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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> The Northampton Regional Livestock Centre Company Ltd v Cowling & Anor [2015] EWCA Civ 651 (30 June 2015)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2015/651.html
Cite as: [2015] EWCA Civ 651, [2015] 4 Costs LO 477, [2016] PNLR 5

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Neutral Citation Number: [2015] EWCA Civ 651
Case No: A2/2014/1415
A2/2014/1434

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
MR JUSTICE GREEN
HQ12X03155

Royal Courts of Justice
Strand, London, WC2A 2LL
30/06/2015

B e f o r e :

LADY JUSTICE ARDEN
LORD JUSTICE TOMLINSON
and
LADY JUSTICE KING

____________________

Between:
The Northampton Regional Livestock Centre Company Limited
Appellant
- and -

(1) Richard Andrew Cowling
(2) Neil Richardson Lawrence
Respondents

____________________

Matthew Reeve & Emily McCrea-Theaker (instructed by Geoffrey Leaver Solicitors LLP) for the Appellant
Timothy Walker (instructed by DFA Law LLP) for the First Respondent
David Lewis (direct access) for the Second Respondent
Hearing dates: 3, 4, 5 March 2015

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Tomlinson:

    Introduction

  1. Like many other livestock markets in the UK, the Northampton Livestock Market was dealt a mortal blow by the foot and mouth crisis of 2001. The livestock auction at Northampton closed permanently in October 2002 and shortly thereafter a decision was taken by the company which owned it, the precursor of the Appellant, to sell the site on which the market was situated. Unhappily the process of disposal, which was protracted, has spawned equally protracted litigation. The litigation has in part, I have no doubt, been driven by considerations other than economic expedience. That said, on the findings of the judge, the litigation has vindicated the assertion by the owners of the market that one of those entrusted with the task of selling the site, a partner in a firm describing itself as "property consultants", had profited from an egregious breach of fiduciary duty. The irony of the litigation is that, in my view, it has demonstrated conclusively that that breach of fiduciary duty has conferred upon the owners of the market a substantial windfall benefit. However, it is right that a fiduciary should be made to account for the profit which he obtained by reason of his breach of fiduciary duty. The principal point on this appeal has been, to my mind, whether the judge was right to exonerate from joint and several liability for this breach of fiduciary duty the defaulting fiduciary's partner who was himself unaware of his partner's sharp practice. The innocent partner is Mr Andrew Cowling, a chartered surveyor, and the First Respondent to this appeal. His then partner, Mr Neil Lawrence, the Second Respondent to this appeal, has no professional qualification.
  2. The trial occupied eleven days and the judge, Green J, produced a long and careful judgment of immense detail, to be found at [2014] EWHC 30 (QB). I propose only to summarise the facts relevant to the issues which arise on this appeal. My summary will often be taken almost verbatim from the judge's account and not always with attribution. For a deeper understanding of the facts resort may be had to the judge's judgment. The judge's careful and for the most part unchallenged findings in my view rendered forlorn most of the points pursued on this appeal.
  3. Mr Cowling is the central figure in this dispute. He is a Northampton man born and bred, who qualified as a chartered surveyor in 1977 after obtaining a degree in Estate Management at Reading University. After training at the national firm Chestertons in London he practised as a chartered surveyor and auctioneer with the family firm Merry Sons and Cowling in Northampton until 1996. In that year he set up a commercial property practice entitled "Merry's Commercial Limited" with Neil Lawrence and two other partners. On the retirement of those two other partners in July 2002 Mr Cowling and Mr Lawrence formed a new partnership known as MCL Property Consultants, ("MCL").
  4. Mr Cowling and Mr Lawrence were the two defendants at trial, separately represented. The Claimant at trial, Appellant on this appeal, is, as I explain hereafter, effectively the owner of the market site. It appeals on the point of joint and several liability and also against the judge's conclusion that the Respondents were not negligent in their conduct of the marketing and sale of the site. Mr Lawrence appeals against various of the judge's conclusions. Mr Cowling supports his appeal in those respects.
  5. The facts in outline

  6. In the 1990s redevelopment plans formulated by Northampton Borough Council ("NBC") threatened the continuation of the livestock market which had been held on two successive town centre sites since the 19th Century. The company from which the site was leased and by which the market was operated, Northampton Livestock Sales Limited ("NLS") resolved to move the market out of the town centre. It sought to acquire a new 12.7 acre site at Lilliput Road, Brackmills, ("the Site"). For that purpose a new company was formed, Northamptonshire Auctions PLC ("the Company"). Mr Cowling was at all material times Chairman of the Company and the largest single shareholder in it, holding 41%. Mr Lawrence at no time had any interest in the Company. The Claimant at trial, Appellant on this appeal, is The Northampton Regional Livestock Centre Company Limited. The Appellant is the assignee of the Company's causes of action, if any, against Mr Cowling and Mr Lawrence. The Claimant/Appellant brought this action on behalf of all shareholders in the Company, including therefore Mr Cowling.
  7. The Site was sold to the Company in 1996 by the Commission for New Towns, a Government agency later renamed English Partnerships, ("EP"). Planning permission for an auction and sales centre with associated facilities and overnight lorry parking had been granted in September 1995.
  8. The planning permission granted in 1995 was not limited to use of the Site for the auction of livestock, although that was the use to which it was mainly put until 2002. The Local Plan for 1997 records that B8 permission was given to allow the relocation of the livestock auction out of the town centre and to the Site. The category B8 is "distribution warehouse." B1 is office use. B2 is light industrial. There was an ambiguity about the Local Plan that later caused considerable debate among developers. The initial 1997 Local Plan did not expressly prohibit the use of the Site for other B1, B2 or B8 purposes; but nor did it expressly permit such usages or suggest that the planning authorities would adopt a sympathetic approach to further applications for change of use. In February 2005 NBC confirmed that the Site could, within its existing consent, be used as a car auction and sales centre, i.e. sale of prestige and imported vehicles, or as a receivership auction centre, i.e. sale of bankrupt stock, written-off vehicles, plant and machinery, office furniture etc. and as a commercial vehicle auction centre.
  9. The Site had clear development potential. It is close to junctions 15, 15a and 16 on the M1 motorway. It is adjacent to the Brackmills industrial estate. Northampton is of course a prime centre for logistics and warehousing located in the middle of England.
  10. The Site was sold to the Company by EP at a discounted price of £52,500, a relatively nominal consideration to reflect its intended use as a cattle market, thereby preserving this facility for the benefit of the local farming community. However in view of its development potential EP insisted on an "overage" or "clawback" provision pursuant to which EP would be entitled to a percentage of the increase in value of the Site over a base value of £1.2 million in the event of a change of planning use occurring over the next 21 years. The percentage clawback started at 100% of the incremental increase in value over the first two years, but then reduced over time. In respect of a change of use permitted by a planning permission granted between 2004 and 2006, which is broadly the period of interest in the present case, the clawback was 40%. Thus had the company in 2005 sold the Site for £3 million on a basis which was contingent on the purchaser obtaining planning permission for change of use, 40% of the increase in value over £1.2 million, thus £720,000, would have been payable to EP, leaving the Company with a net recovery of £2.28 million.
  11. The purchase price of £52,500 represented only a small part of the Company's initial investment. Mr Cowling and his friends managed to raise £750,000, of which £320,000 represented a personal investment in the company by Mr Cowling. A further £750,000 was borrowed from National Westminster Bank. To the purchase price of £52,500 was added a further approximately £47,500 comprising vendor's costs, infrastructure contribution to the vendors of £36,300 and a contribution towards compensation payable to an agricultural tenant. A further £1.3 million was spent on road engineering and market facilities such as internal and external livestock pens, sale rings, café, sale rooms, offices and lorry park as well as water and sewerage infrastructure.
  12. The foot and mouth crisis of 2001 effectively destroyed the livestock auction business of the Company. After a brief resumption of trading in 2002 the livestock auction business was permanently closed in that year. From 2002 onwards the Company explored the possibility of obtaining planning permission for a change of use to B1, B2 or B8 usage. The Company retained a limited income from lorry parking and the on-site café, which was insufficient to enable it to meet its overheads. From 2002 onwards the financial position of the Company became ever more stretched. Its indebtedness to the bank mounted substantially as its income stream declined. Its only material asset was the Site which would have to be sold in order to repay the bank and to provide at any rate some return to shareholders. Accordingly, shortly after the permanent closure of the market, the Board of the Company resolved to sell the site.
  13. At this stage, as already explained, the Site had planning permission for use, in substance, only as an auction centre. There was powerful and durable opposition from the local farming community, some of whom were minority shareholders in the Company, to any sale of the Site on the basis of redevelopment which risked a change of use away from that of a cattle auction and market. The farming community was not only vocal but was also well organised and pursued a vigorous campaign, deploying all sorts of stratagems and devices, to prevent the local planning authority from agreeing to any change of use. They were in this regard effective. The planning authority more or less set its face against any redevelopment of the Site away from that of an auction facility and, more specifically, a cattle auction facility. This meant that, if the full development value of the Site was to be unlocked, it had to be made part of a much wider, comprehensive, development which involved not only the cattle market site but the two adjacent sites, both of which happened to be owned by EP. These adjacent sites were known as D1, which was land to the north of the Site; and a green space site to the south. I shall refer to these adjacent sites in this judgment as the "D1" site and the "Green Space" site.
  14. When the time came for the Company to sell the Site there were two basic sale options open to it, the unconditional basis and the conditional basis. The unconditional basis was to sell the Site on the basis of its existing permitted planning use, leaving it to the purchaser to assume the task of exploiting the Site commercially on the basis of existing permitted use or alternatively seeking planning change of use either for the Site in isolation or as part of a wider and more comprehensive redevelopment. The conditional basis was to sell the Site upon a basis which involved, either wholly or in part, an element of payment which was conditional upon redevelopment, which necessarily involved a permitted planning change of use.
  15. It is, unsurprisingly, common ground that there is a material difference in the value of land with and without planning permission for a change of use. If land is sold on the basis of its existing use then a purchaser will pay for the land on the basis of that permitted use but will, or might, pay in addition an increment to reflect the planning potential of the land. This increment is called the "hope" value. In such a sale the consideration paid to the vendor is not made contingent upon a change in planning use. In contrast, in a conditional sale, all or some of the consideration may be contingent upon permission to change usage. The value of the "hope" element in an unconditional sale and the value of the contingent element in a conditional sale depend upon the likelihood of the planning authorities granting change of use as well as a range of commercial considerations, such as the availability of finance for redevelopment, the existence of partners to share risk, etc.
  16. In the present case, the Site, when marketed, did not have permission for a change of use. Accordingly, if the sale was to have been on a conditional basis this would have involved the Company assuming risk, i.e. that planning consent would be obtained within a reasonable period of time, and/or that an agreement could be reached under which the purchaser still paid a significant up-front component of the total consideration payable, with the contingent element deferred.
  17. When the Company initially sought offers for the Site it did not limit the offers it sought. They could be conditional or unconditional. It left it to the market to decide. The Site did stimulate considerable interest which included conditional offers but none came to fruition. This was particularly the case with a development company called Prologis.
  18. The Prologis Agreement

  19. On 28th December 2001 Prologis Developments Limited ("Prologis") expressed interest in the Site. They made an offer of £4m gross of clawback (which amounts to £2.88m net). The Board discussed the offer. Proposed Heads of Purchase were compiled with Prologis on 11th June 2002. A conditional contract was signed on 4th April 2003 for the conditional sale and development of the Site. The sale was subject to satisfaction of a "Condition Precedent". This was that the "Unconditional Date" should occur prior to the Termination Date. The latter date was defined as the first to occur of (i) the date on which proceedings are exhausted and a satisfactory planning permission is not granted or (ii) the fourth anniversary of the agreement. In other words, unless planning consent was obtained within four years the agreement lapsed. Within that timeframe, Prologis was obliged to apply for planning permission (clause 19) and, if successful, purchase the Site at a rate of £400,000 per developable acre. On grant of planning permission Prologis was to pay a further sum equal to the clawback payable to EP. A further development agreement was entered into with the Company for a 50/50 profit share upon the successful completion of a development scheme.
  20. For a variety of reasons the agreement, though prima facie very attractive, ran into the sands. The Company used MCL to act for it on an unremunerated basis during this period. Mr Cowling asked Mr Lawrence to assist Prologis to seek and obtain planning change of use. Mr Lawrence attended a number of meetings with NBC, EP and others in relation to this project. He did this on behalf of the Company since it was obviously in the Company's interests that Prologis should succeed in obtaining planning permission. However, as the judge described in his judgment at paragraphs 77-83 and 98-102, both NBC and EP proved obstructive. It was clear that planning permission for change of use on the Site was going to be extraordinarily hard to achieve. So far as concerns the prospect of Prologis and the Company coming to terms with EP for a comprehensive deal involving the Site and EP's adjacent land (D1 and the Green Space), this too proved remarkably difficult. Indeed, EP ultimately took the view that Prologis should "butt out" of the agreement with the Company, as the judge described at paragraph 78 of his judgment.
  21. In late September/October 2004 Prologis approached the Company with a view to unwinding the agreement. This loss of confidence on the part of Prologis was what caused Mr Cowling on behalf of the Company formally to instruct MCL to seek to market the Site again. The Board of the Company gave Mr Cowling express authority to negotiate a release of the Prologis agreement. At trial there was an issue whether Mr Cowling's handling of the Prologis contract was negligent. The judge found that it was not, and there is no appeal against that finding.
  22. Thus MCL had acted for the Company from about 2002 onwards in relation to the possible sale of the Site to a purchaser. Mr Cowling, in his oral evidence, accepted that he had no fee paying retainer from the Company at that stage and that his involvement with Mr Lawrence, qua partners in MCL, was speculative, in that they merely hoped that in due course their work would lead to remunerative work. But Mr Cowling also accepted without hesitation that both he and Mr Lawrence were at this stage acting for the Company and owed fiduciary duties, notwithstanding the absence of any immediate remuneration. He said that both of them knew that they would be in a position of conflict if they acted for two parties to a transaction without obtaining the consent of the Company, their principal. MCL's relationship with the Company was hence long-standing and arose in large measure because of Mr Cowling's position on the Board of the Company, his knowledge of the business and his long experience as a surveyor, and because, to put it shortly, the Board trusted his judgment in matters relating to property sales and valuation.
  23. The financial position of the Company

  24. The financial position of the Company had deteriorated during the currency of the Prologis agreement. Turnover, £1.209 million at its peak in 2000, declined to £0.462 million in 2003, £0.246 million in 2004 and £0.135 million in 2005. Over the same period profits of £17,425 in 2000 were followed by losses of £203,474 in 2001, £302,339 in 2002, £104,295 in 2003, £72,201 in 2004 and £138,324 in 2005. The Company's position was dire and it survived only by the courtesy of its bankers, by now Royal Bank of Scotland, ("RBS"). By 2002 the Company's borrowings were in excess of £1.8 million. In March 2002 the bank increased the Company's overdraft facility by £150,000 over and above the existing £250,000, but interest on the incremental £150,000 was at 3.5% above base rate whereas the first £250,000 attracted interest at 1.5% above base. The bank now required a fee of £5,000 to be paid upon successful sale of the Site. During the course of 2003 the bank tightened the screw further. The operations of the Company were insufficient to meet the monthly outgoings, in consequence of which the bank viewed the Company as now essentially a component part of a property transaction rather than as a trading company. The price of the bank's continued support was that it required a property participation agreement whereby it would receive 3% of the sale value of the property. At the end of 2003 the Company had to ask the bank to increase the facility by a further £50,000. The price of this modest extension was severe. In return for agreeing to lend a further £50,000 the bank now demanded a 6.8% stake in the proceeds of any sale of the site and required the Company to remain in credit on its current account and to pay interest on its borrowings quarterly. On 28 June 2004 all bank loans were consolidated into one loan repayable on or before 4 April 2007. However the position worsened. In 2004 interest payments were only met because the directors personally lent £30,000 to the Company, and even with that assistance the Company went into overdraft, and thus became in breach of its banking covenants, when meeting the June, October and December interest payments.
  25. Just to anticipate the later position, in June 2005 the Company was unable to meet the interest payments due that quarter. The bank's view was, as it had been since September 2004, that interest payments were for the shareholders to service. The Company was by now pursuing an offer to purchase from Denbigh Land at £3.25 million, subject to written confirmation from the local planning authority that the Site could be used as an auction centre for the sale of motor vehicles and that this was permitted under existing planning consent. By early June it was apparent that Denbigh was procrastinating and the Company returned to the market. Discussions were entered into with London and Cambridge Property ("L&CP") by whom a formal offer of £3 million was made on 30 June 2005. On the strength of these offers being on the table the Company was able to persuade the bank to defer the outstanding interest payment pending receipt of the sale proceeds from one or other of these projected sales, an agreement set out in the bank's letter of 24 June 2005. Not long after the ink was dry on that letter both transactions fell through – Denbigh Land by 6 July and L&CP on 27 July. The Company was by then in extremely dire straits. The basis upon which it had sought and obtained indulgence from the bank had evaporated.
  26. The formal instruction of MCL

  27. On 18 October 2004 Mr Cowling, in his capacity as Chairman of the Company, sent to Mr Lawrence, as partner of MCL, a Letter of Instruction to "market the site on our behalf on the basis of its existing use as an Auction Centre and Lorry Park". Mr Cowling and Mr Lawrence discussed the terms of the instruction between them before the letter was sent but the decision as to the terms of the Letter of Instruction was Mr Cowling's. His fellow directors were however fully informed and gave their consent.
  28. The Letter of Instruction reads:-
  29. "Dear Neil,
    Re: The Auction Centre, Lilliput Road, Brackmills, Northampton
    We are concerned at the delays being experienced by Prologis Developments in developing the above site, which we understand, are due to inactivity by English Partnerships in respect of the neighbouring land.
    Following discussions between the Company and Prologis, we can advise you that Prologis are flexible in whether they complete their conditional contract to purchase the site. We therefore instruct your practice to market the site on our behalf on the basis of its existing use as an Auction Centre and Lorry Park.
    As you are aware, the site is subject to a claw-back in favour of English Partnerships should planning permission for an alternative use be granted. No claw-back is payable if the site is sold on the basis of existing use. Hence we are not interested in receiving offers that are conditional on a change of use.
    Would you please set out your practice's terms for handling the sale on behalf of the Company, together with your recommendations for marketing the site. MAM Transport and S W Wreford & Son, both of whom have expressed interest in purchasing the land, have already approached us. However, there may well be other potential purchasers, both locally and on a more national basis, which you will be able to attract.
    We look forward to hearing from you shortly."
  30. Two important limitations were accordingly imposed upon MCL. First that the site should be marketed only "…on the basis of its existing use as an Auction Centre and Lorry Park". Secondly, that the Company was not interested in obtaining conditional offers.
  31. Mr Lawrence, on behalf of MCL, responded on 20th October 2004. He confirmed that MCL was happy to accept the instructions to act in relation to the disposal of the Site. He then set out his advice. Mr Lawrence did not question or query the sense or wisdom of the two limitations. He fashioned his advice very clearly with the use limitation in particular in mind. The advice can be summarised in the following way.
  32. Mr Lawrence stated that MCL would work "closely with you" and would make a "substantial and positive contribution to the disposal of this property". He emphasised that MCL would adopt a coordinated, carefully structured and positive marketing campaign to ensure that the "objectives of Northamptonshire Auctions Plc are met". He then set out a marketing strategy which included the use of agency boards and the production of property particulars. In relation to mailing, he identified the interest that might be shown by hauliers at both national and local level and from those national companies which have "requirements for trailer parking and fleet maintenance facilities". He referred to a mailing exercise to target "specific occupier groups located in the main commercial centres in the counties of Cambridgeshire, Warwickshire, Leicestershire, Buckinghamshire and Bedfordshire". In this regard he added the rider that it was "clearly possible" that a potential purchaser for a "property of this type" will be advised by a professional agent and that accordingly the particulars should be advertised through the "Agents Clearing House". In respect of advertising he suggested a budget of £3,000 with a highly targeted approach to local property and business press as well as Property News Midlands, Logistics Manager, the Estates Gazette and Property Week.
  33. Particulars of sale were produced. They stated "Conditional offers are unlikely to be of interest to the Vendor". However, the particulars did not preclude conditional offers and indeed some were lodged as serious propositions and were put to the Board as such. The advertising made clear that offers in excess of £3.5m were sought for the property which was being sold freehold. No leasehold offers were sought. Copies of extant planning permissions were attached to the particulars.
  34. In return for accepting instructions on a sole agency basis, MCL was to receive a fee of 1.25% of the final sale price plus expenses incurred in advertising the Site. The normal commission charged by MCL was 1.5% and this was a discount on the normal rate. Mr Cowling described this as "competitive" and the judge had no doubt that this was a fair description of the fee.
  35. The marketing exercise by MCL generated five offers. The Denbigh offer was accepted as the highest unconditional bid. Although the Board of the Company naturally placed great reliance upon Mr Cowling's experience in property matters, it is clear from the judge's findings that this was again a fully informed decision taken at the meeting of the Board on 8 February 2005.
  36. Mr Lawrence decides to leave the partnership

  37. It was at about this time that Mr Lawrence first intimated to Mr Cowling a desire to leave the partnership. I must set out the judge's findings as to how the parting of the ways was effected as they are crucial to the resolution of the question whether at the relevant time in August and September 2005 Mr Lawrence continued to owe a fiduciary duty to the Company. It is the case of Mr Lawrence that he resigned from the partnership with effect from 4 July 2005, and that thereafter he owed no continuing duty to the Company and was free to exploit all opportunities without limit. It was however the Appellant's case, accepted by the judge, that whilst de facto the relationship between Mr Cowling and Mr Lawrence changed as from 4 July 2005, Mr Lawrence continued to owe a fiduciary duty to the Company until 23 September 2005, the date on which the Site was finally sold to Earlplace Limited ("Earlplace").
  38. The reasons for the judge's conclusions on this point are as follows:-
  39. "203. Mr Lawrence argued that he resigned from the MCL partnership on 4th July 2005 and was free thereafter to exploit all opportunities without limit. He considered that this extended to seeking out clients who might purchase the Site. He says that the opportunity to act for Earlplace and his involvement in the sale of the Site to Earlplace all occurred after he had resigned from MCL and ceased to owe any duty to the Company. Mr Cowling in his Witness Statement says that Mr Lawrence first intimated a desire to leave the partnership in February 2005 and that in consequence he realised that he needed to take steps to find a new practice from which he could continue working. He discussed options with Mr Lawrence and they sought professional (non-legal) advice which was that the best option was for him and Mr Lawrence to sell the business of MCL allowing Mr Lawrence to retire from MCL and Mr Cowling to carry on practising in some new guise. Mr Cowling then commenced discussions with Carter Jonas, the national organisation of surveyors and estate agents. He explained that he and Mr Lawrence agreed that the proceeds of any sale would be split 50:50 between them. Mr Cowling prepared a statement of current instructions. Towards the end of May 2005 the basics of a sale to Carter Jonas were close to fruition. In his Witness Statement Mr Cowling stated that, following a meeting with a Mr Howarth of Carter Jonas on 4th July 2005: "Neil and I left that meeting believing that everything was pretty much agreed. I was pretty confident that a deal would be struck. Neil was anxious to move on. We thereafter agreed that his involvement in MCL would cease". But negotiations proceeded slower than anticipated and in fact, it was only on 13th September 2005 that the sale of the MCL business to Carter Jonas was completed. He also says that the Board was well aware of this and was content that Mr Lawrence would be free to pursue his own interests. In his witness statement and in oral evidence, Mr Cowling accepted that there were certain caveats to the proposition that Mr Lawrence was wholly released. He recognised, for instance, that the delay in the sale of the MCL business to Carter Jonas meant that "technically" the partnership did not end on 4th July 2005.
    204. For the reasons set out below whilst I accept that de facto the relationship between MCL and Mr Lawrence changed as from 4th July 2005, I do not accept that Mr Lawrence ceased to owe a fiduciary duty to the Company as of that date. That duty ceased only on 23rd September 2005 when the Company and Earlplace exchanged contracts for the sale of the Site. I record below chronologically the relevant evidence.
    205. First, there is the evidence of Mr Lawrence himself as to the hurdles that he accepted had to be overcome before he would resign from MCL. He was, as of 4th July 2005, well aware that he and Mr Cowling had to bring the partnership to an end before he could cease to be a partner. The point in time at which Mr Lawrence would leave the partnership was connected with the sale of MCL. Mr Lawrence in his Witness Statement describes the agreement that he had with Mr Cowling in the following terms:
    "… we agreed that I would leave MCL once we had found a surveying company that was a suitable "fit" in terms of acquiring or merging with MCL and could offer Andrew the opportunity to continue practising as a chartered surveyor" (italics added).
    206. When he reflected on this some years later (in the course of preparation for this trial) Mr Lawrence was of the view that it was completion of the due formalities of the sale to Carter Jonas that would trigger his cessation as a partner: See paragraphs [220, 221] below.
    207. Next, on 26th July 2005, some 3 weeks after he says he resigned from MCL, Mr Lawrence wrote to Peter Springett of EP stating that an employee of NBC had told him that Wrefords had not obtained planning consent and that his clients "haven't a chance" of using the auction centre site for anything other than a cattle market. He observed that his effort to have a constructive conversation with this official about "the bigger picture" had proven ineffectual. He sent the email using the MCL email address. The "client" was clearly the Company. Peter Springett replied on 2nd August 2005 to Mr Lawrence, also at his MCL email address, stating that he had taken up the opportunity to move forward a comprehensive development scheme for the three Brackmills sites which included the Site, the D1 land and the Green Space with WNDC. He stated that the authority had expressed interest in looking further at the possibilities. He stated that he was awaiting a response from the Development Corporation but anticipated that this would be positive and he asked whether the cattle market was still available as "…we would need to factor in the opportunity to safeguard the Cattle Market function". It is thus apparent that (i) Mr Lawrence was communicating with EP on behalf of MCL and the Company in late July 2005; and (ii) just days later, Mr Springett of EP believed that he was dealing with Mr Lawrence still acting on behalf, via MCL, of the Company. Mr Cowling said in evidence that he was away on holiday at this time and was unaware of the exchange. He speculated that he might have learned about it at the end of August. He understood, based upon this exchange, that Mr Lawrence was acting for the Company.
    208. On 10th August 2005, Mr Lawrence wrote on MCL headed notepaper to an agent whom he understood was acting for Brownhills Leisure Group in respect of their search for locations along the M1 corridor. He explained that he acted for a client that owned a site located in Northampton which he considered might be of interest to the agent's client. It is clear from the context that the client that owned the site was the Company. He expressly represented that he had specific instructions from the Company as to whom he should be approaching and that the Company would accept an offer on a freehold or leasehold basis. He said that "…he has been instructed to approach a select number of alternative named occupiers with this opportunity on a confidential basis". He also said: "My clients will look at disposing of the site on either a freehold or leasehold basis". As of 10th August 2005, Mr Lawrence was explicitly holding himself out as acting for the Company and more specifically, as having express instructions from the Company to approach selected potential purchasers to seek freehold and/or leasehold offers. There was some confusion about this communication since it emanated from Mr Lawrence's personal email (not that of MCL) but the email itself was in the form of a letter on MCL headed note paper. But quite irrespective of precisely how this came about, it is clear that the missive was sent by Mr Lawrence purporting to acting for the Company with its express authority and instructions. I say "purporting" because in oral evidence Mr Lawrence explained that in fact he was not authorised by the Company to send this letter (upon the basis that he had hitherto resigned from MCL on 4th July 2005) and he therefore sent the letters on his own account in the hope of drumming up some interest which he, personally, could then exploit in bringing a potential customer to the Company.
    209. It is common ground that Mr Lawrence came into the MCL office to cover for Mr Cowling on MCL business including in relation the sale of the Site on behalf of the Company, when Mr Cowling was away of holiday 1st – 5th, and, 15th – 19th August 2005.
    210. On 15th August 2005, Mr Cowling made himself a file note (on a sheet of paper headed "Record of Meeting") of a meeting with Carter Jonas in relation to the sale of the MCL business. In that note he noted: "Neil Lawrence retiring no written partnership agreement - NL due to finish by 31/8". The inferences to be drawn are obvious namely that Mr Lawrence had not, in Mr Cowling's view yet retired from MCL and that event was intended to be linked to the Carter Jonas sale.
    211. At about this time (on 17th and 18th August 2005) Mr Lawrence sent about 30 letters to prospective purchasers of the Site in the motor vehicle sector in which, once again, he expressly purported to be acting on behalf of the Company with its express instructions. He gives as his contact address his personal email, but he explicitly holds himself out as acting for the Company. It is quite clear that the "client" he says that he is acting for is the Company. Two facts in relation to these letters are relevant. First, Mr Lawrence sent the letters at the request of Mr Cowling with a view to re-marketing the Site following the collapse of the L&CP offer (as to which see paragraph [123] above). Secondly, but inconsistently, Mr Lawrence explained in his oral evidence that notwithstanding this he was not, in his view, acting for the Company but was instead acting on his personal behalf. So for example he inserted the reference to leasehold offers in the hope that an offer might come in that he – personally – could take to investors and exploit for a fee. He was seeking to earn money out of these opportunities by purporting to act on behalf of the Company when in his own mind this was part of a stratagem to further his own commercial interests. He never disclosed to Mr Cowling or to the Company his real intentions or the reason why he inserted the reference to the Company seeking leasehold offers. In cross examination the following exchange occurred:
    "A. As I say my view at the time was there was a site there that was for sale. It had an existing consent, that was the simplest way of realising a sale. And what I'd hoped to do, you know, if one or two of those had come back leasehold, is then to take that to an investor and in this case I started to talk to Denbigh Land at the end of August again with a view to try and put a deal together
    Q. So we're clear about this, and there may be no embarrassment about this on your part, Mr Lawrence, what you expected is to get an instruction from Denbigh which would give you a fee from them is that right?
    A. I would hope that, if I was able to put a deal together for Denbigh, that I would be recognised in some way, yes
    Q. You recognised that you weren't serving the interests of the company at that point?
    A. I wasn't representing the company, but, as I said before, I maintain to this day I always worked in the company best interest, both in terms of my personal relationship with Andrew Cowling – I wanted to see the site sold and the shareholders receive some return on their investment as opposed to the route taken by other parties who wouldn't have allowed that to happen."
    212. It was put to Mr Lawrence by Mr Reeve that this was "not the best business practice". Mr Lawrence first responded: "What do you mean". Counsel elaborated: "Well to allow statements to go out that are misleading like this?" To which the answer was:
    "A. Well, I'm not going to disagree with that. It's loose language, I completely accept that, but I'm sure if you went through the files of an awful lot of commercial property agents you would see similar language being used when they trying to put deals together".
    213. This was not just "loose language"; this was on Mr Lawrence's own account a deliberate policy of seeking to use, in an actively misleading manner, the Company's name in order to drum up business from which Mr Lawrence intended he would earn fees. Moreover, he did this having agreed with Mr Cowling to seek to re-stimulate the market on behalf of the Company. He did not tell Mr Cowling about his ulterior motives, nor did he show Mr Cowling the letters before they were sent. This has significance because it had hitherto been no part of the Company's marketing plan that they should seek leasehold offers and indeed the published particulars expressly seek only freehold offers (see paragraph [112] above).
    214. On 9th September 2005 Mr Lawrence sent an email to the Company's solicitor, Mr Mike Thomson, in which he said in relation to the Site: "I'm pleased to advise that terms have been agreed between our mutual clients, Northampton Auctions Plc and Earlplace Ltd in respect of a sale of the above property". He drafted the email himself. He added his name and "MCL Property Consultants". When questioned about this he accepted (i) that he had personally typed the email (ii) that he had also personally typed the words "MCL Property Consultants" (he said that he had erroneously used a lower case "p" instead of upper case "P" – and hence this showed that it was specifically typed by him) and he expressly accepted that when he used the phrase "our mutual clients" he was referring to Northampton Auctions Plc (not Earlplace). He thereby made a clear representation to the Company's solicitor that he was still acting for the Company.
    215. On 13th September 2005 a Deed of Dissolution was entered into between Mr Lawrence and Mr Cowling in the context of the Carter Jonas sale which makes it quite plain that as of that date Mr Lawrence was still a partner of MCL and, of course, MCL still acted for the Company. The Deed is signed by both Messrs Lawrence and Cowling and it was witnessed and signed by Mr Michael Thomson, the Company's solicitor. Under the heading "Background" the document records that for some years the parties had carried on the business of chartered surveyors and development consultants under the name "MCL" which is defined as "the Firm". It records further that they had agreed to transfer "their business as a going concern to Carter Jonas LLP under an Agreement for Sale between them and Carter Jonas". The text then goes on to record that "…in due course when all monies due to the Firm have been received under the Sale Agreement and otherwise to cease their partnership". There then followed the terms which governed dissolution. Clause 1 expressly stipulated:
    "1. Dissolution. The said partnership shall be dissolved on a date to be agreed or as recommended by the Firm's accountants Hawsons".
    216. MCL's accountants recommended that the partnership be dissolved only in 2012 when all of the monies that were owed to MCL (under the Sale Purchase Agreement – see below) were fully paid up. Clause 5 recorded that because Mr Lawrence had rights to fees earned in his capacity as partner Mr Cowling owed him a duty to act in his best interests.
    217. Also, on 13th September 2005 Mr Lawrence and Mr Cowling entered the Sale Purchase Agreement with Carter Jonas. Recital 1 to the agreement provided: "The Sellers are now and have for some time been carryings on in partnership the business of property consultants under the business Name". "Sellers" was defined as "…the partnership carried on by the sellers". This was an express representation to Carter Jonas that as of the date of the agreement Mr Lawrence was still a partner of MCL. Under paragraph 2.1 of Schedule 6 they warranted as "Sellers" that they had full power and authority to enter into and perform the agreement and all related agreements. This agreement was much more than a legal nicety or a technical detail (as both Mr Lawrence and Mr Cowling at various points suggested). Had the MCL partnership really dissolved on 4th July 2005 then Mr Cowling would have continued thereafter as the sole proprietor of the MCL business and he would have been the sole vendor of the MCL business to Carter Jonas. Any reconciliation of moneys owed by MCL to Mr Lawrence would have had to be resolved through an entirely separate agreement between MCL and Mr Lawrence. However, to the contrary, for the reason that he was as of the date of the sale an extant partner, Mr Lawrence obtained material benefits under the sale agreement to Carter Jonas.
    218. Of further significance is the fact that pursuant to the Letter of Instruction of 18th October 2004 MCL was to be paid commission at a rate of 1.25% of the sale price only upon sale of the Site. As of 4th July 2005 no sale had occurred so Mr Lawrence had no obvious right to a share of the commission that would be earned on the sale of the Site to Earlplace some 11 months later because, on his own case, he did not at that point in time have any contact with Earlplace. Yet, Mr Lawrence expected to receive, and did receive, his share of the commission paid by the Company to Carter Jonas and then to MCL for the sale of the Site to Earlplace. This can only be on the basis that he was still a partner of MCL and still owed a duty to the Company as of the date upon which MCL's entitlement to commission on the sale of the Site arose.
    219. The perceptions of Mr Grove and Mr Malby of Earlplace are also relevant. They were both under the impression during August 2005 and until at least exchange of contracts in September that insofar as Earlplace was concerned Mr Lawrence was "seeing this out", i.e. still acting for MCL and the Company. Mr Malby was asked in cross examination whether Mr Lawrence had identified to him whether he had resigned from MCL. He said that Mr Lawrence did not identify a date but said: "I had the impression that he was very much seeing this out...". Mr Grove made very similar comments. What is plain is that Mr Lawrence did not say to Messrs Grove or Malby in clear and ringing terms: "I am a free agent; I have nothing at all to do with MCL or the Company". On the contrary, both had the impression – albeit somewhat vague - that Mr Lawrence was still acting for MCL and the Company during their dealings with him in August 2005. There is a certain tension in their evidence on this; they both believed that Mr Lawrence retained a connection with MCL and the Company but both were content to use Mr Lawrence to secure a deal for Earlplace. I say "tension" but in truth this reflected the economic reality of the situation that, as I have found, they were intent on securing the Site at the lowest possible price and used Mr Lawrence to assist them achieve this and they were not unduly concerned by any perceived conflict that might arise in Mr Lawrence's position.
    220. On 20th September 2005 (shortly prior to exchange of contracts) Mr Lawrence, along with Mr Lawrence Grove, Mr Malby and Mr Springett met. In an email dated 23rd February 2010 (between Mr Lawrence and Mr Cowling in relation to the evidence to be given in this case and disclosed following a waiver of privilege) Mr Lawrence stated of this meeting: "I was definitely still wearing my MCL hat at this meeting". The email also includes this comment:
    "Surely the argument is that I had to hold Earlplace's hand leading up to exchange so as to give them comfort to actually do the deal. Following exchange they talked to me about working with them on the development as a consultant by which time I'd left the MCL partnership".
    In that same exchange of emails one finds also this:
    "Having thought about this overnight I guess that the answer to the question is that I left the partnership on1y on 13th September 2005 (date of deed of dissolution) and was subsequently retained by Earlplace AFTER exchange of contracts took place on 23rd September 2005".
    The clear tenor of this is that Mr Lawrence was seeking to work out in his own mind how best this chronology of events could be painted with a view to minimising his liability. There is an element of Mr Lawrence reverse engineering the evidence here. I must take this into account in unravelling the events and analysing them. However, it is significant that Mr Lawrence himself is quite clear that he was still a partner and acting for the Company long following the day when Earlplace and the Company agreed terms on 1st September 2005.
    221. Yet further confirmation exists in the form of another email exchange dated 20th February 2012 between Mr Lawrence and Mr Tim Malby of Earlplace (also disclosed following a waiver of privilege), in which Mr Lawrence records that he had been on the phone to MCL's insurers' solicitors, Clyde & Co, and that he had been asked about when he started working for Earlplace. In this email Mr Lawrence states that he worked for MCL until 14th September 2005:
    "I stated that I worked for MCL, up until 14th September (the date the sale of MCL to Carter Jonas completed) and after that I was a free agent and the first recorded/letter to Brodie from me as Lawrence Associates was dated 29th September.
    I advised him that I had assisted you before this date and attended a meeting with you, Lawrence and Springett prior to exchange as all agents would in order to ensure the sale progressed to an exchange/completion. And that no written agreement regarding my appointment was ever confirmed and dated as it was a verbal agreement discussed over a period of time as general matters rapidly developed after exchange."
    222. In relation to the question as to when Mr Lawrence ceased to owe a duty to the Company I have come to the following clear conclusions:
    First, Mr Lawrence and Mr Cowling agreed on 4th July 2005 that Mr Lawrence would leave the partnership contingent however upon a number of future events including the sale of the MCL business to Carter Jonas and a formal dissolution of the partnership. As of 4th July 2005 it was agreed between Mr Lawrence and Mr Cowling that Mr Lawrence would henceforward be free to exploit opportunities in his own name and that he could compete with MCL.
    Secondly, and as a qualification to the first conclusion, in engaging in independent activities it was however necessarily understood that this would not involve any activity on Mr Lawrence's part that put him in a position of conflict with the Company or MCL's continuing instruction from the Company to market the Site.
    Thirdly, and in any event, Mr Lawrence continued to owe a fiduciary duty to the Company until exchange of contracts for the sale of the Site from the Company to Earlplace on 23rd September 2005. I note that the view of RICS (RICS Manual of Estate Agency Law and Practice, 2nd Edition – April 2004, at B2.2.5) is that in normal circumstances an agent's duty to his client will cease upon exchange.
    Fourthly, although technically, Mr Lawrence remained a partner of MCL after exchange his duty to the Company ceased at that point since the sale price to Earlplace was then legally fixed."
  40. It was in this context that Mr Lawrence both remarketed the site, in mid August 2005, at the request of Mr Cowling as described by the judge at paragraph 211 above, and, at the end of August, introduced Earlplace, as a prospective purchaser. In the meantime, as I describe hereafter, the proposed sale to Denbigh had run into difficulties and Mr Lawrence had already carried out further unobtrusive marketing which led to the L&CP offer to which I have already referred, an offer made on 30 June 2005. As already described Denbigh Land had dropped out of the picture by 6 July and the L&CP negotiation collapsed on 27 July.
  41. The introduction of Earlplace

  42. Mr Lawrence first came into contact with Earlplace through a chance meeting with Mr Grove, a director of Earlplace, at a social event in late July 2005. They had a discussion about the fact that Earlplace was interested in acquiring property in Northampton. Mr Lawrence told Mr Grove about the Site and gave Mr Grove to believe that he was acting for the agents for the vendors of the Site. At some point after 19 August Mr Lawrence mentioned Earlplace to Mr Cowling as a possible purchaser. There were discussions between Mr Grove and/or Mr Malby, another director of Earlplace, and Mr Lawrence which by 30 August had developed to a point where Earlplace was close to being able to finalise an offer to purchase the Site.
  43. On 31 August 2005 over lunch it was agreed between Mr Grove and Mr Lawrence that Mr Lawrence would act for Earlplace in relation to the Site. The deal was simply formalised by a handshake and never reduced into writing. It was however agreed that Mr Lawrence would be paid a third of any uplift in value between the price Earlplace paid to the Company for the Site and the value that Earlplace later realised on subsequent sale or disposal of the Site to a third party. No money accordingly passed hands at this stage, but, if Earlplace purchased the Site and then sold it on for a higher sum, Mr Lawrence stood to be handsomely rewarded.
  44. Mr Lawrence did not tell either Mr Cowling or the Company of this arrangement with Earlplace. Mr Cowling knew as from 30 August that Mr Lawrence was acting for Earlplace. Mr Cowling did not ask Mr Lawrence about the terms upon which he was acting for Earlplace. This was for two reasons. First, Mr Cowling thought that Mr Lawrence had left MCL on 4 July. Second, and in any event, he simply assumed that Mr Lawrence would be remunerated on a set fee or hourly rate basis for his work on the sale from the Company to Earlplace.
  45. On 1 September 2005 a meeting took place between Mr Grove, Mr Malby, Mr Lawrence and Mr Cowling. Earlplace made an unconditional offer of £2 million for the Site. It seems that Mr Lawrence said little or nothing at this meeting. Mr Cowling attempted to push the price up, countering at £2.5 million, and tried also to negotiate an element of clawback or "overage" in the event of permission for change of use. Although the judge records that "Mr Grove and Mr Malby were having none of it" Mr Cowling was in fact partially successful in that Mr Grove made an increased, albeit firm and final, take it or leave it, offer of £2.25 million.
  46. Mr Cowling sought and obtained Board consent for a sale to Earlplace at £2.25 million. He told the Board that at the meeting on 31 August Mr Lawrence had been representing Earlplace – the Board already knew of his resignation from MCL.
  47. On 14 September 2005 Earlplace and the Company agreed a "lock-out" period whereby the Company would negotiate exclusively with Earlplace for the sale of the Site until 12 October 2005. Earlplace paid £20,000 for this right. On 23 September 2005 the Company exchanged contracts with Earlplace on an unconditional basis for £2.25 million. Earlplace consented to the Company using both the 10% deposit, £225,000 and the non-refundable deposit referable to the "lock-out" agreement £20,000, to reduce its borrowings and to pay that month's interest.
  48. Completion was initially agreed as 24 March 2006, although it was delayed until 3 April 2006 upon payment of a further £15,000 by Earlplace. In the event the sale price was sufficient to repay the Company's liabilities and costs (£2,103,624.47) leaving a surplus of £557,750.53 for distribution to shareholders. As part of the agreement Earlplace took over the Company's obligation to repay the clawback to EP.
  49. On the same day, 3 April 2006, Earlplace simultaneously sold the Site to Kilmartin Limited ("Kilmartin") on an unconditional basis for £5 million. The approach to Earlplace by Kilmartin came out of the blue some months after Earlplace had exchanged contracts with the Company on 23 September 2005. It was neither on the cards nor in contemplation when Mr Lawrence agreed his retainer with Earlplace on 31 August 2005. Mr Lawrence played no part in the introduction of Kilmartin or in the negotiation of the sale to it. He knew nothing about the sale to Kilmartin until after it had completed on 3 April 2006 and was as astonished about the price paid as was everyone else who came to hear of it. It is clear that the price paid by Kilmartin was completely out of line with what the market regarded as sensible. Mr Springett of EP for example was on record as thinking that the £3.5 million sought by the Company was itself "lunacy". The acquisition by Kilmartin appears to have owed something to sibling rivalry between local developers. The acquisition was apparently funded by a 100% loan from Halifax Bank of Scotland. It should be remembered that this occurred in April 2006, before the cataclysmic events of 2008. The upshot was however that Mr Lawrence became entitled to one third of the uplift, which was calculated as £744,035.02. The size of his commission, as I will call it, did not become apparent until six years later and details were only then obtained pursuant to a specific order of the court. It is unsurprising that the size of this bounty and the reluctance of Mr Lawrence to reveal it should have excited suspicion as to the propriety with which Mr Lawrence had acted.
  50. Kilmartin never developed the site. Unsurprisingly it went into liquidation in 2010. The site reverted to Lloyd's Bank, who had by now acquired HBOS, and was sold on, as part of a package, for a figure believed to be in the region of £500,000 and was then resold to Roxhill Developments for £1.75 million. Planning permission was obtained for a change of use for a large distribution unit in November 2011. There is no longer a cattle auction on the Site.
  51. The action

  52. Wide ranging claims were made against both Mr Cowling and Mr Lawrence, including allegations of fraud. Shortly before trial all allegations of fraud were abandoned and at some stage all allegations of breach of fiduciary duty asserted against Mr Cowling, independent of the conduct of Mr Lawrence, were also dropped. At trial therefore the allegations advanced were that the defendants were both independently and jointly liable in respect of negligence and/or breach of a contractual duty of care. Mr Cowling was sued both in his capacity as a director of the Company, alleging breaches of his duty owed to the company in that regard, and as an agent, acting for the company as a partner in MCL. Mr Lawrence was of course sued only as a partner in MCL. Put broadly, it was said that the Site was not marketed in an appropriate fashion in consequence of which it was sold at an undervalue.
  53. Additionally, Mr Lawrence was said to have acted in breach of his fiduciary duty of loyalty owed to the Company. The Claimant sought an account of the undisclosed commission and a proprietary remedy in respect thereof. I am not quite sure whether it was ultimately alleged that, leaving on one side the recoverability of the undisclosed commission, the Claimant was also entitled to equitable compensation on the footing that Mr Lawrence's breach of fiduciary duty had resulted in sale at an undervalue, but in view of the judge's findings on negligence and causation it may not matter.
  54. Finally, and importantly, insofar as Mr Lawrence was held liable to account for the undisclosed commission, Mr Cowling was sought to be held jointly and severally liable with him on the traditional partnership basis of joint and several liability, or vicarious liability, for the wrongful act or omission of a partner acting in the ordinary course of the business of the partnership.
  55. The judge's conclusions

  56. The judge concluded that Mr Cowling's conduct of the marketing and sale was reasonable and that he was not negligent either in his capacity as director of the company or qua agent as a partner in MCL.
  57. The judge's conclusions so far as concerns the allegations of negligence against Mr Lawrence were as follows:-
  58. "171. In relation to Mr Lawrence the Claimant has not sought materially to advance a case which differs from that against Mr Cowling. Prima facie, this is because MCL was given a defined and limited role under the Letter of Instruction and Mr Cowling drafted the Letter of Instruction specifically including its limitations. If Mr Cowling is not negligent, it is hard to imagine how, in a practical sense, Mr Lawrence could be guilty of negligence to the Company. I therefore propose to summarise my conclusions on this issue relatively briefly and to address only those points which relate specifically to Mr Lawrence.
    172. First, the starting point is that Mr Lawrence was given clear instructions by the Company in the Letter of Instruction. For the reasons of law set out in paragraphs [135-137] above it is important to measure an agent's conduct by reference to the terms of their appointment. On a proper interpretation of those Instructions I find MCL (and hence Mr Lawrence) was instructed only to act in respect of the marketing of the Site: See the second substantive paragraph of the Letter of Instruction at paragraph 108 above.
    173. Secondly, MCL was not asked to advise on planning matters or on valuation or indeed to do anything other than market the Site on the stipulated restricted basis. The decision to impose the limitations was taken by Mr Cowling, with Board approval, and was predicated on the complex medley of reasons set out above. Mr Lawrence cannot be criticised for not challenging the limitations. He certainly had some knowledge of the background factors but the decision that mattered to impose the limitations was not his and there was nothing in the surrounding facts that indicated that he could or should step outside of his contractual limitations.
    174. Thirdly, MCL (and hence Mr Lawrence) was not instructed nor expected to advise on commercial transactions that the Company was engaged in at the time, for example the Prologis agreement. Mr Cowling asked Mr Lawrence to assist Prologis in seeking to obtain planning change of use. He did so on behalf of the Company. He was not, in my judgment, acting for Prologis at this time. But this did not equip him to advise the Company on the way in which the Company should act viz a viz the Prologis agreement. Prologis formed its own view of the prospects of securing planning permission for a change of use. Through Mr Alan Curtis they negotiated directly with Mr Cowling. Mr Cowling was aware of the complexities surrounding the position adopted by NBC and EP. If the criticism is that Mr Lawrence should have advised the Company to compel Prologis to continue with the agreement then, manifestly, this was not something that Mr Lawrence could have been expected to express a considered view upon. Mr Lawrence's instructions emanated from Mr Cowling, a professional surveyor with 30 years experience. There would have been no need to instruct Mr Lawrence to provide advice on matters Mr Cowling was well able to form his own judgment upon. In any event, for the reasons I have given above (see paragraphs [148 and 149] above), Mr Cowling would have acted perfectly sensibly in rejecting such advice had it been given.
    175. Fourthly, I also bear in mind that Mr Lawrence in fact construed his instructions somewhat more broadly and generously than a rigid injunction to accept only unconditional offers. I have referred to the fact that he marketed the Site in the particulars upon the basis that there was a preference for unconditional offers but that conditional offers were not excluded. I have referred also to the fact that he put unconditional offer to the Board (the Frontier bid) and that he did not say to the Board that it should be rejected outright because it was conditional. On the contrary, he assessed its merits relative to the other unconditional offers that were made.
    176. In conclusion Mr Lawrence did not act negligently. The Claimant's case fails in this regard. For the avoidance of doubt my conclusion on negligence is without prejudice to the different analysis relating to breach of fiduciary duty, to which I now turn."
  59. The judge did however conclude that by acting for both vendor, the Company, and purchaser, Earlplace, Mr Lawrence placed himself in a position where he had an obvious conflict of interest. In breach of fiduciary duty he had imparted to Earlplace valuable commercial information, at least a substantial portion of which was either confidential to the Company or was information which came into Mr Lawrence's possession because, and only because, he was working for the Company, and was information which the Company would not have wished to be divulged to Earlplace because it would have "increased their leverage vis a vis the Company."
  60. The judge went on to point out that the conflict of interest into which Mr Lawrence placed himself manifested itself most acutely on 31 August when Mr Lawrence agreed his retainer with Earlplace and in particular, of course, the profit sharing arrangement. Thereafter he had a powerful incentive to see the Company sell the Site at the very lowest price possible. The judge emphasised at paragraph 246 of his judgment that he would have found Mr Lawrence to be liable for breach of fiduciary duty on the basis of his acceptance of that profit sharing arrangement alone, irrespective of the communication of information to Earlplace. It followed therefore that Mr Lawrence had to account to the Company for the commission which he had earned in consequence of the abuse of his position.
  61. The judge did not however find that Mr Cowling was vicariously liable for his partner's breach of fiduciary duty. The judge concluded that the conduct of Mr Lawrence was sufficiently divorced from the ordinary business of MCL to justify the conclusion that it was not in the ordinary course of the partnership business.
  62. The appeal

  63. The Claimant appeals on two main grounds:-
  64. i) It is said that the judge should have found that the marketing of the Site was negligently conducted by Mr Cowling and Mr Lawrence. Importantly however, indeed crucially in my view, there is no appeal against the judge's conclusion that Mr Cowling properly and carefully discharged his duties as a director of the Company;

    ii) It is said that the judge should have found Mr Cowling jointly and severally liable with Mr Lawrence on account of Mr Lawrence's breach of fiduciary duty.

  65. Mr Lawrence appeals against the conclusion that he remained a fiduciary after 4 July 2005, although he does not challenge the judge's conclusion that the partnership in fact subsisted in form until 2012. Mr Lawrence also contends that the judge failed to deal with his argument that the Company became estopped by convention from denying that he was permitted to act for Earlplace. Mr Lawrence challenges the judge's findings that he imparted confidential information to Earlplace in an unauthorised manner. Mr Lawrence also supports the Claimant's contention that Mr Cowling should have been held jointly and severally liable with him if, contrary to his case on appeal, he was in breach of fiduciary duty.
  66. Mr Cowling supports Mr Lawrence in the first two of his grounds of appeal identified above.
  67. Finally there are two discrete appeals on questions of remedy and costs. That on remedy was conceded – see paragraph 88 below.
  68. Negligence and marketing

  69. The appeal on this point ranged far and wide but it resolved to essentially one point. It was negligent to market the Site on the basis of its existing use. The Site should have been actively and positively marketed to developers on the basis of its development potential, particularly in conjunction with the two adjacent sites. Only by marketing in such a manner could the "hope value" of the Site be maximised. The high point of this argument was reliance upon advice apparently given to Earlplace by Mr Lawrence on 31 August 2005 to the effect that:-
  70. "…we could flip it to one of the haulage operators and make a £750,000/£1m profit. Alternatively we could sweat the asset, get the planners working and go for B8 change of use"

    Why, Mr Reeve for the Appellant asks rhetorically, did not Mr Cowling and Mr Lawrence give such advice to the Company and market the Site in a manner consistent therewith? In consequence, submits Mr Reeve, the site was sold at an undervalue, a conclusion to which the judge must have come had he paid proper regard to the expert valuation evidence.

  71. The judge dealt in great detail with these arguments and I do not propose to reproduce his careful findings here. In my judgment the appeal on this ground is quite hopeless. It fails at the outset on two distinct grounds.
  72. First, as I have recorded above, there is no appeal against the judge's finding that Mr Cowling discharged his duties owed to the Company qua director in a proper and careful manner. That was a realistic approach for the Appellant to take, but it is completely destructive of the case in negligence. Mr Cowling was highly experienced in the acquisition and disposal of commercial property and the Company placed great reliance upon his advice as to the correct approach to marketing the Site. MCL had been attempting since 2002, albeit on an informal and uninstructed basis, to market the Site on the broadest basis possible, exploring all development opportunities. For the reasons exhaustively set out by the judge, these efforts had come to nothing, not least because of the highly effective tactic of some of the minority shareholders and/or the farming interests in lobbying the council not to countenance permission for use of the Site other than as a cattle market. The judge's findings are to be found at paragraphs 50-105 of his judgment and they were not challenged. Indeed, they are incapable of challenge. The Prologis conditional offer at £4 million gross of clawback, accepted by the Board in 2002 and pursued throughout 2003, had by September/October 2004 finally run into the sand. It is accepted that Mr Cowling was not in breach of duty in the manner in which he extracted the Company from this transaction which was going nowhere. Indeed, Mr Cowling had the express informed consent of the Board on 8 February 2005 to negotiate a release of the agreement.
  73. One comes then to the letter of instruction to MCL of 18 October 2004, with its twin limitation to marketing on the basis of existing use and the indication that the Company was not interested in receiving offers conditional on change of use.
  74. In fact, as the judge finds at paragraph 175 of his judgment, Mr Lawrence construed his instructions somewhat more broadly and generously than a rigid injunction to accept only unconditional offers. The Site was in fact marketed by MCL in the published particulars upon the basis that there was a preference for unconditional offers but that conditional offers were not excluded. Indeed, the marketing exercise generated an offer from Frontier Estates Limited of £4.25 million conditional upon planning consent for B1, B2 and B8 usage. In putting that conditional offer to the Board Mr Lawrence assessed its merits relative to the other unconditional offers that were made, and did not suggest its rejection outright simply because of its conditional basis. For the moment however I leave this out of account.
  75. I also leave out of account for the time being the judge's pertinent observation, at paragraph 153 of his judgment, that one of the ironies of this case is that the decision by Mr Cowling and the Board at this stage to limit the sale, with a preference for unconditional offers on the basis of existing use, was precisely what the farmers and farming minority shareholders wanted. The judge concluded that had Mr Cowling at this stage marketed the Site inviting all offers of every type, it was in his view inevitable, given the history, that it would have stimulated still further rounds of high profile, disruptive, guerrilla tactics by the farmers to block any deal for use other than as a cattle market. The judge thought it entirely possible that in the face of such tactics putative developers or others could have been altogether deterred from bidding. Mr Cowling took all this into consideration and in the view of the judge was perfectly entitled to do so.
  76. The short point which is in my view determinative is that it is no longer contended that in instructing MCL in this manner Mr Cowling acted in breach of his duties owed to the Company. The decision taken by Mr Cowling to market in this manner was one heavily influenced by the exigencies of the situation in which the Company found itself in October 2004. It was in dire financial straits, at the mercy of its bank. Time was not on its side, and it had no resources with which it could itself explore development potential by, for example, initiating development proposals and funding the inevitable appeals which would be necessary to overcome the resistance of the planners. The Site was undoubtedly blighted, or as Mr Lawrence put it "tarnished", as a result of the "political" situation and the failure of the development proposals hitherto mooted, both in terms of the Site itself and its potential for development in conjunction with the adjacent sites over which the company had no control. Thus it was the considered view of Mr Cowling that it was in the best interests of the Company for the Site thenceforth to be marketed in the manner indicated. It should not be overlooked that as the largest single shareholder with 41% of the Company Mr Cowling had a powerful incentive to maximise the amount which could be realised by the Company on sale of the Site. If this decision is accepted as having been reached by Mr Cowling in the best interests of the Company, how can Mr Lawrence plausibly be criticised for accepting the instructions and acting upon them? As Mr Walker for Mr Cowling rightly observed, the conduct of Mr Lawrence cannot be looked at in isolation. It is the instructions given by the Company which moulded and delineated the relationship with MCL. The suggestion that MCL, in the shape of Mr Cowling and Mr Lawrence, should have advised the Company to rethink a strategy carefully and properly devised by Mr Cowling, with input and assistance from Mr Lawrence, and acknowledged as reached in the best interests of the Company, has only to be stated to be seen to be absurd. In the light of the acceptance that Mr Cowling properly fulfilled his duty qua director, the following finding of the judge at paragraph 150 of his judgment has become determinative:-
  77. "…The Site in issue in this case had very particular characteristics and complexities and Mr Cowling was well aware of these. None of the comparables exhibited quite so many moving and interconnected parts all of which had to be in perfect synchronicity for the full development value to be realisable, as did the Site. Once again I cannot see anything which even the most comprehensive expert valuer might have said which would have made Mr Cowling's task in 2004/2005 of assessing the basis upon which and the right price to sell the Site any the easier. Indeed, at that time Mr Cowling also had the benefit of advice on valuation from Mr Lawrence who had greater experience than did Mr Cowling and Mr Lawrence expressed a view on valuation in 2003 which took account of comparables. In short, I have been unable to identify any specific piece of information, practice or intelligence that an expert third party could have provided that might have been so novel that it could or even might have exerted a material impact on Mr Cowling's decision making in 2004 or 2005. I am clear that the decision not to take advice was not negligent."
  78. I have already indicated that Mr Lawrence did not in fact in the particulars of sale sent out to likely purchasers preclude conditional offers. It was merely said that they were unlikely to be of interest to the vendor. Developers did not construe the invitation as precluding conditional offers and as I have already indicated, one such offer was received, from Frontier Estates Limited. At the Board meeting of 8 February 2005 the offer from Denbigh Land of £3.25 million, subject to written confirmation from the local planning authority that the Site could be used as an auction centre for the sale of motor vehicles, and that this was permitted under existing planning consent, was accepted in preference, as the highest unconditional bid. The Board recognised that pursuing the Frontier route was "likely to prove something of a protracted process with no guarantee of eventual success."
  79. In the light of his conclusions the judge did not have to address the question whether such negligence as was alleged had plausibly caused the Claimant loss. However at paragraph 169 he said this:-
  80. "The probability of material loss being caused to the Company: I also take into account that the loss to the Company from any finding of breach would have been highly speculative. It has not been necessary for me to address questions of causation or damage but I formed the view in the course of the trial that even if the Site had been more broadly marketed in accordance with the Claimant's analysis, it is most unlikely that it would have generated either more or better offers of either a conditional or unconditional nature. It must be borne in mind, in this regard, that the Site had been marketed for about 2 years prior to October 2004 and this had not generated any conditional or unconditional offer that had proven viable. Further, in August 2005 Mr Cowling instructed Mr Lawrence to re-market the Site and this also did not generate new offers of any materiality."

    This again as it seems to me is completely destructive of the Claimant's appeal on this part of the case.

  81. I mean no disrespect to Mr Reeve's persistent argument when I observe that it was in any event comprehensively and persuasively rejected on its merits by the judge. His principal findings in this regard are to be found at paragraphs 148-158 and 171-176 of his judgment, although of course they need to be read in the light of all of his detailed and unchallenged findings as to the financial position of the Company and the course of events between 2002 and 2004. I cannot improve upon the judge's analysis. I would merely highlight two points.
  82. First, I was for my part wholly unimpressed by the suggestion that the marketing by MCL after October 2004 was defective because it failed to accentuate the development potential of the Site. This is a relatively sophisticated market in which most of the players are relatively sophisticated users of/or investors in commercial property. The potential pool of purchasers is however relatively small and relatively localised. This market did not need to be told of the obvious development potential of the Site. The problem lay in realising the potential. As the judge vividly put it at paragraph 150, cited above, the situation was one in which there were many moving and interconnected parts all of which had to be in perfect synchronicity for the full development value to be realisable. In fact, ironically, the greater danger in marketing probably lay in explaining too much about the "politics" to any intending purchaser. Mr Malby of Earlplace explained in evidence that had he known in greater detail of the history of attempts to develop the Site and/or obtain planning permission so to do, Earlplace would probably not have expressed interest in the Site.
  83. Secondly, we were much pressed by Mr Reeve with the expert valuation evidence. Mr Whitfield, the Claimant's expert in this area, put the market value of the site, including "hope" value as £3.4 million. Bearing in mind that MCL in fact marketed the Site by inviting offers in excess of £3.5 million, with the express approval of the Board, I do not understand how MCL is in this regard to be criticised. Insofar as the marketing campaign attracted two unconditional offers, at £3.2 million, Harbrora, and £3.25 million, Denbigh Land, it could be said to have been successful. As already noted, the Denbigh Land offer did not develop into a sale for reasons beyond the control of the Company. Despite an indication that it was in a position to proceed unconditionally, Denbigh proved unwilling to proceed without a binding commitment from its proposed occupier. It should also be noted that the consortium of local farmers, including some of the minority shareholders themselves, bid £1.8 million, which, whilst no doubt pitched deliberately on the low side, will have taken fully into account the Company's financial situation and is therefore likely to be a closer approximation to the value which could be realised by the Company than any theoretical assessment of market value. The judge regarded the expert valuation evidence as deficient in that the experts were not instructed to factor into their assessment of how the property could be marketed, and what price could realistically be achieved, any consideration of the difficult circumstances in which the Company found itself. In my view the judge was obviously correct so to regard it.
  84. Once it became apparent that the Denbigh offer was running into difficulties Mr Cowling instructed Mr Lawrence to remarket the site in an unobtrusive manner. This generated an offer from L&CP on 30 June 2005. The offer was £3 million of which £2.25 million was upfront and thereafter two further payments would be made (a) £350,000 either on 28 March 2008 or the date upon which L&CP obtained B1, B2 or B8 planning consent, whichever was the earlier and (b) £400,000 either on 28 March 2010 or, again, the date upon which L&CP obtained B1, B2 or B8 planning consent, whichever was the earlier. The proposed agreement also assumed that the parties would set aside a ransom strip to provide potential access to adjoining land owned by EP. In the event that the ransom strip was sold to a third party then L&CP and the Company would share the net proceeds of sale equally. This offer was accepted. However L&CP later withdrew for commercial reasons. The judge found that L&CP withdrew having taken planning advice and having conducted their own research and having formed a negative view of the chances of obtaining planning consent. This episode again bears out the wisdom of the judge's approach in being cautious about assuming that any notional headline "market value" as assessed with the benefit of selective hindsight was realisable by the Company at the time.
  85. L&CP withdrew on 27 July 2005. The Company's position was now still more serious. Both of the proposed transactions on the strength of which the bank had been prepared to defer the June interest payment until September had now fallen away. If any further indulgence could have been obtained from the bank it could be expected that it would come at a high price, probably higher than that already exacted. Mr Lawrence sent out about thirty letters to prospective purchasers in the motor vehicle sector on 17 and 18 August 2005. There was justified pessimism about obtaining any planning consent for change of use within any time scale that would be of any assistance to the Company. It is nothing to the point that the attitude being adopted by the planners, urged on by some of the minority shareholders, was very arguably contrary to the local plan and therefore possibly, or even probably, susceptible in due course to a successful appeal to a Planning Inspector. The Company did not have the time or resources to mount such an appeal.
  86. Against this background it is in my view quite idle to suggest that MCL was negligent in allowing the Company to sell the site to Earlplace for £2.25 million. If Mr Cowling was not in the circumstances negligent or in breach of duty qua director of the Company in advising the Company to sell at this price, I cannot understand how MCL can be criticised insofar as it failed to advise that this would be a sale at an undervalue. On the contrary, it is plain that this sale represented a sale at the best price reasonably obtainable by the Company in the circumstances in which it found itself. As Mr Cowling put it in his evidence, the company had run out of options.
  87. As I have indicated above, the appeal against the judge's conclusions on negligent marketing of the site has become unsustainable in the light of the acceptance of the judge's findings concerning the discharge by Mr Cowling of his duties qua director. Putting that point on one side however, the allegation of negligence is quite hopeless for the reasons given by the judge, to which I have merely added my own gloss above. Given that the site was simultaneously resold at a vast profit, and given the conduct of Mr Lawrence which has subsequently emerged, I can understand the visceral reaction of the minority shareholders that the site must have been sold at an undervalue and that their advisers must have been at fault. At the time however the Board was happy with the terms upon which it had secured a sale. The exhaustive processes of the trial have demonstrated why the Board was right to be happy.
  88. Mr Lawrence's appeal

  89. It is logical to deal next with Mr Lawrence's appeal against the conclusion that he remained a fiduciary of the Company after 4 July 2005.
  90. As I have already recorded there is no challenge to the judge's finding that the partnership formally subsisted until 2012. It was however submitted that this was in substance, as from 4 July 2005, only a "twilight partnership", by which I think is meant one which was fading towards extinction. The principal attack upon the judge's findings was upon his conclusion, at paragraph 222 of his judgment, that whilst it was agreed between Mr Cowling and Mr Lawrence that as of 4 July 2005 Mr Lawrence would henceforward would be free to exploit opportunities in his own name, and that he could compete with MCL, nonetheless and as a qualification to that it was necessarily understood that Mr Lawrence's independent activities would not involve any activity on his part that put him into a position of conflict with the Company or with MCL's continuing instruction by the Company to market the site. It is said, rightly, that this conclusion of the judge was based upon no evidence of any express discussion between Mr Cowling and Mr Lawrence which gave rise to this qualification upon the ability of Mr Lawrence henceforth to go his own way.
  91. I do not think that this point avails Mr Lawrence. Whatever may have been the mutual intention as at 4 July 2005, at which time it was hoped that either the sale to Denbigh, unlikely, or the sale to L&CP, more likely, would swiftly come to fruition, it is plain that Mr Lawrence did in fact thereafter, in part off his own bat and in part at the request of Mr Cowling, continue to assist in the marketing of the Site on behalf of the Company, in the manner particularised by the judge at paragraphs 205-221 of his judgment. The only possible rationalisation of this conduct is that Mr Lawrence was seeing out the obligation to the Company which he and Mr Cowling had jointly undertaken, and in relation to which he expected to receive 50% of the fee due to MCL in the event that their endeavours were successful in bringing about a sale of the Site for the Company. In these circumstances the judge was I think, at paragraph 222 of his judgment, doing no more than to spell out the term which had necessarily to be implied into the parties' agreement in order to give it business efficacy, since it was axiomatic that if Mr Lawrence was to see out this obligation to the Company, he must continue to be bound by the incidents of the legal relationship between him and the Company to which it necessarily gave rise, including therefore the duty of loyalty. It would have required only a moment's reflection, if that, by a reasonable market professional placed in Mr Lawrence's shoes to realise that, insofar as he intended to remain involved in the marketing and sale of the Site for the Company, his newly acquired liberty to compete with MCL could not and did not extend to competing with the Company by whom he and Mr Cowling were jointly instructed and for whom he intended to continue to act, or for whom in any event he did continue to act. If that term did not come into being on 4 July, it necessarily came into being as soon as it became apparent that Mr Lawrence's involvement on behalf of the Company would continue. On the judge's findings the first manifestation of that may have been on 26 July.
  92. Mr Lewis was inclined to characterise the agreement between Mr Cowling and Mr Lawrence as an "unfettered release" by Mr Cowling of Mr Lawrence from any of his fiduciary duties incurred whilst they had been in partnership together. He also submitted that whilst the circumstance that Mr Lawrence held himself out as acting as a partner in MCL after 4 July 2005 might potentially have involved him in a liability to anyone who on the faith of such representation gave credit to the firm, see Partnership Act 1890 section 14, it did not detract from the efficacy of the release which he had received from his fiduciary duties. I reject these submissions. Mr Cowling had no authority from the Company to release Mr Lawrence from the fiduciary duty arising out of his past instruction on its behalf, and insofar as Mr Lawrence continued to act for the Company in the context of that retainer, as he plainly understood he was in fact doing, it is axiomatic that he would remain bound so to conduct himself as to ensure that his duty and his personal interest did not conflict. I note in particular Mr Lawrence's statement, recorded by the judge at paragraph 220 of his judgment, that at a meeting with Earlplace on 20 September 2005 "I was definitely still wearing my MCL hat." Mr Lawrence did not simply hold himself out as a partner in MCL. He was a partner in MCL, and he continued to carry out for the partnership the task for which it had been retained by the Company.
  93. The estoppel point

  94. In his opening address at trial Mr Lewis, for Mr Lawrence, proposed an amendment to his Defence to permit reliance upon an alleged estoppel by convention binding the Company and Mr Lawrence. The proposed text of the amendment was:-
  95. "The Second Defendant informed the Claimant that he was proposing to work with Earlplace. The Claimant did not object and did not disabuse the Second Defendant of his belief that he was entitled to act for Earlplace. Thus, the Claimant is estopped from denying that the Second Defendant was permitted to act for Earlplace and is estopped from recovering damages as a consequence of the Second Defendant acting for Earlplace."

    The proposed amendment was, submits Mr Lewis, effectively allowed to run and submissions about it were made both in opening and closing. In particular, Mr Lewis placed reliance upon the decision of the Court of Appeal in Rossetti Marketing Limited v Diamond Sofa Co Limited [2013] 1 All ER (Comm) 308. Mr Lewis submits that the Company was fully aware that Mr Lawrence introduced Earlplace to Mr Cowling as his potential partner and that a conflict of interest thereby arose, yet permitted Mr Lawrence to continue to act, to his detriment in the event, in that he exposed himself to a claim by the Company. He points to Mr Cowling's evidence that Mr Lawrence told him at the end of August that he was going to be acting for Earlplace as a planning consultant and that Mr Cowling regarded it as no business of his to enquire what he would be getting out of his relationship with Earlplace. Mr Lewis submitted that an estoppel by convention is made out.

  96. In my judgment the suggested estoppel does not go far enough to assist Mr Lawrence. It is not in issue that Mr Lawrence was entitled to act for Earlplace. The question is whether he was entitled to do so in a manner which put his duty and his interest in conflict. Mr Lewis suggested that the inadequacy in the pleading reflected uncertainty as to the case which Mr Lawrence had to meet at trial, in that it was unclear what if any confidential information Mr Lawrence was alleged to have passed to Earlplace. The bare unparticularised allegation at paragraph 55 (8) of the Amended Particulars of Claim is that Mr Lawrence "us[ed] information confidential to the Company for his own benefit and/or for the benefit of MCL and/or for the benefit of Earlplace." Particulars were sought but not provided until after closing submissions, in the shape of a document prepared by the Claimant entitled "Note of Inside Track Information used by D2" i.e. by Mr Lawrence. This is in many ways an unsatisfactory document, as is the development of the case in this way. It has implications for the reliability or fairness of the judge's findings as to the extent to which Mr Lawrence imparted confidential information, in breach of his duty of loyalty owed to the Company. I shall revert to it, albeit shortly, in that context. For present purposes it is however of limited relevance, for the very reason stressed at the outset of the Claimant's document that the misuse of confidential information was not the Claimant's primary case against Mr Lawrence. It was rather the position of conflict in which he placed himself, as principally manifested by the commission agreement concluded on 31 August.
  97. It remains therefore the position that the pleaded estoppel is insufficient to assist Mr Lawrence so far as concerns the position of conflict into which he placed himself on 31 August. It is not in terms asserted that the Claimant is estopped from denying that Mr Lawrence was permitted to take an undisclosed commission from Earlplace. I should indicate however that I do not consider that Mr Lewis could have prevailed on this point even had the amended pleading made the necessary averment. Mr Lewis recognised that he could not suggest that the Company had given its fully informed consent to Mr Lawrence acting in this manner. He did however submit that the decision of the Court of Appeal in Rossetti, above, is authority for the proposition that an estoppel might nonetheless arise in this context in the absence of informed consent. He particularly relied upon what Lord Neuberger MR said at paragraphs 40 and 41 of his judgment. The question arose in that case whether Diamond, a manufacturer of leather upholstery in Thailand, had consented to its agent in connection with the sale of leather upholstery in the UK, SML, acting for two other furniture manufacturers, Creative and Casarredo, but only in so far as Creative and Casarredo's furniture did not clash with that manufactured by Diamond. Lord Neuberger was not sure that such consent was in any event required – see the discussion at paragraph 30, reiterated at paragraph 40, but pointed out that whether the agent acting in such a manner would give rise to a conflict of duty involves a fact-sensitive enquiry. Counsel for Diamond advanced the argument that (i) in fact no such consent had been given; (ii) if given, there was no consideration for it, and (iii) if that was not right, then the consent did not operate as it was not given on a fully informed basis. Paragraph 41 of Lord Neuberger's judgment reads:-
  98. "Even if Diamond's consent was needed (see again para. 30 above) to SML acting for Creative and Cassaredo in relation to furniture which did not clash with that of Diamond, I would reject those arguments. As to argument (i), the Judge found there was consent. In any event, it must have been clear to Diamond from the October 2006 email that Mr Willan believed that Diamond would not object, and Diamond did nothing to disabuse him of that belief, upon which SML acted by taking on Cassaredo: if necessary an estoppel could, in my view, be founded by SML on that. The estoppel point may be made in answer to argument (ii); in addition, it is possible that, if Diamond had objected to SML acting for Cassaredo, SML would have stopped acting for Diamond. Argument (iii) is more powerful, but, in the end, it seems to me to go nowhere. Even if there was no effective consent, it cannot be right that Diamond could recover damages arising from SML having acted for Cassaredo (and, for the same reason, Creative) in so far as any loss was suffered as a result of SML acting as agent for non-clashing furniture, because Diamond had made it clear that it did not object to SML acting in that way. Whether the Judge was right in finding effective consent but only to non-clashing furniture, or Mr Samek QC is right in saying that there was no consent, therefore seems to me to make no difference to the outcome of these proceedings."

    The upshot was that the point whether the consent, or the indication of no objection, was given on a fully informed basis simply did not arise because all that was in issue was whether SML could act for Casarredo and Creative in relation to non clashing furniture, which it was plain Diamond knew SML intended to do. Lord Neuberger in my judgment gives no encouragement to the notion that an estoppel could arise in circumstances where the agent's acceptance of an unusual commission from a second principal without the knowledge of his first principal put his duties to his two principals, or his duty to the Company and his own interests, so starkly at odds as occurred in the present case. It is usually regarded as a pre-requisite of the operation of an estoppel by convention that it must be unjust or unconscionable to permit one of the parties to resile from the convention on the basis of which they have regulated their dealings – see per Bingham LJ in The Vistafjord [1988] 2 Lloyds Rep 343 at 352. There can be no unconscionability in the Company seeking to recover from Mr Lawrence the benefit which he here secured to himself. Whether the position might have been different had Mr Lawrence's remuneration from Earlplace been confined to a set fee or hourly rate on a conventional basis as envisaged by Mr Cowling does not arise for decision.

    Misuse of confidential information

  99. Mr Lewis challenges the judge's findings that Mr Lawrence in his dealings with Earlplace misused confidential information which had come into his possession only because he was working for the Company and which the Company would not have wished to be divulged to Earlplace since it would have weakened the Company's negotiating position. I have already explained the unsatisfactory way in which this aspect of the case developed at trial.
  100. The principally relevant paragraphs in the judge's judgment are as follows:-
  101. "240. Thirdly, it is possible to identify from documents disclosed the range and nature of information that Mr Lawrence imparted to Earlplace.
    241. Evidence from this point in time shows that Mr Lawrence was on the cusp of advancing a fully fledged offer to the Company on behalf of Earlplace (see paragraphs [226-230] above). Since Mr Lawrence had arrived at this advanced stage in his relationship with Earlplace, it necessarily presupposes that he had engaged in prior discussions with them about all aspects of their bid including, critically, at what level to pitch the offer. This conclusion is supported by the evidence of Mr Grove and his recollection of the conversation he and Mr Malby had with Mr Lawrence on 31st August 2005 (when they agreed his retainer). It emerged from Mr Grove's evidence that, at the very least (i.e. the following list is not exhaustive), the following topics were discussed: (i) what they would do with the Site (i.e. if they purchased it); (ii) whether Earlplace could "flip" it to haulage operators; (iii) the level of "profit" that might be made on such a "flip"; (iv) whether Earlplace could keep it and "sweat the asset get the planners working and go for B8 change of use"; (v) which individuals and parties were influential in relation to any plan to seek change of use (they identified EP and WDNC); and (vi), the "politics" involved. This list indicates that Mr Lawrence was laying bare his knowledge to Earlplace. It is of significance that Mr Lawrence and Messrs Grove and Malby were discussing the "profit" that they might make on a "flip" of the Site (item (iii) above). To be able to calculate a "profit" assumes that the parties had a clear idea of the price at which Earlplace would have purchased the Site and this necessarily assumes that Earlplace had a good idea of what they needed to bid to secure the Site. I am in no doubt that Mr Lawrence advised Earlplace on how best to get the best price from the Company.
    242. At this time, Mr Lawrence clearly possessed information that would have been valuable to Earlplace. For instance, he knew, albeit in broad terms, that the financial position of the Company was very serious and that Mr Cowling badly needed a sale of the Site. He would have known all about the commercial and planning related problems that the Company had experienced with NBC, WDNC and EP. It is not necessary to detail all of the evidence which shows the extent to which Mr Lawrence had access to confidential and/or proprietary information in the period 2002-2005 but there were numerous references in the documents which evidence this. This gave him access to not only the key individuals, from which he learned of their views and concerns, but also access to confidential or commercially valuable information emanating from those companies and organisations such as master plans for developments, relocation reports and confidential position papers relating to possible commercial offerings. It must be recalled in this regard he was tasked by the Company to assist Prologis and sat in on a number of meetings with key personnel involved in seeking to progress the Prologis agreement. In short he held a good deal of "inside track" information about the Company, its negotiating strategy, and the myriad complications of the planning process.
    243. In his evidence Mr Grove said that he had agreed with Mr Malby that they needed "local legs" i.e. someone with specialist local knowledge of the planning complexities and the individuals involved. They decided that Mr Lawrence was that person.
    244. The conclusion to all of this is that Mr Lawrence did impart to Earlplace valuable commercial information, at least a substantial portion of which was either confidential to the Company or was information which came into Mr Lawrence's possession because, and only because, he was working for the Company and which the Company would not have wished to be divulged to Earlplace because it would have increased their leverage viz a viz the Company.
    245. Prima facie, this was a breach of his duty to act loyally towards his principal, the Company. As at the date upon which Mr Lawrence imparted that information to Earlplace his personal interest was in conflict with that of the Company. He was imparting information to Earlplace because he wished to make money out of them for an activity for which he was also due to be paid by the Company.
    246. I would emphasise that whilst it is an independent, free standing conflict I do not view this particular conflict of interest as the very crux of the case against Mr Lawrence. That conflict manifested itself most acutely on 31st August 2005 when Mr Lawrence agreed his retainer with Earlplace and I would have found Mr Lawrence to be liable for breach of fiduciary duty on the basis of the events of 31st August 2005 only i.e. irrespective of the communication of information."
  102. For the reasons given by the judge in that last paragraph of his judgment the question whether the judge's findings set out above are justified is of no relevance to the outcome of this appeal. Nonetheless, out of fairness to Mr Lawrence I feel bound to express my conclusions, albeit quite shortly. However in order to place these into context, it is necessary first to reproduce the judge's findings so far as concerns the conflict arising out of the negotiation of the retainer on 31 August 2005. The judge dealt with this as follows:-
  103. "248. I turn now to the second conflict. As of 31st August 2005 Mr Lawrence had put himself in a position whereby his duty of loyalty to the Company was in conflict with his own personal interest. The situation is closely analogous to that referred to by Lord Justice Tuckey in Hurstanger cited at paragraph [179] above who perceived the conflict as obvious. His self interest now lay in securing a sale by the Company to Earlplace at the lowest possible price. The lower the sale price the greater the chance of the uplift on a resale being substantial and the greater the "hay". At the same time because he was still a partner in MCL and working for the Company he stood to be paid a fee by the Company earned by virtue of the same sale.
    249. However, since the potential return from acting for Earlplace massively outweighed the potential return from acting for the Company, there was a powerful incentive on Mr Lawrence to do whatever he could, to see the sale proceed to Earlplace at as low a rate as possible.
    250. It is important to identify one further aspect of this arrangement. Since the retainer of one third of the uplift was not a retainer based upon the consideration paid by Earlplace to the Company it is not possible to say that the £744,035.02 is a proxy market valuation which reflected the incremental value of the Site which was being creamed off and paid to Mr Lawrence. In other words, whilst it is tempting to say that the real valuation paced upon the Site by Earlplace was £3m of which they would pay £2.25m to the Company and c. £0.75m to Mr Lawrence that would not be logical. The payments to be made to Mr Lawrence were not by way of commission on the sale of the Site to Earlplace. In fact Earlplace paid him nothing at all for securing the sale. The payment focused upon what happened next.
    251. On 1st September, Mr Lawrence attended a meeting between the Company and Earlplace at which the terms of the deal were negotiated. During that meeting Mr Cowling, who was negotiating on behalf of the Company, sought to push the price up and Mr Cowling says that he attempted to agree an element of overage on the sale (i.e. a clawback). But Mr Grove and Mr Malby were having none of it and made a £2.25m "take it or leave it" offer. Information imparted prior to this date by Mr Lawrence to Messrs. Grove and Malby could well have been highly influential in persuading them to offer low and stick firmly to their guns. If they knew that Mr Cowling was in dire financial straits, that he was subject to Bank pressure to do a quick deal, and that they were the only show in town, that would have stiffened their negotiating sinews. If they knew that higher priced offers had recently fallen by the wayside, that would also have added to their resolve to beat Mr Cowling down in the realistic hope that he would be forced to settle for a low payment which would cover the bank debts and provide some modest return to shareholders."
  104. The judge in that last paragraph recognises, I think, that the really critical point is whether Mr Lawrence had disclosed to Earlplace the true nature of the financial predicament in which the Company found itself by 1 September 2005. The judge however expresses his conclusions on this point in only a hypothetical manner. Moreover, I note that his finding at paragraph 242 of his judgment is only that Mr Lawrence knew, in broad terms, that the financial position of the Company was very serious and that Mr Cowling badly needed a sale of the Site.
  105. I do not overlook that, at least until 4 July 2005, Mr Cowling and Mr Lawrence worked together in an open plan office. Even so, I do not think that it can safely or fairly be assumed that Mr Lawrence was, ipso facto, aware of the Company's financial situation, still less the precise extent to which the Company was in imminent danger of uncondoned default. Mr Lawrence gave some evidence concerning his knowledge of the Company's situation. It was in the context of the letter of instruction of 18 October 2004. The following passage appears in his cross examination:-
  106. "Q. Right. Can we agree that there's no mention in this letter of any sort of banking pressure at all?
    A. In what letter?
    Q. In the letter of 18 October.
    A. Yes, I accept that.
    Q. So, on the face of the letter, that wasn't something that you were asked to take into account at all?
    A. Well, as I think I mentioned a moment ago, Andrew and I would have had discussions both concerning this letter, obviously from MCL's perspective what we may be able to do for the company in the marketing. And I believe it was around this time that he would have intimated to me, or I first had a very outline knowledge of the financial predicament of the company.
    Q. Okay. In outline, in numerical terms, what was that predicament?
    A. Well, I don't think we had any great detail, it was none of my business. But I understood I think around this time that there was a requirement to sell the site in order to repay the bank.
    Q. Did you ask how much the bank were owed?
    A. It was none of my business.
    Q. Was it not relevant to the question of the type of marketing, sales mechanism, might suit the company's objectives?
    A. I didn't feel it was my position to enquire too deeply of Northampton Auctions' business and, as I say, I was sitting opposite my partner in MCL who was a chartered surveyor, who also had intimate knowledge of the company's affairs. So, you know, I would listen to him and respect his advice in terms of what the company wanted out of the deal.
    Q. Do you agree that any other competent agent, believing that there were financial constraints on the company which affected the marketing, in those circumstances would have asked the client what those constraints were?
    A. Well, I don't recall in any of my years of being – dealing in commercial property ever enquiring too deeply of any of my clients' financial predicament. I would have taken – I would have asked general questions and taken an overview, but I wouldn't have asked to see evidence or, as I say, asked in any great detail."

    It is also true that Mr Lawrence spoke in evidence of the Earlplace deal "help[ing] Andrew and his shareholders get out of a pretty tricky fix." But that answer, admittedly given with the benefit of hindsight, is again not enough on which to build a case of greater awareness of the degree of detail of the "fix".

  107. In the "Inside Track" document the only, somewhat tentative, allegation as to Mr Lawrence having made use of information concerning the company's financial situation is that:-
  108. "In late 2005, Mr Lawrence appeared to make use of the following information:
    The fact that the Company was in debt to RBS Birmingham – information which appears to have been passed to Mr Malby and was mentioned by him on 1 September 2005."
  109. The fact that the company was in debt to the bank is not really the point. That would not have come as a surprise to Mr Malby. Mr Grove in evidence was asked about the meeting of 14 September 2005 at which the "lock-out" agreement was concluded. He had the following exchange with Mr Lewis:-
  110. "Q. You went to the site and this is the meeting where the lockout was agreed, the deed was then produced and signed and £ 20,000 deposit was paid?
    A. The principle of the lockout had been agreed previously.
    Q. Yes. This was formalisation and it was agreed that the company could use that £20,000 immediately, if it wanted to?
    A. Did they have a pressing interest bill? Yes. We were going to lose that. That was risk money. If we didn't proceed to exchange, then we would have blown £20,000 and a lot of time, whatever, yes."

    That answer is insufficient to found the suggestion that Mr Grove was aware on 1 September 2005 of the true nature of the financial straits in which the Company found itself.

  111. Neither Mr Grove nor Mr Malby were asked at trial whether Mr Lawrence had imparted to them information concerning the financial position of the Company. It was never put to Mr Lawrence in cross examination that he had imparted such information, not even the limited information identified in the "Inside Track" document. It was never put to him that he must have intimated to Earlplace that the Company was simply not in a position to wait for a better offer. Mr Lawrence was asked for whom was he "rooting" at the meeting of 1 September. His answer was "I wasn't rooting for either party. I wanted to try and get a deal done."
  112. The judge records at paragraph 249 of his judgment the obvious and unanswerable point that as from 31 August 2005 there was a powerful incentive on Mr Lawrence to do whatever he could to see the sale proceed to Earlplace at as low a figure as possible. He also records, at paragraph 241 of his judgment, that he was in no doubt that Mr Lawrence advised Earlplace on how to get the best price from the Company. However the judge draws back, at paragraph 251 of his judgment, from a finding that the price secured by the Company on sale to Earlplace was in fact compromised by Mr Lawrence's conduct. There is always of course a temptation to draw what may seem an obvious inference, but the judicial process is designed to ensure that parties know the case they have to meet and have the opportunity to give their answer to it. I hope that I will not be castigated as unworldly or naïve if I give it as my opinion that on balance I do not consider that it would be appropriate to draw an inference to the effect that Mr Lawrence's conduct did compromise the price achieved by the Company. It follows that there is no basis upon which the Company can seek from Mr Lawrence a remedy for breach of fiduciary duty going beyond the requirement that he account for the commission which he received from Earlplace. It is not demonstrated that his conduct gave rise to a sale at an undervalue. As the judge rightly pointed out at paragraph 250 of his judgment, the commission of £744,035.02 cannot be regarded as reflecting the incremental value of the site which Earlplace would otherwise have been willing to pay to the Company.
  113. That leaves the question of the status of the non-determinative findings of the judge at paragraphs 240-244 of his judgment as to misuse of confidential information by Mr Lawrence. The judge has not indicated precisely what information was vouchsafed, and in particular he has not attempted to determine which parts of the information which he infers was passed over may already have been within the public domain. Furthermore, as became very clear during the appeal, the whole gravamen of the complaint concerning negligent marketing was that MCL had failed properly to explain the planning history and relationship with neighbouring plots so as to make clear the development potential of the Site. Thus much of what the judge appears to have found was imparted by Mr Lawrence to Earlplace was on the Claimant's own case information which he was duty bound to communicate to intending purchasers on the Company's behalf. In these circumstances I do not consider that it is appropriate to infer that Mr Lawrence acted in breach of duty to the Company in imparting information to Earlplace.
  114. Remedy

  115. It was common ground on the appeal that in the light of the decision of the Supreme Court in FHR European Ventures LLP v Cedar Capital Partners LLC [2014] 3 WLR 535, the commission of £744,035.02 is held by Mr Lawrence on trust for the Company and the Company is entitled to a proprietary remedy if it wishes so to elect.
  116. Is Mr Cowling jointly and severally liable with Mr Lawrence for the breach of duty consisting in acceptance of the commission from Earlplace?

  117. The question whether Mr Cowling is so liable turns upon section 10 of the Partnership Act 1890 which provides:-
  118. "10. Liability of the firm for wrongs.
    Where, by any wrongful act or omission of any partner acting in the ordinary course of the business of the firm, or with the authority of his co-partners, loss or injury is caused to any person not being a partner in the firm, or any penalty is incurred, the firm is liable therefor to the same extent as the partner so acting or omitting to act."

    The judge concluded that Mr Cowling had not authorised Mr Lawrence's wrongful act and I agree with him. Although the point was not formally abandoned on the appeal, I did not understand either Mr Reeve or Mr Lewis seriously to controvert this proposition. However as pointed out by Lord Nicholls of Birkenhead in Dubai Aluminium Co Limited v Salaam & Ors [2003] 2 AC 366, at paragraph 23, authority is not the touchstone for partnership liability. The touchstone is the connection between the wrongful conduct and the acts the partner was authorised to do, and in particular whether the connection is such that the wrongful conduct may fairly and properly be regarded as done by the partner while acting in the ordinary course of the business of the partnership.

  119. The judge had regard to the scope and status of the business of MCL as from 4 July 2005. He concluded that the firm only had an ongoing "business" in a limited sense, and that such ongoing business as there was had no ordinary course to it. He observed, partly wrongly I think, that Mr Lawrence's agreement with Earlplace provided not for a reward on the sale of the Site to Earlplace but for work done in relation to the Site in the future. The second part of this proposition is incorrect. Mr Lawrence's reward was contingent upon sale of the Site at an increased value, not on work done by him to that end. In the event Mr Lawrence contributed nothing to the resale. From this the judge reasoned, erroneously, but also I think irrelevantly, that the future work would be far removed from the ordinary course of the MCL business. Thus the judge concluded that Mr Lawrence's conduct in relation to Earlplace was sufficiently divorced from the business of MCL to enable him to conclude, at paragraph 276:-
  120. "(vi) I therefore conclude based upon the combination of the above evidential features that the unauthorised conduct of Mr Lawrence in relation to Earlplace is sufficiently divorced from the ordinary business of MCL to enable me to conclude that it was not in the ordinary course of business. This is closer to the "frolic of own" cases and to cases of dishonesty or malpractice where case law suggests that vicarious liability may not be imposed. "
  121. I can understand why, in human terms, the judge wished to exonerate Mr Cowling of joint liability for the "sharp practice" of his partner. With respect however his conclusion is subversive of the legal policy underlying vicarious liability. As Lord Nicholls pointed out in Dubai:-
  122. "19. Vicarious liability is concerned with the responsibility of the firm to other persons for wrongful acts done by a partner while acting in the ordinary course of the partnership business or with the authority of his co-partners. At first sight this might seem something of a contradiction in terms. Partners do not usually agree with each other to commit wrongful acts. Partners are not normally authorised to engage in wrongful conduct. Indeed, if vicarious liability of a firm for acts done by a partner acting in the ordinary course of the business of the firm were confined to acts authorised in every particular, the reach of vicarious liability would be short indeed. Especially would this be so with dishonesty and other intentional wrongdoing, as distinct from negligence. Similarly restricted would be the vicarious responsibility of employers for wrongful acts done by employees in the course of their employment. Like considerations apply to vicarious liability for employees.
    20. Take the present case. The essence of the claim advanced by Dubai Aluminium against Mr Amhurst is that he and Mr Salaam engaged in a criminal conspiracy to defraud Dubai Aluminium. Mr Amhurst drafted the consultancy agreement and other agreements in furtherance of this conspiracy. Needless to say, Mr Amhurst had no authority from his partners to conduct himself in this manner. Nor is there any question of conduct of this nature being part of the ordinary course of the business of the Amhurst firm. Mr Amhurst had authority to draft commercial agreements. He had no authority to draft a commercial agreement for the dishonest purpose of furthering a criminal conspiracy.
    21. However, this latter fact does not of itself mean that the firm is exempt from liability for his wrongful conduct. Whether an act or omission was done in the ordinary course of a firm's business cannot be decided simply by considering whether the partner was authorised by his co-partners to do the very act he did. The reason for this lies in the legal policy underlying vicarious liability. The underlying legal policy is based on the recognition that carrying on a business enterprise necessarily involves risks to others. It involves the risk that others will be harmed by wrongful acts committed by the agents through whom the business is carried on. When those risks ripen into loss, it is just that the business should be responsible for compensating the person who has been wronged.
    22. This policy reason dictates that liability for agents should not be strictly confined to acts done with the employer's authority. Negligence can be expected to occur from time to time. Everyone makes mistakes at times. Additionally, it is a fact of life, and therefore to be expected by those who carry on businesses, that sometimes their agents may exceed the bounds of their authority or even defy express instructions. It is fair to allocate risk of losses thus arising to the businesses rather than leave those wronged with the sole remedy, of doubtful value, against the individual employee who committed the wrong. To this end, the law has given the concept of 'ordinary course of employment' an extended scope."
  123. In Dubai "the Amhurst firm" of solicitors acted for Mr Salaam. One of the tasks undertaken was drafting agreements. The case proceeded upon the assumption that Mr Amhurst, the senior partner in the firm, dishonestly assisted Mr Salaam in a fraud by drafting the necessary agreements. It was assumed that in so acting Mr Amhurst was acting in his capacity as a partner in the firm. He was seeking to promote the business of the firm. The question was whether his partners, personally innocent of any dishonesty, were nonetheless vicariously liable for his allegedly wrongful acts.
  124. Lord Nicholls continued:-
  125. "31. In Hamlyn v John Houston & Co [1903] 1 KB 81, 85, one aspect of the business of the defendant firm of grain merchants was to obtain, by lawful means, information about its competitors' activities. Houston, a partner in the firm, obtained confidential information on the plaintiff Hamlyn's business by bribing one of Hamlyn's employees. The Court of Appeal held the firm was liable for the loss suffered by Hamlyn. Collins MR said that if it was within the scope of Houston's authority to obtain the information by legitimate means, then for the purpose of vicarious liability it was within the scope of his authority to obtain it by illegitimate means and the firm was liable accordingly. Collins MR rested his decision on the broad 'risk' principle: the principal having selected the agent, and being the person who will have the benefit of his efforts if successful, it is not unjust he should bear the risk of the agent 'exceeding his authority in matters incidental to the doing of the acts the performance of which has been delegated to him'.
        32. The limits of this broad principle should be noted. A distinction is to be drawn between cases such as Hamlyn v John Houston & Co [1903] 1 KB 81, where the employee was engaged, however misguidedly, in furthering his employer's business, and cases where the employee is engaged solely in pursuing his own interests: on a 'frolic of his own', in the language of the time-honoured catch phrase. In the former type of case the employee, while seeking to promote his employer's interests, does an act of a kind he is authorised to do. Then it may well be appropriate to attribute responsibility for his act to the employer, even though the manner of performance was not authorised or, indeed, was prohibited. The matter stands differently when the employee is engaged only in furthering his own interests, as distinct from those of his employer. Then he acts 'so as to be in effect a stranger in relation to his employer with respect to the act he has committed': see Isaacs J in Bugge v Brown (1919) 26 CLR 110, 118. Then the mere fact that the act was of a kind the employee was authorised to do will not, of itself, fasten liability on the employer. In the absence of 'holding out' and reliance, there is no reason in principle why it should. Nor would this accord with authority. To attribute vicarious liability to the employer in such a case of dishonesty would be contrary to the familiar line of 'driver' cases, where an employer has been held not liable for the negligent driving of an employee who was employed as a driver but at the time of the accident was engaged in driving his employer's vehicle on a frolic of his own…
     36. On this assumed factual basis, I consider the firm is liable for Mr Amhurst's dishonest assistance in the fraudulent scheme, the assistance taking the form of drafting the necessary agreements. Drafting agreements of this nature for a proper purpose would be within the ordinary course of the firm's business. Drafting these particular agreements is to be regarded as an act done within the ordinary course of the firm's business even though they were drafted for a dishonest purpose. These acts were so closely connected with the acts Mr Amhurst was authorised to do that for the purpose of the liability of the Amhurst firm they may fairly and properly be regarded as done by him while acting in the ordinary course of the firm's business."

    The "assumed factual basis" to which Lord Nicholls refers at paragraph 36 is that which I have summarised at paragraph 90 above.

  126. If John Houston's partners and Mr Amhurst's partners were vicariously liable, then so a fortiori must be Mr Cowling. Neither Hamlin nor Dubai Aluminium were cases where the partnership had assumed a responsibility to the wronged person. Here however MCL had agreed a retainer with the Company for the purpose of selling the Site. MCL was to be rewarded for so doing. MCL authorised Mr Lawrence to perform the task of selling the Company's Site as agent for the partnership. MCL thus introduced the risk of Mr Lawrence "exceeding his authority in matters incidental to the doing of the acts the performance of which had been delegated to him." Mr Lawrence was at all material times furthering both his own interest and that of MCL, for whom he hoped to secure the agreed fee for successfully disposing of the Site for the Company. Indeed, Mr Lawrence was at all times furthering the interests of the Company in disposing of the Site. The judge, with respect, has concentrated on the wrongful aspect of what Mr Lawrence did without focusing on the context in which he did it, or identifying the entirety of the task upon which he was embarked. MCL was authorised to find a purchaser for the Site, and in introducing Earlplace Mr Lawrence was performing the very task which MCL had undertaken to the Company to perform. He was not acting on a frolic of his own but was on the contrary carrying out the partnership's business, albeit in a misguided fashion.
  127. As Lord Millett put it in Dubai Aluminium:-
  128. "122. The vicarious liability of an employer does not depend upon the employee's authority to do the particular act which constitutes the wrong. It is sufficient if the employee is authorised to do acts of the kind in question: see Navarro v Moregrand Ltd [1951] 2 TLR 674, 680 per Denning LJ. This is equally true of partners, though it is perhaps less obvious in their case, since the relation between partners is essentially one of agency. An employer may authorise his employee to drive, but he does not authorise him to drive negligently. A firm of solicitors may authorise a partner to draft agreements for a client, but it does not authorise him to draft sham agreements. Lord Lindley wrote
    "it is obvious that it does not follow from the circumstance that such tort or fraud was not authorised, that therefore the principal is not legally responsible for it"
    cited in Lindley & Banks on Partnership 17th ed (1995) pp 332-333.
    123. In Lister v Hesley Hall Ltd [2002] 1 AC 215 several of your Lordships observed that the traditional Salmond test for determining whether an employee's act was in the course of his employment is not happily expressed when applied to the case of intentional or fraudulent wrongdoing. Sexually assaulting a boy is not an improper mode of looking after him. It is an independent act in itself, not an improper mode of doing something else. To say that a solicitor drafted an agreement negligently is to describe the way in which he drafted it; it is to accuse him of having done an authorised act in a wrongful and unauthorised way. But to say that he drafted an agreement dishonestly, or that he drafted a sham agreement, does not describe either the way in which he drafted it or the nature of the document. Rather it describes the purpose for which he intended it to be used.
        124. But these differences are immaterial. If regard is paid to the closeness of the connection between the employee's wrongdoing and the class of acts which he was employed to perform, or to the underlying rationale of vicarious liability, there is no relevant distinction to be made between performing an act in an improper manner and performing it for an improper purpose or by an improper means. In Hamlyn v John Houston & Co [1903] 1 KB 81 a partner obtained confidential information of a competitor's business by means of a bribe. Collins MR said that if it was within the scope of his authority to obtain the information by legitimate means, then for the purpose of vicarious liability it was within the scope of his authority to obtain it by illegitimate means. In the Court of Appeal Evans LJ distinguished this case on the ground that the corrupt employee who received the bribe could have believed that the party who offered it to him had his firm's authority to do so. But it does not matter what he thought. The action was not brought in respect of a reliance-based tort, nor was it brought by the employee. It was brought by his employer who did not rely on the partner's authority and had no relevant dealings with the defendant firm at all…
    126. Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 is another example. A valuer in the defendants' employ gave negligent valuations to former clients of theirs. He was doing work of a kind which he was employed to do. But the defendants were not liable. The valuer was moonlighting. He was acting, not as an employee of the defendants, but as an employee or associate of the former clients to whom he gave the valuations and on their instructions. He carried out the valuations at the premises of the former clients and using their staff. The defendants received no payment for the valuations and the director responsible knew nothing of them. The only connection between the valuations and the defendants was that the valuations were made on the defendants' stationery. As Lord Wilberforce said at p 475
    "A clearer case of departure from the course or scope of [the valuer's] employment cannot be imagined: it was total.""
  129. Mr Lawrence was not moonlighting, he was carrying out MCL's business. The case falls squarely on that side of the line which, on principle and on authority, attracts vicarious liability. I would therefore allow the appeal on this issue and hold that Mr Cowling is jointly and severally liable with Mr Lawrence to account both for the sum of £744,035.02, being commission earned through Mr Lawrence's breach of fiduciary duty, and for the sum of £14,062.50 being Mr Lawrence's share of the fee paid by the Company to Carter Jonas in respect of the sale of the Site. It is not of course suggested that a proprietary remedy is available against Mr Cowling.
  130. Interest

  131. At paragraph 64 of the Company's skeleton argument on the appeal it is suggested that the judge was wrong to decide that the Company was, as against Mr Lawrence, entitled only to simple interest. It is submitted that "where money obtained in breach of fiduciary duty has been used in trade, compound interest should be awarded." The authority cited is Wallersteiner v Moir (2) [1975] 1 QB 373 at 397E. There Buckley LJ said that if it is established that the defaulting trustee has used the money in trade, he may be charged compound interest. This argument is not foreshadowed in the Company's Grounds of Appeal and it has no permission to raise it. We heard no argument on it. However compound interest was sought in the Amended Particulars of Claim, and the claim for relief also claimed all necessary accounts and enquiries to enable the Claimant to trace and recover all money, property and assets which the Defendants acquired, directly or indirectly, from their dealings with the Company's property and/or their secret profits. Obviously the judge declined to direct the taking of such accounts and enquiries in the light of his rejection of the claim to a proprietary remedy. The position is now different, in the light of the supervening decision of the Supreme Court in FHR European Ventures LLP v Mankarious [2015] AC 250. An ability to trace might render the question of compound interest academic. Alternatively, it may be said that, as in Wallersteiner, it should be presumed that the use to which Mr Lawrence put the money was profitable. It was asserted on the appeal, without evidence, that Mr Lawrence had invested the money in property and sustained losses, but that begs the question whether the property has been retained and over what period losses are said to have been suffered.
  132. In the circumstances I would defer further consideration of the question whether the Company should be permitted to pursue an appeal on the question of compound interest, and if so whether it should be awarded, until the Company has had an opportunity to consider whether and if so how it wishes to pursue a proprietary remedy against Mr Lawrence.
  133. I would however note that it was suggested by Lord Denning MR in Wallersteiner that an alternative justification for the award of compound interest in that case was that the company to whom Dr Wallersteiner owed fiduciary duties, had it not been deprived of the money, would have used it in its own trading operations and that only an award of compound interest represents adequate compensation. Buckley LJ rejected this approach at page 398H and Scarman LJ did not support it either. Buckley LJ would have rejected it on the additional ground that it was not shown that the monies were working capital of the relevant companies. As the Company here was no longer trading, an award of compound interest on this suggested basis seems unlikely to be justifiable.
  134. Costs

  135. The judge adopted an issues-based approach to costs. On the basis of the parties' and his own assessment of the proportion of costs expended on the various issues, he directed Mr Lawrence to pay 40% of the Claimant's global costs and the Claimant to pay 60% of Mr Lawrence's global costs. He directed the Claimant to pay the whole of Mr Cowling's costs of the action.
  136. I would invite written submissions from the parties as to the appropriate costs order as between the Claimant and the First Defendant Mr Cowling in the light of our decision, if my Ladies agree with me, that Mr Cowling is jointly and severally liable to the Claimant as I have proposed.
  137. The Claimant sought permission to pursue a free-standing appeal against the judge's costs order as between it and Mr Lawrence, Ground 8 of the Grounds of Appeal. The premise of that application was however that the judge's findings on liability remained undisturbed. Richards LJ deferred consideration of that application to the full court hearing the appeal, recognising that it might become academic in the light of the outcome of the substantive appeals. On the hearing of the appeal Mr Reeve did not pursue that application, reiterating that the premise thereof is that there is no change to the underlying basis of the judge's findings on the substantive issues. He submitted that the circumstance that it is now conceded that the Claimant is entitled to a proprietary remedy against Mr Lawrence of itself vitiates the basis upon which the judge reached his conclusion and entitles this court to reconsider the matter. Subsequently, in submissions lodged after we had circulated our judgments in draft form, we were told that the issue whether the Claimant is entitled to a proprietary remedy had generated significant costs below, necessitating a series of interlocutory hearings. Before the judge, Mr Lawrence estimated the percentage of his overall costs incurred relating to this issue as 10%. It can fairly be assumed that the Claimant incurred a similar percentage.
  138. I agree with Mr Reeve that the Claimant's success on this issue, whilst it was conceded before us and therefore took little time, does necessitate a re-visiting of the costs order made by the judge. The judge directed that the costs of this issue be costs in the case. Manifestly, since the judge did not award a proprietary remedy, his award to the Claimant of 40% of its costs does not reflect the Claimant's ultimate success on this important issue.
  139. I also agree with Mr Reeve's further submission, again made after circulation of our draft judgments, that the circumstance that we have concluded that joint and several liability should be imposed upon Mr Cowling, and of course upon Mr Lawrence, has, to use his expression, "changed the architecture of the case." In the light of his findings, the judge felt it appropriate to adopt a "success-based" approach as between the Claimant and Mr Cowling but an "issues-based" approach as between the Claimant and Mr Lawrence. In my judgment it is no longer appropriate to make different costs orders in respect of the two defendants on inconsistent bases. Accordingly, I would set aside the judge's costs order as between the Claimant and Mr Lawrence also, and invite written submissions from the parties on the appropriate order in relation to the costs of the action as between the Claimant and Mr Lawrence.
  140. I would therefore allow the Company's appeal to the extent of imposing joint and several liability upon Mr Cowling and permitting a proprietary remedy against Mr Lawrence. I would defer consideration of the appeal in respect of the award of interest. Save as indicated above, I would dismiss the Company's appeal and Mr Lawrence's cross-appeal.
  141. Postscript

  142. When we circulated our judgments in draft and invited further submissions on costs we indicated our provisional view that the appropriate order in the light of the outcome of the appeal is that the First and Second Defendants should pay 60% of the Claimant's costs, both of the action and of the appeal, and that there should be no further order save that, as agreed between the Defendants, Mr Cowling should pay 25% of Mr Lawrence's costs of the appeals and cross-appeals.
  143. We also indicated that we were minded to direct that the scope of the enquiry and account should be as directed by a Master, should the Claimant so elect.
  144. We were asked by the Second Defendant to defer our ruling, foreshadowed at paragraph 104 above, setting aside the judge's issues-based costs order as between him and the Claimant, until after the Second Defendant had had an opportunity to make full submissions on the point. Accordingly, we allowed all parties to make further written submissions in the light of the draft judgment, and all three parties have made detailed submissions.
  145. Upon consideration of those submissions, subject to one caveat, I remain of the same view as that which the court had provisionally reached. I reject the submission, based on A.E.I Limited v Phonographic Performance Limited [1999] 1 WLR 1507, that the court lacks jurisdiction to revisit the judge's costs order. The outcome of the appeal entails that the judge made his order in an inappropriate context, as I have explained at paragraphs 102-104 above. The question of costs is necessarily at large after an appeal the outcome of which has altered the balance of success and failure as perceived by the judge.
  146. In any event, whilst I can understand why the judge thought it appropriate to adopt an issues-based approach, in my respectful view he has fallen into much the same error as that identified by Longmore LJ (with whom Clarke and Ward LJJ agreed) in A.L. Barnes Limited v Time Talk (UK) Limited [2003] EWCA Civ 402 where he said:-
  147. "It does seem to me that the Judge has, with the greatest respect, fallen into an error of principle. In what may generally be called commercial litigation… the disputes are ultimately about money. In deciding who was the successful party the most important thing is to identify the party who is to pay money to the other. That is the surest indication of success and failure."
  148. Like the trial judge in Kastor Navigation Co Limited v AGF MAT ("The Kastor Too") [2004] 2 Lloyd's Rep 119, as it happens me, the judge here did not start from the general rule that the successful party is entitled to its costs. Adopting the approach of the Court of Appeal in that case, it was in my view "an error of approach simply to visit the mathematical outcome of the issue by issue approach" on the Claimant – see per Rix LJ at page 149. One needs to stand back from the mathematical result and ask whether in all the circumstances it is the right result.
  149. I am quite satisfied that, particularly in the light of the outcome of the appeal, the judge's issues-based approach to costs does not achieve a fair balance between the Claimant's overall success against the firm MCL and its failure on the negligence issue. The costs order needs to reflect that the Claimant had to litigate in order to vindicate its claim to a very substantial sum, accounting for which was a partnership liability falling jointly and severally upon both partners in MCL, and in relation to which furthermore the Claimant was entitled to pursue a proprietary remedy if so advised. The Claimant's victory in that regard should not be Pyrrhic. It is apparent that a substantial driver of the claim was the refusal to admit the "secret profit" claim or to make an offer of settlement which valued it correctly. The Defendants also in my view overlook and underestimate the natural and reasonable suspicions which their conduct in that regard engendered. Furthermore, the Defendants approached the litigation upon the basis of a flawed analysis that success by the Claimant on this issue could result in there being no available professional indemnity insurance cover.
  150. I am however persuaded that the unsuccessful pursuit of the negligence claim should be reflected in a somewhat greater discount from the Claimant's recovery than I had at first thought appropriate. In all the circumstances the justice of the case is I consider met by an award to the Claimant of 50% of its costs of the action and of the appeal, to be borne jointly and severally by the Defendants.
  151. The Second Defendant has contended that as between himself and the Claimant he should be regarded as having succeeded on the appeal, bearing in mind that he supported the Claimant's appeal against exoneration of the First Defendant from joint and several liability. There is something peculiarly unattractive about this submission, not least because it overlooks that the Second Defendant is jointly and severally liable for the costs incurred by the Claimant in seeking to establish the liability of the First Defendant. Be that as it may, the submission also overlooks that the Second Defendant failed in his appeal against the judge's finding that at the relevant time he owed a fiduciary duty to the Company, and failed also in his appeal upon the associated estoppel point. The order I have proposed fairly reflects relative success and failure on the appeal.
  152. Lady Justice King:

  153. I agree.
  154. Lady Justice Arden:

  155. I also agree.


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