Nurcombe v Nurcombe
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LAWTON,LORD JUSTICE BROWNE-WILKINSON,SIR DENIS BUCKLE |
| Judgment Date | 24 July 1984 |
| Judgment citation (vLex) | [1984] EWCA Civ J0724-3 |
| Docket Number | 84/0316 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 July 1984 |
and
[1984] EWCA Civ J0724-3
Lord Justice Lawton
Lord Justice Browne-Wilkinson
Sir Denis Buckley
84/0316
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR. JUSTICE VINELOTT)
Royal Courts of Justice
MR. A. R. P. A. ULLSTEIN (instructed by Messrs. Clintons) appeared for the Appellant.
MR. T. H. MOSELEY (instructed by Messrs. Morgan, Bruce & Nicholas, Cardiff; appeared for the Respondents.
This is an appeal by the plaintiff, Mrs. Miriam Evelyn Nurcombe, against a judgment of Vinelott J., delivered on 25th May 1983, whereby he dismissed with costs her claim as a minority shareholder that the first defendant, her former husband and the majority shareholder in, and a director of, the second defendants, should pay to the second defendants a profit of £293,925 which, so she alleged, in breach of his fiduciary duty as a director, he had diverted from the second defendants to another company in which he had a controlling interest. The learned judge decided as he did on the ground that, when, in proceedings against the first defendant under the Matrimonial Causes Act 1973 for periodical payments and a lump sum, she learned of his breach of fiduciary duty to the second defendants with its consequence of loss to it and potential loss to her, she elected to continue with those proceedings and, through her counsel, she invited the judge to take into consideration when assessing what, if anything, the first defendant should pay her by way of a lump sum the profit which had accrued to him as a result of his breach of that duty.
The first defendant is a property dealer. At all material times he worked as such in South Wales. He married the plaintiff on 21st July 1951. On 30th September 1964 the second defendant ("CHT") was incorporated: 99 shares were allotted to the first defendant, one to the plaintiff. At some date before 31st October 1968 the first defendant transferred another 33 shares to the plaintiff. She was the registered holder of 34 shares when the writ in this action was issued on 20th December 1978. On 15th April 1966 another company, Maidsfield Property Limited ("Maids—field") was incorporated. A solicitor named Biggs was allotted 99 shares and a Mr. Francis one share. On 30th July 1976 Mr. Biggs transferred his shares to Mrs. Gerda Nurcombe, whom the first defendant had married on 12th June 1974 after a decree absolute in favour of the plaintiff had been pronounced on 14th May 1974. In the matrimonial proceedings to which I have referred Rees J. decided in a judgment delivered on 3rd October 1977 that Mrs. Gerda Nurcombe held these shares as nominee for the first defendant.
The plaintiff and the first defendant separated in 1969. She started matrimonial proceedings in 1971, at first for a judicial separation and later for a divorce. After the decree absolute she asked the court to make financial provision for her and later, as a result of learning something about the first defendant's property dealings, for an order under section 37 of the Matrimonial Causes Act 1973 to set aside dispositions of monies and shares alleged to have been made by the first defendant.
When the plaintiff started the proceedings for financial provision she did not know much about the first defendant's financial position and she did not get much reliable information from his affidavit of capital and income. Some time in the spring of 1977 she learned from a magazine called "Rebecca" that in 1966 he had been concerned with the purchase and development of some land at Pontypridd. It was alleged in that magazine that the first defendant had made a substantial profit, alleged to be at least £128,000, out of his property dealing activities in respect of that land.
The proceedings for financial provision started before Rees J. at Cardiff on 4th April 1977. The plaintiff was represented by Mr. J. Jackson Q.C. On 5th April 1977 the first defendant gave evidence. In his examination-in-chief he said that he had no beneficial interest in Maidsfield. He was merely a consultant, entitled to fees. He claimed that he had been frank with the court about his assets. Under cross-examination it became clear that he had not been frank and had not made full discovery of the relevant documents in his possession. He was asked questions about his dealings with regard to the land at Pontypridd and gave unsatisfactory answers. He had to admit that he had been concerned with the making of a contract for the purchase of this land on behalf of CHN. He claimed that it had proved impossible for CHN to take advantage of its contract and that it had lapsed. He also had to admit that Maids—field had entered into a contract for the purchase of part of the land. He said that he had no interest in Maidsfield save to the extent that he was entitled to fees as its consultant.
On 6th April 1977 Rees J. adjourned the proceedings until 2nd May 1977. By that date the plaintiff by her advisers had reason to suspect that the first defendant might have been in breach of his fiduciary duty to CHN but there was no firm evidence to prove a breach.
The hearing was resumed on 2nd May 1977. The first defendant's solicitor, Mr. Biggs, gave evidence. He was cross-examined by Mr. Jackson about the first defendant's connection with the dealings over the land at Pontypridd and his connection with Maidsfield. At the end of that day's proceedings it was clear that between 31st March 1976 and 30th July 1976 CHN had had a contractual right to purchase the land, that it had not done so, that Maidsfield had bought part of the land and had made a substantial profit as a result of a further sale to Tesco Stores.
The next day, 3rd May, Mr. Biggs returned to the witness box for further cross-examination. He then produced a number of contracts relating to the purchase of the land, two to which CHN was a party, three to which Maidsfield was. For the purposes of this appeal I do not find it necessary to deal in detail with these contracts. It suffices to record that by a contract dated 29th January 1976 CHN agreed to buy from Ninian Property Investment Company Limited 38.8 acres of land at Pontypridd at a price of £10,000 per acre. It was not well drafted. The parties to it decided to substitute for it another contract dated 31st March 1976. This provided for the purchase by CHN of the same land at the same price. Under it CHN had to use its best endeavours to get planning permission within 12 months for a specified development, the vendors to have the right to rescind if planning permission was not obtained within this period. The first defendant expected to be able to get planning permission. Once it was obtained CHN could have expected to make a substantial profit on any re-sale. At all material times the first defendant was the sole director of CHN. It was his duty to get for CHN, not for himself, all the profit he reasonably could out of this contract. He did not do so. He negotiated with the owners a contract for the purchase by Maidsfield of 13.073 acres of the same land at a price of £125,000. It was this land which was sold to Tesco Stores for £500,000. In acting as he did the first defendant was in breach of his duty to CHN: and on Rees J.'s finding as to his beneficial interests in the 99 shares in Maids—field registered in Mrs. Gerda Nurcombe's name he did what he did in order to get the profit for himself. Mr. Biggs' explanation for the first defendant's conduct, namely that there were tax advantages in letting Maidsfield buy part of the land rather than CHN, did not provide the first defendant with any defence to a charge of breach of duty to CHN. Such tax advantages as there may have been would have been for his benefit, not CHN's.
At the end of Mr. Biggs' evidence the plaintiff, by her advisers, knew, first, that the first defendant, for his own purposes but not for CHN's, had so arranged matters that Maidsfield was put into a position to make a profit which could have been made by CHN; secondly, that Maidsfield's profit had been large and, subject to some of it which went elsewhere because of a third party's interest in the negotiations with Tesco Stores, most of it had gone to the first defendant. On 3rd May the exact amount of this profit was not known but the plaintiff's advisers would have appreciated that it would have been at least £125,000. At that stage of the proceedings, with more witnesses to be heard, Mr. Jackson could not have been expected to consider the legal implications of what had been revealed; but he had an opportunity of doing so a few days later when Rees J. adjourned the hearing until 22nd July 1977. During this adjournment the plaintiff's advisers had an opportunity of evaluating the evidence and considering the legal consequences of it. The first defendant, as a result of his dealings with the Pontypridd land, had acquired assets out of which Rees J. could and probably would order him to pay a substantial lump sum to the plaintiff. But what the first defendant had acquired should have gone to CHN in which the plaintiff had one-third of the shares. As a shareholder she could expect one day to get the benefit of any sum which the first defendant had to pay CHN for breach of his duty to it. It was doubtful, however, what that benefit would be or when she would get it. It was probable that CHN would be liable for a substantial amount of corporation tax once the first defendant had repaid CHN the profit which Maidsfield had made. On repayment there would be no certainty, as Browne-Wilkinson L.J. pointed out during argument, as to when, if...
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