Ross River Ltd and Another in Appeals 28856 v Cambridge City Football Club in Appeal 2849
| Jurisdiction | England & Wales |
| Judge | Mr Justice Briggs |
| Judgment Date | 19 September 2007 |
| Neutral Citation | [2007] EWHC 2115 (Ch) |
| Docket Number | Case No: HC07C00021 |
| Court | Chancery Division |
| Date | 19 September 2007 |
[2007] EWHC 2115 (Ch)
Mr Justice Briggs
Case No: HC07C00021
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Jonathan Seitler QC and Andrew Mold (instructed by Field Fisher Waterhouse) for the Claimants
Nicholas Davidson QC and Alexander Hall—Taylor (instructed by Messrs Ince & Co) for the Defendants
Hearing dates: 23 rd 24 th 25 th 26 th 27 th 30 th 31 st July 2007
Introduction
This judgment follows the liability only trial of a claim by the defendant Cambridge City Football Club Ltd (“the Club”) to rescind or have set aside three related transactions with the claimants Ross River Ltd (“Ross River”) and Blue River LP (“Blue River”) providing for the sale and lease-back of its football ground and stadium in Cambridge (“the Ground”). The first of those transactions consisted of the sale of the Club's freehold interest in the Ground to Ross River for £1.3 million plus a share in the overage attributable to the obtaining of residential planning permission (“the Overage”), pursuant to a conditional agreement dated 3 rd February 2005, completed on the 29 th April 2005. The second consisted of a sale by the Club to Ross River of its share in the Overage for £900,000 on 7 th October 2005 (“the Overage Agreement”). The third was a contracted-out lease of the Ground by Ross River to the Club dated 21st June 2006, for a term which expired on the 31 st May 2007, following which the Club has continued in occupation, pending the outcome of this litigation. That lease replaced two earlier consecutive lease-backs of the Ground dated respectively 29 th April and 7 th October 2005.
The Club claims to be entitled to have those three transactions set aside on two distinct grounds. The first arises from payments made in June and November 2005 and January 2006 by agents on behalf of Ross River to Mr Arthur Eastham, the then chief executive of the Club, who took the lead in the negotiation of the three transactions on behalf of the Club, which the Club characterises as having constituted bribes. The second basis is that the Club claims to have been induced to enter into the second and the predecessor of the third of those transactions by reason of fraudulent misrepresentations made on behalf of Ross River by a Mr Paul Harney of Waveley Project Management Ltd (“Waveley”) to a Mr Edwin Lee of the Club's surveyors Cheffins in a letter dated 25 th May 2005.
The claimants admit that the payments to Mr Eastham and the statement to Mr Lee were made on behalf of Ross River. As to the payments, they allege that the first of these consisted of the discharge in part of the Club's liability to pay consultancy fees to Mr Eastham, known to and requested by the Club at a time when it lacked the funds to make the payment itself. The remaining payments are said to be for work done by Mr Eastham for Ross River after the sale of the Club's share in the Overage. As to the representations, the claimants' defence is in outline that they were honest and accurate expressions of the claimants' belief and (to the extent factual) of the underlying facts, but that the Club did not rely upon them in any event.
The apparent oddity that the claims in this litigation are made by the defendant against the claimants arises from the fact that the immediate casus belli consisted of the Club's registration of a unilateral notice on 24 th October 2006 against the claimants' title to the Ground at HM Land Registry, leading to the claimants issuing the present proceedings for the purposes of securing the removal of the notice, and declarations of non-liability, possession of the Ground upon the termination of the 2006 lease, and damages for breach of statutory duty under section 77 of the Land Registration Act 2002. The claims with which in substance this litigation is primarily concerned were then made by the Club in its Defence and Counterclaim.
The witnesses
The Claimants called eight witnesses, seven of whom were cross examined. Mr Brian Peter York gave evidence first. He and his family beneficially own and control the claimants. He was neither a particularly satisfactory nor obviously unreliable witness. The most noticeable feature of his attitude towards giving oral evidence was that he appeared to have schooled himself, (there was no suggestion that he had been schooled), into a too easy inability to recall matters about which he was being cross examined. In particular, he tended to confuse the question whether he could recall an event with the question whether he could remember a particular document in which that event had been referred to or described. An understandable lack of recollection of the document led him all too often to assert that he had forgotten all about the described event as well. For that reason, amounting in substance to a disinclination to engage fully or cooperatively with cross examination, I found it necessary to treat his evidence, and in particular his witness statements, with caution. As will appear, I have not found it possible to accept an important part of his evidence about the £10,000 payment to Mr Eastham in June 2005.
He was followed by Mr Eastham. By contrast with Mr York, he was articulate, and talkative to the point of being garrulous. He did not help himself by prefacing answers to sometimes straightforward questions by lengthy self-justificatory speeches. But when regard is had to the fact that following his departure from the Club he was subjected to criticism of the most serious kind in the local press, I gained the impression that his speech making was more to do with him seeking to set the record straight, as he saw it, rather than as a means of evasion.
It was apparent before the trial started that, when asked to return a substantial amount of Club documentation after his resignation, Mr Eastham chose not merely to retain that documentation for a time, but to show it, or copies of it, to Mr Paul Harney, Mr York's principal property adviser in connection with the Ground, in order, as he put it in cross examination, to enable him to piece together an account of events at the outset of the present dispute. Quite apart from the breach of fiduciary duty involved in that use of the Club's documents, which included privileged communications with its solicitors, the involvement of Mr Harney in Mr Eastham's attempt to put together his account of his stewardship of the Club's affairs gives rise to the need to treat the product of that collaboration with considerable reserve, for reasons connected with Mr Harney's own lack of credibility and the lack of integrity demonstrated by his behaviour in connection with the matters in issue, which I shall describe in due course.
Nonetheless, I did not form the impression when listening to Mr Eastham that he was seeking deliberately to mislead the court. On the contrary, he engaged fully with the cross examination and, on occasion, made some significant realistic admissions. As will appear however, I have not been able to accept certain important parts of his evidence about the circumstances in which he accepted payment from the claimants in 2005. In important respects, the combination of his desire to justify his conduct and the assistance of Mr Harney in recreating his account of what happened led to him giving a significant amount of evidence which I have found myself obliged to disbelieve.
Mr Harney himself followed Mr Eastham, and was subjected to a sustained cross examination designed to portray him as the villain of the piece. He is a highly intelligent and experienced player in the property business, both as a project manager for others, including Mr York, and on his own account. He plainly has above average powers of recollection, and gave an articulate and, on occasion, highly detailed account of his participation in the relevant events. For the most part, his evidence appeared at first sight to be well reasoned and plausible, until subjected to a comparison with the contemporaneous documents, in particular those created by Mr Harney himself, when assessed in their proper context. That comparison, which was carried out by Mr Davidson QC for the Club in cross examination at length and with rigour, persuaded me that the critical parts of Mr Harney's evidence were a meticulously prepared and sophisticated attempt by him to disguise the fact that he had, in 2005, set out deliberately to mislead Mr Lee, the Club's surveyor, about the progress of the project to obtain residential planning permission for the Ground. I have therefore been forced to conclude that Mr Harney was no more to be trusted as a witness than as a professional colleague.
At an early stage in his cross examination, Mr Harney was caught red-handed in a blatant attempt in a letter to deceive the Cambridge City Council's Planning Authority into thinking that a generous planning permission would assist the Club in realising the value of its interest in the Ground, at a time when, in January 2006, the Club had already parted with the whole of its interest in the residential development of the Ground, by reason of the Overage Agreement made in October 2005. By that date, the only beneficiaries of any generosity on the part of the City Council in its attitude to the grant of planning permission were (subject to the Club's claims in this litigation, which had not by then been adumbrated), the claimants and Mr Harney's own company which, as project manager, was to be remunerated solely by a share in Mr York's companies' profit. Rather than admit the inevitable, Mr Harney wriggled and evaded with imagination but without candour, and this became the hallmark of his evidence in cross examination, all the more so in relation to more...
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