Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Martin Nourse,Lord Justice Carnwath,Lord Justice Brooke |
| Judgment Date | 16 November 2005 |
| Neutral Citation | [2005] EWCA Civ 1355 |
| Docket Number | Case No: A3/2004/2467 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 November 2005 |
[2005] EWCA Civ 1355
Lord Justice Brooke
(Vice-President of the Court of Appeal, Civil Division)
Lord Justice Carnwath and
Sir Martin Nourse
Case No: A3/2004/2467
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Hon Mr Justice Lewison
Royal Courts of Justice
Strand, London, WC2A 2LL
Charles Purle QC and Shelley White (instructed by Edwin Coe) for the Appellants
Christopher Nugee QC and Joanne Wicks (instructed by Linklaters) for the Respondents
Judgement
On 9th November 2004, in a long and careful judgment reserved after a ten day trial, Mr Justice Lewison dismissed an action brought by Kilcarne Holdings Ltd ("Kilcarne") against Targetfollow (Birmingham) Ltd ("TBL") and its holding company Targetfollow Group Ltd ("TGL").
The subject-matter of the action was a 250 year lease of Baskerville House, Centenary Square, Birmingham, which the judge described as one of Birmingham's great civic buildings. On 5th February 2002 completion took place of an agreement by Birmingham City Council to grant the lease to TBL. The amount required by TBL in order to complete the transaction was £2.5m, of which £1m was lent to it by Kilcarne in exchange for loan notes of the same value ("the Birmingham loan notes") and as part of a composite transaction under which Kilcarne and an associated company called Rosedale Ltd ("Rosedale") together lent £2.5m to TBL and another subsidiary of TGL.
Shortly stated, the primary question for decision by the judge was whether, on or before 5th February 2002 and in addition to the contractual rights and obligations of the parties under the instrument creating the Birmingham loan notes, there came into existence a legally enforceable oral agreement between Kilcarne and TBL for a joint venture for the development of Baskerville House. The judge decided that question in the negative and in favour of TBL, and no appeal has been brought against that part of his decision. In this court Kilcarne has relied mainly on its secondary claim before the judge, which can broadly be stated as one in constructive trust.
Although permission to appeal was later granted on a renewed application to this court (understandably in such a complicated case), both the judge and Lord Justice Jonathan Parker (on consideration of the documents) refused Kilcarne permission on the ground that the judge's decision was essentially one of fact. After full argument, Mr Purle QC, for Kilcarne, has failed to satisfy me that they were wrong. Moreover, while the emphasis of the judge's judgment was necessarily different, in rejecting Kilcarne's primary claim he made findings which are just as much fatal to the claim in constructive trust. The appeal can therefore be disposed of relatively briefly and without an examination of the other elements of the composite transaction or the negotiations by which it came to take the form that it did.
The largest (though not the majority) shareholder in TGL was Mr Ardeshir Naghshineh, who was also a director of TGL and TBL, the latter having been set up specifically to acquire the lease of Baskerville House. The negotiations on behalf of TGL and TBL were conducted throughout by Mr Naghshineh.
The moving spirit on the Kilcarne side was Mr Malvinder Singh. His position was less clear cut than Mr Naghshineh's. The judge said that Mr Singh's and his family's business interests were organised through off-shore trust arrangements, the principal trust being the Jadriya Trust, a discretionary trust established by Mr Singh of which he and his family were beneficiaries. At the time of the material events the trustee of that trust was Standard Chartered Grindlays Trust Company ("SCGTC"). It owned the share capital in a British Virgin Islands company called Daphne Caprice Co Inc. The shareholders in Kilcarne were two nominee companies bearing names associated with SCGTC. The judge added (para. 16):—
"It is said that Daphne Caprice is the ultimate owner of both Kilcarne and Rosedale; but the precise structure of ownership is obscure … Mr Singh is at pains to point out that he does not control Daphne Caprice and is not a director of or otherwise connected with Kilcarne or Rosedale. Although Kilcarne and Rosedale are incorporated in different places, they are administered from Jersey."
Having said that Kilcarne's articles of association provided for its business to be administered by the directors, and that its relevant directors at the time were Ms Justine Wilkinson (a manager with SCGTC) and Mr Clive Black (its managing director), the judge continued (paras. 18 and 19):—
"Mr Black did not attend any relevant board meetings. There was at least one other director but she plays no part in the story, apart from having attended two board meetings and having signed documents. The trusteeship of the Jadriya Trust has since passed to HSBC. This may explain why neither Ms Wilkinson nor anyone else from [SCGTC] gave evidence at the trial.
Mr Singh is, however, the managing director of Sitac Ltd, which, he says, acted for Kilcarne. Mr Singh is also the majority shareholder in Sitac. He describes Sitac as an adviser to companies in the Daphne Caprice group."
Mr Singh claimed and Mr Naghshineh accepted that, after preliminary discussions, an agreement in principle was first reached between them on or about Tuesday 29th January 2002, at which point Mr Naghshineh stopped looking for alternative sources of finance. Each of them instructed solicitors on that date. Between then and Tuesday 5th February 2002 there were detailed negotiations between the two sides, during which there were proposals and counter-proposals and the form of the transaction varied from time to time. The negotiations were described by the judge in paras. 29–107 of his judgment. In para. 108, under the heading "the Bible", the judge summarised the large number of documents which were completed on 5th February and in paras. 109–116 he referred to the detailed terms of some of those documents, including clause 8 of the instrument creating the Birmingham loan notes:—
"The Noteholders and the Company confirm that this Loan Note Instrument may be supplemented and/or replaced by an agreement in writing between both parties in relation to the proposed joint development of the Property" (emphasis added).
As part of the background to the material findings of the judge, it is also necessary to make particular reference to the following:
(1) At 16.31 hours on 1st February Mr Singh emailed a recommendation to Ms Wilkinson. He said:
"The intention is to turn the project soon and since your exposure is £1m as secured creditor with 1st charge, the risk return opportunity is excellent. I have personally known Ardeshir since late 80's and know that he has very high integrity and can recommend this deal to you strongly."
(2) At 10.27 hours on 4th February, Mr Cooper (of TGL's solicitors) sent an email to Mr Naghshineh which he copied to Mr Singh. The email attached a draft side letter from TBL addressed to Kilcarne and Rosedale. It began by saying:—
"This letter confirms our understanding of a joint venture agreement we wish to complete with yourselves following the completion of the proposed Funding and subsequent development of Baskerville House."
In paragraph 4 the draft said:
"In relation to the above funding arrangements we confirm our intention to enter into good faith negotiations in order to complete a joint venture agreement whereby from the date of the proposed funding above all costs incurred in relation to the development, purchase and running of Baskerville House will be shared between [TBL] and one of your companies."
The judge said it was not disputed that the draft letter was duly received by Mr Singh, who said, however, that he did not read it at the time.
(3) On 5th February the board of Kilcarne met in Jersey. It resolved to proceed with the transaction, which was minuted as consisting of two investments of which the second related to the Birmingham loan notes. The minutes recited that Kilcarne had been in negotiations with TBL regarding an investment of £1m loan notes and that an instrument by TBL constituting the principal thereof was before the meeting. The material resolution of the board was expressed thus:
"IT WAS RESOLVED THAT the Company proceed with the investment of £1,000,000 …. Loan Notes of £1 each to be repaid at base rate plus 2% plus a sum equal to 50% of the Net Sale Proceeds of [Baskerville House]".
There were further resolutions to proceed with a legal charge by TBL over Baskerville House and a personal guarantee given by Mr Naghshineh. As the judge observed (para. 106), the board minutes said nothing about a joint venture agreement.
As it has been put by Mr Purle in this court, the constructive trust claim raises the following issues:
(1) Does TBL hold the lease (or TGL the shares in TBL) on a constructive trust for Kilcarne under a Gissing v Gissing [1971] AC 886 constructive trust?
(2) Does TBL hold the lease (or TGL the shares in TBL) on a constructive trust for Kilcarne under a Pallant v Morgan [1953] Ch 43 constructive trust?"
[[/bl]]
Mr Nugee QC, for TGL, has said that a Gissing v Gissing constructive trust received almost no attention below, having not been referred to in Kilcarne's opening submissions (written or oral) nor in its written closing submissions; there was only a fleeting reference to it in Mr Purle's oral closing submissions (of which we have seen a transcript). However, Mr Nugee has not...
To continue reading
Request your trial
-
Stephen Hunt (as Trustee in Bankruptcy of Janan George Harb) v Janan George Harb Hrh Prince Abdul Aziz Bin Fahd Abdful Aziz
...appear to fall foul of section 2 of the 1989 Act–see Grossman v Hooper [2001] EWCA Civ 615, [2001] 2 EGLR 82, and Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd & Anor [2004] EWHC 2547 (Ch), [2005] 2 P&CR 8. 10 Whatever problems the claim might face, Mrs Harb was aggrieved by the tru......
-
Generator Developments Ltd v LIDL UK GmbH
...of a joint venture agreement is insufficient to support a constructive trust: Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2005] EWCA Civ 1355 at [15] and [23]. In short, a “subject to contract” agreement is no agreement at all. For the same reason, the consequence of an express n......
-
(1) Crossco No. 4 Unlimited (2) Piccadilly and Another v (1) Jolan Ltd (2) Jolan Piccadilly Ltd and Others
...withdrawing from subject to contract negotiations: see per Mummery LJ at [42] and [48]. 287 The Defendants relied on Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd [2005] 2 P&CR 105(Lewison J) and [2005] EWCA Civ 45 (Court of Appeal). In that case, Targetfollow (Birmingham) Ltd ("TB......
-
Crossco No.4 Unlimited and Others v Jolan Ltd and Others
...129, at 170–171, cases like Holiday Inns Inc v Broadhead (1974) 232 EG 951 and 1089, Yaxley v Gotts [2000] Ch 162, Kilcarne Holdings Ltd v Targetfellow (Birmingham) Ltd [2005] EWCA Civ 1355 and Clarke v Corless [2010] EWCA Civ 388, and the endorsement of Banner Homes in Cobbe v Yeoman's Row......