Edward Murray (sitting as a Deputy Judge of the Chancery Division) :
- This is the trial of a claim for damages for breach of a settlement agreement dated 14 January 2011 (the "Settlement Agreement") between Mr Frank Otuo, the Claimant, and Mr David Brierley, the Defendant. The Settlement Agreement recorded the terms of the settlement of an earlier set of proceedings between Mr Brierley as claimant and Mr Otuo as defendant.
- The principal issues are:
i) whether, prior to his issue of these proceedings, Mr Otuo was entitled to exercise certain rights under clause 4.3 of the Settlement Agreement;
ii) if so, whether, prior to his issue of these proceedings, he had effectively exercised those rights; and
iii) if so, whether, as a result of such exercise, Mr Otuo is entitled to an indemnity from Mr Brierley in relation to any payments made by Mr Otuo to certain creditors of the partnership that had existed between them (the "Partnership") and that was effectively dissolved by the Settlement Agreement.
- There have been numerous pre-trial hearings in relation to this matter, many orders and a few related judgments, of which the most detailed was handed down by Anthony Elleray QC, sitting as a Deputy Judge of this Division, on 24 September 2013 (Otuo v Brierley  EWHC 2869 (Ch)), and of which the most recent was given by Mr Justice Birss on 17 February 2015 (Otuo v Brierley  EWHC 472 (Ch)). The history of dealings between the parties up to September 2013 is set out in considerable detail in the learned Deputy Judge's judgment, while Birss J's judgment also provides a summary of that history and brings matters up-to-date. The issues to be determined in this case turn to a significant extent on the construction of provisions of the Settlement Agreement, which, of course, must be read in their contractual context and against their background facts. It is not, however, in my view necessary to set out the history of the prior dealings in great detail in order to make clear why I have determined the issues in this case in the way that I have.
- Mr Otuo and Mr Brierley are each investors in and developers of residential property in England. They formed the Partnership in April 2006 to further those activities, operating under the name "Brierley and Otuo". In May 2006 they set up a company through which to conduct the business under the name Brierley & Otuo Limited (the "Company"). On 22 July 2008, they entered into a shareholders' agreement (the "Shareholders' Agreement") and a partnership agreement (the "Partnership Agreement") in relation to these activities.
- The structure adopted by the partners was to operate the Company as a building firm, dealing with the building sub-contractors and undertaking liabilities in connection with all building work relating to development of the properties, and to hold the properties and collect rent generated by the properties in the Partnership. Mr Otuo selected the properties for investment. For credit reasons, it was not possible for the Partnership to obtain mortgage loans and purchase those properties directly. Accordingly, Mr Brierley obtained the mortgage loans and purchased the properties in his own name and then executed declarations of trust confirming that the properties were held in trust for the Partnership. He was therefore individually liable for the mortgage payments relating to the properties.
- The properties of the Partnership (the "Properties), listed in Schedule 1 to the Settlement Agreement, consisted of: (i) three leasehold properties (Flats A, B and C) at and the freehold of 5 Brading Road, London SW2 2AP; (ii) three leasehold properties (Flats A, B and C) at and the freehold of 6 Maplestead Road, London SW2 3LX; (iii) a leasehold property at 42 Holmewood Road, London SW2 3RR; (iv) the freehold of 77 St Julians Farm Road, London SE27 0RJ; and (v) the freehold of 4 Craven Mews, Taybridge Road, SW11 5PW.
- During the period with which we are principally concerned, from 2006 to 2011, Mr Brierley lived and worked in Dubai. Mr Otuo lived and worked in London. Mr Otuo's role in the Partnership was therefore to manage the business of the Company and the Partnership, including dealing with all matters relating to development and management of the Properties, including the letting of the Properties.
- Over time relations between the partners began to deteriorate for various reasons, which are a matter of dispute between them. Mr Brierley's evidence is that relations with Mr Otuo were good until about the middle of 2008, but then the flow of rental income passed to him by Mr Otuo began to fall, which meant that the income received by Mr Brierley was insufficient to cover the mortgage payments relating to the Properties, even though, in Mr Brierley's opinion, the aggregate rental income from the Properties should have been more than sufficient to cover the mortgage payments.
- Mr Brierley had a number of other concerns regarding Mr Otuo's conduct of the business, principally relating to a lack of communication and transparency by Mr Otuo, and, of course, Mr Otuo has his own version of events during this period. It is not necessary for me to decide who was principally at fault, or the degree to which either party was at fault, for this deterioration. The upshot was that Mr Brierley issued proceedings against Mr Otuo on 1st March 2010, seeking the winding up of the affairs of the Partnership and its dissolution, and after several months of negotiation, the parties entered into the Settlement Agreement, in relation to which Master Price made a Tomlin order on 23 February 2011.
- In terms of the evidence adduced at the trial, I had a lengthy witness statement dated 25 February 2015 from Mr Otuo, on which he was cross-examined by Mr Roseman. The witness statement ranges widely over a variety of issues, some of which are irrelevant and many of which are at best tangential to the issues arising at the trial in relation to the proper interpretation of the Settlement Agreement. It includes many accusations against Mr Brierley and a lengthy and embittered recital of the history of their dealings prior to and leading up to Mr Brierley's action against Mr Otuo that was settled by the Settlement Agreement, as well as their dealings since then. Much of his evidence appears to go to Mr Brierley's credibility rather than to the specific issues arising at this trial. It is difficult to separate his submissions from his factual statements.
- I am conscious that Mr Otuo is representing himself in relation to these proceedings, and I make allowance for this fact in considering the contents of the witness statement as well as his Re-Amended Particulars of Claim, which he apparently prepared without the benefit of legal advice. In cross-examination, however, Mr Otuo was often evasive and inconsistent. Mr Roseman put to him that he had stated in his affidavit dated 6 December 2012, prepared in connection with his application for a freezing injunction or other interim proprietary relief in relation to the Properties, that he had paid Jay Thenuwara in respect of the debt listed in Schedule 2 to the Settlement Agreement, when his evidence now appeared that he had not paid Mr Thenuwara but had given him security, instead. When it was put to him by Mr Roseman that his statement in his affidavit that he had paid Mr Thenuwara was not true, he replied that he had not lied. When he was pressed on his knowledge, as an experienced businessman, of the distinction between making a payment and granting security, he admitted that he did understand the distinction and then apologised to the court to the extent that "the court felt misled by" his statement.
- Overall, I do not feel able to place much reliance on the content of Mr Otuo's witness statement or his evidence given in cross-examination, except where that evidence is confirmed by contemporaneous documents or is otherwise consistent with undisputed facts.
- Mr Brierley provided a witness statement dated 26 February 2015, however he did not attend trial to make himself available for cross-examination by Mr Otuo. Accordingly, his evidence has not been tested, and I have not relied on it, except where it is confirmed by contemporaneous documents or is otherwise consistent with undisputed facts.
- Mr Robert Wee also gave evidence during the trial, to which I will revert in due course. I have also reviewed correspondence between the parties and their solicitors and with third parties over the period with which we are concerned, principally from 2007 to 2013. I have also reviewed the numerous orders and judgments arising from pre-trial hearings in this case, as well as the documents prepared for, correspondence relating to and, where they have been produced for me, transcripts of sections of prior hearings in this case. I comment on some of this material below, where appropriate. The transcripts have not been of particular assistance, but may have some relevance when I come to consider costs.
- This matter turns principally on the construction of certain provisions of the Settlement Agreement. Both Mr Otuo and Mr Roseman referred in their submissions to the speech of Lord Hoffmann in the leading case of Investors Compensation Scheme Ltd v West Bromwich Building Society  1 WLR 896,  1 BCLC 493 and, in particular, his well-known summary of the principles applicable to the construction of a commercial contract ( 1 BCLC 493 at 547-548). I also bear in mind the subsequent cases that have furthered clarified or developed the basic principles, such as Chartbrook Ltd v Persimmon Homes Ltd  AC 1101 (HL), Re Sigma Finance Corp  BCC 40 (SC) and Rainy Sky SA v Kookmin Bank  WLR 2900 (SC). The judgment of the Supreme Court in Arnold v Britton  UKSC 36, handed down after the trial of this matter, does not, in my view, indicate any change in the law that applies in this case. The parties do not dispute the relevant law applicable to construction of commercial contracts, but they differ in their application of those principles to the relevant provisions of the Settlement Agreement.
- There was no material dispute between the parties as to the law applicable to the other issues arising in this case. I refer to other authority where relevant in relation to specific points below.
The Settlement Agreement
- The purpose of the Settlement Agreement was, of course, to settle Mr Brierley's claim against Mr Otuo by having Mr Otuo retire from the Partnership and renounce any claim to or interest in the Properties, subject to certain exceptions to which I will revert, and to provide for and deal with the consequences of the dissolution of the Partnership. The Company had already been dissolved by the registrar of companies on 14 December 2010, apparently for failure to file returns.
- In the Settlement Agreement, Mr Otuo is referred to as "Frank" and Mr Brierley as "David". Recital C to the Settlement Agreement provided as follows:
"Frank has had the de facto control of the development and management of the Properties to the date hereof."
- Under clause 3 of the Settlement Agreement, Mr Brierley agreed to pay Mr Otuo the sum of £220,000 (defined in clause 3(a)(i) as the "Principal Sum"), in two stages.
i) £160,000 was to be paid on or before 31 January 2011. This amount was paid in full to Mr Otuo on the date of signing of the Settlement Agreement.
ii) A further £60,000 was due on the first anniversary of the date of the Settlement Agreement. This amount was paid to Mr Otuo on 29 April 2013, so it was over a year and three months overdue when finally paid.
Clause 5 of the Settlement Agreement provided for default interest to be payable by a party in relation to any payment not made when due under the Agreement. In his Amended Particulars of Claim, Mr Otuo claims the amount of £3,825 under this clause in respect of the late payment of the sum of £60,000. Mr Brierley does not deny that this is due.
- Apart from clause 3, the critical clauses of the Settlement Agreement for purposes of this dispute are clauses 2 and 4. The relevant provisions of clause 2 are:
"2. PRINCIPAL TERMS
In consideration of the obligations of David and Frank to each other under this agreement:
2.1 IT IS HEREBY AGREED AND DECLARED that:
(a) Frank has been entitled to a salary of £5,000 per month since May 2006
(b) From the date of payment of the sum of £160,000 to Franks solicitors, Frank shall have no entitlement to any property income capital or profit of the Partnership nor any obligation to contribute to losses of the Partnership and shall only be entitled to receive from David the Principal Sum and other payments set out in this agreement
(c) Frank shall be deemed to have retired from the partnership upon the date of payment to his solicitors of the sum of £160,000 as set out in clause 3(a)(i) of this agreement);
(d) David shall thereupon succeed to all of Frank's interest in the Partnership and Frank shall then (if he has not already done so) immediately execute and deliver such documents and perform such acts as may be required to vest the entire legal or equitable ownership in any property of the Partnership (or the Properties) in David including but not limited to the documents set out in the schedules hereto. To the extent necessary any such documents will be deemed to be delivered by Frank upon the payment of £160,000 as per clause 3(a)(i) of this agreement to Frank's solicitors;
(e) Unless and until any such property is transferred or assigned, Frank shall hold it and any monies, goods or other benefits received in relation to it as trustee for David.
2.2 Frank must upon signing the agreement return to David all books of account, records, deeds, drafts, letters and other documents, whether in paper or electronic form, relating to the Partnership which are in his possession or under his control
2.3 Further Frank:
(a) WARRANTS AND UNDERTAKES TO AND COVENANTS WITH David and the Partnership that:
(i) So far as Frank is aware
(A) the creditors and liabilities of the Partnership are only those set out in schedule 2 ("the Creditors") which include any liability for any tax due and unpaid or which is later due and assessed as unpaid which shall include but is not limited Corporation Tax Value Added Tax or any levy or payment due in respect of any Construction Industry Scheme or arrangement by which the Company or the Partnership may howsoever be liable to any taxation in respect of any work carried out by any person by or for or on behalf of the Company or the Partnership
(B) In relation to the Partnership and the Company
1. without prejudice to the generality of clause [2.3(a)(i)(A)] the only claims against Frank the Partnership and the Company are those set out in Schedule 2
2. he has disclosed all and any claims against Frank the Partnership and the Company in Schedule 2
(C) all and any tax or levy of any nature (whether related to building work construction work or otherwise) which has accrued or is payable by or in respect of the Company has been paid
(D) he has not misappropriated or misapplied any asset of the Company or of the Partnership (but having regard to clause 2.1(a)).
(ii) he will
(A) act in good faith and fully co-operate with David in respect of the affairs of Partnership
(B) unless required to by law or by any Court of competent jurisdiction not howsoever assist any person (other than any creditor of the Partnership) in respect of any claim against the Partnership.
(iii) he will do all such things and sign all such documents as may be required in order to give effect to the provisions of this agreement.
(D) Frank undertakes that he is not aware of any outstanding claims against the Partnership, or of circumstances which could lead to such a claim, which have not been fully and promptly reported to the insurers of the Partnership.
(E) Frank undertakes that he will NOT incur or purport to incur any liability cost or expense of any nature whatsoever on behalf of the Partnership from the date of this agreement without David's prior written consent."
- Clause 2.3(a)(i)(B)(1) refers to "clause 2.4(a)(i)(A)", but must be a reference to clause 2.3(a)(i)(A). In any event, there is no clause 2.4. The provisions of clause 2.3 that I have omitted, sub-clauses (a)(iv) and (a)(v)(A) to (C), set out various obligations of Mr Otuo to sign and deliver letters and other documents to give effect to the end of the Partnership and the ending of the declarations of trust made by Mr Brierley in respect of the Properties.
- Schedule 2 to the Settlement Agreement, referred to in clause 2.3(a)(i), reads in full as follows:
CREDITORS AND LIABILITIES
|Drain test Fee
It is not in dispute that the amounts in the second column of Schedule 2 are denominated in Sterling.
- Clause 4 of the Settlement Agreement reads in full as follows:
"4. WARRANTY AND INDEMNITY TO FRANK
4.1 David warrants and undertakes to Frank that he will, in good faith, ensure that payment in full of such sums as are due is made to the Creditors from the assets of the Partnership. If David does not pay the same from non-partnership assets, he will use reasonable endeavours to sell a property or properties owned by the Partnership which after the deduction of any charges or encumbrances over any such property and the costs and expenses of sale will be sufficient.
4.2 David further warrants and undertakes to Frank that the net proceeds of sale of any Partnership properties shall first be applied in discharging such sums as are due to the creditors of the partnership.
4.3 If Frank is concerned that such sum as are due to the Creditors have not been paid
(a) Frank may in writing require David in writing to state within 14 days of such written request from Frank whether David has paid such sums as are due to the Creditors of the Partnership;
(b) If Frank wishes to make any further payments in addition to those which David has paid he shall give David 14 days written notice thereof
(c) If David does not agree to pay any such creditor being one of the Creditors the Partnership shall indemnify Frank in respect of such sum as is due and David consents to the amount of such payment as is due being secured by Frank against the titles to the properties owned by the Partnership.
4.4 In respect of 42 Holmewood Road London SW2 3RR David warrants and undertakes as soon as is reasonably practicable to grant long leases."
- The core of Mr Otuo's case is that Mr Brierley failed to comply with his obligations under clauses 4.1 and 4.2 of the Settlement Agreement, most importantly under the first sentence of clause 4.1 to make "payment in full of such sum as are due … to the Creditors from the assets of the Partnership". This, in his view, permitted him to invoke the procedure under clause 4.3. He therefore invoked that procedure and has, on his case, become entitled to be indemnified under clause 4.3 in respect of "such sum as is due" to any "Creditor", which Mr Brierley has not "agree[d] to pay".
- In a nutshell, Mr Brierley's defence is that he has not failed to comply with this obligations under clauses 4.1 and 4.2 and therefore the circumstances have not arisen entitling Mr Otuo to invoke clause 4.3. Even if that is wrong, Mr Otuo did not properly invoke clause 4.3 in accordance with its terms and certainly had not done so by the time he initiated these proceedings. There was therefore no cause of action at that time, and his case could and should be struck out on that basis alone.
Whether Mr Otuo was entitled to exercise his rights under clause 4.3
- I now turning to the first of the three issues summarised in para 2 above. A preliminary point to note is that although the purpose of the Settlement Agreement was to bring the Partnership to an end upon the payment of the first part of the Principal Sum (namely, the payment of £160,000, which was paid to Mr Otuo on the date of the Settlement Agreement), there are a number of provisions of the Settlement Agreement that refer to the Partnership as though it continues to exist after that date. An example that is prominent in the context of this case is clause 4.3(c), which provides that "the Partnership shall indemnify Frank" in the circumstances there described, which would ordinarily only occur after Mr Otuo's retirement from the Partnership. There is also a reference in that clause to "Properties owned by the Partnership" and references elsewhere in the document to assets owned by the Partnership. Where such a reference refers to a time after Mr Otuo's retirement from the Partnership has taken effect (namely, as it transpired, from the date of the Settlement Agreement), I have taken a reference to a claim, debt or obligation of the Partnership to be a reference to a claim, debt or obligation that was originally incurred on behalf of the Partnership and, if then still extant, became an obligation of Mr Brierley alone under the terms of the Settlement Agreement. Similarly, I have taken a reference to an asset of the Partnership simply to be a reference to an asset that belonged to the Partnership immediately prior to the dissolution of the Partnership under the Settlement Agreement and, by virtue of the Settlement Agreement, then became an asset of Mr Brierley alone (subject, in relation to a couple of the Properties, to certain contingent interests of Mr Otuo under clause 3(e) of the Settlement Agreement that were not at issue in the trial before me). It appears to me that this is consistent also with the way each party put his case, although this point was not directly addressed during the trial.
- The first important issue of interpretation is the scope of the term "Creditor" in the Settlement Agreement. In my view, clause 2.3(a)(i)(A) clearly defines "Creditor" to mean a creditor of the Partnership set out in Schedule 2. The language would be unambiguous to a reasonable person reading it in its contractual context and with knowledge of the background facts. Mr Otuo maintained, when pressed to clarify his view on this point during cross-examination, that the term should be construed to include creditors of the business as a whole, comprising the Company and the Partnership. But the text does not support this interpretation, there being no reason to depart from the ordinary and natural meaning of the words used in clause 2(a)(i)(A), which clearly limit the term to creditors of the Partnership set out in Schedule 2.
- This is important because Mr Brierley's principal obligation under clause 4.1 is to pay the Creditors as defined, and it is that obligation that is the subject of clauses 4.2 and 4.3. It may, in fact, be the case that there are other creditors of the Partnership that come to light, but for the purposes of clauses 4.1, 4.2 and 4.3, on which Mr Otuo's claim is based, we are only concerned with creditors of the Partnership, and not the Company, and we are only concerned with those creditors of the Partnership specified in Schedule 2.
- I note in this connection that in clause 2.3(a)(i)(A) Mr Otuo represented and warranted that there were no other creditors of the Partnership of which he was aware other than those listed in Schedule 2. He further "undertakes" (this, in context, clearly meaning "represents and warrants") in clause 2.3(a)(i)(D) that he is not aware of outstanding claims against the Partnership or of circumstances that could lead to such a claim that have not been "fully and promptly reported" to the insurers of the Partnership.
- The next question is whether the creditors specified in Schedule 2 are all Creditors in the sense described above, that is, creditors of the Partnership listed in Schedule 2. Clause 2.3(a)(i)(B) makes it clear that Schedule 2, at least potentially, includes creditors of (i) Mr Otuo personally (but, by necessary implication, in respect of obligations incurred by him in connection with the business he conducted on behalf of the Partnership and the Company), (ii) the Partnership and (iii) the Company. This also, in my view, explains the reference to liabilities of the Company in clause 2.3(a)(i)(A), which in the latter half of the provision is describing the scope of Schedule 2, as opposed to the scope of the defined term "Creditors".
- It was not in dispute before me that "inland revenue", which is clearly a reference to HM Revenue & Customs, was a creditor of the Company rather than the Partnership. Accordingly, it is clear that while all creditors of the Partnership are listed in Schedule 2, not all of the creditors listed in Schedule 2 are creditors of the Partnership. It therefore becomes necessary to identify which of those creditors listed in Schedule 2 are creditors of the Partnership rather than of the Company or of Mr Otuo personally.
- This is where the real difficulties begin. Recital C of the Settlement Agreement, to which I have already referred, confirms that Mr Otuo had de facto control of the development and management of the Properties prior to the date of the Settlement Agreement. Mr Brierley lived and worked at this time in Dubai. He did not have access, other than through Mr Otuo, to any information regarding the business of the Partnership or the Company. Mr Otuo conducted all of the relevant operations of both the Partnership and the Company and owed a duty to his partner, Mr Brierley, to maintain proper records of those dealings and to make those records reasonably available to Mr Brierley upon request.
- In an e-mail dated 8 March 2011, Mr Brierley wrote to Mr Otuo in the following terms:
"Referring to the Agreement we signed in January [the Settlement Agreement], in order for me to validate the so called creditors you listed in Schedule 2, can you please send me their contact details and supporting documentation.
I would like to draw your attention to the following:
Clause 2.3(a)(i)(A) states the following: 'So far Frank is aware, the creditors of and liabilities of partnership are only those set out in schedule 2.[']
Clause 4.1 states the following: 'David warrants and undertakes to Frank that he will, in good faith, ensure that payment in full of such sums as are due is made to made to [sic] the creditors from assets of the partnership'[.]
You did not provide me with any contact details or supporting documentation prior to signing; however; [sic] unless I can validate that the creditors listed by you in schedule 2 are liabilities of the partnership, I do not acknowledge any sums are due.
Delivery notice: As you are aware, there is no postal service in Dubai, thus when using a commercial courier, please make sure my address including cell number is listed and once dispatched, provide me with the waybill number in order for the delivery to be tracked."
- On 2 June 2011 Mr Brierley sent an e-mail to Mr John Andrews at Stone Rowe Brewer LLP, then acting as solicitors for Mr Otuo, in response to a message from Mr Andrews dated 1 June 2011 to Mr Simon Jacobs of Seddons, then acting as solicitors for Mr Brierley, confirming that Mr Brierley had still not received any communication from Mr Otuo under clause 4.3(a) of the Settlement Agreement and asking for tracking details of the communication that Mr Andrews said had apparently been sent. This appears to be a reference to a letter that Mr Otuo prepared dated 25 February 2011, and to which I will return in paras 43 to 47 below.
- In a letter to Mr Brierley dated 12 July 2012 (the "12 July 2012 Letter"), Mr Otuo set out in some detail the nature of the claims relating to the following claims listed in Schedule 2: Robert Wee, Jay Thenuwara, "Drain test Fee", Phillip Preston, "Building control Fees", Derick Campbell ("Derek Campbell" in the 12 July 2012 Letter) and Twumasi Otuo. He enclosed a number of documents relating to each of these claims. He also promised to follow up in relation to the claims relating to Hannah Otoo and Grzegorz Klisiewicz, which he did in a letter to Mr Brierley dated 16 July 2012. There is no information in either letter regarding the tenants' deposits claim.
- Mr Otuo admitted during cross-examination that, prior to the 12 July 2012 Letter, he had not provided Mr Brierley with specific information regarding any creditor listed on Schedule 2 in response to his request for information on 8 March 2011. His case, however, is that Mr Brierley knew or should have known about each of these creditors already and from other sources.
- For most of the creditors listed in Schedule 2, Mr Otuo was unable to demonstrate, by reference to the evidence adduced, what those sources were or how and why, in relation to any creditor, Mr Brierley knew or should have known about the creditor and the detail of his, her or its claim prior to the 12 July 2012 Letter. The possible exceptions are Mrs Lawton, Mr Wee and the category of claim labelled "tenants deposits" in Schedule 2. I will revert to each of these possible exceptions in due course.
- It is clear, as confirmed by Recital C, that Mr Otuo had sole control of the business, while Mr Brierley was resident in Dubai during the period with which we are concerned. On his own case, it was Mr Otuo who had incurred the liabilities on behalf of the Company and the Partnership that are reflected in Schedule 2. Therefore Mr Brierley was naturally dependent on Mr Otuo for information concerning those liabilities.
- Mr Roseman submitted that Mr Brierley's obligation under clause 4.1 to pay the creditors of the Partnership set out in Schedule 2 was, as a matter of construction, subject to three conditions precedent, namely, clauses 2.2, 2.3(a)(ii)(A) and 2.3(a)(iii), which I have set out in para 20 above.
- I am not sure that I agree with Mr Roseman that each or any of these provisions is, as a matter of construction, a condition precedent to the obligations of Mr Otuo under clause 4.1. First, there is the absence of wording in clause 4.1 making Mr Brierley's obligation expressly subject to Mr Otuo's compliance with each or any of the provisions. Secondly, the provisions referred to in para 39 above are each much broader than would be necessary in order to enable Mr Brierley to discharge a specified debt to a particular creditor of the Partnership. It would be unfair to Mr Otuo if he were not able to exercise his rights under clause 4.3 because of some failure to comply with one of these three provisions that did not relate to the specific creditor and specific claim.
- But it goes without saying that Mr Brierley cannot be expected to pay any alleged creditor of the Partnership without adequate evidence as to the identity of the creditor and the source and legitimacy of that creditor's claim. It is undisputed (and, indeed, confirmed by Mr Otuo in Recital C to the Settlement Agreement) that Mr Otuo had de facto control of the business of the Company and the Partnership, including knowledge of the dealings that lead to the purported claims listed in Schedule 2. Mr Otuo would therefore have sole control of any relevant written communications and other records relating to such claims. Mr Brierley lived and worked in Dubai throughout this period and was not involved in the day-to-day business of the Partnership and the Company.
- I would therefore put this on the footing of an implied term, within the principles summarised by Lord Hoffmann in Attorney General of Belize v Belize Telecom  1 WLR 1988 at para 21. In other words, it was an implied condition precedent to the obligation of Mr Brierley under clause 4.1 that Mr Otuo should provide him with the information necessary reasonably to establish the identity of each creditor of the Partnership and the source and legitimacy of that creditor's claim as listed in Schedule 2. This is a narrower condition precedent than those argued for by Mr Roseman. It is also fair to say that if Mr Otuo had fully complied with clause 2.2 (assuming he had kept proper records, which was itself subject to dispute between the parties), clause 2.3(a)(ii)(A) or clause 2.3(a)(iii), or any of them, in relation to the alleged creditors of the Partnership listed in Schedule 2, then the narrower condition precedent that I say should be implied would be fulfilled.
- It is clear to me, based on the contemporaneous evidence of the correspondence, and bearing in mind both that (i) Mr Otuo had de facto sole control of the business and incurred the liabilities alleged to be incurred on behalf of the Partnership and reflected in Schedule 2 and (ii) Mr Otuo admitted during cross-examination that he had not provided any information regarding the creditors in Schedule 2 to Mr Brierley prior to the 12 July 2012 Letter, that at the time that Mr Otuo issued the proceedings he had not satisfied the condition precedent as I have formulated it above, and therefore no obligation of Mr Brierley arose to any alleged creditor of the Partnership listed in Schedule 2, with the possible exceptions, already noted, of Mrs Lawton, Mr Wee and the tenants' deposits, to which, as I have said, I will in due course revert.
- My conclusion on the issue set out in para 2.i) above is that, subject to the possible exceptions I have mentioned and to which I will revert, Mr Otuo was not, at the time he issued these proceedings, entitled to exercise his rights under clause 4.3 against Mr Brierley by virtue of his failure to satisfy the condition precedent that he should provide Mr Brierley with the information necessary reasonably to establish the identity of each creditor of the Partnership and the source and legitimacy of that creditor's claim as listed in Schedule 2.
Whether Mr Otuo effectively exercised his rights under clause 4.3
- Regardless of whether Mr Otuo had satisfied the condition precedent to which I have referred to the obligations of Mr Brierley under clause 4.1, clause 4.3 merely requires that Mr Otuo be "concerned that such sums as are due to the Creditors have not been paid" before he is entitled to invoke it. Assuming, for the sake of argument, that there were such sums due to creditors of the Partnership, Mr Roseman submitted that Mr Otuo failed effectively to exercise his rights under clause 4.3.
- Mr Roseman submitted that, as a matter of construction, clause 4.3, which is set out in para 23 above, requires at least two steps to be completed in sequence, namely:
i) a written request under clause 4.3(a) from Mr Otuo to Mr Brierley, to which Mr Brierley must respond within 14 days as to whether Mr Brierley "has paid such sums as are due to the Creditors of the Partnership", followed by
ii) a written notice by Mr Otuo to Mr Brierley under clause 4.3(b) giving him at least 14 days' written notice of his intention to make "further payments" to Creditors in addition to any payments already made by Mr Brierley.
- According to Mr Roseman's construction of clause 4.3, having complied with this two-step process, Mr Otuo would only become entitled to be indemnified by Mr Brierley if Mr Brierley "[did] not agree to pay any such creditor being one of the Creditors".
- Mr Otuo's view is that the written request in clause 4.3(a) and the written notice in clause 4.3(b) are independent requirements and do not have to be complied with in sequence. On 25 February 2011 Mr Otuo wrote a letter to Mr Brierley in which he purported to comply with both clause 4.3(a) and clause 4.3(b) in the same letter. There is an issue as to the timing of the receipt by Mr Brierley of this letter to which I will return in a moment. In Mr Otuo's view, Mr Brierley failed to agree to pay the Creditors, and Mr Otuo is therefore entitled to an indemnity from Mr Brierley under clause 4.3(c) in relation to sums he has paid to discharge the relevant debts.
- In my view, it is clear that the correct objective interpretation of clause 4.3 is that the steps set out in that clause must be complied with in sequence. That is how the clause would be interpreted by a reasonable person considering the words in their contractual context with knowledge of the relevant background that would have been reasonably available to the parties at the time of entering into the Settlement Agreement.
- Viewed objectively, the purpose of the mechanism is clear. Mr Brierley needs to be given the opportunity first to say whether he has paid the sums due. Only once he has had that opportunity and either failed to take advantage of it or positively confirmed that he has not paid those amounts within the stipulated 14 days should Mr Otuo be able to give the stipulated 14 days' notice that he will make "further payments" to the relevant Creditors. The purpose of this additional 14 day period is to permit Mr Brierley to respond to Mr Otuo's stated intention to make any such payments himself, for example, to avoid duplication of payment or to clarify any misunderstanding as to which Creditors have been paid and which remain outstanding. That much would, in my view, be clear to a reasonable person reading this clause, as I have said, in its contractual context and with knowledge of the relevant background reasonably available at the relevant time.
- Accordingly, Mr Otuo's letter of 25 February 2011 was insufficient to invoke his right to indemnification under clause 4.3, regardless of when it was effectively received in accordance with the clause 16 of the Settlement Agreement, which sets out the requirements for notices given under the Agreement.
- The issue of when Mr Brierley effectively received Mr Otuo's letter of 25 February 2011 was canvassed before Birss J at a pre-trial hearing relating to this claim, to which I have already referred. In his judgment ( EWHC 472 (Ch)) at para 8, he stated his conclusion that the letter "clearly did not arrive with Mr Brierley until June 2011". Mr Otuo appeared to concede the point at the trial, presumably in light of Birss J's conclusion. Given my conclusion that the letter was, in any event, ineffective to trigger Mr Otuo's right to an indemnity under clause 4.3(c), nothing turns on the timing of Mr Brierley's receipt of the letter. At best, it satisfied the requirement of clause 4.3(a), but Mr Otuo would still have been required to provide 14 days' written notice under clause 4.3(b), which he clearly did not do before he issued these proceedings.
- Accordingly, in relation to the issue set out in para 2.ii) above, I conclude that at the time he issued these proceedings, Mr Otuo had not effectively exercised his rights under clause 4.3 in compliance with the procedure set out in clauses 4.3(a) and (b).
- In view of these conclusions, the issue set out in para 2.iii) above does not arise for consideration. In other words, the conclusions I have already reached are enough to dispose of Mr Otuo's claim. For the sake of completeness, however, I shall now, as briefly as possible, consider the evidence and arguments concerning the other individual claims listed in Schedule 2.
Jay Thenuwara, Derrick Campbell and Grzegorz Klisiewicz
- In his order made on 17 February 2015, Birss J struck out any claim of Mr Otuo for any liability in relation to Jay Thenuwara, Derrick Campbell (listed as "Derick Campbell" in Schedule 2) and Grzegorz Klisiewicz (listed as "Greg" in Schedule 2). I turn now to the other creditors listed in Schedule 2.
HM Revenue & Customs
- I have already dealt with HM Revenue & Customs in para 31 above. It was not a creditor of the Partnership.
- Karen Lawton confirmed in her witness statements dated 12 December 2012 and 23 January 2013 that the debt of £66,000 referred to in Schedule 2 to the Settlement Agreement (the Schedule being exhibited to her second witness statement for identification) was "absorbed" by a personal loan made by her to Mr Brierley on 20 September 2010. I understand this to mean that she has forgiven the debt of £66,000 to the extent that it was owed, in words drawn from the second paragraph of her second witness statement, by "the Partnership and/or David Brierley in his personal capacity and/or Brierley & Otuo Limited [i.e. the Company]" in consideration of Mr Brierley accepting it as part of the principal of a new, larger loan to him personally. Mrs Lawton's evidence expressly avoids clearly characterising the original loan as a loan to the Partnership, as opposed to a loan to the Company or Mr Brierley personally. In any event, she confirms that she was not, as of 20 September 2010, a creditor of the Partnership, if she ever was.
- In June 2008 Mr Robert Wee made a loan to the Company of £175,000. Each of Mr Otuo and Mr Brierley signed a somewhat curious document dated 22 June 2008 and headed "Declaration of Assets for the Purpose of Loan Guarantee". It is a little over a page, excluding the signature blocks, and states that Mr Otuo "has secured a loan of £175,000 from Robert K.H. Wee … to Finance [sic] various business transactions on behalf of [the Company]". It further provides that the loan will bear an interest rate of 7.75 per cent per annum and will be repaid on 30 June 2009 in the amount of £188,562.50. It then provides as follows:
"In the event that the payment [on 30 June 2009] has not been made Frank Otuo and David Raymond Brierley and 'the Company' will have by virtue of this agreement authorised the sale at current market values, of all their assets mentioned hereunder in order to pay the debt owed to Robert Wee."
The document then lists seven of the Properties, provides for English law to govern and the English courts to have jurisdiction, and is signed by each of Mr Otuo and Mr Brierley above their own names and by Mr Otuo on behalf of the Company.
- The document does not mention the Partnership expressly or provide expressly that the loan is guaranteed by the Partnership or by either Mr Otuo and Mr Brierley each acting in an individual capacity. It is not even entirely clear whether Mr Otuo and Mr Brierley are doing more than simply undertaking to direct the sale of the named Properties in the event that the loan is not repaid on time. But the document could plausibly be construed as a guarantee of the loan by the Partnership, which, if correct, would have made Mr Wee a creditor of the Partnership as at the time Mr Otuo issued these proceedings to the extent that the loan had not, at that point, been repaid.
- By the time of the trial Mr Wee was no longer a creditor of the Partnership, if he ever was, by virtue of a settlement agreement entered into between Mr Wee and Mr Brierley dated 26 February 2013. This followed an earlier offer made by Mr Brierley to Mr Wee in July 2012 to settle the debt for £200,000, which Mr Wee accepted in a letter dated 23 August 2012 to Mr Brierley.
- Despite Mr Wee no longer being a creditor of the Partnership (if he ever was) or of the Company (which, as already noted, had been dissolved by the registrar of companies on 14 December 2010), Mr Otuo wished to call Mr Wee as a witness at the trial. On 5 March 2015, Mr Justice Peter Smith made an order giving permission to Mr Otuo to require the attendance of Mr Wee, subject to the condition that Mr Wee was to be examined "solely for the purpose of what dealings he has had with the Defendant after 26 February 2013 in relation to the settlement agreement entered into between Mr Robert Wee and the Defendant of the same date".
- Mr Wee was called and examined by Mr Otuo, whom I had to direct carefully at times to ensure that he complied with the condition of Peter Smith J. I found Mr Wee to be a straightforward witness who was trying his best, in circumstances he clearly found stressful, to tell the court the truth in relation to the questions he was asked. His evidence, however, did not go to any issue that I need to decide in relation to this matter, and therefore I have not relied on it.
The remaining Schedule 2 creditors
- Accordingly, by the time of the trial of his claim, the only creditors listed in Schedule 2 in relation to which there was a triable claim were Hannah Otoo, Phillip Preston, Twumasi Otuo, "tenants deposits", "Building control Fees", "Drain test Fee" and "Holmewood" (the "Remaining Schedule 2 Creditors"). In relation to each of these, Mr Otuo has provided no evidence that he provided any information to Mr Brierley prior to the 12 July 2012 Letter, much less information sufficient to enable Mr Brierley to identify the creditor and verify the source and legitimacy of the claim. For example, Mr Otuo did not provide Mr Brierley with copies of any invoices relating to any of these purported creditors and their claims listed in Schedule 2 prior to issuing these proceedings, nor had he even provided contact details to Mr Brierley by that stage.
- In the cases of Mrs Lawton and Mr Wee, each of whom was no longer a creditor of the Partnership by the time of the trial (if either was ever a creditor of the Partnership), Mr Brierley had direct dealings and could be presumed to have had sufficient information as to the nature and details of their claim. In relation, however, to the Remaining Schedule 2 Creditors, with the exception of "tenants deposits", to which I will turn in a moment, Mr Otuo has provided no evidence on which I could conclude:
i) that any such creditor is a creditor of the Partnership as opposed to the Company or Mr Otuo individually; or
ii) that Mr Otuo has fulfilled the condition precedent to the obligations of Mr Brierley under clause 4.1 that I have found to apply in paras 39 to 41 above.
- Prima facie, it is almost certainly the case that the "Building control Fees" and "Drain test Fee" are claims against the Company, through which the construction and development side of the business was operated, rather than a claim against the Partnership, and this appears to be confirmed by the 12 July 2012 Letter. In that same letter, Mr Otuo states that the claim owed to Phillip Preston is "attributable to B&O Ltd", that is, he was a creditor of the Company rather than the Partnership. In any event, in his letter to Mr Brierley dated 25 February 2011, to which I have referred in para 48 above, Mr Otuo stated that he had already paid the claim of Phillip Preston and the claim labelled "Building control Fees". Accordingly, none of these three claims fell, or were capable of falling, within the scope of clause 4.
- In relation to Hannah Otoo, Mr Otuo provided to Mr Brierley prior to the trial a copy of a bank statement indicating that she had made a payment into the Company's bank account. In the case of Twumasi Otuo, Mr Otuo's brother, Mr Otuo provided to Mr Brierley, with the 12 July 2012 Letter, a copy of a set of bank statements for the Company showing payments received from Twumasi Otuo into the Company's bank account totalling £12,000. Mr Otuo argued that the payments by his brother constituted a loan to the Partnership, but he had not, even by the time of the trial, provided evidence that the Partnership (or even the Company) had agreed to borrow the money from Mr Twumasi Otuo. The bank statements do not, in either case, indicate the purpose of the payments.
- Accordingly, the bank statement evidence is not capable of substantiating Mr Otuo's claim that either Ms Otoo or Mr Twumasi Otuo is a creditor of the Partnership (or, as I have said, even of the Company). I also note that, in any event, none of this bank statement evidence was provided to Mr Brierley in response to his requests for information regarding the Schedule 2 creditors prior to the 12 July 2012 Letter, sent almost a year after Mr Otuo had commenced these proceedings.
- In relation to the claim in Schedule 2 labelled "Holmewood" in the amount of £1,132, Mr Otuo acknowledged during cross-examination that he had been paid by Mr Brierley, and so I need say no more about this.
- In relation to the claim in Schedule 2 labelled "tenants deposits" in the amount of £19,945.68, the evidence provided at trial was relatively scanty. I will refer to such evidence as there was in a moment, but, for example, I was not given a list showing the relevant tenants, Properties and deposit amounts aggregating to the figure I have just mentioned or, apart from a couple of passing references, any information about the specific tenancy deposit scheme or schemes by which the deposits were protected in accordance with the provisions of sections 212-215 of and Schedule 10 to the Housing Act 2004.
- As I have already held that Mr Otuo failed effectively to exercise his rights under clause 4.3 by following the stipulated procedure, his claim for an indemnity under that clause fails in relation to this part of his claim relating to the tenants' deposits as much as to the claims of the Remaining Schedule 2 creditors that were still "live" as at the time of trial. However, as, despite scanty evidence, there was full argument about this part of the claim, it may assist the parties for me to express my view on this part of the claim.
- Foxtons acted as letting agent for the Properties. It appears that this amount related to various deposits received by Foxtons acting as letting agent for the Partnership in relation to some of the Properties. In an e-mail dated 14 March 2011 from Ms Kate O'Neill in the Tenancy Department at Foxtons to Mr Brierley, Ms O'Neill confirmed that:
"All deposits have been dealt with in line with the tenancy deposit scheme. Deposits have been passed to Mr Otuo with the confirmation of the tenants in each case and on receipt of confirmation of his membership to [sic] an approved scheme."
- Unfortunately, Ms O'Neill did not provide any further information in that e-mail regarding the scheme (for example, as to the identity of the scheme), but it appears that Mr Otuo did register the deposits with an approved scheme.
- Mr Timothy Francis, writing on behalf of a company named TEA London Limited, sent an e-mail dated 5 March 2011 to Mr Otuo, Mr Brierley and various others relating to a tenancy at the Property at 77 St Julian's Farm Road. The implication of the e-mail was that the tenancy was a corporate tenancy in favour of TEA London Limited, although this was not expressly stated in the e-mail or confirmed by any other evidence adduced during the trial. Mr Francis confirmed that the premises had been vacated two weeks earlier, complained about the lack of communication regarding the deposit (including any proposed deductions) and asked for repayment. Mr Francis also confirmed that:
"Foxtons has provided notice that the deposit is registered with the TDSL in a letter date [sic] 18 February 2009, yet when we asked them for it, they say it is landlord held."
- The reference to "TDSL" is presumably to Tenancy Deposit Solutions Limited, which operates MyDeposits, an insurance based tenancy deposit scheme. The Housing Act 2004 provides that, under an insurance based tenancy deposit scheme, the landlord retains the deposit but owes various obligations to the scheme administrator. If the landlord defaults in repayment of a deposit registered with the scheme, then the tenant may seek to recover its deposit from the scheme administrator, which will then take action against the landlord. The scheme administrator is required to effect and maintain adequate insurance in respect of the possible failure of a landlord to repay a deposit as directed by the scheme administrator.
- Another tenant, Mr Liam Curd, provided a witness statement dated 30 May 2013 in relation to these proceedings. In his witness statement, he referred to proceedings he had issued on 22 April 2013 in Northampton County Court against Mr Otuo and Mr Brierley in the amount of £1,787.06, seeking repayment of his deposit for his assured shorthold tenancy at Flat C, 6 Maplestead Road, which commenced on 28 March 2009 and came to an end on or about 31 July 2012. In his Particulars of Claim in the Northampton County Court proceedings, Mr Curd noted that he "was not presented with a certificate that his deposit was registered in a certified deposit scheme".
- If true, this would, of course, be a contravention of the requirements of the Housing Act 2004 relating to tenancy deposit schemes for which prima facie Mr Otuo would be responsible. Mr Curd noted in his witness statement that he had not retained a copy of the assured shorthold tenancy agreement, and therefore the possibility cannot be discounted that he had received a tenancy deposit scheme certificate and misplaced it along with the tenancy agreement. In his Re-Amended Particulars of Claim, Mr Otuo notes that, "to the best of his knowledge", Mr Brierley settled the claim of Mr Curd, and Mr Otuo therefore reduces his claim in relation to tenants' deposits to the amount of £18,158.62.
- The foregoing is, more or less, the extent of the evidence with which I was presented regarding the tenants' deposits, other than some references to tenants' deposits in correspondence between Mr Otuo and Mr Brierley and in their respective witness statements prepared for the trial, on neither of which, as I have already stated, do I place much direct reliance for the reasons I have given. Mr Otuo would, presumably, have been in a position to provide more detail regarding these, including, for example, as to the individual deposit amounts, the scheme with which each was registered and so on, given his de facto control of the Partnership during the relevant period.
- In his e-mail to Mr Otuo of 8 March 2011, Mr Brierley asked for such information, and it does not appear to have been forthcoming. If, however, Mr Otuo registered the tenants' deposits with an insurance based scheme, such as MyDeposits, then as the representative of the landlord he would have received the deposits and would have been under no obligation, as far as the scheme was concerned, to place the monies received into a separate designated account in the name of the scheme administrator, as would have been required if the deposit were registered with a custodial tenancy deposit scheme, as provided for under the Housing Act 2004.
- It appears from some of the statements that Mr Brierley makes in correspondence in 2011, in his Amended Defence and in his witness statement dated 26 February 2015 that he was under the impression that the tenants' deposits should have been paid into a designated account and that Mr Otuo had breached a statutory obligation in failing to do so. If, as appears to have been the case, the tenants' deposits were registered with an insurance based scheme, then Mr Otuo would have been entitled to receive the funds as the authorised representative of the landlord and to use them for the purposes of Partnership business. Mr Otuo claims that he had told Mr Brierley that he had applied the funds for the purposes of the development side of the business, and that Mr Brierley had agreed to his doing so. Mr Brierley disputes this. It is not necessary for me to resolve that issue.
- It is clear that liability for any deposits taken from tenants of any of the Properties and not yet repaid as at 14 January 2011 became a liability of Mr Brierley as the successor in interest and liabilities to the Partnership under the Settlement Agreement. Therefore, if the aggregate figure of £18,158.62 (after deduction of the settlement of Mr Curd's claim) is accurate and represents genuine claims by former tenants of the Properties, then the tenants would be Partnership creditors, and this amount would be capable of falling within the procedure set out in clause 4.3.
- Leaving aside Mr Otuo's failure properly to invoke the clause 4.3 procedure before issuing these proceedings, Mr Brierley's defence is broadly two-fold. First, Mr Otuo has failed to provide adequate evidence of the identity of each former tenant and his, her or its specific claim, sufficient for Mr Brierley to verify the authenticity of the claim. Mr Otuo says that Mr Brierley is in possession of sufficient information, including, for example, the relevant assured shorthold tenancy agreements. If that is the case, the information was not adduced as evidence during the trial.
- Secondly, Mr Roseman on behalf of Mr Brierley argued that Mr Otuo, in his handling of the tenants' deposits, clearly breached the Settlement Agreement and is now seeking to rely on that breach to obtain an indemnification from Mr Brierley under clause 4.3. Such a reliance is, he submitted, prohibited as a matter of law.
- Mr Roseman referred me to the speech of Lord Jauncey in the case of Alghussein Establishment v Eton College  1 All ER 267 (HL). Lord Jauncey in his speech summarised the "long line of authority" that held that "a contracting party will not in normal circumstances be entitled to take advantage of his own breach as against the other party" (ibid at p 270). As to whether this is an absolute rule of law and morality or a rule of construction, he declined to decide, although he indicated that he thought in an appropriate case, such as a case of self-induced frustration, it might apply as an absolute rule. He was of no doubt that "the weight of authority favours the view that, in general, the principle is embodied in a rule of construction rather than in an absolute rule of law" (ibid at p 274).
- Mr Roseman referred to the following statement made by Mr Otuo in an e-mail dated 6 March 2013 to David Brierley:
"All the deposit [sic] where [sic] put into company account and were used for the building projects. It changes nothing as they were listed and declared as creditors."
- This, according to Mr Roseman, is an admitted breach of clauses 10.4 and 10.5 of the Partnership Agreement, which require all sums received by or on behalf of the Partnership to be paid promptly into a Partnership bank account and require that no monies may be transferred out of a Partnership bank account for a sum in excess of £2,000 unless signed by both parties. There seemed to be a question as to whether a Partnership bank account had, in fact, ever been set up, which would complicate the analysis of whether this constituted an admission by Mr Otuo of a breach of the Partnership Agreement. The key point for present purposes, however, is that the principle articulated by Lord Jauncey in the Alghussein Establishment case only applies where a party seeks to rely on its breach of the contract under which it is seeking a benefit. I do not need to decide for present purposes whether a broader principle might come into apply that would prevent a party from relying on its breach of one contract with the other party from seeking a benefit under another contract with the same party.
- Mr Roseman also submitted that Mr Otuo had breached his fiduciary duty as a partner of Mr Brierley to act in utmost good faith and to disclose all wrongdoing on his part prior to entering into the Settlement Agreement, which would include disclosing to Mr Brierley that he had breached the requirements of the Housing Act 2004 in relation to the tenants' deposits. I am not satisfied, based on the evidence to which I have referred, that there was such a breach by Mr Otuo. There is evidence provided by Foxtons that he registered the deposits with a tenancy deposit scheme and evidence provided by one tenant, Mr Timothy Francis on behalf of TEA London Limited, that Mr Otuo registered that deposit with an insurance based tenancy deposit scheme rather than a custodial scheme. I do not have evidence on which I can confidently conclude, on a balance of probabilities, that Mr Otuo failed to comply with other provisions of the Housing Act 2004 in relation to the tenants' deposits, for example, the provision of prescribed information to the tenant or other relevant person within 30 days of receipt of the deposit, as required by section 213 of the Housing Act 2004.
- Mr Roseman further submitted that Mr Otuo's failure to disclose to Mr Brierley prior to the signing of the Settlement Agreement that the tenants would have a claim against the Partnership in relation to their deposits amounted to a breach of clause 2.3(v)(D) of the Settlement Agreement, under which Mr Otuo represented and warranted that he was unaware of any outstanding claims or circumstances that could lead to a claim against the Partnership. Mr Otuo did, however, disclose the existence and aggregate amount of the tenants' deposits claims, by listing that category of claim and the aggregate amount in Schedule 2. It is not now suggested that there are any other outstanding deposits owed to former tenants.
- Mr Otuo does appear to have failed to provide sufficient further detail to Mr Brierley regarding each individual claim comprised within the aggregate amount set out in Schedule 2, and Mr Brierley has been forced to deal with each claim as it has, in effect, come out of the woodwork. This is clearly unsatisfactory and, as I have already said, a failure by Mr Otuo to fulfil a condition precedent to the obligations of Mr Brierley under clause 4.3. While I am not able to conclude that Mr Otuo has breached clause 2.3(v)(D) of the Settlement Agreement in relation to the tenants' deposits, it seems to me, on a balance of probabilities, that he has breached clause 2.2 of the Settlement Agreement. He should have kept proper records of each tenant, the deposit taken, the scheme with which the deposit was registered and so on. Mr Otuo is an experienced businessman. On his own case, he did receive the deposits and did register them with a tenancy deposits scheme, and the evidence I have already discussed appears to support that. He would therefore have had records relating to the deposits. Those records should have been supplied to Mr Brierley in accordance with clause 2.2, and he was therefore in breach of that clause.
- Accordingly, on the basis of the evidence I have reviewed in relation to the tenants' deposits, it seems to me that Mr Otuo's claim under clause 4.3 of the Settlement Agreement in relation to the tenants' deposits fails, not only by virtue his failure to comply with the relevant condition precedent and his failure to comply with the procedure set out in clause 4.3, but also by virtue of the application of the rule articulated by Lord Jauncey in the Alghussein Establishment case.
- Given that the Partnership held the relevant Properties and was the landlord in relation to each tenancy prior to the dissolution of the Partnership, it would appear prima facie that the relevant tenants were creditors of the Partnership and therefore "Creditors" as defined in the Settlement Agreement. Upon succeeding to the liabilities of the Partnership by virtue of the Settlement Agreement, Mr Brierley would, as the landlord, be liable to each of the tenants whose claim has been included in the aggregate amount set out in Schedule 2 and who has not yet been paid. Mr Otuo, however, is not able to obtain any indemnification under clause 4.3 in relation to any such claim, for the reasons I have stated.
- In paragraph 31 of his Re-Amended Particulars of Claim, Mr Otuo seeks an order for specific performance by Mr Brierley of his obligation to repay such tenants' deposits as remain outstanding. I do not, however, see that there is any basis on which it would be appropriate to exercise my discretion to order specific performance in accordance with the well-established principles that govern such exercise.
Estate Agents' Fees claim
- In his Re-Amended Particulars of Claim, Mr Otuo seeks an order that the amount of £28,269.01 be paid to Foxtons by Mr Brierley as fees for Foxtons acting as letting agent for the Partnership. This claim appears to have arisen after the date of the Settlement Agreement. If this is a genuine and unsatisfied claim against the Partnership, it would fall to Mr Brierley to pay this amount. Mr Otuo has no claim in his own right against Mr Brierley in relation to this amount, which is not listed as an outstanding claim against the Partnership in Schedule 2. Accordingly, this part of Mr Otuo's claim also fails.
- Furthermore, Mr Otuo's failure to disclose this as a potential liability to Foxtons by the Partnership would appear to be a breach of clause 2.3(a)(v)(D).
- Once again Mr Otuo seeks an order for specific performance of the alleged obligation to Foxtons for its fees. There is no basis, however, on which it would be appropriate for me to order specific performance of this payment obligation, assuming that it arose and remains outstanding.
- My last observation applies more generally to Mr Otuo's prayer in his Re-Amended Particulars of Claim that the court order specific performance "of the entire Agreement by the Defendant".
No cause of action at the date of the claim
- In paras 18 to 38 of his judgment of 17 February 2015 on the application of Mr Brierley for summary judgment, Birss J dealt with the question of whether Mr Otuo had a cause of action at the time he issued proceedings. Broadly, he concluded as follows:
i) Assuming that it is correct, as a matter of construction of the Settlement Agreement, that it is a condition precedent to the obligations of Mr Brierley under clause 4.3 that Mr Otuo should provide sufficient evidence of each claim in Schedule 2, it becomes a question of fact and evidence, rather than construction, as to what constitutes sufficient evidence in relation to a specific claim. In other words, if Mr Brierley was already in possession of sufficient information regarding a claim listed in Schedule 2, then it cannot be right to deny Mr Otuo his rights under clause 4.3 for failure to provide further information regarding that claim. It being a matter of fact and evidence, Birss J concluded that it needed to be addressed at trial and not decided on an application for summary judgment.
ii) Regarding Mr Roseman's argument that Mr Otuo failed to comply with the procedure required by clauses 4.3(a) and (b), Birss J considered that it was a matter of fact, to be considered at trial, whether there had been a communication by Mr Otuo to Mr Brierley capable of amounting to satisfaction of clause 4.3(a) so that the letter dated 25 February 2011, found by Birss J to have been received by Mr Brierley in June 2011, would have been the notice required by clause 4.3(b). This was another reason for his refusing to grant Mr Brierley's application for summary judgment or to strike out the claim, the same test applying in either case.
- As already discussed, I have found that Mr Otuo did not, as a matter of fact, comply with clause 4.3(a) prior to the letter dated 25 February 2011 and, as a matter of construction, his letter dated 25 February 2011 could not satisfy both clause 4.3(a) and clause 4.3(b). Accordingly, at the time Mr Otuo issued proceedings, in my view he had no cause of action under clause 4.3 against Mr Brierley.
Interest due on late payment of £60,000
- As I have already discussed in para 19 above, under the Settlement Agreement Mr Brierley was required to pay Mr Otuo a further £60,000 to complete payment of the Principal Sum on the first anniversary of the Settlement Agreement. He made the payment late on 29 April 2013, and Mr Otuo claims interest of £3,825 in respect of this late payment under clause 5 of the Settlement Agreement. Mr Brierley does not dispute that this amount is due.
- Other than in relation to interest on the late payment of £60,000, Mr Otuo's claim fails for the reasons I have given.