Brannigan v Style
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Asplin |
| Judgment Date | 02 February 2016 |
| Neutral Citation | [2016] EWHC 512 (Ch) |
| Docket Number | Case No: HC-2015-3825 |
| Court | Chancery Division |
| Date | 02 February 2016 |
[2016] EWHC 512 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
Mrs Justice Asplin
Case No: HC-2015-3825
Mr Brannigan in Person
Mr E Danes (instructed by Winston & Strawn) appeared on behalf of the Defendant
(As Approved)
This is an application by Mr Brannigan, a minority shareholder in Portobello Estates Limited ("PEL") for permission to continue a derivative claim under Part 11 of the Companies Act 2006. The claim is against the first, second, third and fourth respondents who are directors and shareholders of PEL, which was incorporated as a special purpose vehicle in relation to certain development projects. An indemnity from PEL for Mr Brannigan's costs in pursuing the derivative action is also sought.
It is alleged that the first respondent, in particular, was negligent and/or acted in breach of duty in failing properly to progress the project, which it is said would have yielded around £22 million profit for PEL. Particulars of Claim which have been drafted by Mr Brannigan himself, are in narrative form. Although reference is made to breach of duty pursuant to section 172 of the Companies Act 2006 and negligence, there was no reference to the standard of care below which it is alleged that the actions and/or omissions fell.
Instead of being dealt with on paper the application was first placed in the interim applications list and by order of 5 th October 2015 Her Honour Judge Walden-Smith, sitting as a High Court Judge directed the application be listed for an inter partes hearing. This is accordingly or was that substantive hearing of the application under section 261(4) of the Companies Act 2006.
In addition Mr Brannigan issued an additional application last week on 20 th January 2016 by which he sought to join what was described as PEL's parent company, WPG, that is the Williams Pears Group, as a party to the action. He also sought the admission of further evidence and the amendment of the Particulars of Claim. He says he only discovered the evidence very recently despite it being on the Royal Borough of Kensington & Chelsea's planning portal and that it reveals that against the interests of PEL, WPG made its own application for planning permission in relation to PEL's property at 275 Portobello Road, which Mr Brannigan says jeopardised the greater development opportunity. In addition he says the further evidence shows that WPG sought to starve PEL of necessary funds.
I dealt with the application to amend and to join WPG on the first day of the hearing and gave permission in respect of the proposed paragraphs the content of which were implicit from the totality of the evidence. I refused permission in relation to those proposed paragraphs in which it was alleged that WPG had a contractual funding obligation in relation to PEL, was required to take the steps set out under a memorandum of agreement with the Royal Borough of Kensington and Chelsea, and that it obtained £25,000 by failing to provide that funding. There is no evidence before the court to support those allegations and therefore, they have no prospect of success. I also refused permission in relation to the paragraph numbered 43 in the draft, which was repetitive of other allegations already contained in the Particulars of Claim and paragraph 45, which concerned the failure to hold an AGM or EGM. With regard to the latter I concluded that the allegation was unsuited to a derivative claim and that in any event Mr Brannigan had a remedy himself under section 305 of the Companies Act 2006. I also refused permission to join WPG as a party to the action, because there was no evidence before the court that it was under an obligation to PEL to fund the relevant project to which I shall refer.
Relevant Facts
I now turn to the facts upon which the application to continue the derivative action is based. In summary, in 2007 the second respondent, who is a director of the William Pears Group, a very substantial property investment business, in which the second, third and fourth respondents are interested, was approached by the first respondent who proposed that WPG should invest in a project for a development of land owned by the London Underground Limited ("LUL"). The land is part of the embankment to the Hammersmith and City line, between Ladbroke Grove and Portobello Road. The second respondent agreed to become involved on the basis of a joint venture between the Pears family and the first respondent with the intention that the profits would be split 50/50.
As a result PEL was incorporated on 4 th April 2007, 50 per cent of the shares being A shares, which were allotted to the Pears family and 50 per cent being B shares allotted to the first respondent and his associates. Mr Brannigan was allocated 200 B shares, being 20 per cent of PEL's capital, having been introduced to the project by the first respondent.
The directors of PEL are the first, second, third and fourth respondents and WP Registrar Limited. It is common ground that WPG was to provide the finance for the project by way of a loan to PEL. The only evidence before the court in relation to the nature of the funding arrangement between PEL and WPG is that of the second respondent Mr David Pears. He states that initially he agreed a budget of £250,000 with the first respondent in respect of professional fees for the development project by way of a loan and wanted to monitor how it was spent. Further monies were provided thereafter on a task specific basis. In addition PEL acquired 275 Portobello Road adjacent to the development site for approximately £1.38 million financed by WPG.
Mr Brannigan was involved with the first respondent in negotiations with LUL regarding the development proposal for the LUL land and 275 Portobello Road. By mid-September 2010 £110,000 had been expended in professional fees, all of which had been funded by WPG. In November 2010 WPG put a moratorium on further spending on the project until PEL had acquired an exclusivity agreement with LUL in relation to the redevelopment of LUL's land. An exclusivity agreement was reached with LUL in February 2011 and WPG authorised further expenditure. A planning application was made in February 2011 for a 10 house project in respect of the LUL land, WPG, through the second respondent having agreed a further budget of £45,000 in this regard. However, it was objected to by the Royal Borough of Kensington and Chelsea and refused on 27 th May 2011 on the grounds, amongst others, that it would constrain wider development potential and wider regeneration benefits.
From March 2011 there were discussions about a more comprehensive project, including not only LUL land and 275 Portobello Road, but also land belonging to the Royal Borough of Kensington and Chelsea. This is the comprehensive project upon which the derivative action is based.
Following a meeting in October 2011 negotiations commenced with a view of finalising a memorandum of agreement in relation to the comprehensive development, Royal Borough of Kensington and Chelsea having made clear its imperative to achieve the best value for the site. Nevertheless, an appeal was lodged against the refusal of planning permission in relation to the LUL land on 13 th December 2011 and WPG authorised expenditure of up to £125,000 for that purpose. Mr Brannigan says that the appeal should not have been countenanced and was detrimental to progressing a more comprehensive development project with the Royal Borough of Kensington and Chelsea, including LUL, Royal Borough of Kensington and Chelsea and PEL land referred to in the planning refusal and which the Royal Borough of Kensington and Chelsea had indicated it was open to.
Mr Brannigan has recently discovered that in addition a planning application for 275 Portobello Road alone was submitted on behalf of PEL on 8 th December 2011. He said that this is an indication of bad faith, something to which I shall return.
On 18 th December 2011 Mr Brannigan received an email from Richard Carroll, former head of the Royal Borough of Kensington and Chelsea Property Services, who was acting as a consultant for PEL, stating that the only way to avoid additional appeal costs in relation to the development of the LUL land was to tie up an agreement with LUL and to convince the Royal Borough of Kensington and Chelsea that the marriage value from a joint venture far outweighed the abortive costs of an appeal. He stated that he did not think it difficult to achieve. Having obtained advice from a planning silk who identified "impact on diversity" as a "new and worrying issue", the planning appeal was withdrawn.
Around this time on 6 th January 2012, Mr Brannigan emailed Michael Baker, a director of WPG Registrars Limited, stating that he had persuaded LUL not to force PEL to continue with the appeal, but to join any proposed larger development project with the Royal Borough of Kensington and Chelsea. Mr Brannigan stated that PEL should never have been in the appeal and added that the withdrawal: "…was necessary, as the appeal prospects had dimmed. Against that, both LUL and the Royal Borough of Kensington and Chelsea should be signed to MOAs on the larger scheme within days, allowing us to potentially withdraw; unfortunately, not without financial consequences. It is then up to David to decide what direction we follow". The reference to David appears to be a reference to the second respondent. Mr Brannigan also complained at this stage...
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