John Kent v William Paterson-Brown
| Jurisdiction | England & Wales |
| Judge | Mr Justice Zacaroli,MR JUSTICE ZACAROLI |
| Judgment Date | 30 July 2018 |
| Neutral Citation | [2018] EWHC 2008 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC-2013-000569 |
| Date | 30 July 2018 |
[2018] EWHC 2008 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Zacaroli
Case No: HC-2013-000569
Miss Catherine Newman QC, Mr Maxim Cardew (instructed by Grosvenor Law) for the Claimant
Mr Tom Weisselberg QC, Mr David Lowe (instructed by Wallace LLP) for the Defendants
Hearing dates: 11, 14–18, 22 & 23 May and 6 June 2018
(1) Introduction
In late 2004 the Claimant, John Kent, until then an English resident, was looking to emigrate. Switzerland was the likely destination. He was in the process of selling his care-home construction businesses, which would provide him with substantial capital to invest elsewhere.
The First Defendant, William Paterson-Brown (“WPB”) was then living in Switzerland, having moved there in 2001. Among other things, as I will describe more fully below, he was in the business of promoting companies to potential investors, operating from an office at 15 rue de la Confederation, Geneva (the “Geneva office”).
Mr Kent was introduced to WPB by a mutual acquaintance, Grant Tromans, in the following circumstances. Mr Tromans ran a property business called Develica, and recommended to Mr Kent that he invest in a fund called “Develica 1”. Mr Kent took him up on that offer some time in 2004, investing £500,000 of his pension fund's money.
Mr Kent mentioned to Mr Tromans that he was thinking of emigrating to Switzerland. Mr Tromans offered to introduce Mr Kent to colleagues of his, including WPB. According to Mr Kent, Mr Tromans told him that WPB was part of a group of business associates, including Mr Tromans and a Mr Stephen Forsyth, who worked closely together making investments in businesses and managing them. He described them as clever businessmen with far reaching connections extending to the Royal Family of Abu Dhabi. Mr Tromans told Mr Kent that WPB would be able to offer him advice.
Mr Kent and WPB disagree as to the precise timing of their first meeting, and the extent of contact between them prior to June 2005. Mr Kent says that they first met towards the end of 2004, and that they met on several subsequent occasions between then and June 2005, all of which were of a social nature. It is an element of Mr Kent's case that he believed that the relationship between him and WPB was from the beginning one of friendship, which meant that the business conducted between them was done on an informal basis, involving trust, rather than with formal documentation as would have been the case had Mr Kent been dealing with a company.
WPB, on the other hand, says that, while he was friendly towards Mr Kent, their relationship was a business one. He says that they first met at a Burns' night celebration on 12 February 2005, and that Mr Kent had been introduced to him as someone interested in making investments.
To the extent that it is necessary to make any findings about the precise nature of the relationship between Mr Kent and WPB, I do so when dealing with the elements of the causes of action pleaded. For the moment, it is sufficient to note that it is common ground that the first time they seriously discussed business was at the Geneva office on 16 June 2005.
At that meeting, WPB offered Mr Kent an investment opportunity which, shortly afterwards, Mr Kent took up. Thereafter, over the next four years, on WPB's recommendations Mr Kent invested several millions of Euros and acquired shares in a variety of different companies, sometimes with new cash and sometimes with the proceeds of sale of earlier share purchases. The last of these investments was made in February 2009.
Between July 2010 and February 2011, Mr Kent was provided with share certificates (for shares held in certificated form) or evidence of shares held in uncertificated form for all the shares which – according to the sales and purchases made over the period 2005 to 2009 – he should have held. There was some considerable delay in provision of those share certificates to Mr Kent, but no claim is asserted by reason of that delay.
The investments acquired by Mr Kent were badly affected by the global financial crisis of 2007–2008, such that very little value remains in them.
In December 2013, Mr Kent commenced these proceedings against WPB, WPB's brother, Timothy Paterson-Brown (“TPB”), and three companies with which WPB had been associated, Asia I.T. Capital Investments Limited (“Asia IT”), Khalidiya Investments SA (“Khalidiya”) and Zica SA (“Zica”). In April 2014 the claim form was amended to remove the corporate Defendants. In particulars of claim dated 7 April 2014, wide ranging claims in fraud and conspiracy were asserted, as well as a claim for an account based on allegations that the Defendants were trustees of money or other property for Mr Kent.
In 2015, however, the original particulars of claim were withdrawn, and new particulars served. The fraud and conspiracy claims were abandoned. The only claims now asserted by Mr Kent against WPB are (1) a claim for an account, in the sense of a description of what happened to his money and his investments and (2) (if and to the extent that upon the taking of the account it turns out that shares were purchased for him) damages for WPB's failure to inform him of various matters (for example commissions received by companies associated with WPB), in breach of an alleged advisory duty. In addition, Mr Kent asserts a claim against TPB based on knowing receipt of trust property.
(2) The claim for an account against the First Defendant
Mr Kent claims that WPB is obliged to account for his dealings with Mr Kent's money and/or shares on three separate, but linked, bases.
First, he claims that WPB acted, in his personal capacity, as his agent in the purchase of shares and that, as such, he owed numerous fiduciary duties, including a duty not to profit from his position, a duty not to use the Claimant's property to acquire a benefit, a duty not to allow his personal interests to conflict with his duty to the Claimant, and a duty to account for all his dealings.
Second, he claims that WPB became a trustee of the money which Mr Kent provided for the purchase of shares. The trust is said to be a “purchase trust”, in accordance with the principles derived from Quistclose Investments Ltd v Rolls Razor Ltd [1970] AC 567, in that the money was provided for the specific purpose of purchasing the relevant shares. The claim for an account, on this basis, is limited to an account of what he did with the purchase monies.
Third, if and to the extent that the purchase monies were used to acquire shares for Mr Kent, then it is alleged that WPB held those shares on trust for Mr Kent and, as trustee, is obliged to account for his dealings with them over the period that he held them.
WPB contends that his dealings with Mr Kent were limited to promoting investments to him (which he did in his capacity as director of Khalidiya), and that after introducing specific opportunities to him, Mr Kent contracted with another company (in most cases Asia IT) for the actual purchase of shares. He contends that any money provided by Mr Kent, and any shares held for him, were at all times held by a corporate entity, in most cases either Asia IT or a nominee company, Asia I.T. Nominees Ltd (“Asia Nominees”), a subsidiary of Asia IT. WPB denies, therefore, that he can be made liable to account in equity to Mr Kent.
Mr Kent submits that English law applies to his claim. WPB submits that if any relationship existed, as asserted by Mr Kent, then it was governed by Swiss law.
Mr Kent accepts that, after his dealings with WPB came to an end, he was in possession of all the shares which he should have held, pursuant to the numerous transactions (both purchases and sales) he believed he had entered into according to the information he received from WPB at the time. Leaving aside the claim for breach of an advisory duty (which I deal with separately below), therefore, there is no question of Mr Kent having suffered any loss even if WPB was a fiduciary or trustee and had abused that position in connection with money or shares held for Mr Kent. When I asked Ms Newman QC, counsel for Mr Kent, what would be the purpose of ordering an account, she said that it was partly to determine whether WPB had made an unauthorised profit by use of the purchase money or shares. For example, if WPB owed a fiduciary duty not to make a secret profit, then Mr Kent was entitled to an account to determine whether he had ever done so. Moreover, she said that if, on the taking of an account, WPB had not in fact – at the time – purchased the shares that he appeared to Mr Kent to be purchasing, but did so much later, then Mr Kent might be entitled to his money back, rather than being stuck with the shares themselves (most of which were now worthless).
It is important to appreciate what is not alleged by Mr Kent. It is not alleged that there was any over-arching relationship of agency between WPB and Mr Kent, or that WPB was appointed Mr Kent's agent for the purpose of identifying, recommending and/or purchasing investments on his behalf. It is common ground that there was no written or other express appointment of WPB as agent, and that no remuneration of any kind was ever paid by Mr Kent to WPB.
Instead, it is alleged that, on each occasion when Mr Kent acquired shares, a separate agency relationship was created, pursuant to which WPB purchased those shares for and on behalf of Mr Kent.
Accordingly, it is necessary to examine each occasion on which Mr Kent acquired shares to determine whether WPB assumed a personal obligation to...
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