David Hugh Carr v Formation Group Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 19 November 2018 |
| Neutral Citation | [2018] EWHC 3116 (Ch) |
| Docket Number | Case No: BL-2018-000670 |
| Court | Chancery Division |
| Date | 19 November 2018 |
[2018] EWHC 3116 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch)
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Mr Justice Morgan
Case No: BL-2018-000670
Mark Vinall (instructed by Peters & Peters Solicitors LLP) for the Claimants
James Hall (instructed by Moore Blatch LLP) for the First Defendant
Giles Maynard-Connor (instructed by Aticus Law Solicitors) for the Second Defendant
Adam Deacock (instructed by Harrison Clark Rickerbys Limited) for the Third Defendant
Shail Patel (instructed by Beale & Company Solicitors LLP) for the Fourth and Fifth Defendants
Andrew Grantham (instructed by FS Legal Solicitors LLP) for the Seventh Defendant
Hearing date: 9 th November 2018
On 9 November 2018, at a case management conference, I considered a number of procedural matters which arose in this case. One such matter was an application by the Fourth, Fifth and Seventh Defendants for permission to call expert evidence in relation to certain issues in the case. This request was opposed by the Claimants.
Although I will need to refer to the pleadings in more detail later in this judgment, I will at this stage give a brief summary of what is alleged in this case by the Claimants. There are seventeen Claimants. Sixteen of them were professional footballers and one (Mr Carr) was a financial adviser.
The Claimants engaged the services of sports agents (or possibly other agents). The principal sports agent was ProActive Sports Management Ltd (“ProActive”). The Seventh Defendant, Mr Urquhart, traded as a sports agent on his own account until 2004 or 2005 at which point he became employed by ProActive. The Claimants asked their agents to recommend a financial adviser to assist those Claimants with advice as to possible investments. The agents put the relevant Claimants in touch with Formation Asset Management Ltd (“Formation AM”) which then gave those Claimants financial advice resulting in the Claimants making a number of investments. The parties in which the Claimants invested paid a commission to Formation AM. The payment of this commission was disclosed to the Claimants and there is no complaint about that. Formation AM then shared this commission with the Claimants' agents, including ProActive. The Claimants say that this sharing of the commission was not disclosed to them.
The Claimants say that the payment of a share of the commission by Formation AM to ProActive and others involved unlawful conduct by Formation AM. The Claimants also say that where ProActive and Mr Urquhart were involved, the payment of commission to them involved unlawful conduct by them. Formation AM is insolvent and ProActive has been dissolved. The Claimants have joined Formation AM as a party to these proceedings for the purpose of obtaining disclosure from it but there is no expectation of any recovery from Formation AM. These proceedings are brought against various other defendants who are said to have been involved in the unlawful conduct so as to become liable to the Claimants.
The justification for an expert witness was described in the Fourth and Fifth Defendants' Directions Questionnaire in these terms:
“The Claimants plead dishonesty. The expert evidence will go to the market practice and regulatory requirements relating to the disclosure of shared commission and therefore to the key element of whether or not the Defendants acted with any dishonest intent.”
I now need to refer to the pleaded cases in more detail but only so far as relevant to the present issue.
The Claimants or some of them allege that ProActive and Mr Urquhart (and other agents who have not been sued) owed them fiduciary duties when acting as agents for the Claimants. In relation to Mr Urquhart, it is said that he owed personal fiduciary duties both before he joined ProActive and also when he was an employee of ProActive. The relevant fiduciary duties included a duty of loyalty, a duty to avoid a conflict of interest and a duty not to make a profit out of the fiduciary position. It is then alleged that ProActive and Mr Urquhart broke those fiduciary duties by agreeing to accept commission from Formation AM, by introducing the Claimants to Formation AM and then by actually receiving commission from Formation AM in relation to the introductions. It is then alleged that a recipient of commission (i.e. ProActive at all times and Mr Urquhart up to 2004 or 2005) is liable for the tort of deceit. It is further alleged that Mr Urquhart, in so far as he did not receive commission personally, is liable as a joint tortfeasor together with ProActive. Finally, in relation to Mr Urquhart, it is said that he dishonestly assisted ProActive to commit a breach of its fiduciary duty.
The Claimants allege that Formation AM is liable in the tort of deceit for paying commissions to ProActive and others when it knew that the recipients were agents for the Claimants, without disclosing to the Claimants the payment of commission. It is pleaded that Formation AM had “a systematic practice” of paying commission in this way. As regards the Second, Fourth and Fifth Defendants, it is alleged that they are liable to the Claimants as joint tortfeasors with Formation AM and as parties to a conspiracy to use unlawful means. The Particulars of Claim do not spell out the unlawful means which are alleged but it would seem that the allegation is that the unlawful means were the commission of a tort by Formation AM. Finally, as regards the Second, Fourth and Fifth Defendants, it is alleged that they are liable for dishonestly assisting the payment of commission to the Claimants' fiduciary agents without disclosing such payments to the Claimants. In this part of the pleading, it is alleged that what these Defendants did was “contrary to normally acceptable standards of honest conduct”.
The First Defendant, Formation Group Ltd (“Group”), was the parent company of both Formation AM (from 2003) and ProActive (from 2001). It is pleaded that Group received dividends from ProActive knowing that they represented the proceeds of commissions paid by Formation AM so that Group is liable in equity for receipt of those dividends derived from such commissions. It is also alleged that Group is liable as a joint tortfeasor, for unlawful means conspiracy and for dishonest assistance of a breach of fiduciary duty.
I will next refer to the Defences served by the Fourth, Fifth and Seventh Defendants. I will start with the Defence of the Seventh Defendant. He made no admissions as to the pleaded allegation that Formation AM had a systematic practice of paying commission to others such as ProActive, although it was pleaded that it did so on occasion. It was alleged that such payments were actually disclosed to the Claimants by various documents issued by Formation AM. In relation to one of the Claimants, Mr Savage, it was alleged that Mr Savage had actual knowledge of the fact that Formation AM paid commission to someone in the position of Mr Urquhart and an exchange between Mr Savage and the Fourth Defendant in 2006 was relied upon. Mr Urquhart also alleged that the Fourth Defendant told him that the Fourth Defendant disclosed all commissions paid to the Fourth Defendant and others arising out of transactions undertaken on behalf of clients of Formation AM. Mr Urquhart denied liability to the Claimants in relation to the various ways in which liability was pleaded against him. He contended that the receipt by a fiduciary of an undisclosed commission would constitute the tort of fraud and not the tort of deceit. Finally, he relied on limitation and contended that all of the claims had a limitation period of six years from the date of the relevant payment and the six year period had expired before the issue of proceedings.
The Fourth and Fifth Defendants served a joint Defence. In response to the Claimants' allegation that Formation AM had a systematic practice of paying commission to introducers, it was pleaded that it was an accepted (but not invariable) practice in the financial advisory industry prior to around 2007 to pay to an introducer part of a commission received from a product provider. It was said that disclosure of such payments was not mandatory until 2007. It was also pleaded that some investors were aware of this practice although out of the Claimants only Mr Savage was identified as being so aware. It was also alleged that the payment of commission to introducers had been disclosed to the Claimants so that it was fanciful to suggest that the Fourth and Fifth Defendants had been dishonest or had been involved in a conspiracy. They denied liability to the Claimants in relation to the various ways in which liability was asserted against them. They contended that the payment of an undisclosed commission to a fiduciary was the tort of bribery and not the tort of deceit. Finally, they relied on limitation and contended that all of the claims had a limitation period of six years from the date of the relevant payment and the six year period had expired before the issue of proceedings.
The Claimants served a combined Reply to all of the Defences. In relation to the Defendants' pleas of limitation, the...
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