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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Russell v Cartwright & Ors [2020] EWHC 41 (Ch) (20 January 2020) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2020/41.html Cite as: [2020] EWHC 41 (Ch) |
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BUSINESS AND PROPERTY COURTS OF
ENGLAND AND WALES
CHANCERY DIVISION
Rolls Building, Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
RAJAN RUSSELL |
Claimant |
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- and - |
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EDWARD CARTWRIGHT ROBERT SLOSS TIMOTHY BARLOW |
Defendants |
____________________
Dan McCourt Fritz & Stephanie Thompson (instructed by Gowling WLG (UK) LLP) for the Defendants
Hearing dates: 25-29 November, 2, 3, 5 & 6 December 2019
____________________
Crown Copyright ©
Mrs Justice Falk:
Introduction
Background and chronology
The claims
i) The Defendants were in breach of express or implied duties to Mr Russell. Express duties were engaged under the FJVA. Implied duties arose either because the relationship was fiduciary in nature or because the contract was a relational one into which duties should be implied, in particular duties of good faith and fair dealing, including a duty to disclose documents or information relevant to the FJVA.Mr Russell says that these breaches were fraudulent in nature. The failure to disclose the Wembley project was intentional and dishonest, and the Defendants dishonestly and deliberately used the connection with Bridges, goodwill generated from the Rockbridge projects and Hub resources for their personal gain in relation to Wembley, to Mr Russell's exclusion. They took active steps to prevent him finding out about the project.ii) Mr Russell also claims fraudulent non-disclosure (referring to HIH Casualty v Chase Manhattan Bank [2003] 1 All ER 349 at [19] to [22]), on the grounds that a duty to disclose existed, there was a deliberate withholding of information, and the Defendants acted dishonestly or recklessly because they knew they should have disclosed the Wembley project. Furthermore, the Defendants were obliged to correct Mr Russell's misunderstanding about the financial viability of Hub, which was what had prompted his resignation. The failure to do so in the light of the Wembley project and, for example, the information provided for the purposes of the NLP valuation report (which made no reference to Wembley), amounted to fraudulent misrepresentation.
iii) Alternatively, Mr Russell claims that the Defendants were parties to an unlawful means conspiracy. There was a collective, dishonest decision to withhold information and exclude Mr Russell from the Wembley project with the intention of causing damage by unlawful means. The unlawful means comprised the intentional and dishonest breach of the express or implied duties owed, or alternatively fraudulent misrepresentation, or fraudulent breach of a duty to disclose and/or a duty to correct. The unlawful acts resulted in loss. The conspiracy was either entered into in April 2014, when the Wembley opportunity came in, or if Mr Cartwright was not aware of that opportunity at that stage then the conspiracy was formed on or about 23 May 2014 when the offer to purchase was made.
Evidence
Mr Russell
Mr Ferguson
Ms Skowronska: the alleged instruction
Mr Barlow
Mr Sloss
Mr Cartwright
Mr Ringer
Mr Kanjiyani, Mr Sugui and Mr Denee
Mr Paul
The duties owed
Fiduciary duties?
"159. Thus, fiduciary duties typically arise where one person undertakes and is entrusted with authority to manage the property or affairs of another and to make discretionary decisions on behalf of that person. (Such duties may also arise where the responsibility undertaken does not directly involve making decisions but involves the giving of advice in a context, for example that of solicitor and client, where the adviser has a substantial degree of power over the other party's decision-making: see Lionel Smith, 'Fiduciary relationships: ensuring the loyal exercise of judgement on behalf of another' (2014) 130 LQR 608.) The essential idea is that a person in such a position is not permitted to use their position for their own private advantage but is required to act unselfishly in what they perceive to be the best interests of their principal. This is the core of the obligation of loyalty which Millett LJ in the Mothew case [1998] Ch 1 at 18, described as the 'distinguishing obligation of a fiduciary'. Loyalty in this context means being guided solely by the interests of the principal and not by any consideration of the fiduciary's own interests. To promote such decision-making, fiduciaries are required to act openly and honestly and must not (without the informed consent of their principal) place themselves in a position where their own interests or their duty to another party may conflict with their duty to pursue the interests of their principal. They are also liable to account for any profit obtained for themselves as a result of their position."
"Without in any way attempting to define the circumstances in which fiduciary duties arise (something the courts have avoided doing), it seems to me that what all these citations have in common is the idea that A will be held to owe fiduciary duties to B if B is reliant or dependent on A to exercise rights or powers, or otherwise act, for the benefit of B in circumstances where B can reasonably expect A to put B's interests first. That may be because (as in the case of solicitor and client, or principal and agent) B has himself put his affairs in the hands of A; or it may be because (as in the case of trustee and beneficiary, or receivers, administrators and the like) A has agreed, and/or been appointed, to act for B's benefit. In each case however the nature of the relationship is such that B can expect A in colloquial language to be on his side. That is why the distinguishing obligation of a fiduciary is the obligation of loyalty, the principal being entitled to "the single-minded loyalty of his fiduciary" (Mothew at 18A): someone who has agreed to act in the interests of another has to put the interests of that other first. That means he must not make use of his position to benefit himself, or anyone else, without B's informed consent."
The FJVA: extent of obligations of good faith
"3.3 Each Principal undertakes with each of the other Principals to exercise all voting rights available to such Principal as a shareholder, partner or member in and director of any Hub Entity so as to procure the proper conduct of the business of that Hub Entity in accordance with the terms of this Agreement and the relevant Hub Entity Constitutional Documents and at all times to act in good faith as regards the procurement of the business of each Hub Entity.
…
14.1 For so long as the joint venture contemplated by this Agreement remains in existence and has not been terminated … none of the Principals nor any of their Affiliates will:
(a) engage in any Restricted Activity without the prior written consent of the remaining Principals…
…
14.3 No Principal shall, and each Principal shall procure that no Affiliate of him shall, (whether on his own account or on behalf of any other person and whether alone or jointly with any other person), after the date of this Agreement and while it remains in force, acquire (or enter into any agreement to acquire) any direct or indirect legal or beneficial interest of whatsoever nature in, over or in respect of any real estate, the purpose of which is either to frustrate or compete with the joint venture contemplated by this Agreement. The Principals shall act in good faith with respect to each other and the joint venture contemplated by this Agreement with respect to the provisions of this clause.
…
16.1 Except to the extent necessary to comply with any applicable law or any requirements of any relevant stock exchange or governmental or regulatory body and any other regulatory requirements in force from time to time affecting the Principals, the joint venture, or any Hub Entity, and save as permitted pursuant to this Agreement, none of the Principals shall divulge or communicate to any person or use or exploit for any purpose whatsoever (including for personal gain) any of the confidential knowledge of information relating to the joint venture, any Hub Entity, the Business, or relating to the other Principals or to this Agreement, which the relevant Principal may receive or obtain as result of entering into this Agreement…"
The Settlement Deed
"This Deed is in full and final settlement of, and RR hereby releases and forever discharges with effect from Completion, all and/or any actions, claims, rights, demands and set-offs, whether in this jurisdiction or any other, whether or not presently known to RR or to the law, and whether in law or equity, that he ever had, may have or hereafter can, shall or may have against the Company and/or any of the other Parties arising out of or connected with the Framework Joint Venture Agreement and/or the Subsequent Framework Joint Venture Agreement or any matter or matters contained therein or any other matter arising out of or connected with the relationship between RR and any of the other Parties, and including, but not limited to, any rights which RR may have in relation to the "Hub" name…"
The Hub 2 agreement
"Once that is done, the existing hub@hubgroup.co.uk will be used for correspondence with respect to Acton and TBR and the new one will be used for all other email distributions. There is no interest from this end not to let you be party to any dialogue with respect to the two projects."
"When I saw him yesterday, he agreed that he shouldn't see emails on new business going forward but, equally, I agreed that he shouldn't be excluded from TBR and Acton info flow. The idea of two email groups was reached mutually and he approved it."
5 June email
"There hasn't been any mention of the Hayes transaction, or for that matter Gibraltar which was agreed the profit on which would fall 40% less costs into Hub at the March board meeting. Origination of the deal at Hayes, as well as all future deals in mid market London resi relies on the Hub track record. If you used the Hub track record to originate a deal, that deal is a Hub deal and I own 25% of it, both now as well as going forwards in the event I do not sell my shares."
Other allegations of dishonesty
Conclusions on fraud/dishonesty allegations
Conclusions on claim and counterclaim
Note 1 Clause 17 of the FJVA expressly provided: “Nothing in this Agreement shall be deemed to constitute a partnership or agency relationship between the parties.” It is the case that the Rockbridge structure involved both a limited partnership and a LLP, but those were holding vehicles for the investments, and not the vehicles through which HRL conducted its business. [Back]