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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Kilcarne Holdings Ltd v Targetfollow (Birmingham) Ltd & Anor [2005] EWCA Civ 1355 (16 November 2005) URL: https://www.bailii.org/ew/cases/EWCA/Civ/2005/1355.html Cite as: [2005] EWCA Civ 1355 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
Hon Mr Justice Lewison
Strand, London, WC2A 2LL |
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B e f o r e :
(Vice-President of the Court of Appeal, Civil Division)
LORD JUSTICE CARNWATH
and
SIR MARTIN NOURSE
____________________
KILCARNE HOLDINGS Ltd |
Claimants/ Appellants |
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- and - |
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TARGETFOLLOW (BIRMINGHAM) Ltd & anor |
Defendants/ Respondents |
____________________
Christopher Nugee QC and Joanne Wicks (instructed by Linklaters) for the Respondents
Hearing dates : July 25th, 26th and 27th
____________________
Crown Copyright ©
Sir Martin Nourse:
"It is said that Daphne Caprice is the ultimate owner of both Kilcarne and Rosedale; but the precise structure of ownership is obscure . . . Mr Singh is at pains to point out that he does not control Daphne Caprice and is not a director of or otherwise connected with Kilcarne or Rosedale. Although Kilcarne and Rosedale are incorporated in different places, they are administered from Jersey."
"Mr Black did not attend any relevant board meetings. There was at least one other director but she plays no part in the story, apart from having attended two board meetings and having signed documents. The trusteeship of the Jadriya Trust has since passed to HSBC. This may explain why neither Ms Wilkinson nor anyone else from [SCGTC] gave evidence at the trial.
Mr Singh is, however, the managing director of Sitac Ltd, which, he says, acted for Kilcarne. Mr Singh is also the majority shareholder in Sitac. He describes Sitac as an adviser to companies in the Daphne Caprice group."
"The Noteholders and the Company confirm that this Loan Note Instrument may be supplemented and/or replaced by an agreement in writing between both parties in relation to the proposed joint development of the Property" (emphasis added).
(1) At 16.31 hours on 1st February Mr Singh emailed a recommendation to Ms Wilkinson. He said:
"The intention is to turn the project soon and since your exposure is £1m as secured creditor with 1st charge, the risk return opportunity is excellent. I have personally known Ardeshir since late 80's and know that he has very high integrity and can recommend this deal to you strongly."
(2) At 10.27 hours on 4th February, Mr Cooper (of TGL's solicitors) sent an email to Mr Naghshineh which he copied to Mr Singh. The email attached a draft side letter from TBL addressed to Kilcarne and Rosedale. It began by saying:-
"This letter confirms our understanding of a joint venture agreement we wish to complete with yourselves following the completion of the proposed Funding and subsequent development of Baskerville House."
In paragraph 4 the draft said:
"In relation to the above funding arrangements we confirm our intention to enter into good faith negotiations in order to complete a joint venture agreement whereby from the date of the proposed funding above all costs incurred in relation to the development, purchase and running of Baskerville House will be shared between [TBL] and one of your companies."
The judge said it was not disputed that the draft letter was duly received by Mr Singh, who said, however, that he did not read it at the time.
(3) On 5th February the board of Kilcarne met in Jersey. It resolved to proceed with the transaction, which was minuted as consisting of two investments of which the second related to the Birmingham loan notes. The minutes recited that Kilcarne had been in negotiations with TBL regarding an investment of £1m loan notes and that an instrument by TBL constituting the principal thereof was before the meeting. The material resolution of the board was expressed thus:
"IT WAS RESOLVED THAT the Company proceed with the investment of £1,000,000 . . . . Loan Notes of £1 each to be repaid at base rate plus 2% plus a sum equal to 50% of the Net Sale Proceeds of [Baskerville House]".
There were further resolutions to proceed with a legal charge by TBL over Baskerville House and a personal guarantee given by Mr Naghshineh. As the judge observed (para. 106), the board minutes said nothing about a joint venture agreement.
(1) Does TBL hold the lease (or TGL the shares in TBL) on a constructive trust for Kilcarne under a Gissing v Gissing [1971] AC 886 constructive trust?
(2) Does TBL hold the lease (or TGL the shares in TBL) on a constructive trust for Kilcarne under a Pallant v Morgan [1953] Ch 43 constructive trust?"
Mr Nugee QC, for TGL, has said that a Gissing v Gissing constructive trust received almost no attention below, having not been referred to in Kilcarne's opening submissions (written or oral) nor in its written closing submissions; there was only a fleeting reference to it in Mr Purle's oral closing submissions (of which we have seen a transcript). However, Mr Nugee has not suggested that Mr Purle is not entitled to base his primary claim in this court on that principle.
"To put it positively, what Kilcarne relied on in entering into the transaction was the form of the written documents embodying the contractual arrangements (which it may not fully have understood), rather than any oral discussions between Mr Singh and Mr Naghshineh or Mr Singh's emails recounting those discussions."
Although the judge was there dealing specifically with the question of reliance in relation to a Pallant v Morgan constructive trust, it follows inevitably from his finding that, in relation to the £1m lent by Kilcarne to TBL, the parties intended that their rights and obligations should be governed simply by the instrument creating the Birmingham loan notes.
"I begin by looking at Kilcarne's understanding. Mr Singh's recommendation to Ms Wilkinson of 1 February was expressed in terms of a secured loan. It said nothing about a joint venture agreement. . . Kilcarne's board also approved the various documents, which included the Birmingham loan notes, containing clause 8. Clause 8 contained the confirmation that the loan notes 'may' be supplemented or replaced by a joint venture agreement. Otherwise the minutes of the board meeting say nothing about a joint venture.
These, surely, represent Kilcarne's understanding of the transaction it was agreeing to undertake. In the absence of any evidence from Ms Wilkinson I am not prepared to infer that Kilcarne had any greater understanding. Indeed, I think it is likely that Mr Singh himself had the same understanding, although what is relevant is Kilcarne's understanding rather than Mr Singh's."
Earlier, in para 176, the judge had reverted to the omission to call Ms Wilkinson and Mr Black. Although he repeated that the trusteeship of the Jadriya Trust had since passed from SCGTC to HSBC, he described the omission as "striking".
"Broadly, I consider that Targetfollow's understanding was the same as Kilcarne's. But there is this difference. Assuming that Mr Singh did not read the side-letter attached to the email of 4th February, Targetfollow would, in my judgment, have been entitled to assume that he had."
Further reference is made to para. 241 below. At this stage it is enough to say that the question whether TBL would have been entitled to assume that Mr Singh had read the side letter is not one of importance. That is because the judge had already found (paras. 239 and 240) that Kilcarne's understanding of the transaction was as set out in its board minutes. In any event, the side letter shows clearly that TBL's understanding was that there were going to be "good faith negotiations in order to complete a joint venture agreement", ie that it had no fixed intention to enter into such an agreement at that stage. In the circumstances, the side letter was evidence which supported the judge's conclusion that the necessary common intention was lacking.
"I find that Mr Singh and Mr Naghshineh both positively intended that a joint venture agreement of some sort should be entered into, and both were confident that agreement on its terms would be reached. But I accept Mr Naghshineh's evidence that further important details were left for future discussion and both he and Mr Singh envisaged that the joint venture agreement would be a written one."
"Essentially the principle is that (i) if A and B agree that A will acquire some specific property for the joint benefit of A and B and (ii) B, in reliance on A's agreement, refrains from attempting to acquire the property, then equity will not permit A, when he acquires the property, to keep it for his own benefit, to the exclusion of B."
"This, I think, has an obvious bearing on whether it is unconscionable for TBL to set up its title to the lease of Baskerville House as representing its beneficial entitlement. If A claims against B that there is an understanding between them that [B] will acquire property for the joint benefit of both of them, and B has attempted to make it clear to A, before the acquisition, that the furthest he is prepared to go is to say that he will enter into good faith negotiations, why should B's conscience be affected if, unknown to him, A does not read what he has sent?"
"It is important to stress that this is not a claim brought either by Mr Singh or by Sitac. Sitac was given the opportunity to be joined into the proceedings but declined."
"So under the first way in which the case is advanced Kilcarne must establish that TBL or TGL requested Kilcarne (not Sitac or Mr Singh) to provide services. There is simply no evidence to this effect. It is not in dispute that Mr Singh did actively involve himself in the progress of the development . . . So far as the outside world is concerned, Mr Singh presented himself either as Mr Singh personally or as Sitac. He did not represent that he was performing any service on behalf of Kilcarne. There is no evidence of any communication between Mr Naghshineh and Kilcarne in Jersey relating to Mr Singh's services; and no evidence that Mr Singh ever passed on to Jersey any request for the provision of his (or anyone else's) services. On the one occasion when Mr Singh raised with Mr Naghshineh the question of payment for his services (following Frontier's approach) it was a payment to Sitac (not Kilcarne) that was under consideration."
"The obvious question is: what contract? Mr Purle's answer is the joint venture agreement. But in my judgment Kilcarne (as opposed to Mr Singh) had no expectation that a joint venture agreement would materialise. It was merely a possibility for the future, if terms could be agreed. In the meantime, it was content to rely on its security and the possibility of a 50 per cent share in profit if the development were to be sold before 31st January 2007. That possibility, as I have said, explains its decision to incur a liability to Sitac and/or Mr Singh for monitoring the development."
Lord Justice Carnwath:
Lord Justice Brooke: