Primlake Ltd ((in Liquidation)) v Matthews Associates and Others

JurisdictionEngland & Wales
CourtChancery Division
Judgment Date26 May 2006
Neutral Citation[2006] EWHC 1227 (Ch)
Docket NumberCase No: HC 03 C 04314 (TLC 137/05))
Date26 May 2006

[2006] EWHC 1227 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Royal Courts of Justice

Strand

London WC2A 2LL

Before

MR JUSTICE LAWRENCE COLLINS

Case No: HC 03 C 04314 (TLC 137/05))

Between
Primlake Limited
(in Liquidation)
Claimant
and
(1) Matthews Associates
(2) Derrick Arthur Matthews
(3) Ann V Matthews
Defendants

Mr Christopher Parker and Mr William Edwards (instructed by Wedlake Bell) for the Claimant

Mr Michael McParland and Mr Paul Toms (instructed by Wallace LLP) for the Defendants

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this

judgment and that copies of this veersion as handed down may be treated as authentic.

(Mr Justice Lawrence Collins)

Mr Justice Lawrence Collins

Mr Justice Lawrence Collins:

IIntroduction

1

David and Gwyneth Rees ("Mr and Mrs Rees") have always been farmers. When they married in 1967 Mr Rees owned what had been his father's farm, and Mrs Rees owned two farms, Coton Farm and South Lodge Farm, which she had inherited from her father. Mr Rees sold his father's farm and purchased Wakeley Farm which was nearby and became their home.

2

Coton Farm was originally all one farm. The construction of the M6 divided the land into two sections, north and south of the M6. What became known as Coton Farm South ("the land") consisted of just under 100 acres. From the early 1970s Mr and Mrs Rees became interested in exploiting the development potential of the land.

3

In 1987 they granted a 4 year option to the house builders Wilson Bowden Properties Ltd ("Wilson Bowden") to purchase the land, conditional on the grant of planning permission for development. The option was not exercised. Shortly before its expiry Mr and Mrs Rees were introduced, through a mutual friend (Mr Norman White) to Mr Derrick Matthews ("Mr Matthews"), a retired architect and planning consultant.

4

Mr Matthews was born in 1928. He qualified as an architect in 1952. For two years he worked as an in-house architect for building companies, and subsequently practised on his own until his retirement in 1988. He acted as an architect and planning consultant for a number of property developers in that period. He told me that the most he had ever earned in one year was about �50,000.

5

Mr Matthews had had business contacts with Mr Richard Rowe ("Mr Rowe") since the 1980s. Mr Rowe was born in Guernsey, and in 1977 he formed Channel Trust Ltd ("Channel Trust"), a Guernsey company providing company formation, administration and trust facilities. He was the managing director and major shareholder of Channel Trust until about 1993, when it sold its trust and corporate business and merged with a Guernsey firm of accountants, Chandler & Co, to form a new company Mercator Trust Co Ltd ("Mercator"). Mr Rowe remained a director and shareholder of Mercator for five years until his resignation in 1998, when he left the Channel Islands to live in Poland.

6

Mr Rowe had since the mid 1980s instructed Mr Jonathan Foreshew ("Mr Foreshew"), a solicitor practising in London, who had qualified in 1980 and specialised in commercial property development, to act for offshore companies engaged in property related transactions in the United Kingdom. Mr Foreshew practised as Tussauds, and subsequently in partnership as Overbury Tussauds.

7

Mr Matthews proposed to Mr and Mrs Rees that he would find a developer to buy the land, and he and Mr Rowe put forward to Mr and Mrs Rees a scheme whereby they would save capital gains tax by transferring the land to an offshore company set up by Channel Trust. At that time it was thought that the net value of the land with planning permission (in conjunction with adjoining landowners) was well in excess of �10 million.

8

In 1992 the land was transferred to a Channel Trust company, Neyland Properties Ltd ("Neyland"), an Isle of Man company, and then by Neyland to another Channel Trust company, Primlake Ltd ("Primlake"), a Nevis company. In 1994 Primlake granted an option to purchase the land to a property company, Kyle Stewart Properties Ltd ("Kyle Stewart"), when a deposit of �1 million was paid. In 1997 the terms of the option relating (inter alia) to the incidence of infrastructure costs were varied by a Deed of Variation, and a further deposit of �1.6 million was paid. In March 2000 planning permission for a very substantial development on the land and on adjoining land was granted. Subsequently Kyle Stewart transferred its interests to a company in the Grosvenor Estates group, which (as part of a consortium) has developed much of the site. Grosvenor Estates has paid a further �400,000 due to Primlake on the first land sale in the development but has refused to make any further payments on the ground that the effect of the Deed of Variation in 1997 is that the infrastructure costs are such that as yet no further part of the deferred consideration is payable.

9

Consequently only �3 million has been received for the land.

10

Between 1994 and 2001 Mr Rowe authorised, at the request of Mr Matthews, payments by Primlake direct to accounts in the names of Mr and Mrs Matthews of about �900,000.

11

Primlake is now in liquidation, and claims through its joint liquidators that most of these payments (and other payments of about �100,000) were made without legal justification. Mr Matthews claims that he was entitled to be paid these sums: mainly for his fees, but also for reimbursement of loans to Mr and Mrs Rees of about �200,000, and other miscellaneous disbursements.

IIPrimlake

12

Primlake was incorporated in Nevis on June 29, 1990. Until 1993 or 1994 it was administered by Channel Trust, and later by Mercator. From about May 2000 the administration of Primlake was carried out by Mr James Turian of Richard Gray & Co in Guernsey. Its main bank was Leopold Joseph & Sons Guernsey Ltd ("Leopold Joseph").

13

Mr Rowe was originally president and treasurer, and from 1994 he was managing director. On February 9, 2000 he was appointed sole director of Primlake.

14

At all material times (except for a period between February and November 2000) the shares in Primlake were held expressly as nominee for Mr Matthews, or from November 2000 for pension schemes in which Mr Matthews and Mr Rowe respectively had interests:

(1)The shares in Primlake were originally held by Bridge Trust Co Ltd ("Bridge Trust") and Channel Trust (2,500 each) who by declarations of trust dated July 20, 1990 held them as nominees for Mr Matthews. That was because (according to Mr Rowe) Primlake was originally intended to be used as a vehicle to develop a hotel on land owned by Mr Wilfred Pearce, a farmer.

(2)On February 26, 1991, the shares in the name of Bridge Trust were transferred to Fiducia Trust Co Ltd ("Fiducia Trust"), which made a similar declaration of trust in favour of Mr Matthews.

(3)On November 19, 1999 the shares in the names of Fiducia Trust and Channel Trust were transferred respectively into the names of Mercator Nominees Ltd and Mercator Trustees Ltd, each of which executed declarations of trust (in respect of one share each only, probably as a result of an error) on the same day as nominee and trustee for Mr Matthews.

(4)On February 9, 2000 Mercator Nominees Ltd and Mercator Trustees Ltd each transferred 2,500 shares to FIFO Ltd. This was, according to Mr Rowe, connected with his concern that Neyland and Primlake might be seen as connected companies for the purposes of UK tax legislation. FIFO Ltd held the shares in trust for Tiber Trust which was owned by Mr Allan Garland in Holland.

(5)On November 18, 2000 FIFO Ltd executed declarations of trust to the effect that it held 1,250 shares in Primlake as nominee and trustee for the Ramble Pension Scheme (for the benefit of Mr Rowe), and 3,750 shares as nominee and trustee for the Medoc Pension Scheme (for the benefit of Mr Matthews).

IIIThe history

15

In about 1972 Mr and Mrs Rees applied for permission to develop the land, and transferred it to an offshore company called Marchmont Ltd. But planning permission was refused and the land was transferred back to Mrs Rees.

16

In the 1980s Mr and Mrs Rees retained Berry Brothers, agricultural agents, to effect a sale of the land. Mr Rees agreed a fee of 2% of the sale proceeds. Berry Brothers introduced Mr and Mrs Rees to the house builders, Wilson Bowden. On December 22, 1987 Mrs Rees granted a 4 year option to Wilson Bowden to purchase the land for development. Wilson Bowden was to apply within 9 months for planning permission to develop the land, and there was provision for extension of the option period in the event of there being appeals against refusal of planning permission. The price payable if the option were exercised was �100,000 per acre (subject to a formula for an increase by reference to the retail price index), less the infrastructure costs, which were capped at �60,000, so that the option price was to be not less than �40,000 per acre.

17

Wilson Bowden came to be part of a consortium with two developers, Britannia Property Development and Construction Ltd ("Britannia") and Abbcott Estates Ltd ("Abbcott"), who had acquired options over adjoining properties. Wilson Bowden applied for outline planning permission in December 1989 for use classes B1, B2 and B8.

18

On November 27, 1990 RBS Guernsey made a facility of �131,500 available to Mr and Mrs Matthews to assist with the purchase of 2 Station Road, Burnham Market, Norfolk (later called "Pebble Lodge"), subject to a first charge on the property, and also subject to a charge by way of assignment over a cash deposit of �136,500 made on Mr Matthews' behalf by CT Management and Guarantors Ltd, a Channel Trust affiliate.

19

Mr Matthews was introduced to Mr and Mrs Rees by their mutual friend, Mr Norman White, probably in late 1991. Mr White claims, and Mr Matthews denies, that Mr White and Mr Matthews agreed that Mr Matthews would...

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