JD Wetherspoon plc v Van de Berg & Co Ltd and others
Property agent – Fiduciary duty – Dishonesty – Defendants retained to advise on acquisition of properties by claimant public house chain – Transactions where claimant advised to acquire leasehold when freehold available – Further transactions where property referred to rival of claimant – Whether defendants owing fiduciary duties – Whether breach of duty – Whether liability for dishonest assistance arising – Claim allowed in part
The claimant was a public house operator, which for several years employed the first defendant company as its property finder and consultant. The second defendant was the sole director of the first defendant and, with his family, owned the shares in that company. He worked closely with the claimant’s chairman during the period in question. The third and fourth defendants were employees and directors of the first defendant. Over the period of its retainer, the first defendant introduced numerous properties to the claimant and received £14m in fees for its work. There was no written contract. The defendant was at first paid a retainer of £20,000 pa plus commission of £10,000 on each property acquired but, from 1999 onwards, an annual flat fee was negotiated instead for its services. The first such fee was £2m but subsequent fees were lower because the claimant acquired fewer sites.
In 2005, the claimant summarily terminated the first defendant’s retainer and brought proceedings against the defendants, alleging misconduct in respect of various transactions. It brought two actions: (i) a first action alleging that, between 2002 and 2005, the defendants had introduced four properties to a rival of the claimant in breach of their duty to act exclusively for the claimant; and (ii) a second action in respect of 12 transactions between 1993 and 1998, alleging that the defendants had advised the claimant to enter into leases of properties of which the freehold had been available, while dishonestly diverting the freehold to other purchasers. The claimant alleged breach of contract against the first defendant and conscious and deliberate breach of fiduciary duty, fraud and dishonesty against all four defendants. The first defendant counterclaimed for damages for wrongful termination of its contract.
Property agent – Fiduciary duty – Dishonesty – Defendants retained to advise on acquisition of properties by claimant public house chain – Transactions where claimant advised to acquire leasehold when freehold available – Further transactions where property referred to rival of claimant – Whether defendants owing fiduciary duties – Whether breach of duty – Whether liability for dishonest assistance arising – Claim allowed in part The claimant was a public house operator, which for several years employed the first defendant company as its property finder and consultant. The second defendant was the sole director of the first defendant and, with his family, owned the shares in that company. He worked closely with the claimant’s chairman during the period in question. The third and fourth defendants were employees and directors of the first defendant. Over the period of its retainer, the first defendant introduced numerous properties to the claimant and received £14m in fees for its work. There was no written contract. The defendant was at first paid a retainer of £20,000 pa plus commission of £10,000 on each property acquired but, from 1999 onwards, an annual flat fee was negotiated instead for its services. The first such fee was £2m but subsequent fees were lower because the claimant acquired fewer sites.In 2005, the claimant summarily terminated the first defendant’s retainer and brought proceedings against the defendants, alleging misconduct in respect of various transactions. It brought two actions: (i) a first action alleging that, between 2002 and 2005, the defendants had introduced four properties to a rival of the claimant in breach of their duty to act exclusively for the claimant; and (ii) a second action in respect of 12 transactions between 1993 and 1998, alleging that the defendants had advised the claimant to enter into leases of properties of which the freehold had been available, while dishonestly diverting the freehold to other purchasers. The claimant alleged breach of contract against the first defendant and conscious and deliberate breach of fiduciary duty, fraud and dishonesty against all four defendants. The first defendant counterclaimed for damages for wrongful termination of its contract.Held: The claim was allowed in part; the counter-claim was dismissed. (1) On the evidence, it had not been expressly agreed that the first defendant would provide its services exclusively to the claimant, and there were no grounds for implying such a term. However, the first defendant owed fiduciary duties to the claimant given the large amount of confidential material that it had obtained and its close relationship with the claimant. It could not properly act for a competitor without placing itself in a situation of conflict and, if it sought to act for such a competitor, it was under an obligation to do so only with the claimant’s informed consent, given after full disclosure of the proposed transaction. In practice, that required disclosure by the second defendant to the claimant’s chairman, that being the crucial interface between the two companies. It would be insufficient to provide material to lawyers or surveyors that, if seen by the claimant’s chairman, might suggest that the proposed transaction might amount to a breach of fiduciary duties. Moreover, the second defendant owed a direct personal fiduciary duty to the claimant since a relationship of trust and confidence existed between him and the claimant’s chairman, and the first defendant was his vehicle for discharging that relationship: Bristol & West Building Society v Mothew (t/a Stapley & Co) [1998] 1 Ch 1, Satnam Investments Ltd v Dunlop Heywood & Co Ltd [1999] 3 All ER 652 and Ratiu v Conway [2005] EWCA Civ 1302; [2006] 1 EGLR 125 applied. Further, the second defendant’s discussions with and recommendations to the claimant regarding the acquisition of properties had carried a representation that the property in question was the best available to the claimant such that liability for deceit could arise where that representation was false.(2) In respect of the 10 of the 12 impugned transactions in the second action, the first and second defendants had acted dishonestly and in breach of fiduciary duty by deliberately concealing the freehold position from the claimant in order to divert the freehold to a third party and to enable it to make a profit at the claimant’s expense; the first defendant was also liable for breach of contract. Regarding the other two transactions, the first defendant was liable in negligence only for one of them and no liability arose in respect of the other.(3) In the first action, the first and second defendants’ misuse of confidential information amounted to a breach of fiduciary duty where it had led to a successful property conclusion; accordingly, they were liable in respect of the one property where a completed transaction had taken place. With the other three properties, where no completed transaction had occurred, their actions amounted to an attempt to commit a breach of fiduciary duty.(4) The third and fourth defendants owed no direct and personal fiduciary duty to the claimant since they had no close relationship with the claimant but were merely paid employees of the first defendant, which was controlled by the second defendant. Consequently, the necessary special relationship did not exist to found a fiduciary duty or to make a director personally liable for wrongs done by a company: Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 applied. However, such a person could be liable for providing dishonest assistance to the breaches of fiduciary duty by another. Such accessory liability could arise only where the defendant in question had been personally dishonest; mere knowledge that an opportunity was being afforded by another’s breach of fiduciary duty was not enough: Satnam applied. However, it was unnecessary that property should be held on trust, the breach of which would give rise to accessory liability. Accessory liability did not involve a trust, but involved providing dishonest assistance to another party that was in a fiduciary capacity and had committed a breach of its fiduciary duties. It was appropriate that an accessory that acted dishonestly in respect of such a breach should be liable since, in most cases, the breach could only occur as a result the activities of the accessory: Attorney-General of Zambia v Meer Care & Desai [2007] EWHC 952 (Ch) and Baden v Société Générale pour Favoriser le Dévelopment du Commerce et de l’Industrie en France SA [1993] 1 WLR 509 applied; Paragon Finance plc v Thakerar & Co (No 1) [1999] 1 All ER 400 considered; Goose v Wilson Sandford & Co unreported 1 April 1996 not followed. If that were wrong, and the existence of trust property was a requirement, confidential information could be trust property for the purposes of such a claim: Satnam applied. In respect of three transactions in the second action, the fourth defendant had been aware of the breach of fiduciary duty by the first and second defendants and his conduct in respect of that matter had been dishonest and fallen below the required standard. He had participated fully in the dishonest actions of the first and second defendants and had embraced and perpetuated their deception. The third defendant was also liable in respect of the three transactions with which he had been involved. No liability for dishonest assistance arose in respect of the first action since none was pleaded. (5) The claimant’s actions were not time-barred since they fell within either section 21(1)(a) of the Limitation Act 1980, as actions in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy, to which no limitation period applied, or by virtue of section 32, which extended the limitation period in cases of fraud, concealment or mistake and applied both to breaches of fiduciary duty and dishonest assistors.Catherine Newman QC, Hugh Evans and Alec McCluskey (instructed by the legal department of JD Wetherspoon plc) appeared for the claimant; Paul Emerson (instructed by Turbervilles, of Uxbridge) appeared for the first and second defendants; Claire Hoffmann and James Mather (instructed by Mundays, of Cobham) appeared for the third defendant; Clive Blackwood (instructed by direct public access scheme) appeared for the fourth defendant.Sally Dobson, barrister
