Courtwood Holdings S.A. (a company registered and incorporated under the laws of Panama) v Woodley Properties Ltd (a company registered and incorporated under the laws of Jersey)

JurisdictionEngland & Wales
JudgeMr Justice Nugee
Judgment Date09 October 2018
Neutral Citation[2018] EWHC 2163 (Ch)
CourtChancery Division
Docket NumberCase No: HC-2015-002163
Date09 October 2018
Between:
Courtwood Holdings S.A. (a company registered and incorporated under the laws of Panama)
Claimant
and
(1) Woodley Properties Limited (a company registered and incorporated under the laws of Jersey)
(2) Douglas Maggs
(3) The Honourable Charles George Yule Balfour
(4) The Right Honourable David Mellor
(5) Svea Balfour
(6) Wharf Land Investments Limited (in Administration)
(7) Night Rhythm Limited (a company registered and incorporated under the laws of Gibraltar)
(8) Tamadot Capital SA (a company registered and incorporated under the laws of Nevis)
(9) Kingfisher Holdings Limited (a company registered and incorporated under the laws of Nevis)
(10) Woodcock Limited (a company registered and incorporated under the laws of Gibraltar)
(11) Charlestown Management Limited (a company registered and incorporated under the laws of Nevis)
(12) Chateau Management Limited (a company registered and incorporated under the laws of Nevis)
Defendants

[2018] EWHC 2163 (Ch)

Before:

Mr Justice Nugee

Case No: HC-2015-002163

HC-2015-002636

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

BUSINESS LIST (Ch D)

Rolls Building, Royal Courts of Justice

Fetter Lane, London EC4A 1NL

Mark Cunningham QC and Gregory Banner QC (instructed by Wallace LLP) for the Claimant

Brie Stevens-Hoare QC and Sarah Clarke (instructed by CMS Cameron McKenna LLP) for the 1 st, 4 th, 8 th, 11 th and 12 th Defendants

Tom Beasley (instructed on a public access basis) for the 3 rd Defendant

Thomas Robinson (instructed by Isadore Goldman) for the 5 th, 9 th and 10 th Defendants

Hearing dates: 1, 2, 5, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20 and 28 March 2018

Mr Justice Nugee

Introduction

1

This action is a second round of litigation in relation to a development site known as Sandford Farm, Berkshire (“ Sandford Farm”). Sandford Farm was acquired in 2005 in the name of a Jersey company called Sandford Farm Properties Ltd (“ SFPL”). SFPL was a single purpose vehicle or SPV funded in part by bank borrowing and in part by a number of investors, the aim being to improve the planning position and sell the land for a profit. This project was put together by the 2 nd Defendant, Mr Douglas Maggs, who had a background in property, and who used the 6 th Defendant, Wharf Land Investments Ltd (“ Wharf”), a company of which he was in 2005 the sole director, to manage a number of development projects. At Sandford Farm the plan was that Wharf would provide the expertise to enable SFPL to obtain planning permission and in return would receive 50% of the profits, the other 50% going to the investors. The 4 th Defendant, the Rt Hon David Mellor PC QC (the well-known former Cabinet Minister), had an interest in this because he and Mr Maggs were equal 50% owners of Wharf. The 3 rd Defendant, the Hon Charles Balfour, also had an interest: he had been asked by Mr Maggs to find investors for the project, and was to be rewarded by a share of Wharf's share of the profits.

2

It was initially hoped this would be quite a short-term project, but in the event no improved planning permission had been obtained by 2009 when, in circumstances that I will come to, SFPL's bankers, Abbey National Treasury Services plc (“ Abbey”), called in its loan and appointed receivers ( “the Receivers”). The Receivers sold Sandford Farm to the 1 st Defendant Woodley Properties Ltd (“ Woodley”), another Jersey company, for £15m, a price that meant that the bank was repaid but the investors lost all their money. Woodley was a newly-incorporated SPV put together by Messrs Maggs, Balfour and Mellor and owned (through offshore companies) by Messrs Maggs and Mellor and the 5 th Defendant, Mrs Svea Balfour (Mr Balfour's wife, now separated from him (they separated in 2013)). Woodley succeeded in obtaining residential planning permission and subsequently sold Sandford Farm to Taylor Wimpey for £27m and substantial further overage, thereby realising a significant profit. The essential complaint in these proceedings (put simply) is that the profits from Sandford Farm which should have belonged to SFPL, and hence the investors, have ended up instead in the hands of those who were supposed to be managing the project for SFPL.

3

In the first round of litigation Ms Vivien Rose (as she then was), sitting as a Deputy High Court Judge, held that one of the investors, Mr Pavel Lisitsin, who had invested £2m in SFPL through his company Ludsin Overseas Ltd (“ Ludsin”), had been induced to do so by fraudulent misrepresentation: her judgment ( Ludsin Overseas Ltd v Eco3 Capital Ltd [2012] EWHC 1980 (Ch)), which was subsequently upheld on appeal (see at [2013] EWCA Civ 413), gives a detailed background to the project. I will call these “theLudsinproceedings”.

4

This second action is brought by Courtwood Holdings SA ( “Courtwood”), a Panamanian company which is a corporate vehicle for another of the investors, Mr Giovanni Capodilista. It sues as assignee from SFPL (which is in liquidation). Its claim is to recover the profits made by Woodley from the sale of Sandford Farm, and to trace and recover the monies representing the proceeds of sale and overage from the other defendants. The claim is that Woodley received Sandford Farm with knowledge of a breach of fiduciary duty such as to make it liable as a constructive trustee on the grounds of knowing receipt; and that the other defendants are liable as constructive trustees on the grounds that they received monies derived from the sale of Sandford Farm, again with sufficient knowledge of a breach of fiduciary duty to make them liable on the grounds of knowing receipt.

5

The claims in knowing receipt are the only pleaded claims that I am concerned with. There was originally a pleaded claim for breach of fiduciary duty against Wharf, but Wharf was already in administration before these proceedings commenced and the Particulars of Claim made it clear that no financial relief was sought against Wharf but only a declaration that it procured the disposal of the land at Sandford Farm to Woodley in breach of its fiduciary duties to SFPL; I was told that Wharf is now in liquidation and as I understand it even this limited relief is not now being pursued. At any rate it has not been suggested to me that any application has been made to lift the stay imposed by s. 130(2) of the Insolvency Act 1986.

6

There are four individual defendants who are sought to be made liable for knowing receipt, namely Mr Maggs, Mr Mellor, Mr Balfour and Mrs Balfour. The other defendants to this claim are corporate entities, all incorporated in offshore jurisdictions, which are said to be associated with one or other of the individual defendants, and to have been used to receive some of the profits.

7

Not all the defendants took an active part in the trial. The position at trial was that there were three separate groups of defendants represented, as follows:

(1) Mr Mellor, together with Woodley and three Nevis companies said to be associated with him – the 8 th Defendant Tamadot Capital SA (“ Tamadot”), the 11 th Defendant Charlestown Management Ltd (“ Charlestown”), and the 12 th Defendant Chateau Management Ltd (“ Chateau”) – were represented by Ms Brie Stevens-Hoare QC and Ms Sarah Clarke. I will refer to these defendants as “the Mellor defendants” (Ms Stevens-Hoare said that they preferred to call themselves “the CMS defendants” but I do not think the label is of any significance – it is not intended to prejudge any of the issues).

(2) Mrs Balfour, together with two companies associated with her – the 9 th Defendant Kingfisher Holdings Ltd (“ Kingfisher”), a Nevis company; and the 10 th Defendant Woodcock Ltd (“ Woodcock”), a Gibraltar company – were represented by Mr Thomas Robinson. (Mr Robinson told me that Kingfisher is in fact now dissolved, but continues in existence for the purpose of these proceedings).

(3) Mr Balfour was represented by Mr Tom Beasley.

The other defendants were not represented. Wharf, as I have said, is now in liquidation and the proceedings against it are no doubt stayed. Mr Maggs is bankrupt. Neither he nor the 7 th Defendant Night Rhythm Ltd (“ Night Rhythm”), a Gibraltar company associated with him, served a defence and at a Case Management Conference on 22 November 2016, the Chancellor ordered that he and Night Rhythm be debarred from defending the claim as to liability, and that Courtwood's applications against them for judgment on liability and consequential relief in default of them having served defences should be adjourned to the hearing of the trial.

8

As I said in a judgment which I delivered on Day 1 of the trial, there are in effect four building blocks in Courtwood's case. The first is that Wharf owed SFPL a fiduciary duty. SFPL, which had no personnel of its own other than professional directors in Jersey, signed an agreement with Wharf called a Property Advisory Agreement ( “the PAA”) which provided for Wharf to advise SFPL in relation to the planning permission, development and sale of Sandford Farm in return for its fee of (effectively) half the profits of the project. This appears to have been a model which Mr Maggs had used for other property ventures, some of which were successful and some not. Wharf is said to have owed SFPL a fiduciary duty either as a result of the express terms of the PAA, or from the way in which Wharf in fact ran SFPL's business almost entirely itself, the Jersey directors playing no more than a formal role in the business.

9

The second building block is that Wharf acted in breach of that fiduciary duty. I will have to look at the details of what is alleged in due course but in summary the allegation is that it entered into a scheme to bring about the demise of SFPL by making it effectively insolvent, causing the Receivers to be appointed and procuring the Receivers to sell Sandford Farm to Woodley.

10

The third building block is that...

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