William Allan Jones v Andrew McCarthy
| Jurisdiction | England & Wales |
| Judge | Jarman |
| Judgment Date | 17 August 2022 |
| Neutral Citation | [2022] EWHC 2186 (Ch) |
| Docket Number | Case No: BL-2021-CDF-000003 |
| Court | Chancery Division |
[2022] EWHC 2186 (Ch)
HIS HONOUR JUDGE Jarman QC
Sitting as a judge of the High Court
Case No: BL-2021-CDF-000003
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN WALES
BUSINESS LIST (ChD)
Cardiff Civil and Family Justice Centre
2 Park Street, Cardiff CF10 1ET
Mr Fraser Campbell (instructed by Burges Salmon LLP) for the claimants
Mr George McPherson (instructed by Blake Morgan LLP) for the defendant
Hearing dates: 12–14 July 2022
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.
HIS HONOUR JUDGE Jarman QC
HH JUDGE Jarman QC:
Introduction
In February 2008, the first claimant Mr Jones and the defendant Mr McCarthy orally agreed (the 2008 agreement) to exchange assets, whereby Mr McCarthy would obtain beneficial ownership of a yacht known as Biggest Buzz (the yacht) and registered in the British Virgin Islands (BVI), in exchange for Mr Jones acquiring a villa near Palma, Mallorca (the villa) and a mooring (the mooring) situated on mainland Spain. The yacht was registered in the name of the second claimant, a company owned and controlled by Mr Jones. The legal title to the villa was in the name of Mr McCarthy. The mooring was in the name of Mr McCarthy's father. There was at the time, a substantial mortgage on the yacht and another on the villa. It was envisaged by Mr Jones and McCarthy at the time that after the swap the yacht and the villa would be sold to third parties. It is also not in dispute that part of the reason for the swap was to enable Mr Jones to buy a bigger boat. When I refer in this judgment, to the parties, unless indicated otherwise, I refer to Mr Jones and Mr McCarthy, as the second claimant plays a minor part.
In the autumn of 2008, Mr McCarthy sold the yacht to a third party for around £1 million, having had the use of it since the 2008 agreement was made. The second claimant had cleared the outstanding mortgage on the yacht. Mr McCarthy retained the proceeds of this sale, as was envisaged by the parties. The villa was not sold until 2016, at a price of €1.1 million. The proceeds of that sale were also retained by Mr McCarthy, which was something not envisaged at the time.
The primary remedy sought by the claimants is damages for breach of the 2008 agreement on the part of Mr McCarthy, to put them in the position they would have been in if Mr McCarthy had complied with his obligations thereunder by selling the villa at the direction of Mr Jones at its market value of €1.58 million or at least the value for which it was sold at €1.1million.
Alternatively, the claimants say that they are entitled to an account of profits and a constructive trust over the proceeds of sale of the villa, if this provides a more advantageous remedy to the claimants than that available in contract. Mr McCarthy was paid €150,000 by a Brian Proctor in December 2014 under an agreement between them which related to the villa and the mooring, and then bought it back for €950,000. Mr McCarthy then sold the villa to a third party in November 2016 for €1.1 million, so the wrongful proceeds of sale amount to €1.25 million.
Mr McCarthy denies that the claimants are entitled to any such relief. He claims that Mr Jones told him that the yacht was mortgage free, and that he was expecting to be able to sell it on within a matter of days, but instead delays in providing the yacht's logbook and clearing its mortgage meant that a prospective buyer, Mr Bransgrove, did not complete an agreed sale for £1.386 million. Mr Jones says that he made clear to Mr McCarthy that the yacht was mortgaged which would have to be cleared, and that this was not the reason the sale to Mr Bransgrove fell through. Mr McCarthy accepts that he did not, as he could have done, check on the BVI register for any charged borrowing on the yacht, because he says past experience showed that this can take several weeks.
As for the villa, Mr McCarthy paid to Mr Jones a sufficient sum to discharge the mortgage and says that it was agreed between the two of them that he would do so. It is not in dispute that Mr Jones did not do so, and thus Mr McCarthy says as a result that he could no longer be required to transfer the unencumbered beneficial interest in the villa to Mr Jones. The latter says that it was always understood and agreed that he could use these monies to finance the purchase of another boat, and that he would take over the mortgage repayments, as in the event he did, until the market conditions improved so that he was better placed to arrange a sale to a third party and discharge of the mortgage.
Alternatively, Mr McCarthy says that his obligations under the agreement changed when Mr Proctor became involved a couple of years later. Mr Jones now accepts that from 2010 he owed money to Mr Proctor, something which he did not admit to in his pleadings. This is in respect of the sale of a property which they had bought together in Dubai, which debt he says at that time was in the order of €400,000, and that he had discussions with Mr Proctor about the possibility of using monies from a future sale of the villa to pay this debt.
Although Mr McCarthy was not involved in these discussions, he says that it is clear from emails passing at the time that by the end of 2010, Mr Jones had transferred any interest in the villa to Mr Proctor as part of a deal to discharge this debt. Mr Jones denies this and says that the amount of the debt was and is still unresolved between him and Mr Proctor. The determination of the amount of the debt depends upon a reconciliation of sums owed one to the other in complex business dealings between the two.
Thereafter, Mr McCarthy dealt with Mr Proctor concerning the villa and in 2014 transferred his obligations under the agreement to him in exchange for €150,000. In 2016 Mr McCarthy re-purchased the beneficial ownership of the villa for €950,000. Those proceeds were then treated as diminishing Mr Jones' debt to Mr Proctor. Mr McCarthy says that as the result of the foregoing, the claimants had no residual beneficial interest in the villa after 2016.
The witnesses
The only witnesses to file written evidence and to give oral evidence before me were Mr Jones, Mr McCarthy and Mr Bransgrove. On the face if it that is surprising. Although Mr Proctor was not involved in the agreement, he was involved in subsequent dealings with the villa. Another person who was heavily involved in the agreement and in events afterwards was Andy Mallett, a chartered accountant who had worked for both Mr Jones and Mr McCarthy. At the time of the 2008 agreement he was employed by a company controlled by Mr Jones. Mr Jones accepts that from 2003 to 2016, Mr Mallett was his “right hand man” whom he trusted and had the authority to sign contracts on his behalf, but maintains that he retained the ultimate decision making authority. That evidence rang true and I accept it. However, after the breakdown in the relationship of the parties, Mr Mallett went to work for Mr McCarthy, but subsequently left that employment as well. He is now engaged in litigation with Mr Proctor against Mr McCarthy.
Toni Serra is a lawyer based in Mallorca who acted for Mr Jones until 2016, and drafted documents for the parties at the time of the 2008 agreement, as referred to below. However, he became in dispute with Mr Jones for what the latter says were unauthorised payments in respect of the mortgage on the villa. That dispute was settled in 2019, on terms which included that he would not declare himself against Mr Jones in litigation.
In light of that somewhat convoluted subsequent history of interwoven personal relationships, it is perhaps not that surprising that none of these three potential witnesses gave evidence in the present proceedings. Accordingly in my judgment it is inappropriate to draw adverse inferences against any party from any of those absences.
Mr McPherson, for Mr McCarthy, submits that the fact that Mr Jones did not call his wife to give evidence, even though she was involved in dealings with the villa from 2016, is a powerful indication that those closest to him are unwilling to support his version of events because it is untrue. She was not involved in the making of the agreement. In my judgment the fact that she had some involvement with the villa some eight years later when battle lines had been drawn does not give a sound basis for such an inference.
Battle lines remain firmly drawn. In these proceedings, each of the parties accuse the other of lying on oath, of giving evidence which is internally inconsistent and inconsistent with documentation, as well as inherently unlikely.
Both parties made detailed submissions as to why his demeanour in giving evidence showed him to be a witness of truth, and that of his opponent showed the opposite. In The Queen on the application of SS (Sri Lanka) v The Secretary of State for the Home Department [2018] EWCA Civ 1391 the Court of Appeal considered the importance of the demeanour of a witness in assessing the credibility of that witness. Leggatt LJ, giving the lead judgment, said this at paragraph 41:
“No doubt it is impossible, and perhaps undesirable, to ignore altogether the impression created by the demeanour of a witness giving evidence. But to attach any significant weight to such impressions in assessing credibility risks making judgments which at best have no rational basis and at worst reflect conscious or unconscious biases and prejudices. One of the most important qualities expected of a judge is that they will strive to avoid being influenced by personal biases and prejudices in their decision-making....
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