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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> CNM Estates (Tolworth Tower) Ltd v Carvill-Biggs & Anor [2023] EWCA Civ 480 (05 May 2023) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2023/480.html Cite as: [2023] EWCA Civ 480, [2023] 1 WLR 4335, [2023] WLR 4335, [2023] WLR(D) 214 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
JULIA Dias QC (sitting as a Deputy Judge of the High Court)
Strand, London, WC2A 2LL |
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B e f o r e :
LORD JUSTICE NEWEY
and
LORD JUSTICE MALES
____________________
CNM ESTATES (TOLWORTH TOWER) LIMITED |
Claimant/ Appellant |
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- and - |
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(1) SIMON PETER CARVILL-BIGGS (2) FREDDY KHALASTCHI |
Defendants/ Respondents |
____________________
Mark Simpson KC and Isabel Barter (instructed by Kennedys Law LLP) for the Respondents
Hearing date: 22 March 2023
____________________
Crown Copyright ©
LORD JUSTICE MALES:
Background
"At all material times, once it became apparent to them that refinance and redevelopment in accordance with CNM's original intentions was not achievable by reason of the events complained of herein, Mr Samady and Mr Ross have been/were willing to negotiate a sale of the Café Sub-lease to the Receivers and/or to a purchaser of the Development Site. Ownership of the Café Sub-lease, or its surrender, would allow/have allowed a purchaser of the Development to easily take vacant possession of the Podium and proceed with the intended second phase of development, and would therefore have/have had a material favourable impact on the value of the Development Site to that purchaser."
"The facts set out at paragraph 72 above (including the willingness to sell the Café Sub- lease) were communicated (i) to Knight Frank by no later than 14 November 2017, and (ii) to the Receivers (specifically Mr Khalastchi) by no later than 15 November 2017. Reliance is placed upon emails sent respectively on those dates by Mr Samady (i) to Mr Justin Gaze of Knight Frank, copied to the Receivers, and (ii) to, or copied to, the Receivers. The purchase of the shares in Hartland by Mr Samady and Mr Ross, ultimately achieved by means of a special purpose vehicle, would have been highly material to any prospective purchaser of the Development Site if, as should have been the case, the Receivers had informed such prospective purchasers of that fact, and that Mr Samady and Mr Ross were anxious to conclude arrangements in connection with the Café Bar on terms favourable to a person wishing to develop the Development Site. This would have been critical to any development business plan."
"I would like to inform you that we have agreed and signed terms for the Vacant Possession of the Pub Lease at TT. Please inform buyers that VP [vacant possession] would be available."
and
"Re the pub lease agreement to purchase lease holder has been entered which is good news for the asset and is a key driver of value for bidders in the sale process. Therefore urgently the sales data room requires updating and each interested party informed without which bids will be somewhat meaningless."
"The Receivers opened, or caused to be opened, an online virtual data room (the 'Data Room') for the purpose of marketing the Development Site and making information available (electronically) to potential purchasers. The Data Room included the 2003 Café Lease, but did not include (i) any information concerning the surrender of that lease to which the title had been closed, or (ii) any information concerning the Café Sub-lease and the fact that this lease was available to be purchased."
CNM's claims against the Receivers
"PARTICULARS OF BREACH
(1) the Receivers failed to market the Development Site adequately in all respects, including in particular by marketing it for approximately just 40 days;
(2) the Receivers caused or permitted the 2003 Café Lease to be provided to potential bidders, in particular via the Data Room, notwithstanding that it had been surrendered and/or failed to make the fact of its surrender known to potential bidders;
(3) the Receivers failed to take reasonable steps to ascertain the terms on which the Café Sub-Lease might be acquired, thereby failing in their duty to familiarise themselves with the nature of the asset which they were marketing;
(4) the Receivers:
(i) failed to inform potential purchasers that [the] Café Sub-Lease was available to be purchased or their other terms would be available, for example for the acquisition of the shares of Hartland (as to which possible purchase/other terms, potential purchasers could and should have been referred to Mr Samady for further information), such that it was therefore possible to secure vacant possession of the Podium; and
(ii) as pleaded in paragraphs 25.3, 25.12 and 25.14 of the Knight Frank Defence, on various occasions between 30th October 2017 and 14th November 2017 inclusive, [Mr Carvill-Biggs] took active steps to cause Knight Frank to withhold from the market information about the Hartland Agreement. Those paragraphs deal respectively with the Receivers' instructions to Knight Frank:
(a) on or about 30th October 2017 not to inform the market about information imparted by Mr Samady to Mr Gaze about having recently 'come to an agreement' with Wizard 'about surrendering' the Café Lease unless and until the receivers and/or Knight Frank had documentary evidence of the surrender,
(b) on or about 10th November 2017, not to release to potential purchasers documents that have been provided to the Receivers by the Claimant's former solicitors relating to the surrender of the Café Lease, and to the sub-lease. These in turn had been passed to Knight Frank. This was despite Knight Frank's specifically having advised the Receivers that discussions with potential purchasers were starting to centre around the ability to 'deliver the [development] scheme with the current tenants in situ' and in particular the Wizard Inns' tenant.
(c) on or about 14th November 2007, in terms similar to those pleaded at (a) above.
Until disclosure has been provided, CNM is unable more fully to particularise these matters as it is dependent at present upon what has been pleaded by Knight Frank in its Defence.
(5) the Receivers otherwise failed to market the Development Site on the basis that it was or could be available without any lease or occupation encumbering the Café or to invite potential purchasers to submit bids on the basis of vacant possession being available;
(6) the Receivers failed to give proper or adequate consideration to the question of whether TTIL's bid represented a reasonable price for the Development site, or whether it might be possible to obtain a better price; and
(7) the Receivers failed to give proper consideration to the interests of CNM when assessing whether to accept TTIL's bid or to extend the sale process, particularly given the apparent close connection between TTIL and Meadow."
The preliminary issue
The unless order
"The Claimant shall, by 4pm on Friday, 14 January 2022 serve on the parties and CE File draft Re-Re-Amended Particulars of Claim ('the Proposed RRAPOC'), failing which its claim shall be struck out."
The proposed amendments
"However, the Receivers wilfully withheld this information from perspective [sic.] buyers, despite multiple requests from Knight Frank for this information to be made available as requested by potential buyers. Both Knight Frank and potential buyers viewed this as critical information which would have a very significant impact on the value of the property. The Receivers did so, wilfully, to suppress the buyer interest, and hence the value of the highest bid in order, that TTIL/Meadows, who appointed them, could reach their known objective of securing the site purchase at the lowest possible price."
"This was a wilful omission by the Receivers to suppress the buyer interest, and hence the value of the highest bid in order, that TTIL/Meadows, who appointed them, could reach their known objective of securing the site purchase at the lowest possible price. Despite protests from Knight Frank, they were instructed by the Receivers to 'go to market come what may'."
"I want to make it plainly clear that his [Mr Samady's] obstruction only hampers the marketing effort and come what may, we shall launch tomorrow with the information as it stands."
"The Receivers conducted the bid process to enable the 'pre-selected' buyer TTIL/Meadows to purchase the property at the lowest possible price and on the best delayed completion terms, dictated by TTIL/Meadows, thereby rendering the entire process a sham."
"The Claimant will contend that the breaches of duty set out above constitute gross negligence on the part of the Receivers. …"
The judgments
"… this was an unless order, it was designed to be the last chance and it seems to me that I would drive a coach and horses through the spirit and intent of that order if I am now to say that it should not take effect in accordance with its terms."
"36. Taking a step back and balancing the factors all in the scales, I cannot regard this as anything other than a claim which is speculative and weak, even if I charitably assume that it is just about pleadable. In my judgment, therefore, it would not be right or in accordance with the overriding objective to allow it to continue for another two or three years occupying court time, which has many other calls on it."
Submissions on appeal
Analysis
Was relief from sanction needed?
"Where a party has failed to comply with a rule, practice direction or court order, any sanction for failure to comply imposed by the rule, practice direction or court order has effect unless the party in default applies for and obtains relief from the sanction."
Wilful misconduct
"If I summarise the principle in my own words, it would be to say that for wilful misconduct to be proved there must be either (1) an intention to do something which the actor knows to be wrong or (2) a reckless act in the sense that the actor is aware that loss may result from his act and yet does not care where the loss will result or not or, to use Mr Justice Barry's words in Horobin's case, 'he took the risk which he knew he ought not to take' [1952] 2 Lloyd's Rep at p.460."
Gross negligence
Disposal
SIR GEOFFREY VOS, MASTER OF THE ROLLS and LORD JUSTICE NEWEY:
The law applicable to granting permission to amend
"41. For the amendments to be allowed the Appellants need to show that they have a real as opposed to fanciful prospect of success which is one that is more than merely arguable and carries some degree of conviction: ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472. A claim does not have such a prospect where (a) it is possible to say with confidence that the factual basis for the claim is fanciful because it is entirely without substance; (b) the claimant does not have material to support at least a prima facie case that the allegations are correct; and/or (c) the claim has pleaded insufficient facts in support of their case to entitle the Court to draw the necessary inferences: Three Rivers District Council v Bank of England (No3) [2003] 2 AC 1.
42. The court is entitled to reject a version of the facts which is implausible, self-contradictory or not supported by the contemporaneous documents and it is appropriate for the court to consider whether the proposed pleading is coherent and contains the properly particularised elements of the cause of action relied upon. With that test in mind, I turn to the grounds of appeal."
"8. I regard the distinction between a realistic and fanciful prospect of success as appropriately reflecting the observation in [Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyd's Rep 221] that the defence sought to be argued must carry some degree of conviction. Both approaches require the defendant to have a case which is better than merely arguable ….
10. It is certainly the case that under both rules, where there are significant differences between the parties so far as factual issues are concerned, the court is in no position to conduct a mini-trial: see per Lord Woolf MR in Swain v Hillman [2001] 1 All ER 91 at 95 in relation to CPR 24. However, that does not mean that the court has to accept without analysis everything said by a party in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporary documents. If so, issues which are dependent upon those factual assertions may be susceptible of disposal at an early stage so as to save the cost and delay of trying an issue the outcome of which is inevitable: see the note at 24.2.3 in Civil Procedure (Autumn 2002) Vol 1 p.467 and Three Rivers DC v Bank of England (No.3) [2001] UKHL16, [2001] 2 All ER 513 per Lord Hope of Craighead at … [95]."
"The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
"103. … Those proceedings were meant to be as defined in the particulars of claim for which permission to serve out was sought. In this case the challenge was made on the grounds that the claimants had no arguable case against the anchor defendant. Where, as in this case, there are particulars of claim, that is an issue which should ordinarily fall to be addressed by reference to the pleaded case.
104. If the issues are addressed by reference to the pleaded case, then the focus of the inquiry is clearly circumscribed and problems of lack of proportionality should generally be avoided.
105. In the present case, not only did the parties choose to swamp the court with evidence, but it appears that the claimants chose not to update their pleadings to reflect the evidence. …
107. The result is that instead of focusing on the pleaded case and whether that discloses an arguable claim, the court is drawn into an evaluation of the weight of the evidence and the exercise of a judgment based on that evidence. That is not its task at this interlocutory stage. The factual averments made in support of the claim should be accepted unless, exceptionally, they are demonstrably untrue or unsupportable."
"The new case set out in the proposed pleading must have a real prospect of success …. The approach to be taken is to consider those prospects in the same way as for summary judgment namely whether there is a real as opposed to a fanciful prospect of the claim or defence being raised succeeding. It would clearly be pointless to allow an amendment if the claim or defence being raised would be defeated by a summary judgment application. However, at the stage of considering a proposed amendment that test imposes a comparatively low burden and the question is whether it is clear that the new claim or defence has no prospect of success. The court is not to engage in a mini-trial when considering a summary judgment application and even less is it to do so when considering whether or not to permit an amendment."
The judge's decision on the wilful misconduct case
"Taking a step back and balancing the factors all in the scales, I cannot regard this as anything other than a claim which is speculative and weak, even if I charitably assume that it is just about pleadable. In my judgment, therefore, it would not be right or in accordance with the overriding objective to allow it to continue for another two or three years occupying court time, which has many other calls on it."
There would have been no need for the judge to "[balance] the factors in the scales" if she had seen the claim which CNM wished to pursue as having no real prospect of success: permission to amend would necessarily have been refused regardless of any other factor.
Do the proposed amendments have a real prospect of success?
The Hartland Agreement allegations
"The court is entitled to reject a version of the facts which is implausible, self-contradictory or not supported by the contemporaneous documents and it is appropriate for the court to consider whether the proposed pleading is coherent and contains the properly particularised elements of the cause of action relied upon."
Other matters
The gross negligence allegations
Re-exercising the discretion as regards the draft wilful misconduct and gross negligence pleadings