The Northampton Regional Livestock Centre Company Ltd v Richard Andrew Cowling and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Green,Re |
| Judgment Date | 23 January 2014 |
| Neutral Citation | [2014] EWHC 30 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ12X03155 |
| Date | 23 January 2014 |
[2014] EWHC 30 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Green
Case No: HQ12X03155
Matthew Reeve and Emily McCrea-Theaker (instructed by Geoffrey Leaver) for the Claimant
Tim Walker (instructed by DFA Law) for the 1 st Defendant
David Lewis (instructed by Watson Burton) for the 2 nd Defendant
Hearing dates: 7, 9–11, 14–18, 22, 23 October
Approved Judgment
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 version as handed down may be treated as authentic.
INDEX TO JUDGMENT
| A. INTRODUCTION | Paragraph(s) |
| (1) The issue in outline | 1–6 |
| (2) A short overview of the facts | 7–32 |
| (3) The allegations made against the Defendants | 33–34 |
| (4) The ultimate fate of the Site | 35 |
| B. OBSERVATIONS ON WITNESSES | |
| (1) Observations on the witnesses | 37–47 |
| (2) Observations on limitations in the expert evidence | 48–49 |
| C. THE FACTS | |
| (1) Introduction | 50 |
| (2) The original sale of the Site from the Commission for New Towns to the Company: The overage or "clawback" provisions | 51–55 |
| (3) The original planning permission for the Site | 56–57 |
| (4) The financial position of the Company in the wake of the foot and mouth crisis leading up to the decision to sell the Site | 58–66 |
| (5) The Prologis Agreement: 2003–2005 | 67–70 |
| (6) The conduct of the minority shareholders and the farming interests | 71–76 |
| a) The tactics deployed by the farmers' contingent | |
| b) The spoiler | |
| c) The minority shareholders' attempt to wind the Company up | |
| d) The pestering telephone calls | |
| (7) The position of English Partnerships (EP) | 77–94 |
| (8) The position of the planning authorities to change of use | 95–102 |
| (9) The Wollaston Motors Ltd application for temporary change of use | 103–105 |
| (10) The Letter of Instruction from the Company to MCL of 18 th October 2004 | 106–109 |
| (11) The Letter of Advice from MCL of 20 th October 2004 | 110–111 |
| (12) The particulars of sale | 112 |
| (13) The fee arrangement | 113 |
| (14) Evidence relating to valuation of the Site 1996–2006 | 114–123 |
| (15) The sale from the Company to Earlplace: 2005 | 124–127 |
| (16) The sale of the Site by Earlplace to Kilmartin: 2005 | 128–129 |
| D. NEGLIGENCE BY THE FIRST AND SECOND DEFENDANTS | |
| (1) Capacity in which Defendants are sued | 130 |
| (2) Relevant legal principles | 131–138 |
| a) The scope of the duty | |
| b) Relevance of contract | |
| c) Being wise in hindsight | |
| (3) Position of the First Defendant (Mr Cowling) | 139–157 |
| a) The allegation Mr Cowling failed to obtain authority from the Board | |
| b) The alleged irrationality in not forcing Prologis to pursue its agreement with the Company | |
| c) The alleged irrationality in failing to obtain advice in relation to the sale of the Site | |
| d) The alleged irrationality in failing to do a deal with EP to neutralise clawback | |
| e) The alleged irrationality in marketing the Site on an unconditional basis only | |
| f) The position of minority shareholders and the farming community | |
| g) The alleged irrationality in failing to resist Bank pressure or negotiate further concessions from the Bank | |
| h) The alleged irrationality of selling the Site to Earlplace for £2.25m | |
| i) Conclusion | |
| (4) Alternative analysis of the position of the First Defendant: Power of court to grant relief under Section 1157 Companies Act 1986 | 158–169 |
| (5) Position of the Second Defendant (Mr Lawrence) | 170–176 |
| E. BREACH OF FIDUCIARY DUTY BY FIRST AND SECOND DEFENDANTS | |
| (1) Introduction | 177 |
| (2) Relevant legal principles | 178–199 |
| a) Basic principles | |
| b) The relevance of contract | |
| c) The duty to account | |
| d) Exceptions to the duty to account: where acting for multiple principals is inherent to the business | |
| e) Exceptions to the duty to account: informed consent and disclosure | |
| f) Failure to provide any disclosure at all | |
| g) Provision of partial disclosure | |
| h) Interest | |
| i) Confidential information | |
| (3) Position of Second Defendant (Mr Lawrence) | 200–267 |
| a) The date upon which Mr Lawrence ceased to owe a duty to the Company | |
| b) The date upon which Mr Lawrence was first retained by Earlplace and the terms of his retainer | |
| c) Whether Mr Lawrence was in a position of conflict as between the duties he owed to the Company and his own personal interest | |
| (i) The communication of information by Mr Lawrence to Earlplace | |
| (ii) The conflict arising out of the negotiation of the retainer on 31 st August 2005 | |
| d) Whether there was adequate disclosure | |
| e) Conclusion in relation to the Second Defendant | |
| (4) Position of First Defendant: Section 10 Partnership Act 1890 | 268–278 |
| a) The Statutory framework | |
| b) The House of Lords in Dubai Aluminium | |
| c) Summary of relevant questions to ask | |
| d) Conclusion in relation to the First Defendant | |
| F. CONCLUSION | 279 |
A. INTRODUCTION
(1) The issue in outline
This case concerns the fiduciary and tortious duties of agents in relation to the sale of commercial property. In particular it concerns the duties of agents who act, or seek to act, for both the vendor and purchaser of commercial property in the same transaction and of company directors who instruct a firm in which they are a partner, to act for their company.
With regard to the scope and extent of an agent's fiduciary duty to its principal, the facts of this case concern the situation, commonplace in relation to transactions relating to commercial property, whereby an agent (A) is instructed for the vendor (V) to market a site and where A, often using his own contact book, finds a purchaser (P) but at the same time accepts instructions from P in relation to the sale of the same land.
As the facts of this case demonstrate, various permutations of this scenario can arise. For instance, A might in the early stages agree to act on an unremunerated basis for V in the hope, expectation or even promise that at a later stage V might formally instruct A on the actual sale for a commission. In the present case the agents in question worked for the vendor for some years on an unremunerated basis and only in the latter stages of the marketing and sale process were they formally instructed on remunerated terms. Further, A might, when seeking out putative purchasers on behalf of V, start working for them more or less immediately on a speculative and unpaid basis in the hope that if V does in fact sell the land to the putative P they will be instructed by P on the subsequent disposal of the land. In this case, the agents giving evidence described acting on an unremunerated basis as a "speculative" instruction. Undoubtedly there are many other permutations but they all raise the question of the duties of agents who in a variety of different ways seek to act for more than one side in a transaction.
I have said that these arrangements are commonplace and evidence before me suggests that this is indeed the case. Many commercial property transactions involve local agents and developers and they will tend to know each other. An agent will frequently have a contact book that he can exploit for the benefit of a vendor. Many of the contacts in that book who might become purchasers might also be former clients of the agent. In one sense it is therefore in the interest of the vendor to use an agent who has strong local connections and who can, through using his local contacts and goodwill, identify potential purchasers and introduce them to the property in question. And of course once the sale is over there may very well be ongoing work for a good and competent agent now acting for a new client, viz., the purchaser.
But this conceals a problem which is that an agent who has an interest in the transaction from both sides of the negotiating table has a clear conflict of interest. The vendor wants to sell for the highest price; the purchaser wants to buy for the lowest price. The incentives operating upon the agent can depend upon the nature and structure of the fee arrangement. A fee structure can operate to create a powerful incentive on an agent to favour V or P and he might fashion his advice accordingly. From V's point of view if A is also advising P then A might not loyally be seeking the highest price possible. He might also be using information of a commercial or confidential nature which belongs to V and which A has acquired only by virtue of acting for V, but which could be of real value if communicated to P. This value could lie in P negotiating a lower price in the sale from V and/or at a later stage when P wishes to sell the property on, or develop it, or otherwise exploit it for commercial gain. It is important also to recognise that the point in time at which a conflict might arise can be well before A actually negotiates a fee arrangement with P. If A seeks, speculatively, to procure P as a client then A might well promote himself upon the basis of the "inside track" knowledge that he has of V. That information might be valuable to P in deciding upon the optimal level of offer to make to secure the purchase; but the information might be proprietary to V and be in the possession A only because of his retainer from V. For instance it might relate to problems that V is facing in negotiations with individual officials in the planning authority or financial pressure imposed on V by its bank or creditors, which...
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