Sir Owen George Glenn Knzm Onzm v Eric John Watson (personally and as trustee of the Richmond Trust)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 31 July 2018 |
| Neutral Citation | [2018] EWHC 2016 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: HC-2015-001647 |
| Date | 31 July 2018 |
[2018] EWHC 2016 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch D)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr Justice Nugee
Claim No: HC-2015-001647
Elizabeth Jones QC, Justin Higgo, Gareth Tilley, Paul Adams and Oliver Jones (instructed by Farrers) for the Claimants
John McCaughran QC, Hannah BrownQC and Eleanor Campbell (instructed by Oury Clark) for Mr Watson
Sa'ad Hossain QC, Jamie Goldsmith and Joyce Arnold (instructed by Wilson Gilmore) for Novatrust Ltd (until 6 June 2017)
Mr Leahy in person for himself and Nucopia Partners Ltd
Hearing dates: 5, 8, 9, 10, 11, 12, 15, 16, 17, 18, 19, 22, 23, 24, 25, 26 May, 6, 7, 8, 9, 12, 13, 14, 15, 16, 19, 20, 21, 22, 23, 26, 27, 28, 30 June, 20, 21, 24, 25, 26 July 2017
Judgment Approved
| Index | Para |
| Introduction | 1 |
| The background and principal witnesses | 12 |
| Sir Owen | 13 |
| The trust arrangements | 21 |
| Mr Miller | 46 |
| Mr Watson | 50 |
| Mr Leahy | 55 |
| Factual narrative down to Project Edsel | 62 |
| Relationship between Sir Owen and Mr Watson | 62 |
| Red Mountain | 64 |
| Property investments – ground rents | 68 |
| Property investments – affordable housing | 78 |
| Mr Watson interests Sir Owen in property opportunities | 92 |
| Project Edsel | 94 |
| Claims in relation to Project Edsel | 127 |
| Fiduciary duties – (i) the law | 128 |
| Fiduciary duties – (ii) application to the facts | 135 |
| Did Sir Owen have any sufficient interest in Kea to support a fiduciary duty? | 157 |
| If Mr Watson owed a fiduciary duty was he in breach of it? | 175 |
| The Term Sheet | 181 |
| The use of the £7,045 | 189 |
| Affirmation | 211 |
| Conclusion on Project Edsel | 213 |
| Facts — Project Spartan | 214 |
| The background to the presentations of Project Spartan | 216 |
| The initial presentations to Mr Miller (29 March) and Sir Owen (1 April) | 224 |
| From the presentations to Mr Leahy's e-mail of 28 May 2012 – the draft Term Sheets | 253 |
| The M&G deal and its impact – Mr Leahy's e-mail of 28 May 2012 | 270 |
| From 28 May 2012 to signature of Spartan Term Sheets on 7 June 2012 | 295 |
| From the Term Sheets to the July agreements | 317 |
| Newco | 320 |
| Personal benefits or incentives | 326 |
| Obtaining more money from Kea; Voltaire | 330 |
| Los Angeles meetings on 10 and 11 July | 336 |
| Mr Watson raises Fladgates conflict issue | 340 |
| The July agreements – 24 July 2012 | 347 |
| Claims in relation to July agreements | 357 |
| Deceit | 358 |
| Autumn 2012 | 378 |
| Affirmation | 412 |
| Inducements | 417 |
| Breach of fiduciary duty by Mr Watson | 432 |
| Breach of fiduciary duty by Mr Dickson | 443 |
| Subsequent events | 450 |
| The Supplemental Loan Agreement | 450 |
| The Deed of Amendment to the Shareholders' Agreement | 460 |
| The Nucopia Consultancy Agreement | 461 |
| Further proposed amendments to Spartan Shareholders' Agreement | 467 |
| Project Royal | 471 |
| The Interim Arrangement | 475 |
| The Nevis Injunction | 478 |
| Second and Third Kea Loan Agreements | 483 |
| Subsequent events | 501 |
| The 2014 Settlement with Messrs Miller and Dickson | 515 |
| The 2017 Settlement with Novatrust | 522 |
| Relief | 526 |
| Questions 1 to 3: duty and breach | 528 |
| Question 4: knowing receipt | 531 |
| Questions 5 and 6: equitable compensation | 537 |
| Questions 7 and 8: damages for deceit | 555 |
| Question 9: interest | 561 |
| Questions 10: did Mr Leahy receive at least $363,566 from the Munil Money? | 565 |
| Questions 11 to 13: Project Edsel | 567 |
| Question 14: allocation | 569 |
| Conclusion | 581 |
Introduction
This judgment is given after the trial of the action.
When the trial started, the claim was being pursued against all Defendants, and the action was one of three sets of related proceedings that had been managed and were being tried at the same time, the other two being a derivative action brought by Novatrust Ltd (“ Novatrust”) on behalf of Spartan Capital Ltd (“ Spartan”) against Kea Investments Ltd (“ Kea”), and a petition to wind up Spartan brought by Kea. In the course of the trial however the Claimants and Novatrust reached an agreement which settled not only the Claimants' claims in this action against Novatrust and Spartan, but also the entirety of the derivative action and the petition. I am therefore now only concerned with the one action, and only with the claims brought by the Claimants against the Defendants other than Novatrust and Spartan.
The protagonists are two wealthy businessmen from New Zealand, Sir Owen Glenn (he was not knighted until late 2012 but I will refer to him as “Sir Owen” throughout) and Mr Eric Watson ( “Mr Watson”). Over the course of a long career, Sir Owen had founded and built up from nothing a highly successful international logistics business known as OTS Logistics Group or “ OTSLG”. In 2012, by which time he was in his early 70s, he sold OTSLG for a substantial sum – I do not think the precise amount is in evidence, but it was about US$350m (in the rest of this judgment I will use $ to refer to US dollars, with A$ and NZ$ for Australian and New Zealand dollars respectively).
Sir Owen had formerly owned OTSLG himself, but by the time of the sale it was held by an offshore trust called the Corona Trust which had been established in 2009 for the benefit of Sir Owen's family and a foundation which he used for his charitable and philanthropic activities called the Glenn Family Foundation ( “the GFF”). As a result of the sale the trust had a large amount of cash to invest, and the proceedings arise out of investment opportunities that Mr Watson made available for this purpose, in particular two investments put forward by Mr Watson codenamed Project Edsel and Project Spartan.
Project Edsel came first. This was an investment in an affordable housing scheme for the London Borough of Barking and Dagenham (“ LBBD”). The basic idea was that Sir Owen's interests would provide 90% of the capital required and Mr Watson's 10% but that the profits, after repayment of capital and interest, would be split 50/50. On the Sir Owen side the investment was made by Kea, which was then owned (indirectly) by the Corona Trust (it is now owned by Sir Owen personally). On the Watson side the investment was made by Novatrust, a professional trustee company, in its capacity as trustee of the Clearview Trust ( “Clearview”), one of several trusts established by or associated with Mr Watson.
The venture was a success and returned substantial profits to both Kea and Novatrust. However Mr Watson also benefited from a share in the management “carry”, that is a share of profits payable to the managers of the investment, which in the event also gave him very substantial amounts. The Claimants in the current action bring personal and proprietary claims against Mr Watson on the basis that this aspect of the arrangement involved a breach of fiduciary duty owed to them by Mr Watson, and on various other grounds.
Project Spartan followed. This was a project on a much larger scale. It was again a joint venture, with the participants again being Kea on the Sir Owen side, and Novatrust on the Watson side, in this case in its capacity as trustee of the Park Trust ( “Park”), another trust associated with Mr Watson. Kea and Novatrust each became 50% shareholders in Spartan, a BVI company, and each had a representative on Spartan's board of directors. Kea also agreed to lend substantial sums to Spartan which could then be deployed on a number of potential investments.
Documents to give effect to this, such as a shareholders' agreement and loan agreement, were entered into in July 2012. Although an initial presentation had been made to Sir Owen in April 2012, the negotiation of the detailed terms and the decision to go ahead were dealt with not by him but by two individuals who between them ran the Corona Trust: Mr David Miller ( “Mr Miller”), a long-standing adviser to, personal friend and close confidant of Sir Owen's, who was the Protector; and Mr Peter Dickson ( “Mr Dickson”), who owned and ran Pizarro Company Ltd (“ Pizarro”), a Nevis company that was the Trustee. The formal agreements were signed on behalf of Kea by Mr Dickson who was a director of Kea. They involved Kea agreeing to lend Spartan over £12m in effect as the price for participating in Spartan and to make further substantial loans (initially £50m) to Spartan for it to deploy on investments, and committed Spartan to a number of transactions (set out in schedule 2 to the shareholders' agreement and referred to in these proceedings as “the schedule 2 transactions”).
Sir Owen however fell out with Mr Miller and Mr Dickson and proceedings were brought, first by Sir Owen in California against Mr Miller, and then by his daughter, a beneficiary of the Corona Trust, in Nevis against both Mr Miller and Mr Dickson (and Pizarro and others). The upshot of that was that the Nevis Court appointed a new trustee of the Corona Trust, namely a company called Harneys (Nevis) Ltd ( “HNL”), initially on an interim basis, and a new director, Harlaw Ltd (“ Harlaw”), was subsequently appointed to Spartan's board as Kea representative. HNL and Harlaw were companies associated with Harney Westwood & Riegels ( “Harneys”), a firm of solicitors practising in the BVI and elsewhere, and Mr Ross Munro, a partner in Harneys, acted as director of...
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