Peter Farrar v David Charles Lawson Miller
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Lord Justice Patten,Lord Justice Kitchin |
| Judgment Date | 14 February 2018 |
| Neutral Citation | [2018] EWCA Civ 172 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2016/3780 and 3788 |
| Date | 14 February 2018 |
[2018] EWCA Civ 172
Lord Justice Patten
Lord Justice Kitchin
and
Lord Justice Floyd
Case No: A3/2016/3780 and 3788
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
HIS HONOUR JUDGE BARKER QC (sitting as a Deputy Judge of the High Court)
HC14F01534
Royal Courts of Justice
Strand, London, WC2A 2LL
Shane Sibbel (instructed by CANDEY) for the Claimant/Appellant
Jonathan Cohen QC (instructed by Swan Turton LLP) for the Defendant/Respondent
Hearing date: 29 November 2017
Further written submission received on 1 December 2017
Judgment Approved by the court or handing down (subject to editorial corrections)
Introduction
On 15 July 2016 His Honour Judge Barker QC, sitting as a judge of the High Court, gave the claimant, Mr Farrar, permission to amend his particulars of claim to allege that the proceeds of sale of a piece of land known as “Long Stratton” were held on trust for him by the defendant, Mr Miller, under a Pallant v Morgan constructive trust, or that the facts gave rise to a proprietary estoppel. However, the judge refused to give Mr Farrar permission to introduce a claim for breach of fiduciary duty.
Mr Miller and Mr Farrar now appeal to this court. Mr Miller contends that the judge was wrong to give Mr Farrar permission to amend his particulars of claim because the claims so raised were misconceived as a matter of law and had no real prospect of success. Mr Farrar argues that the judge ought to have given him permission to introduce the claim for breach of fiduciary duty.
I will deal with these contentions in turn but before doing so I must explain the relevant facts and the allegations made by Mr Farrar, and say something about the procedural background.
Factual background and Mr Farrar's case
Mr Farrar and Mr Miller were for many years in business together as property developers and their principal operating vehicle was Roxylight Holdings Ltd (“Roxylight”).
In or about 1995 Roxylight or one of its associated companies acquired Edmond Homes Plc (“EHP”) and its various subsidiaries. One of the assets of the EHP group of companies was Long Stratton.
From this time until the events giving rise to these proceedings, the registered proprietor of Long Stratton was a company in which Mr Farrar and Mr Miller each had an indirect 50% interest. Mr Farrar contends that this company was Saxon Developments Limited; Mr Miller says it was one of Saxon Development's subsidiaries. However, it is common ground for the purposes of this appeal that nothing turns on this particular dispute and so I shall refer to the relevant company as “Saxon”.
It is Mr Farrar's case that in early 2008 he, Mr Miller and Mr Richard Chalcraft, who had been chairman of EHP, made an oral agreement (“the Joint Venture agreement”) with the following express terms:
i) Mr Chalcraft would seek to obtain planning permission for the construction of houses on Long Stratton;
ii) Long Stratton would be transferred out of Saxon into a new entity (“the Joint Venture entity”) which would be directly or indirectly owned by the contracting parties in equal shares; and
iii) once planning permission had been obtained, Long Stratton would be sold by the Joint Venture entity and each of the contracting parties would receive one third of the net profits of the sale.
Mr Farrar also contends that the Joint Venture agreement included the following implied terms:
i) in so far as Long Stratton was owned or controlled indirectly through intermediate entities, the contracting parties would direct, permit or procure those entities to act as to give effect to the express terms of the Joint Venture agreement; and
ii) that the contracting parties would not take any steps which would prevent their performance of the Joint Venture agreement or otherwise frustrate it.
It is a further aspect of Mr Farrar's case that it was the practice, as between himself and Mr Miller, that Mr Miller would deal with corporate matters arising in connection with their joint ventures and, so Mr Farrar continues, Mr Miller was given or assumed the responsibility of arranging the transfer of Long Stratton to the Joint Venture entity. Further, Mr Miller owed Mr Farrar and Mr Chalcraft fiduciary duties pursuant to the Joint Venture agreement and, in particular:
i) a duty to act in a manner consistent with the purpose and objectives of the agreement when exercising control (whether through his rights as a director, ultimate shareholder or otherwise) over any entity dealing with Long Stratton;
ii) duties of good faith and loyalty;
iii) a duty not to act in his own self-interest or for his own benefit without the consent of Mr Farrar and Mr Chalcraft;
iv) a duty not to make a profit from the trust of Mr Farrar and Mr Chalcraft and to account for any such profit; and
v) a duty to hold Long Stratton or its traceable proceeds for the benefit of the contracting parties.
At about this time Mr Nigel Brunskill also became involved in the project. Mr Farrar contends that he made a collateral agreement with Mr Miller and Mr Brunskill to the effect that Mr Brunskill would receive a beneficial interest in Roxylight and that the net profit derived from the sale of Long Stratton would be divided in the following shares: 33% to Mr Chalcraft; 28.3% to Mr Farrar; 28.3% to Mr Miller and 10% to Mr Brunskill.
Later in 2008 and following the onset of the global financial crisis, Saxon became insolvent. Administrators were appointed and on 7 October 2008 Long Stratton was sold to Artillery Mansions Limited (“Artillery”). Artillery was owned by Leongreen Limited (“Leongreen”) which was itself owned by Roxylight. There is no dispute that in this way Mr Farrar and Mr Miller retained their respective interests in Long Stratton, but, says Mr Farrar, subject to the terms of the Joint Venture agreement and the collateral agreement.
In August 2009 Artillery sold Long Stratton to Edged Red LLP (“Edged Red”) for £150,000. Mr Miller was a member of Edged Red, as was Mr Brunskill, but Mr Farrar was not. Mr Farrar maintains that this sale took place without his knowledge or consent. He also asserts that in or about December 2010 and again without his knowledge or consent, Edged Red sold Long Stratton to Sunguard Land Limited (“Sunguard”), a company in which Mr Miller, Mr Chalcraft and Mr Brunskill had an interest but he did not, and that in March 2013 the local planning authority granted planning permission for its development. In December 2013 Sunguard sold Long Stratton for a sum believed by Mr Farrar to be in excess of £5 million.
Mr Farrar asserts that Mr Miller was the controlling mind of Artillery, Edged Red and Sunguard for the purpose of the dealings to which I have referred and that each of these companies took possession of Long Stratton on notice of Mr Miller's fiduciary duties under the Joint Venture agreement.
Mr Farrar also contends that the matters to which I have referred at [7] and [8] above constituted representations and assurances given to him by Mr Miller and Mr Chalcraft and that in reliance upon them and to his detriment he:
i) agreed that Mr Chalcraft would receive one third of the net profit on the sale of Long Stratton thereby diminishing his own indirect interest in Long Stratton;
ii) directed, procured and permitted the transfer of Long Stratton from Saxon to Artillery;
iii) permitted Mr Miller to exercise control over Artillery, which control Mr Miller then exploited by transferring Long Stratton from Artillery to Edged Red.
Finally, Mr Farrar contends that in all these circumstances it is unconscionable and a breach of his fiduciary duties for Mr Miller to deny Mr Farrar's interest in Long Stratton and its proceeds. Mr Miller is therefore estopped from doing so and holds those proceeds subject to a constructive trust.
Procedural history
Mr Farrar originally advanced his claim on the basis that Mr Miller had, by his actions, acted in breach of the express or implied terms of the Joint Venture agreement. That claim was struck out by order of Chief Master Marsh on 26 January 2015 on the following grounds: first, the Joint Venture agreement amounted to an oral agreement for the disposition of an interest in land and so was unenforceable by virtue of s.2 of the Law of Property (Miscellaneous Provisions) Act 1989 (“the 1989 Act”); secondly, the claim failed to comply with the requirements of CPR 16 PD 7.4 because it did not set out adequate particulars of the agreement; and thirdly, the agreement lacked consideration.
Judge Barker heard the appeal against the order of the Chief Master on 15 July 2015. He came to the conclusion that the Chief Master had fallen into error in relation to the application of CPR 16 PD 7.4 and the issue of consideration but upheld his decision in so far as it was based upon the provisions of the 1989 Act. Nevertheless, he took the view that the claim and the evidence before him provided a sufficient basis for Mr Farrar to be granted a stay to formulate a claim for breach of constructive trust and proprietary estoppel and to apply for permission to amend his particulars of claim. Draft amended particulars of claim were provided on that same day and the judge heard argument about them on 17 July 2015.
On 18 December 2015 Judge Barker gave judgment. He found that the proposed amended particulars of claim did disclose a properly arguable claim for breach of constructive trust and proprietary estoppel but that they required further refinement. At a consequential hearing on 15 July 2016, the judge approved the form of the amended particulars of claim....
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