James Hay Pension Trustees Ltd v Hird
| Jurisdiction | England & Wales |
| Judge | Mr Justice Lawrence Collins |
| Judgment Date | 27 May 2005 |
| Neutral Citation | [2005] EWHC 1093 (Ch) |
| Date | 27 May 2005 |
| Court | Chancery Division |
| Docket Number | Case No: HC 04 C 02746 |
[2005] EWHC 1093 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Justice Lawrence Collins
Case No: HC 04 C 02746
Miss Elizabeth Jones QC and Mr Tom Smith (instructed by Forsters LLP) for the Claimants.
Mr John Tackaberry QC (instructed by CKFT Solicitors) for the Defendants.
Hearing: May 25, 2005
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.
()
I Introduction: the Partnership Deed
This is an application by the claimants for summary judgment on their claim (and parts of the defendants' counterclaim) pursuant to CPR Part 24. The claimants are the trustees of a pension scheme, the Repton Securities Directors Pension Scheme ("the Pension Scheme"), and sue in that capacity. The first claimant, James Hay Pension Trustees Ltd ("JHPT"), specialises in the provision of pension services and is a subsidiary of Abbey National plc, now part of Banco Santander Central Hispano SA. Repton Securities is now called Molyneux Investments Limited ("MIL"). MIL is an investment vehicle of Mr Colin Molyneux ("Mr Molyneux"). Mr Molyneux and his wife, Alison Molyneux, are the second and third claimants as the other trustees of the Pension Scheme. Mr Molyneux is also a party (both as claimant and as defendant) to Part 20 claims in this action.
The first, and principal, defendant, is Mr Kean Hird ("Mr Hird"). Mr Hird had been a director of Imry Group plc. In 1997 Imry Group plc sold off part of its property portfolio to the South Downs Partnership, a limited partnership formed in that year ("the SDP"). The general partner in the SDP was Prudential Insurance Company of America (PRICOA) and lead investors included Hanover Property Unit Trust, Trans European Investment Trust and Sir Robert MacAlpine trusts.
When he left Imry Group plc, Mr Hird secured a management contract to manage the substantial portfolio held by the SDP, consisting of 79 properties and 345 tenants. He formed Sussex Asset Management Ltd ("SAM") to enter into the management contract. The terms of the management contract also permitted SAM (or its nominee) to subscribe £400,000 for a Special Partner Share (representing 16%) in the SDP.
Mr Harris, the second defendant, had worked with Mr Hird at Imry Group plc, and later with him at SAM. Frame Investments Ltd ("FIL"), the fourth defendant, is Mr Hird's principal vehicle, and Frame (Sussex) Ltd, the fifth defendant held the Special Partner Share in the SDP which is the subject of this application. The sixth defendants are Mr Hird's accountants, and are joined because they hold the proceeds of the relevant distributions of the SDP.
On March 30, 2001 a Partnership Deed was executed in which the parties were expressed to be Mr Hird and the Pension Scheme. The Partnership Deed was executed by Mr Hird and JHPT.
The Partnership Deed included the following terms:
"2 Nature of business and duration
2.1 The Partnership shall with effect from the Commencement Date [which was defined by clause 1 to mean June 1, 1998] carry on the business of 'Special Partner' (as set out in a clause 7.3 of the Private Placing Memorandum … dated October 1997 issued by PRICOA PH (Regulated) LTD in relation to the South Downs Partnership (as therein described) ('the South Downs Partnership')
2.2 The nature of the Partnership business shall not be changed except by the unanimous vote of the Partners
2.3 The duration of the Partnership shall be co-extensive with the duration of the South Downs Partnership and shall continue only thereafter for the purposes of fulfilling the Partnership's duties in relation to the South Downs Partnership and thereafter winding up the Partnership and the date on which all the foregoing has been completed in herein referred to as the Termination Date
…
4 Firm Name
4.1 The Firm Name of the Partnership shall be Frame (Sussex) Partners and the Partnership shall be known by and contract in the name of and conduct its business using only the Firm Name from time to time. Each of the Partners acknowledges that all proprietary and other rights in the Firm Name are vested exclusively in the Firm
4.2 The Firm Name shall be changed only by unanimous vote of the Partners
…
6 Partners' duties
Each Partner shall:
6.1 be just and faithful to the other Partners and at all times give to the other Partners full information and explanations of all matters relating to the affairs of the Partnership
6.2 devote such time and attention to the Partnership as the Partners may by majority vote agree (except when absent as provided in clauses 10 or 11) and diligently and faithfully employ himself in the Partnership business and use his best skills and endeavours to carry on that business for the benefit of the Partnership
6.3 punctually pay his separate debts and taxes and indemnify and keep indemnified the other Partners from and against all losses damages actions proceedings and costs that they may suffer or incur arising directly or indirectly from his failure to do so
…
9 Capital
9.1 All Partnership assets including goodwill in which the Partnership business shall be Partnership property and shall (unless otherwise agreed) belong to the Partners in accordance with the Third Schedule hereto and shall (if vested in any individual Partner) be held by him in trust for all of the Partners and the other Partners shall indemnify such Partner against all liability which may arise whether directly or indirectly out of such ownership
9.2 No interest shall be payable upon the capital of any Partner
9.3 Except on the Termination Date of the Partnership and as set out in Third Schedule hereto no Partner may withdraw capital from the Firm
9.4 Any Profits or losses or liabilities of a capital nature shall belong to or be borne by the Partners in the proportion set out in Part 1 of the Second Schedule
10 Profits, losses and liabilities
10.1 The Profits of an income nature for each Financial Year shall belong to the Partners in such proportions as are set out in the Second Schedule or as shall otherwise be agreed by all of the Partners from time to time
10.2 All losses and all liabilities of an income nature of the Firm shall unless otherwise agreed by all of the Partners be borne by the Partners in the same proportion as those in which they would have been entitled to share in the Profits for the Financial Year during which such losses or liabilities are incurred
10.3 The profits shall only be distributed after the repayment of the loan capital as set out in Part 2 of this Second Schedule
11 Banking
All money and securities belonging to the Partnership shall be paid into the Partnership Bank [defined by clause 1 as Lloyds Bank, Pall Mall, St James Branch, 8–10 Waterloo Place SW1Y 4BE or such other bank as the Partners may choose from time to time] account at or deposited for safe custody with the Partnership Bank. All cheques on the Partnership Bank account shall be drawn in the name of the Partnership
…
13 Management
13.1 Kean Hird shall exercise the day to day management and conduct of business and affairs of the Partnership as though the Partnership were a limited company and he is the Managing Director
…"
Part 1 of the Second Schedule provided for profits to be divided as to 63% to Mr Hird and 37% to the Pension Scheme. Part 2 of the Second Schedule provided for the loan capital to be repaid as to £252,000 to Mr Hird and £148,000 to the Pension Scheme. The Third Schedule provided for capital to be divided as to 63% to Mr Hird and 37% to the Pension Scheme.
The property portfolio of the SDP was sold in October 2002, and about £2,000,000 representing the 16% share due to the Special Partner was distributed to Mr Hird's company Frame (Sussex) Ltd, and was then transferred to the client account of Mr Hird's accountants, Daniel Auerbach & Co LLP, the sixth defendant.
When the solicitors for the Pension Scheme trustees sought payment of the 37% allocated to the Pension Scheme under the Partnership Deed, solicitors for Mr Hird claimed that (a) the partnership established by the Partnership Deed, Frame (Sussex) Partners, did not hold the Special Partner Share in the SDP; (b) the Special Partner Share had been held by Frame (Sussex) Ltd, which had transferred it to a new partnership, Frame (Sussex) Partnership in August 2000 (the partners of which were Mr Hird, Mr Coe, Mr Harris, the Pension Scheme and Mr Molyneux in his personal capacity); and (c) the partnership constituted by the Partnership Deed could not be looked at in isolation, and had to be considered in conjunction with other projects.
II Background
In this section I shall set out the background and some of the principal documents, but in so doing I am making no findings of fact. Mr Hird says that in 1997 he began to look for prospective partners in a property investment venture. He invited Mr Terry Smith ("Mr Smith") to join the partnership, a former director at Imry Group plc who was trained as a architect. He asked Mr Molyneux, whom he knew to have been particularly experienced in the retail sector, to join the partnership. He also arranged for Mr Harris to join the partnership; Mr Harris was formerly an associate at Imry Group plc and was to be primarily responsible for the day to day activities of SAM. Andrew Coe joined them also at an early stage to assist Mr Harris and to...
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...reflected in the 1997 Deed which it would be open to the Appellant to seek rectification, see James Hay Pension Trustees Ltd v Hird [2005] EWHC 1093 (Ch) for a summary of he law on rectification. If this submission was accepted the appeal should be adjourned to enable him to apply for recti......
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