Joseph Ackerman (Claimant/ Appellant) v Naomi Ackerman and Another (3) Andrew Thornhill and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Moore-Bick,Master of the Rolls |
| Judgment Date | 13 June 2012 |
| Neutral Citation | [2012] EWCA Civ 768 |
| Court | Court of Appeal (Civil Division) |
| Date | 13 June 2012 |
| Docket Number | Case No: A3/2012/0263 |
[2012] EWCA Civ 768
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr. Justice Vos
[2011] EWHC 3428 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master of the Rolls
and
Lord Justice Moore-Bick
Case No: A3/2012/0263
Mr. Neil Kitchener Q.C. and Ms Abra Bompas (instructed by Enyo Law LLP) for the appellant
Mr. John Wardell Q.C. and Mr. Andrew Mold (instructed by Berwin Leighton Paisner LLP) for the first, second and fourth respondents
Mr. Andrew Onslow Q.C. and Mr. Edward Knight (instructed by M & S Solicitors Ltd) for the third respondent
Hearing date: 21 st May 2012
The principal matter before the court is an application by Mr. Joseph Ackerman ("Joseph") for permission to appeal against the order of Vos J. dismissing his claim for a declaration that a report made by Mr. Andrew Thornhill Q.C. pursuant to an agreement between Joseph and the first respondent, Mrs. Naomi Ackerman ("Naomi") and certain other parties is invalid and without effect. Coupled with that is an application by Joseph for a stay of execution of the judge's order that he make interim payments to the respondents in respect of their costs of the proceedings below.
The respondents oppose the grant of permission to appeal, but, in the event that permission is granted, ask the court to impose as conditions of pursuing the appeal a requirement that Joseph satisfy the judge's orders for interim payments and a requirement that he provide security for their costs of the appeal. Joseph opposes both applications on the grounds that he does not have the means to comply with them and that his appeal would be stifled if such conditions were imposed.
The proceedings have their origin in a dispute between two sides of the Ackerman family. From the early 1960s Joseph and his brother Jack began to build up a successful property empire, known generally as the Ackerman Group. When Jack died in 1989, his widow, Naomi, acquired his share of the business. Between 1989 and 2004 Joseph continued to run the affairs of the Ackerman Group and from 2001 Barry Ackerman, one of Naomi's sons, began to work part-time with him. However, they did not see eye to eye and from 2004 onwards the relationship between the two branches of the family deteriorated sharply to the point at which they became acrimonious. As a result, in February 2006 Joseph and Naomi decided to separate their interests, but that was not a simple matter, because the affairs of the various companies making up the group were closely intertwined.
For many years Joseph had been advised by the third respondent, Mr Andrew Thornhill Q.C., a senior member of the tax Bar. It was agreed that he should be instructed to assist with the demerger, the first stage of which was to carry out a lottery to decide how the interests should be split. The lottery was performed by Mr Thornhill in March 2009, but the results were not disclosed to the parties at that time.
In June 2009 Joseph, Naomi, Barry, Mr. Thornhill and others entered into an agreement under which Mr. Thornhill, acting as an expert, was to carry out a separation of the interests. The basic principle underlying the agreement was that there should be an equal distribution of the assets of the group between the two sides of the family, but it was recognised that some adjustments would have to be made to the outcome of the lottery in the interests of convenience and to achieve a fair result. One object of the adjustments was to compensate each side for what were described as "Removed Assets", that being the term used to describe assets that had been used or removed from the group for the benefit of one or other side of the family. Adjustments were also to be made in respect of claims which one side of the family might have against the other in relation to the management of the group's affairs. Under the agreement Mr. Thornhill was required to prepare a Provisional Adjustment Report setting out the adjustments he proposed to make and then within a year to prepare a Final Report after considering further observations from the parties.
The agreement contained detailed provisions for the way in which Mr. Thornhill was to carry out his task, including a provision requiring the parties to inform him of any Removed Assets which they or their interests had benefited from and what adjustments they proposed that he should make in dividing the assets between them. It is unnecessary to refer to many of the clauses of the agreement in detail, but at the heart of the dispute lies clause 9(B)(c) which required Mr. Thornhill when preparing his Provisional Adjustment Report to inform Naomi and Joseph of the adjustments which the other had proposed. It was common ground that he also had an implied duty to act fairly as between the parties.
On 5 th January 2011 Mr. Thornhill issued his Provisional Adjustment Report ("the Report") in which he concluded
(i) that Naomi had a "claim" against Joseph for over £23 million;
(ii) that the group had little or no value;
(iii) that all the jointly-owned assets (which would have to be valued) should be transferred to Bana One Ltd (a company formed to hold Naomi's and Barry's shares of the assets) to be credited against Naomi's claim; and
(iv) that certain assets held in trust for the children of Joseph and Naomi should also be transferred to Naomi's company in return for debentures payable at a future date.
Mr. Thornhill implemented the Report by transferring all the assets to Bana One using powers of attorney that had been executed in his favour by Joseph for that purpose.
Joseph was surprised to find that Mr. Thornhill had allocated the whole of the assets to Naomi and thought that he had exceeded his powers under the agreement. He was also angry that he had been divested of the whole of his interest in the Ackerman Group. He therefore brought proceedings against Naomi, Barry and Mr. Thornhill seeking (among other things) to have the Report set aside on a variety of different grounds.
The trial was heard by Vos J. He found that in the course of carrying out the work to enable him to prepare the Report Mr. Thornhill had received from Naomi a proposal that the jointly-owned assets and the assets held in trust for the children should all be transferred to her, but that in breach of clause 9(B)(c) and of his implied obligation to act fairly, he had failed to inform Joseph of that fact. Joseph argued that this invalidated the Report because Mr. Thornhill had not carried out the exercise that he had been instructed to perform. As a result, the report was not that for which the parties had contracted and was therefore not binding. Moreover, he argued that Mr. Thornhill's departure from the agreed procedure demonstrated that he was unable or unwilling to act fairly in the performance of his functions under the agreement which had thereby been repudiated. As a result, the agreement had been discharged.
When dealing with this argument the judge drew a distinction between a departure from agreed procedure (i.e. carrying out the right function but in the wrong way) and a departure from instructions as to matters of substance (i.e. carrying out the wrong function). Having considered the authorities he held (paragraph 380) that
" … a departure from substantive instructions will be material and automatically invalidate a decision unless it is trivial or de minimis, but that a departure from express or implied procedural instructions or an unfairness will not always do so."
He found that Joseph might well have wanted to make submissions both as to the solution that Mr Thornhill should adopt and the way in which it should be effected, but he thought that he would have come to the same conclusions whatever Joseph had said. In paragraph 381 of the judgment he said:
"I cannot possibly say that the final terms of the documentation would inevitably have been the same whatever representations Joseph and his advisers had made. But I am satisfied that they would not have been very much different."
He therefore held that the Report was valid and binding.
It is this part of the judge's decision which has given rise to the first ground of appeal.
The judge also found that following the transfer of the assets to Naomi on 30 th December 2010, Mr. Thornhill failed to give Joseph full information about what he had done in implementation of the Report, that he expressed the view to the group's bank that there were unlikely to be changes to the Report and that he failed to provide Joseph with the documents by which the transfers of the assets had been put into effect. Joseph contended that, taken in conjunction with the failure to inform him of Naomi's proposals, to which I have just referred, Mr. Thornhill's conduct demonstrated an unwillingness or inability to act fairly in completing the demerger exercise. However, the judge rejected that submission. He did not think that these matters, viewed individually or in combination, demonstrated unfair behaviour on the part of Mr. Thornhill, much less an inability or unwillingness to complete his task with the necessary impartiality and fairness. He found that although Mr. Thornhill had not told Joseph the whole story about what he had done to implement the Report, what he had told him was truthful and that he had not acted unfairly. As to the provision of transaction documents, Mr. Thornhill had not deliberately acted unfairly:...
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