Matthew Patrick Walsh v John Joseph Shanahan and Others
|England & Wales
|Lord Justice Rimer,Lady Justice Hallett,Lord Justice Laws
|25 April 2013
| EWCA Civ 411
|Case No: A3/2012/0732
|Court of Appeal (Civil Division)
|25 April 2013
 EWCA Civ 411
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
His Honour Judge Pelling QC (sitting as a Judge of the High Court)
 EWHC 462 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lady Justice Hallett
Lord Justice Rimer
Case No: A3/2012/0732
Ms Geraldine Andrews QC and Mr Simon Johnson (instructed by Richard Slade and Company) for the Appellant
Mr Richard Wilson QC and Ms Grainne Mellon (instructed by Butcher Burns LLP) for the Respondents
Hearing dates: 29 and 30 January 2013
The appellant is Matthew Walsh, the first claimant. The defendants (now respondents) are John Shanahan, James Leonard and SLH Properties Limited, a company of which Mr Shanahan and Mr Leonard are directors and shareholders. Mr Walsh appeals against the order made on 8 March 2012 by His Honour Judge Pelling QC, sitting as a Judge of the Chancery Division. The judge thereby dismissed his claims for a declaration that the respondents were in breach of fiduciary duty and for an account of profits made by them in consequence of their breach of confidence. He did, however, award Mr Walsh damages of £16,965, plus interest of £10,188.54, as compensation for their breach. Mr Walsh asserts that the judge was wrong not to order an account of profits rather than the payment of damages. Geraldine Andrews QC and Simon Johnson represented Mr Walsh, as below. Richard Wilson QC and Grainne Mellon represented the respondents, as also below.
Despite Mr Walsh's ostensible win, the judge ordered him to pay (i) 90% of the respondents' costs down to and including 13 October 2010, and (ii) all their costs thereafter, subject to a detailed assessment. That liability was significant, shown by the fact that Mr Walsh was ordered to pay £105,000 on account of costs estimated at £162,000. The costs order meant that Mr Walsh's victory was akin to that of King Pyrrhus at the battle of Heraclea. Mr Walsh also appeals against limb (i) of the order. He does not challenge limb (ii), which resulted from his rejection of the respondents' offer under CPR Part 36. In the event, the oral argument on the main ground of appeal, the 'account of profits' issue, occupied the whole of the available time and the court adjourned the costs appeal until after it had given its judgments on the substantive appeal. This is my judgment on that appeal.
The second claimant, Brentford Commercials Limited, is Mr Walsh's company. It was joined as a co-claimant in order to meet a contingency that he thought might arise, but in the event did not. The judge made no order as regards Brentford, which is not an appellant and to which little further reference is needed.
The appeal arises in a second round of litigation spawned by events that took place in 1999. Mr Shanahan and Mr Leonard were, at the material times, shareholders and directors of Allied Business & Financial Consultants Limited ('Allied'). Mary O'Donnell was also a shareholder and director of Allied. In 2006, she presented an 'unfair prejudice' petition in the Chancery Division, Companies Court, under what was then section 459 of the Companies Act 1985 against Mr Shanahan, Mr Leonard and Allied. Her petition was tried over 11 days before Richard Sheldon QC, sitting as a deputy judge of the Chancery Division. The outcome of his 263-paragraph judgment, delivered on 7 August 2008, was a dismissal of the petition: see (Ch); . Ms O'Donnell appealed to the Court of Appeal, where the outcome of the judgments (I wrote the lead one, with which Aikens and Waller LJJ agreed) was that the appeal was allowed in part and certain issues were remitted to the trial judge for trial: see ; .
Ms O'Donnell's 2006 petition was based in part on the same conduct by Mr Shanahan and Mr Leonard that was destined to be the subject of Mr Walsh's claim, which he commenced in 2010. The judgments were included in the bundles, but were not referred to in argument. That was not surprising since they were concerned with different issues. Judge Pelling also noted, rightly, that they gave rise to no issue estoppel between the parties to these proceedings and he chose not to read them. The transcripts of the evidence in the Leonard) were, however, used in the cross-examinations of the witnesses in this case; and Judge Pelling referred to certain inconsistencies between the evidence in the two sets of proceedings. proceedings (in which the witnesses included Messrs Walsh, Shanahan and
The only other point I would make about the proceedings at this stage is that, in my judgment on the appeal, I summarised certain of the facts found by Mr Sheldon, which related in part to events I am about to summarise again, this time by reference to the facts found by Judge Pelling. It is possible, although I have not checked, that the summary that I am about to provide may not precisely match that in my previous judgment. If so, it is irrelevant. This appeal turns on the consequences of the facts found by Judge Pelling, not on the consequences of those found by Mr Sheldon. Whilst the same facts cannot change from case to case, different judges may make different findings as to what they are depending upon the evidence before them.
In what follows, I shall: (i) summarise the facts found by the judge, supplemented in part by reference to the documents; (ii) explain his reasoning for the substantive orders he made and refused to make; and (iii) deal with the 'account of profits' appeal. The supplementing is largely to incorporate references to documents relating to a particular factual issue that Ms Andrews argued before us, being documents which were also before the judge but to which he did not refer in his judgment.
A. The story down to Sunday 16 May 1999
In early 1999, Mr Sulaiman contacted Mr Shanahan and told him he wished to sell the leasehold interest in the fifth floor of Aria House, 23 Craven Street, London WC2 ('the property'). He was representing the proposing vendors and understood that Mr Shanahan might have clients who would be possible buyers. The freehold and head lease of the building were owned by Sulaiman Trading Limited, and Cordelia Holdings Limited owned the long lease of the property. Mr Sulaiman had instructed solicitors, Richard Peat & Co ('Peat'), to act for the vendors in the proposed sale. Mr Sulaiman and Mr Shanahan agreed that Allied would receive a commission of £30,000 if it arranged a sale of the property.
Mr Shanahan had met Mr Walsh in 1993. In March 1999, Mr Shanahan telephoned him to ask whether he was interested in buying the property. That led to a meeting at a London hotel between Mr Shanahan and Mr and Mrs Walsh. Mr Walsh indicated his interest in buying the property, which he explained was stimulated by the possibility that planning permission could be obtained for its residential use, which Mr Shanahan said was a realistic prospect. Mr Walsh wanted to buy the property for investment purposes. Mr Walsh (alternatively, Mr and Mrs Walsh, but the alternative matters not) appointed Allied (and, as the judge found, only Allied, and not Mr Shanahan or Mr Leonard personally) to act for him in relation to the arrangements for the purchase, to include liaising with relevant professionals and procuring the offer of any necessary finance, all in consideration of an all-in fee of £30,000 subject to the completion of the purchase. By the end of March 1999, agreement as to price had been reached, subject to contract. If the transaction completed, Allied stood to earn fees of £60,000 (£30,000 from each of Mr Sulaiman and Mr Walsh).
Mr Walsh held money deposited with the Irish Permanent Building Society in the Isle of Man, which he proposed to use towards the purchase. On Mr Shanahan's advice, he decided to make the purchase through an Isle of Man company to be set up for that purpose. Mr Shanahan contacted ECS International Limited ('ECS'), Isle of Man accountants and tax consultants experienced in setting up and administering offshore companies and trusts; and in early April, Mr Bailey of ECS met Mr and Mrs Walsh, Mr Shanahan and Mr Leonard and provided advice about the proposed structure. The decision was made that the property would be acquired by an Isle of Man company to be formed by ECS, who would provide its officers. Mr Shanahan was to liaise with ECS with regard to implementing that decision.
On 6 April, Mr Leonard instructed Jacobsens, solicitors, to act for the proposing purchaser, which he informed them would be an offshore entity. On 12 April, on Allied paper, Mr Shanahan wrote to the vendors' solicitors, Peat, and told them that the purchaser would be 'Harlequin Resources Limited, c/o [ECS]', whose Isle of Man address was given. Mr Shanahan also provided Mr Bailey's contact details and informed them that the purchaser's solicitors would be Jacobsens. Harlequin Resources Limited (hereafter 'Harlequin IoM') had not yet been incorporated.
On 14 April, Mr Shanahan wrote to Mr Sulaiman to confirm their agreement in a prior telephone conversation that the price for the property was to be £1.35m plus a payment to Mr Sulaiman personally of £100,000, which the judge found to be 'ostensibly for fixtures and fittings' and out of which Allied was to be...
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