Mainstream Properties Ltd v Young & Others
| Jurisdiction | England & Wales |
| Judge | Lady Justice Arden,Mr Justice Aikens,Lord Justice Sedley |
| Judgment Date | 13 July 2005 |
| Neutral Citation | [2005] EWCA Civ 861 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2004/2049 |
| Date | 13 July 2005 |
Lord Justice Sedley
Lady Justice Arden and
Mr Justice Aikens
Case No: A3/2004/2049
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM
THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
HIS HONOUR JUDGE NORRIS QC
Royal Courts of Justice
Strand, London, WC2A 2LL
John Randall QC and John de Waal (instructed by The Smith Partnership) for the Appellant
Mark Lomas QC (instructed by Leigh Davis & Co) for the Respondent
This is an appeal with the permission of Sir William Aldous from the order dated 10 September 2004 of HHJ Norris QC sitting as a deputy judge at the High Court of Justice, Chancery Division, Birmingham District Registry insofar as it dismissed the appellant's action against the respondent, the sixth defendant, and ordered the appellant to pay the costs of his defence. I will call the appellant "Mainstream".
The respondent was sued for damages for inducing breach of contract. The contracts in question were contracts of employment of two directors of Mainstream, Mr. Young and Mr. Broad. It is common ground that the acts of the sixth defendant amounted to interference with their contracts. He provided finance to enable Mr. Young and Mr. Broad to appropriate for themselves an opportunity which belonged to their employer. The question in issue is whether the sixth defendant had the intention necessary to commit this tort.
As to the background, Mainstream Properties Ltd. is owned by Mr Moriarty. His business is property development. Mr Moriarty himself has another business and involves himself very little in the business of Mainstream. Mr Young was appointed an executive director in January 1999 and Mr Broad was appointed an employee in February 1999. Mr Broad's responsibility was to find properties for Mainstream.
Within a few months of joining Mainstream, Mr Young and Mr Broad formed companies of their own. First, they formed Excellence Property Management Ltd. ("Excellence"). Excellence was used to exploit opportunities available to Mainstream. Then in May 2000, Mr Broad and Mr Young incorporated Wilfred Young Homes Ltd ("Homes"). Homes undertook two developments as joint ventures with Mr De Winter. Both were on sites identified by Mr Young and Mr Broad as suitable for Mainstream's purposes. The first was at Rangemoor and the second was at Findern. Mr Moriarty was kept in the dark about these companies until the end of March 2001, when Mainstream dismissed both Mr Young and Mr Broad. It then sued them for loss of the Findern opportunity. No claim was brought in respect of Rangemoor. Mainstream also sought damages against Mr De Winter on the grounds that he had induced a breach of Mr Young's and Mr Broad's contracts with Mainstream. At trial the claims against Mr Young and Mr Broad succeeded, but that against Mr De Winter failed.
The judge's assessment of Mr De Winter was as follows:—
"(g) Mr De Winter was a very careful witness, though it was not easy to assess whether the care with which questions were answered arose from a desire to tell the exact and considered truth, or from a desire to assess where the answer fitted in the overall evidence and its implications for his own position. In the end I assessed him as an honest (if calculating) witness who essentially told me the truth (if not the whole truth) as he recollected it. One feature of his evidence was the development of its detail (as the case against Mr Young and Mr Broad progressed); I have felt unable to rely on significant parts of this developed detail unless supported by documents or evidence from Mr Young that I considered was trustworthy."
As to the Rangemoor site, Mainstream declined this in December 1999 as it was a risky conversion project. Mr Young and Mr Broad then took it up. The judge found that Mainstream would not have given its approval if it had known that Mr Young and Mr Broad intended to take it up themselves. The judge made findings about the approach to Mr De Winter. He found that Mr De Winter knew that Mr Broad and Mr Young were directors of Mainstream but that Mr De Winter had been assured that the Rangemoor project would not involve any conflict of interest with Mainstream. He held:
" 51. My finding as to Mr De Winter's involvement in Rangemoor are these. On 23 March 2000 (during the working day) Mr Young and Mr Broad went down to Mr De Winter's business premises in London. They discussed the Rangemoor project. Mr De Winter was to buy the land, Homes would do the development—an evolution of the arrangement that Mr De Winter had with Mr Broad. Mr Young and Mr Broad had prepared documents headed "brief appraisal" setting out the costings and likely profit, showing a margin of 24%. They had also prepared a cash flow projection and the schedule setting out all legitimate charges and expenses. They took with them plans that had been prepared for the development. There were detailed discussions. Following that, on 4 April 2000, Mr De Winter had sent a fax to Mr Young and Mr Broad outlining the risks involved. I regard it as probable that there were then further detailed discussions. On 18 May 2000 Mr De Winter sent a detailed letter containing a detailed funding proposal. This gave Mr De Winter 11% interest on his investment, plus the first £225,000 of any profit, plus 50% of the profits over £450,000. Mr Young and Mr Broad agreed these terms (though at trial neither was very clear what they had let themselves in for). Mr Young, Mr Broad and Mr De Winter all said that there was not really anything else in the way of documents on the Rangemoor development, and that the matter proceeded on the basis of an exceptional level of trust. But I do not consider that I was told the whole truth, and I find that the probability is that there was some written record of the course of the dealings between Mr De Winter and Homes. There are two bases for that finding. First, the probability is that there was a detailed written record of how much was drawn, and when, and for what (since otherwise Mr De Winter's profit share could not be calculated). Second, an entry in Mr Broad's diary referring to a letter to Mr De Winter led to the production (in the course of the trial) of such a letter. It did not match up to the diary entry. But it demonstrated a degree of formality in the relationship, the exchange of financial documents, and the copying of solicitors' correspondence. I therefore find that the arrangement between Mr Young and Mr Broad on the one side and Mr De Winter on the other, whilst in some respects informal, was an arm's length business relationship, the terms of which were formally recorded and the course of which was charted in correspondence and financial documents. It was supplemented by meetings (three or four of which took place at Mainstream's offices) and site visits by Mr De Winter, and by regular telephone calls at the end of each month (when the "draw down" against the schedule expenditure would be considered). "
52. Mr De Winter told me in his evidence what he knew of the circumstances in which the Rangemoor arrangements were made. He told that he knew Mr Broad was Development Director of Mainstream, that he knew Mr Young was a Director of Mainstream, and that Mr Moriarty was the Senior (probably Managing) Director. He was aware that Mainstream bought development sites. He agreed that there was an obvious conflict between Mr Broad and Mr Young acting for Mainstream and in their acting for themselves in the Rangemoor development: and that he certainly realised this. However, he understood that the Rangemoor development had been turned down by Mainstream, and on that basis he proceeded with his relationship with Mr Young and Mr Broad. In his witness statement of May 2003 (though not in either his August or September 2002 witness statements) Mr De Winter said:
"I wish to make it clear that I specifically said to Mr Broad that I would only agree to fund the project provided that there was no conflict of interest with regard to his and Mr Young's employment at [Mainstream]. Mr Broad confirmed to me that there was no question of a conflict of interest and I trusted his reply and was therefore happy to proceed."
In cross examination he confirmed this saying:
"I would use the expression "conflict of interest" from time to time. I would not take something from somebody whose right it was. I wanted them to be free to do something with me: and to be sure that they had the capability. If I had to share men it would inhibit their work and mine."
I have considered the stage at which this evidence about "conflict of interest" emerged: and I have weighed what was said in the witness statements with what was said from the witness box. I have concluded (because of the manner in which the last quoted answer was given) that I can accept Mr De Winter's evidence as to specifically raising the "conflict of interest" issue, and as to receiving the reply he did. I accept that it was on that basis that he proceeded with Rangemoor. That concludes the relevant findings of fact on Rangemoor: and I can at last turn to the central issue."
Thereafter, Mr Young identified the Findern site. Mr Young and Mr Broad again approached Mr De Winter for funding. The judge found that Mr De Winter agreed to fund the site in the course of a telephone conversation on 29 March 2001, shortly before Messrs Young and Broad were dismissed by Mainstream. He also found that Mr De Winter again received an assurance from Mr Broad and Mr Young that there was no conflict of interest with Mainstream. The judge made the following findings, which are...
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