Ticehurst, Taylor and Thomas v Harbour Fund II LLP and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 30 November 2022 |
| Neutral Citation | [2022] EWHC 3053 (Comm) |
| Docket Number | Case No: CL-2017-000323 |
| Court | Queen's Bench Division (Commercial Court) |
And in the Matter of a Part 8 Claim
and
[2022] EWHC 3053 (Comm)
Mr Justice Foxton
Case No: CL-2017-000323
Case No: CL-2022-000330
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
IN THE MATTER OF GERALD MARTIN SMITH
AND IN THE MATTER OF THE CRIMINAL JUSTICE ACT 1988
Elizabeth Jones KC, Daniel Saoul KC, Richard Hoyle and Lorraine Aboagye (instructed by Harcus Parker LLP) for the Settlement Parties
Tony Beswetherick KC (instructed by Stephenson Harwood) for the Enforcement Receivers
Penelope Reed KC and Tom Beasley (instructed by Payne Hicks Beach) for the Trustees
Donald Lilly (instructed by HFW) for the Joint Liquidators
Kennedy Talbot KC and Gary Pons for the Serious Fraud Office
Hearing dates: 14 and 15 November 2022
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Wednesday 30 November 2022 at 14:00.
The Honourable
A INTRODUCTION
In the preface to the fourth edition of Meagher Gummow & Lehane's Equity: Doctrines & Remedies (2002), the editors suggested of one jurisdiction that the prospect of “any principled development of equitable principles seems remote”, a state of affairs they sought to attribute to the “misguided endeavours” of one judge. They observed:
“That one man could, in a few years, cause such destruction exposes the fragility of contemporary legal systems”.
This is now the fourth occasion in this litigation in which, as a commercial lawyer sitting in the Commercial Court, I have found myself neck-deep in the doctrines and principles of trusts law and equity, and I am concerned that my own endeavours (misguided or otherwise) may be provoking a similar reaction. However, as the Part 8 Claim which raises these issues was transferred into the Commercial Court from the Chancery Division, I have done my best to navigate unfamiliar legal pathways, and acknowledge with gratitude the assistance given by “expert guides” in the form of Ms Jones KC and Ms Reed KC, who have attempted to prevent me straying too far from equitable orthodoxy.
The present set of disputes arises from a trust ( the Harbour Trust) created in connection with the provision of litigation funding by Harbour Fund II LLP ( Harbour), for proceedings to be brought by Mr Thomas, Mr Taylor and Orb ARL ( Orb) against Mr Andrew Ruhan ( the Orb Litigation). Those proceedings were settled, on terms which (at least on my findings, albeit subject in important respects to a judgment expected from the Court of Appeal following a hearing on 5 and 6 October 2022) involved the transfer of various rights and assets. Disputes have arisen as to how those assets should be administered and/or distributed pursuant to that trust, and those disputes have generated the following applications:
i) A Part 8 Claim issued by Messrs Thomas and Taylor and Mr Rupert Ticehurst (who I shall refer to as the Trustees without in any way pre-determining their status) seeking to confirm their status, rights and powers as alleged trustees of the Harbour Trust ( the Part 8 Claim).
ii) An application by certain of the Settlement Parties (Harbour, the Viscount on behalf of Orb and four companies controlled by the Joint Liquidators or JLs, but who I will refer to collectively as the Settlement Parties for convenience) seeking to appoint Mr Standish and Mr Pike of Interpath Ltd ( Interpath) as receivers over certain assets which, on my findings, are beneficially owned by the Harbour Trust and by companies under the management of the JLs.
iii) A Part 20 Claim made by certain of the Settlement Parties – Harbour, the Viscount on behalf of Orb and Stewarts LLP ( Stewarts) but who I will once again refer to as the Settlement Parties – in the Part 8 Claim seeking relief in the form of the transfer of shares in certain companies to new trustees to be appointed to the Harbour Trust ( the Part 20 Claim).
iv) An application by Messrs Thomas and Taylor seeking to appoint Mr Katz, Mr Hyde and Mr Rubin of Begbies Traynor as receivers over certain assets alleged to fall within the Harbour Trust.
At the risk of a significant degree of over-simplification, I will refer to these four applications as the Trust Applications.
There were also two further applications:
i) An application to determine whether the court would have jurisdiction to impose a Piggott Condition on the Serious Fraud Office. This was resolved by a consent order.
ii) The Trustees' application for directions for the determination of the JL's application for payment out of certain monies currently held by the Court Funds Office. As I indicated at the hearing, I could not see any answer to the JL's application on the material before me. However, I gave the Trustees the opportunity to consider the position in the period prior to hand-down of this judgment, on the basis that if the JLs were required to attend to argue the application when there were no grounds for resisting it, there might well be costs consequences.
B THE BACKGROUND TO THE TRUST APPLICATIONS
The full background to these applications appears in the judgment at [2021] EWHC 1272 (Comm), the Directed Trial Judgment. However, it may be helpful to recap some of the salient facts which were either common ground or the subject of findings in that judgment.
B1 The Harbour IA
As I have indicated, Harbour provided litigation funding to the claimants in the Orb Litigation. The terms on which they did so were set out in a contract called the Harbour IA, to which Harbour and each of the Orb claimants were parties. Pursuant to the Harbour IA, Harbour agreed to invest up to £5,280,000 to meet “the Claimants' Legal Costs” (as defined), according to an “Agreed Budget and Timeline” (clause 2.1). That amount was to be paid directly to the legal representatives acting for the Orb claimants, defined as the Legal Representatives, who were identified in the Harbour IA, and could only be changed with Harbour's written agreement (which was not to be unreasonably withheld) (clause 4.2(e)).
It was the Orb claimants who had the right to conduct the Proceedings, defined as “any legal proceedings, arbitration, mediation or other steps taken in contemplation of [the same] in relation to any of the Causes of Action” (clause 6.2), with an obligation to keep Harbour informed of material matters (clause 3 and elsewhere). Harbour's control of the litigation process comprised:
i) The due diligence performed in respect of the identified causes of action before entering into the Harbour IA, which was backed up by contractual representations (clause 3.1).
ii) Setting the agreed budget and timeline, the Harbour IA providing that “the budgeted costs for each stage of the Proceedings and for each service provider shall not exceed the specific budgeted costs in the Agreement Budget and Timeline for that stage” unless the change was agreed by Harbour in writing.
iii) Harbour was able to agree the identity of the Legal Representatives in the Harbour IA, and its consent (not to be unreasonably withheld) was required for any subsequent change.
iv) Harbour could suspend the payment of costs if it was not provided with information in accordance with the Harbour IA.
v) Harbour was not liable for costs after it terminated the Harbour IA (under clauses 14.1 and 14.3 and clauses 15.1 and 15.3).
vi) Harbour benefited from certain indemnities from the Orb claimants (clause 2.5).
vii) The Orb claimants agreed to act reasonably and carefully in the litigation, and to listen carefully to the advice of the (Harbour-approved) Legal Representatives (clause 4.2(d)).
Clause 8 was headed “Declaration of Trust” and provided:
“… each of the Claimants agrees on a joint and several basis that the Claimants will hold all Proceeds as Trust property on bare trust absolutely for the benefit of the Claimants and for HF2 and that such Proceeds will be kept separate from the Claimants' own funds. The Claimants further agree on a joint and several basis to give notice of the Trust to the Legal Representatives and will direct the Defendant to pay all Proceeds to the client account of the Legal Representatives. The Claimants and HF2 further agree that the Claimants as trustee of the Trust will hold the Proceeds on trust for the Trust Beneficiaries to the extent of the interests of the Trust Beneficiaries…”
Clause 1.1 defines the trust as that created “under clause 8 and other applicable provisions of the Agreement”.
“Proceeds” was defined as:
“any amount of money or the value of any goods, services or benefits, recovered or received by the Claimants or its Affiliates as a result of Success in the Proceedings and/or Settlement (including the present value of any goods, services or benefits to be paid in the future and the present value of any new commercial arrangements entered into with, or at the direction of, the Claimants or their Affiliates or otherwise), and shall include interest and any sums recovered in the Proceedings by...
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