was reached shortly afterwards, on terms which included agreement by the claimants to pay £30 million to Lancer, which was approved in writing by Sheikh Khalifa on about 3 October 2012. The terms of settlement were set out in two deeds dated 28 November 2012 (the settlement deeds), a deed of settlement and a deed of variation which, among other things, revoked the side letter.
The defendants say that Sheikh Khalifa suffered a stroke in January 2014. As noted above, Dr Al Ahbabi was removed as chairman of the Department of Presidential Affairs in May 2015 and as the owner's representative under the 2005 agreement in September 2015. Lancer's appointment as the claimants' asset managers terminated in September 2017 on notice given by the claimants a year earlier.
The proceedings
In September 2018, the claimants issued the present proceedings. They allege that the arrangements under the side letter and the settlement deeds were means by which Dr Al Ahbabi, in breach of his fiduciary duties, misappropriated over £26 million from the companies. Neither Lancer nor Becker provided any services in...
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